SPOOKS AND RACE HAUNT SARS
An intelligence report, secret agents and racial tension all contributed to the revenue service’s woes. And it was all planned long ago, writes Ferial Haffajee
As with former finance minister Pravin Gordhan and his former deputy Mcebisi Jonas at Treasury, the trouble at the SA Revenue Service (Sars) started with an anonymous intelligence dossier. But what our investigation has also revealed is that race relations at Sars have always been brittle, and they also explain what has taken this worldclass institution into turbulent territory.
President Jacob Zuma said he fired Gordhan and Jonas because of an irretrievable breakdown of their relationship, but according to reports, it was because he believed a dossier alleging the two were back-briefing investors and ratings agencies against him while in London on a global roadshow two weeks ago.
At Sars, the pattern was similar. A dossier called Broken Arrow was circulated in several iterations to allege that an investigation unit at the commission had gone rogue and that racism was rampant.
It is now widely believed the documents were drawn up by Mike Peega, a former Sars man who was fired after he moonlighted as a rhino poacher (see case report).
As the list of Sars’ actions shows, the destabilisation of Sars could have come from many sources, given that the institution had infiltrated and upset syndicates in electronics, customs, tobacco and mining, and even the gang worlds of Cape Town and Durban.
But what is now becoming clear is that the clear-out (or capture) of Sars was planned years ahead.
A photograph of attorney Belinda Walter with intelligence agent Ferdi Fryer was taken on July 20 2014 at a restaurant in Brooklyn, Pretoria (see picture).
In emails at the time, Walter said Fryer had told her he “represented persons who wished to replace the leadership of Sars and the minister of finance”.
Nobody took it seriously, but three years on, his words, as recounted by Walter, have come true. Walter was an intelligence agent who worked for the State Security Agency as well as for intelligence agents working for big tobacco.
Her affair with Sars intelligence boss Johann van Loggerenberg blew up and in the course of its fracture, she revealed the extent of the infiltration of intelligence services by private interests. These intelligence services clashed with Sars.
This week, Walter said it wasn’t true and there had been no grand conspiracy to oust the previous Sars leadership.
On Monday, when newly minted Finance Minister Malusi Gigaba visited Sars for the first time, members of the National Health, Education and Allied Workers’ Union and other professional staff mobbed him excitedly.
When he and Sars commissioner Tom Moyane briefed an almost all-black senior executive team with the media, the staff applauded repeatedly when he spoke.
For black executives who felt isolated by the previous Sars establishment, Moyane has been like manna from heaven. His programme for the Africanisation of leadership is popular because it feels like a hegemonic transformation.
When Pravin Gordhan took over Sars in 1999, “he found himself in charge of an organisation whose legitimacy had been eroded from both inside and outside. Under the apartheid government, tax evasion became a form of protest, cutting into the collection of revenue”, according to a Princeton University case study of Sars, published in 2010.
In addition, there were almost no black senior or managerial staff.
Interviewed at the time, former acting Sars commissioner Ivan Pillay said that: “The prevailing culture was typical of a governmental department of the time. It was very white and Afrikaans.” The new Sars bosses created parallel, informal, black management layers to create skills transfer.
“I created a management team below the existing executive team that would allow for more participation by black managers, although not with formal power, but at least with some informal influence,” Gordhan is quoted in the Princeton study.
This was part of a massive modernisation of Sars, which turned the lumbering and corrupt old Sars into the machine that fed the young developing state with its huge poverty problem. Tax guru Michael Katz has written that Gordhan created Sars with an activist’s eye. “[His] vision of how tax fits into broader society is inspiring and won the confidence of all stakeholders of the tax system and those affected by it. Its success has been spectacular and has enabled South Africa to undertake the developmental journey it desperately needs.”
The tax net was grown from 2.6 million South Africans to 4.1 million between 1999 and 2009 and to 13 million in 2011. E-filing was introduced and an effective marketing drive almost made paying tax a service, and not a burden.
But inside the organisation, fragile race relations were not effectively resolved. Black staff who made up the informal management layer felt stymied.
The flattening of human resource hierarchies had the unintended effect of cauterising ambition: people wanted to be managers or bosses, but the new, modernist structures left fewer grades available for promotion than before.
Money and who got paid what, was a problem. One way Gordhan reshaped Sars was by the tactical use of bonuses for meeting targets, but how these were distributed has caused some conflict in the revenue service and that often cut across racial lines.
And, one key reason that the Sars intelligence unit flamed was because a majority of white investigators earned the highest salaries.
While this was fixed, it generated significant heat, perhaps hot enough to make the organisation explode.
SPY VS SPY Belinda Walter meeting with Ferdie Fryer in 2014