South Africa, Politics

Analysis: SARS Makwakwa probe – are we heading for another costly, discredited investigation?

By Marianne Thamm 20 September 2016

South African Revenue Service Commissioner Tom Moyane, who could face criminal charges for sitting on a report from the Financial Intelligence Centre flagging suspicious activity in the bank accounts of now suspended SARS Chief Officer of Business and Individual Tax, Jonas Makwakwa, and his alleged partner Kelly-Ann Elskie, has appointed the international law firm Hogan Lovells to investigate the matter. Why aren’t the Hawks investigating, you might ask, and can Hogan Lovells, like KMPG, really be considered “independent” when SARS is both the client and the target? And how much will this cost taxpayers? By MARIANNE THAMM.

Here’s the scene. A body has been found sprawled in the middle of a busy city thoroughfare. A pool of blood has leaked from a nasty wound and the murder weapon, a knife, has been left buried deep in the victim’s chest. The police arrive. They regard the scene, pace around the dead man and then turn to the small crowd that has gathered.

Anyone here want to report this murder? Anyone? No, no… This is your last chance…. Nobody? Well then we’ll just move along. Gotta rush, busy, busy.”

Ridiculous? Of course it is. But this essentially is how the Directorate for Priority Crime Investigation (the Hawks), currently headed by Lieutenant-General Mthandazo Berning Ntlemeza, appear to have approached at least two recent revelations of massive criminality (fraud, money laundering, bribery and corruption) and which fall slap bang within their mandate. Both instances hint at extremely serious and high-level corruption not only in state departments but in the private sector too.

The most recent, of course, are revelations that the second most powerful man at SARS, Jonas Makwakwa, and his partner, Kelly-Ann Elskie, also a SARS official, have had suspicious amounts of money – around R1.2-million – moving through their personal bank accounts. This over and above the allegation that Makwakwa had been caught on camera feeding wads of cash into an ATM.

In August an account, @EspionageSA, popped up on Twitter and provided a platform for a massive data dump of affidavits, photographs, minutes of meetings and audio clips belonging to the Fair-Trade Independent Tobacco Association and which implicated agents working on behalf of British American Tobacco in widespread fraud, bribery and corruption.

Before the account was suspended about a month later, the Hawks were made aware of the data dump. At the time, when asked by Daily Maverick whether the unit was investigating these serious allegations, Hawks spokesman Brigadier Hangwani Mulaudzi replied:

We only comment on official complaints and the BAT is one of those that was leaked to the public and no formal docket has been opened. Unless otherwise you have a case number we can assist and if not we cannot help, this goes to the SAPS as well.”

Nothing to see here, move along.

In Makwakwa’s case, the Financial Intelligence Centre (FIC), a banking regulator and supervisory body, had sent a “confidential” memo to Moyane noting that the transactions – 75 deposits between March 1, 2010 and January 31, 2016 and totalling R785,130 – were made into Makwakwa’s account, of which 48 were cash deposits amounting to R726,400 and deposited between 2014 and 2015.

The volume and value of cash deposits are highly unusual as MJM [Makwakwa] is permanently employed. These aforementioned cash deposits should be investigated to determine whether these funds … received by this SARS employee constitute payments of proceeds of crime arising from corrupt activities as defined in the Prevention and Combating of Corrupt Activities Act 12 of 2004, in light of the position of authority held by MJM. The exchange of foreign currency should be investigated to establish if there were exchange control contraventions in this transaction.”

Moyane signed for the receipt of the full report on Makwakwa on May 17 and reportedly only met with Ntlemeza on August 29, a meeting with the Hawks head he has denied.

Nonetheless, until news of the allegations against Makwakwa and his partner were brought to light in the media, Moyane appears to have done nothing, which could see him facing criminal charges under Section 34 of the Prevention and Combating of Corrupt Activities Act, which obliges those in positions of authority to report suspected corruption or fraud to the Hawks or the SAPS at the very least.

After revelations in the media, Hawks spokesman Brigadier Mulaudzi told Daily Maverick that he assumed the allegations were “an internal matter and for further details please consult SARS”.

On Monday SARS announced that it had appointed the “independent and reputable international law firm” Hogan Lovells to investigate the Makwakwa charges. Moyane, in turn, blamed the FIC for his own tardiness and accused the regulator of failing to co-operate with him. He had raised this, he claims, in a briefing with Minister of Finance Pravin Gordhan, to whom the FIC reports.

DA Shadow Minister of Finance, David Maynier, on Monday said that he had requested the chairman on the Standing Committee on Finance, Yunus Carrim, to schedule an urgent meeting with regard to the investigation into the “suspicious and unusual payments” to Makwakwa with Moyane and FIC Director Murray Michell.

We have to be absolutely sure that the serious allegations against Jonas Makwakwa… are being properly investigated and will not be compromised by rivalry between the FIC, SARS and National Treasury,” said Maynier.

Daily Maverick asked SARS whether the appointment of Hogan Lovells and the fact that SARS is effectively the legal firm’s client, might not present a conflict of interest and fundamentally affect its ability to be “independent”. We also asked for the terms of reference of the investigation into Makwakwa.

SARS spokesman Sandile Memela replied that “SARS has released a statement on the matter and will not comment further until the investigation has been completed”. At the time of writing, Hogan Lovells had not responded to questions sent by Daily Maverick.

SARS, of course, has a chequered history regarding commissioning of ‘independent reports’. In light of the R26-million in public funds spent by SARS on the KPMG report into the supposed “rogue unit”, these are reasonable concerns.

The KMPG report has been deeply compromised, not only for copying and pasting “suggested findings” by the law firm Mashiane Moodley and Monama, but also by various leaks and conflicts of interest. The most serious of these is that KPMG were appointed as auditors for British American Tobacco (BAT), which features in the “rogue unit” allegations. The firm did not declare this conflict of interest. The final KPMG report is yet to be made public, more than eight months later

In the just-published book Rogue The Inside Story of SARS’s Elite Crime-busting Unit, former HRIU head Johann van Loggerenberg (who co-wrote the book with former SARS spokesman Adrian Lackay) describes how in order to assist the KPMG investigation he returned to his office at SARS (after he had left) to hand over “certain files on high-risk investigations from my safe and hand them over to a certain senior official”.

Van Loggerenberg writes that he noted that some of his files had already been removed and that others in the safe were “extremely sensitive” and “should not fall into the wrong hands”.

I suggested they should be handed to Moyane in a sealed box – I felt it should be up to him to decide how to deal with the files in question, and not left to KPMG investigators,” Van Loggerenberg writes.

Might this be the sealed box columnist Max Du Preez has described as one of the keys to the hostility between SARS and Minister of Finance Pravin Gordhan? According to Du Preez, the box contains “dynamite allegations of corruption, fraud and front companies and foreign bank accounts against prominent benefactors of President Jacob Zuma”. Van Loggerenberg, however, does not disclose the contents of these files.

The former head of the unit writes that he respected KMPG forensic auditor, Johan van der Walt, who headed the investigation, and had hoped “the truth will come out”.

In the end the report, writes Van Loggerenberg, contained “sweeping statements, is factually incorrect and there is little or no substantiating evidence in too many instances to mention”.

The Makwakwa allegations cut to the heart of SARS, how it operates and the calibre of individual who has been appointed to key positions at this, a key state institution which Moyane is in the process of restructuring. There are those who have claimed that this restructuring has in effect knee-capped the investigative capacity of layers of experienced staff who have either been demoted or have had to reapply for their jobs. Some of these staff members have been intricately involved in investigating shadowy underworld figures who are known to orbit President Jacob Zuma.

The gravity of the allegations against Makwakwa, and considering Moyane has been implicated in the cover-up, require a truly independent, transparent and public inquiry. Now. DM

Photo: SARS commisioner Tom Moyane, (GCIS) and now suspended SARS Chief Officer of Business and Individual Tax, Jonas Makwakwa (SARS photo)

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