SCORPIO

Scorpio: The Makwakwa Dossier, Part 3 – Why SARS No 2’s erratic spending pattern raised red flags with Financial Intelligence

By Pauli Van Wyk 8 December 2017

Jonas Makwakwa – in charge of SARS’ key revenue generating units – seemingly struggles to manage his own finances. We know this because Scorpio has seen the financial statements of Makwakwa’s primary bank account for the years 2014 to 2016. His expenses often outweighed his income – in three months Makwakwa spent about three times more than the salary he gets from SARS, our analysis of his financials show. Reporting a series of suspicious deposits into this account in 2017, the Financial Intelligence Centre (FIC) found that Makwakwa had grown a dependency on possibly illegal payments to maintain his lifestyle. In Part Three, Scorpio reveals that the FIC had good reason to be worried. By PAULI VAN WYK for SCORPIO.

Jonas Makwakwa is a big spender – an excessive habit the 48-year-old struggles to satisfy solely with his income from SARS. Between 2014 and 2016 his monthly salary (after tax) fluctuated between R105,000 and R144,000, the bank statements of his primary FNB account show.

But in April, May and November 2015, Makwakwa’s expenses were at least three times higher than his monthly income from SARS. During another eight months in the analysed three-year period, Makwakwa’s expenses were about twice as much as his monthly income from SARS.

Between July 2014 and August 2016 (26 consecutive months) Makwakwa managed to spend more than what he earned from Sars. His overdraft facility was not enough to absorb Makwakwa’s splurging on luxuries. Makwakwa seems to have depended on a series of “suspicious” and unexplained payments to fund his excessive spending.

In an attempt to give Makwakwa the benefit of the doubt, one might reason then that he earned a legitimate income elsewhere. But his bank statements show that the only other income (that was not flagged by the FIC for being suspicious) rarely exceeded R10,000 per month.

The only other sources of income Scorpio could find were two bonuses paid by SARS in July 2014 and July 2015 – respectively R245,574.06 and R453,018.67. But even with the benefit of these bonuses, the maths does not make sense.

These are the spending habits of SARS’ Chief Officer: Business and Individual Tax – a portfolio that includes SARS’ biggest revenue generating units. After over a year on suspension on the back of these mysterious payments, Makwakwa is back in the job thanks to a tailored disciplinary hearing where he answered only to a fraction of the allegations against him. Now that he’s holding the reins once more, Makwakwa’s main task will be to shrink the R50-billion projected revenue shortfall before the financial year ends in February 2018.

Why is Scorpio disclosing elements of Makwakwa’s bank statements?

Bank statements are a private matter and Daily Maverick respects Makwakwa’s right to privacy. When we received his bank statements from our source, we carefully considered whether the facts before us merit the infringement of Makwakwa’s privacy.

We consulted two sets of lawyers, probed our source’s motives, reviewed the publicly available facts as well as what we knew about the curious case of Makwakwa’s mysterious fortune.

Ultimately it was Moyane’s disastrous reporting stints to Parliament’s standing committee on finance on 28 November and 4 December that convinced us to go ahead and publish some details from Makwakwa’s statements. Members of Parliament criticised Moyane on both occasions for not being frank, but rather combative and defensive.

You have not served yourself well, and you have not served SARS well,” committee chair Yunus Carrim reportedly told Moyane in November after he deflected and attacked a series of questions from MPs across party lines.

There is a strong perception that [Makwakwa] is being protected and you are feeding directly into that perception.”

Carrim also wrote to Moyane in October:

Given the role SARS plays, it not only has to be, but be seen to be above reproach, and perceptions of irregularities by its senior officials have to be effectively addressed.”

Makwakwa oversees mega taxpayers. He needs to be above reproach.

Our source acquired Makwakwa’s bank statements lawfully. The source rationally and truly believes that if the truth learned from the bank statements is not published, justice will not be done. There is a strong and reasonable belief that an escalation of the matter through “appropriate” channels will only result in the source being victimised and the matter dying in Moyane’s office vault.

In Part 1 of the Makwakwa Dossier, Scorpio revealed that Makwakwa did not answer to the majority of allegations highlighted in the FIC report. Makwakwa has not been cleared of money laundering allegations, nor is it clear whether he paid tax on his mysterious income and if the income is regular. Yet Moyane allowed him back in SARS.

While analysing the bank statements it becomes clear, even to a layman, that Makwakwa’s excessive spending cannot be funded by his income alone. This possibly makes Makwakwa vulnerable to abuse, manipulation and even extortion. We asked him on two occasions for an explanation. Our queries were met with a lawyer’s letter attempting to kill the story (more on this later).

Scorpio deliberately leaves out highly personal details of Makwakwa’s life that would make for great click bait and probably scandalous reading. Scorpio’s only focus is to investigate the source and nature of Makwakwa’s reportedly suspicious funds and how this makes him vulnerable, considering his senior position in a crucial state department.

While Scorpio is not accusing Makwakwa of criminality, we believe it our duty to inform the public of the facts and allow them to make up their own minds.

Swipe the plastic

Good food, fancy clothes and even fancier hotels are a priority for Makwakwa.

In April 2015 Makwakwa spent over R16,000 on accommodation at the Fairmont Zimbali Resort Hotel in KwaZulu-Natal. He spent another R19,000 on the same hotel in January 2016 and three months later R24,000 at the Pezula Resort Hotel in Knysna. This does not include the substantive amounts he spent on food, clothes and entertainment during these breakaways. Makwakwa’s financial statements also include some spending in Europe and the United States. Scorpio established that at least one trip to Rotterdam in the Netherlands was in the course of his official duties. It seems as if SARS reimbursed some of these expenses.

The people in his life are similarly important to Makwakwa and some have benefited handsomely from his apparent good fortunes. Makwakwa has repeatedly gifted money to at least 60 people between 2014 and 2016. The list includes family members, his wife Moli Makwakwa and girlfriend Kelly-Ann Elskie (who are both employed by SARS), his children, friends and some SARS colleagues. Elskie received at least R85,000 during this period, while Moli received about R51,000. The payments are typically small amounts paid several times per month between 2014 and 2016.

Makwakwa also co-owns at least three properties, publicly available documents show. The bond payments towards these homes contribute to the about R100,000 in expenditure on loans, insurance and other monthly payments. This does not include payments to his children’s school and tuition fees, their transport, and other payments of a personal nature Scorpio will not disclose.

As already mentioned, SARS paid Makwakwa between R105,000 and R144,000 per month between 2014 and 2016.

Simply put: Makwakwa’s one plus one doesn’t equal two. Makwakwa seems to have grown a dependency on mysterious payments to fund his lifestyle – an assertion made by the FIC in their May 2016 report (more about this later). Scorpio’s analysis now bolsters this finding.

When approached for comment last week, Makwakwa’s lawyer, Norwood-based attorney, conveyancer and notary public Liezel David, at first attempted to dissuade Scorpio from publishing this story by threatening legal action.

According to David, the financials of the second most powerful official in SARS – accused of money laundering and corruption by the highly respected FIC – might be interesting to the public, but they are not in the public interest.

Read David’s entire four-page letter on behalf of Makwakwa:

Neither David nor Makwakwa answered Scorpio’s two sets of questions posed to Makwakwa last week. Neither attempted to contact Scorpio again, despite understanding that the publication of a story was imminent.

According to David, Makwakwa further declined “to engage with [Scorpio] on any matter that has been the subject of due process… including the illegal disclosure of information such as [Makwakwa’s] personal bank statements”.

Makwakwa did not give consent for the publishing of his financial statements.

When one minus three equals four

Makwakwa’s magic touch with numbers was however interesting to the FIC. It is unclear when Makwakwa’s financial behaviour set off alarm bells at the FIC, but in May 2016 the centre gave SARS boss Tom Moyane a damning report detailing how hundreds of thousands of rand in mysterious payments unexplainably found its way into Makwakwa’s account. Between 2010 and 2015 the payments into his account increased yearly from R1.35-million to R3.4-million, an increase of approximately 152%, the FIC found. During this period, Makwakwa’s expenses also grew, “creating a dependency on suspicious cash deposits and payments to maintain his current standard of living”, FIC investigators said. The centre ordered that it be investigated, because the payments might be “proceeds of crime”, point to “money laundering” and are “of concern as they originate from unknown sources and undetermined legal purpose”.

The “suspicious” payments into Makwakwa’s account included cash he and others paid into ATMs, three internet payments made by a company Makwakwa was once a director of as well as a forex payment from an unknown jurisdiction.

Moyane kept a lid on the FIC report until an amaBhungane exposé forced Moyane to suspend Makwakwa in September 2016.

The series of financial statements Scorpio has seen offers a wider view of Makwakwa’s financials than the period ultimately considered by the FIC for their report. An analysis of Makwakwa’s financial statements highlights therefore two additional and important trends.

Timing is of the essence?

The first is how a linear analysis of the mysterious payments create a hyperbolic curve. This means the suspicious payments at first entered his account slowly and in small figures, reached a crescendo in value and frequency in the middle of 2015 – coinciding with the resignation of former deputy SARS commissioner Ivan Pillay – and then tapered off to stop abruptly about a year later.

Payments into Makwakwa’s account stopped around May 2016 – the same time that the FIC gave Moyane its report, which he possibly illegally disclosed to Makwakwa. Simply put: Moyane seemingly tipped off Makwakwa that the FIC was looking over his shoulder. Disclosing FIC reports to unauthorised persons, including the subject of the investigation, is a criminal contravention of the Financial Intelligence Act and could land Moyane in jail or with a hefty fine. This contravention has not been explained by Moyane.

Why the cash payments started in January 2014 is unexplained. In these early months the cash amounts were still low in value, and increased slowly to reach R14,900 in August 2014. But in September 2014, the pattern breaks and 11 cash payments totalling R83,800 were deposited from ATMs at OR Tambo International Airport, Bloemfontein and Mall at Reds in Centurion.

A forex payment of R147,850.65 landed in Makwakwa’s account in the same month. This marked the beginning of Makwakwa’s good fortune. It is – coincidentally or not – also around this time that the Sunday Times’ stories about former SARS executive and head of investigations Johann van Loggerenberg turned weird. In October 2014 the Sunday Times wrote the first story alleging that a “rogue unit” in SARS spied on President Jacob Zuma and ran a brothel – claims the newspaper had to retract later and label as untrue. September 2014 further marks the month Moyane got appointed as SARS Commissioner.

The Makwakwa life

The erratic spending pattern Makwakwa fell into from September 2014 is the second trend highlighted by Scorpio’s analysis.

To understand Makwakwa’s unpredictable spending and why this might be a problem, we need to take a step back and start with the beginning of the financial picture before us.

Between January and June 2014, Makwakwa consistently dipped low into his overdraft. In July 2014 he is awarded a R245,574.06 bonus on top of his R135,389.01 monthly salary from SARS. The bonus temporarily lifts him out of the doldrums and he closes the month of July with R40,924.13 in the green. This means Makwakwa spent over R300,000 in July 2014 – behaviour probably induced by the increase in expendable income. In the previous months (January to June 2014) Makwakwa spent between R130,000 and R200,000 per month. In these six months his salary from SARS never exceeded R106,000 and no other substantial income has been recorded.

Between August 2014 and June 2015 Makwakwa barely managed – even with the help of several suspicious payments – to keep his bank balance in the positive. In April 2015 he received no ATM deposits, and by 9 April Makwakwa had again lived into more than R23,000 of his overdraft limit. On this day, though, Biz Fire Worx, a company he was once a director of, sends the first (R150,000) of three big payments to Makwakwa.

(Side note: The FIC was particularly disturbed by the payments from Biz Fire Worx because it was traced right back to the Department of Water Affairs and Forestry, making a loop through 12 other bank accounts, described by the investigators as a possible money laundering scheme.)

A day later, on 10 April, another R200,000 from Biz Fire Worx arrives in his account. The two payments – flagged as suspicious by the FIC – lift Makwakwa right back to about R308,000 in the bank.

In the following seven days Makwakwa spent large sums of it. By the end of April 2015, Makwakwa had R145,333.41 left in his account after spending about R350,000. This is one of three months when Makwakwa spent more than three times his salary. SARS paid Makwakwa a salary of R110,802.49 (after tax) in April 2015.

On 8 May 2015, Biz Fire Worx’ last payment of R130,000 registers in Makwakwa’s account. Five days later, Makwakwa pays R200,000 cash from his bank account to “Mercedes Benz”. This correlates with the FIC report’s findings, which described the payment as a “Mercedes Benz C220 Bluetec”, bought for his girlfriend Elskie.

The same theme of sudden and excessive spending on luxury items, holidays and food whenever mysterious deposits are paid into Makwakwa’s account repeats itself right through the three years of financial statements Scorpio has had sight of. But when the goose that laid the golden eggs was slain, Makwakwa’s good fortune also seems to have dried up. By the end of August 2016, SARS’ second most powerful official, with the responsibility to lift South Africa out of its revenue doldrums, was R114,671.43 in the red. Again. DM

Photo: SARS No2 (again) Jonas Makwakwa.

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