Reserve Bank a worthy model for cleaner Sars governance

Could the corporate governance that goes with the Reserve Bank’s controversial private shareholding structure be just the model we need for the South African Revenue Service (Sars)? The Nugent commission of inquiry into Sars has made headlines more for the evidence of dysfunction and dodgy dealing during the tenure of suspended commissioner Tom Moyane than for the learned debate in the public hearings about governance. But a key part of the commission’s brief is to make recommendations on Sars’s operating model. In effect, the question is how to Moyane-proof the tax authority in future. That would involve fixing the appointment process that kept him in place despite the finance minister’s efforts to remove him as he did ever-deeper damage to Sars. And it would require putting in place speed bumps that would check the power of a bad commissioner in future.

The Davis committee on tax studied governance and made recommendations that were debated at the Nugent commission recently. The committee didn’t look to the Reserve Bank as a model, but the Bank did come up in the Sars inquiry and there is much in the Bank’s governance structure that could align with what the Davis committee and the commission have in mind.

Like all good companies with private shareholders, the Bank has a board of directors. This is not your usual private-sector board: more than half of its 15 members, including the governor and his three deputies, are appointed by the government. The other seven are elected by the Bank’s shareholders and have to have skills in various sectors of the economy.

Crucially, the board has no say over the Bank’s mandate, which is set by the government, so the board has no influence over monetary policy or exchange control or banking regulation. What the board does is exercise oversight over governance issues such as auditing and remuneration, and ensure the Bank’s executives do their jobs.

That relatively independent oversight helps to ensure the governor and his team have to run the Bank in line with their constitutional mandate and not to suit the Guptas or former president Jacob Zuma, as

Moyane appears to have done at Sars. An oversight board or supervisory committee has been suggested that would provide checks and balances on the Sars commissioner, and its chair would have to be completely independent, with no vested interests in the tax business even though its members would ideally have some tax expertise.

Davis has suggested there be deputy commissioners at Sars — like at the Bank — who might also provide some checks on the commissioner if needed.

How all these people would be appointed is the question, even more so in relation to the commissioner. Currently, the president hires the commissioner and, as former finance minister Pravin Gordhan established when he tried to get rid of Moyane, that also means only the president can fire him or her. Which is why Moyane, who was parachuted in to Sars by Zuma, was in such an unassailable position as long as Zuma held office.

Originally, until the law changed in 2002, the finance minister appointed the commissioner. It makes sense to put the minister back in charge, given how central alignment between the minister and commissioner is for effective fiscal policy. But it needs to be a much more transparent and accountable process open to challenge if a dodgy appointment is suggested. One proposal is a parliamentary process along the lines of the public protector appointment — not that that has worked too well lately. Another is to get the board to select a suitable candidate to recommend to the minister. None of this would be foolproof, but it would be a great deal less open to corruption and capture than Sars is now.

It makes sense to put the minister back in charge of appointing the Sars commissioner