Sars closes in on ‘gold runners’
• Agency secures court order compelling group to hand over documents
The SA Revenue Service (Sars) is closing in on companies it believes are key players in the gold-smuggling industry — an activity it says is bleeding the fiscus of billions of rand.
The tax agency obtained a court order compelling controversial gold refinery firm Rappa Resources to hand over documents it needs to prove a tax liability of more than R4bn in a matter that implicates several players in the industry.
The documents include its “know your client” documentation of its suppliers from January 2019 to June 2020 and its bank statements for the 2018 financial year. Sars will have in its possession Rappa’s records containing declarations made to the SA diamond and precious metals regulator regarding the breakdown of goods bought from suppliers for the period January 2019 to March 2020.
Sars wants insights into documents related to transactions concluded between the Rappa and Gold Kid Trading. Other documents that Rappa has to give to Sars are between itself and the remaining suppliers, concerning the sale and purchase of gold-bearing material during the audit period and its VAT returns and documentation that accompanied the returns for January to December 2018.
The tax agency will further have access to Rappa’s documents in respect of transactions of goods containing gold material received from cash-in-transit, paymaster companies and courier companies.
Sars has taken a particular interest in services of this nature rendered by Northern Spark or a company associated with it from 2018 to 2020. Gold Kid and Northern Spark are both linked
to Andries Greyvenstein, flagged as a key cog in moving gold and illicit funds out of SA in an Al Jazeera exposé last year.
Howard Baker, who has links to Rappa, has also been a director of Gold Kid, with the two firms having traded in gold products of nearly R20bn between them over the years.
Rappa processes mining residues and waste material to extract precious metals, primarily gold and silver. It then exports gold-bearing bars.
SA’s VAT law for the gold industry changed in 2017. Before that vendors could not claim any notional input tax credits upon purchasing any gold products. However, from April 1 2017, a vendor who purchases secondhand gold product from a nonvendor is permitted to claim a notional input tax on the supply.
The law defines second-hand goods as those that exclude gold coins or any other goods containing gold. It is this change in the law that Sars says saw Rappa take advantage and profit at the expense of the fiscus.
Sars says the scheme takes a form of operations which smelted Krugerrands and pretended the gold bars generated by this smelting comprised secondhand jewellery. At the heart of Sars’ case is that the 15% margin for claiming input tax provided a cash flow which allowed for the sale of gold below the spot price.
UK authorities in November sanctioned Baker over his role in allegedly channelling more than $300m in gold revenues to Russia through an outfit called Paloma Precious.
On its website Rappa lists the country’s biggest gold mining houses as its clients, such as Harmony, Goldfields, AngloGold and Sibanye Gold.
However, Sibanye-Stillwater was taken by surprise.
“We don’t do business with Rappa Resources,” said head of investor relations James Wellsted. “We are the largest shareholder in the Rand Refinery and all our metal is refined there and generally sold by the Rand Refinery … Why on earth would we do business with a company like Rappa?”
Gold Fields said it was keeping a close eye on the dispute before taking a decision on its dealings with the company.
“Since 2017 they [have bought] subeconomic gold byproducts from us, which they further treat and refine,”
Gold Fields spokesperson Sven Lunsche said. “We understand … the investigation hasn’t been finalised yet. Once it is, we will conduct a vendor verification assessment on Rappa, as we do with all our business partners.”
Harmony and AngloGold did not respond to questions.
Sars could not be drawn to comment on its dispute with Rappa. However, it said it was sustaining losses due to the smuggling of illicit gold and other precious metals.