Malema's provisional headache
Julius Malema and his Economic Freedom Fighters (EFF) turned the fact that they are cash-strapped into a political advantage. But after a court ruling on Monday that saw him provisionally sequestrated, Malema’s political ambitions may be legally stunted. While he’ll be able to run for Parliament, it is anyone’s guess how long he’ll be allowed to remain there. Unless, of course, he manages to find a way out. By GREG NICOLSON.
“Provisional” is the word that might provisionally have saved Malema’s political ambitions on Monday. Since launching EFF last year, Malema’s overcome a number of hurdles on the road to Parliament. “We are not going to prison, we are going to Parliament!” he declared outside a Polokwane court last year, when trial over charges he illegally benefited from a fraudulent and corrupt tender was postponed until September 2014. The firebrand leader accuses the ANC government of engineering the accusations against him and has vowed to fight them. However, the taxman is his more immediate worry.
The SA Revenue Service (SARS) brought Malema to the North Gauteng High Court over unpaid taxes between 2005 and 2011. After the EFF leader made public comments about the institution, SARS last August invoked a law allowing it to reveal information about taxpayers in order to prove false allegations against it.
In summary, SARS said, “Mr Malema failed to register as a taxpayer and consistently failed to submit income tax returns honestly and on time. He has until now failed to register his trust for tax purposes. SARS had to register it on his behalf. Ultimately when SARS reached a conclusion of how much tax Mr Malema owed SARS, and despite him having had, by his own account, at least R4 million available at the time, he opted not to pay one cent towards his tax debt. He accepted that he owed SARS R16 million in tax, but he did not offer to convert any of his assets towards his tax debt. He did not request any form of payment arrangement. Instead, he attempted to dissipate assets beyond the reach of SARS.”
The legal route was their only option.
Assets from Malema’s homes have already been seized by the Sheriff and auctioned. His Limpopo farm was auctioned for R2.5 million. His Sandton home went for R3.5 million after being auctioned for a second time when the original bid winner couldn’t pay the R5.9 million price. Malema’s Polokwane home went for R1.4 million. The sales couldn’t cover all his tax debts.
But the lost assets are not his biggest problem. According to South African insolvency law, a sequestration order renders a debtor officially insolvent. For Malema, whose party is tipped to win a number of seats in Parliament as it positions itself on the far left, Monday’s court appearance was potentially career ending. The Constitution isn’t picky on which citizens can go to Parliament. Basically, you need to be an eligible voter. But you can’t become an MP if you’re of unsound mind, have been convicted of a criminal offence with no option for a fine and sentenced to more than 12 months in prison (this exception ends five years after your prison term ends). And you can’t be an MP if you’re an unrehabilitated insolvent.
“I am of the view that the arrival of council for the respondent (Malema) this morning (with the application for postponement) is nothing but a delaying tactic and abuse of the system, which the court should not tolerate,” said Judge Bill Prinsloo on Monday, dismissing Malema’s application for a postponement, reported SAPA.
Malema’s lawyer immediately dismissed claims that a provisional sequestration order meant he couldn’t run for election. “The provisional sequestration order of the Commander-in-Chief Julius Malema by the High Court does not disqualify him to stand for public office,” followed Mbuyiseni Ndlozi, EFF’s spokesperson.
University of Johannesburg law Professor Juanitta Calitz explained. “Where compulsory sequestration of a debtor’s estate is applied for by a creditor, the court will usually place the debtor’s estate under provisional sequestration initially. Interested parties are entitled to object to the application, and can try to persuade the court on a later date that the court should not grant the final sequestration order. The debtor is, however, deemed to be an unrehabilitated insolvent from date of sequestration, which includes the date of a provisional order. All the effects of a sequestration order will come into effect on this date, inter alia that the person will be divested of ownership of his estate and ownership will pass to the Master of the High Court and the Master will now appoint a provisional trustee to take charge of such assets.”
Though that doesn’t sound good for Malema, Julian Jones from the law firm Cliffe Dekker Hofmeyr elaborated, “It is only once the provisional order has been made final that he becomes insolvent. His sequestration is at present only provisional. It is, however, effective from the date that the provisional order is granted, i.e. should Malema be unsuccessful on his return day, the effective date of his sequestration would be today.” That means Malema’s fine to contest the election. He will be back in court on 26 May, where the order could be made final, which could seal his Parliamentary ambitions.
Malema has already vowed to appeal the decision before the elections. If he’s unable to reach an agreement with SARS, who seems rather irked with him after his 2012 accusations, or prove to the court he is not insolvent, Malema is in trouble. If the final order goes through after the elections and Malema is already an MP, according to the Constitution he should lose his seat because he becomes ineligible to be a Member of Parliament.
Malema continues to argue that SARS’ tax pursuit is politically motivated. He may have a point: only after his fallout with President Zuma was the issue raised. For years, he was able to get away with not paying. But the fact remains that Malema has admitted to not paying taxes. His appeal will likely centre on the high figure SARS is demanding and his continued belief that he doesn’t need to pay tax on “donations” given to him by benefactors.
Those benefactors could ultimately save Malema. He needs to prove to the courts that he is able to pay his debts and if there’s a cashed-up individual who decides, out of a desire to have one of the country’s most influential politicians in his or her pocket or a commitment to the values of “economic freedom”, to pay Juju’s debts, he’ll likely be off the hook. “If the debt were paid there would be no basis for the sequestration and the provisional order would be discharged. They could either buy the claim at full value or at a discounted amount,” said Jones, when asked if someone else could pay the debt.
Laws preventing insolvent citizens from joining Parliament are common around the world. They exist so that broke MPs don’t become laden to financial overlords and abuse their positions. Sounds great in theory, but these laws certainly didn’t stop Zuma. If SARS get its way, Malema will have scant chance to do the same. Unless, of course, he finds his own financial overlord. DM
Photo: Economic Freedom Fighters leader Julius Malema sits in a tent following a march to the Union Buildings in Pretoria on Thursday, 12 September 2013. Picture: Werner Beukes/SAPA