Sunday Times

Re­serve Bank a wor­thy model for cleaner Sars gov­er­nance

- By Hilary Joffe South Africa Politics · South Africa News · Finance · Politics · Corporate Governance · African Politics · Business · Business Law · Gupta family · Jacob Zuma · Pravin Gordhan

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

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