By now we know the fingerprints of former chief operating officer Jonas Makwakwa have been all over the implosion at SARS. The new Bain and Co’s operating model, Commissioner Tom Moyane’s flagship project, was a spectacular disaster which attempted to fix something that was not broken. Several witnesses told the commission of inquiry into SARS on Day 7 that Bain and Co’s operation model “made no business sense”. The distilled question the commission of inquiry is left with is: “Why?”
Finding a culprit inside SARS willing to take responsibility for the operating model that broke the revenue service is a bit like searching for someone who voted for the National Party.
Evidence leader advocate Carol Steinberg on Thursday declared that she “struggle(s) to find a person who stands up and takes responsibility for the new operation model. Even the project sponsor [former chief operating officer Jonas Makwakwa] says he has not been involved too deep. No one wants to take responsibility.”
How Makwakwa came to denounce his hand in the mess is a curious tale. Steinberg led SARS executive for compliance audits Fareed Khan in evidence on Thursday morning. Khan’s compliance unit survived the radical changes in SARS after the implementation of the new operating model, even if a bit worse for wear.
To understand Khan’s testimony, it is important first to understand the nature of this “new operating model” which had such an extreme effect on SARS that the revenue service missed its revenue target by tens of billions for two consecutive years.
In the late 2000s then Commissioner Pravin Gordhan embarked on an overhaul of SARS to streamline its functions and make it more effective. He introduced the “higher purpose” principle – a mantra that directs the minds of SARS officials to this day. Gordhan drafted a blueprint sketch from which he built a house called “the modern SARS” as we knew it up until 2014. Each subsequent commissioner (Oupa Magashula and Ivan Pillay) over the years had tweaked this sketch in order to build an extra room or break down a wall as it became necessary.
So it happened that Moyane found a world-class house when he took up the job as SARS Commissioner in September 2014. But he brought the wrecking ball with him. He stopped the ongoing modernisation programme implemented at the house and appointed consulting firm Bain and Co – initially only to tweak the existing plans.
Bain and Co provided Moyane and Makwakwa with four preliminary sketches which show that SARS again only planned to build an extra room and break out a wall or two, as was customary. Someone – and this is still a mystery to who this someone is – but someone, or some group in SARS, at this point plugged the wrecking ball into the wall and pushed the green button.
Bain and Co’s four sketches were swept off the table and a final fifth sketch – the new operating model – was adopted. The world-class SARS house was flattened without the inhabitants being told about it before the walls came crumbling down around them. The final Bain and Co architectural sketch for SARS looked remarkably different from the carefully considered house.
The new operating model disbanded several units that were the backbone of SARS’ revenue collection capability. Reporting lines and units became fragmented, an exercise that cost SARS dearly in rand value and human capital.
“The tyres are wearing off and we are going to be on the rims soon”, was the chilling description recorded about the operating model’s effect on SARS.
In his own unit, Compliance head Fareed Khan could feel a crisis brewing. He had to deal with a diminished capacity and a fragmented team while taking on more work that did not actually fit in with his unit’s core business. Khan’s unit was forced to change its operational structure in order to avoid a disaster and absorb the pressure piled on by the new operating model. They worked extremely hard to avert disaster, he testified, and succeeded. When chief operating officer Jonas Makwakwa returned from a year on suspension (after he was illegally found not guilty of serious misdemeanours) and started criticising his unit, Khan thought it ridiculous.
The operating model was partly Makwakwa’s brainchild. He headed the team that drafted the operating model. It was clearly not working, and Makwakwa was criticising Khan’s unit for a mess he himself had made.
So Khan’s senior managers pushed back, he said on Thursday.
“It was on the urging of my management team that after lots of thinking and reflecting I decided to write this email” to Makwakwa, Khan testified.
His carefully crafted letter seems to pre-empt some sort of angry reaction or retort from Makwakwa. When Khan’s letter is read in the bigger context of the time at SARS, one will remember that officials were deathly scared of Makwakwa and the inordinate amount of power he wielded. Khan’s placating and guarded use of language is therefore understandable and perhaps an indication of Makwakwa’s bullying ways.
Khan starts his letter with this opening sentence: “I am writing this mail after much trepidation. I do not wish to step on peoples’ toes or create conflict but there have been several events that have convinced me that I should write this mail to you.”
Again, carefully, Khan ends his letter with: “Please accept my apologies if this mail is construed as disrespectful. I appeal to you for your understanding of the frustrations we face daily and for your support.”
Despite Khan being at pains to miss Makwakwa’s sensitive toes, he did not pull any punches.
“The process had moved towards a certain avenue and there was nothing we can do about it.”
He ensured that Makwakwa understood the operating model was to blame and concluded that the “current model is not sustainable without some serious decisions being made”.
Makwakwa had a surprisingly gracious response: “The operating model is not meant to frustrate the business and from what you say below it is. Although I was the sponsor [head] of the project, my involvement did not go too deep as I believed that we had the right people including business which I believe must a have a full voice in the process (sic)”.
It’s not entirely clear on what basis Makwakwa is trying to talk himself out of this jam, but it is clear that he is distancing himself from a project that he himself headed, which ultimately turned out to be disastrous.
(Days after Makwakwa’s emailed reply to Khan, dated 7 March 2018, he resigned. Scorpio and Sunday Times revealed how Makwakwa dished out a lucrative debt-collecting contract to a company which paid hundreds of thousands of rand into his personal bank account and was thought to be part of a money-laundering ring.)
Makwakwa’s reply to Khan is extraordinary and needs to be tested. By all accounts of insiders Makwakwa was intricately involved in the setup and design of the operating model. The commission of inquiry has also heard testimony that alluded to this fact in the past two months.
Despite Makwakwa’s huffing and puffing over the accusations levelled against him in the commission of inquiry, he had not yet indicated whether he would be defending his honour under oath.
Chair of the commission, retired Judge Robert Nugent, made an apparent swipe at Makwakwa and Moyane on Thursday, saying he continuously invited people to testify, but “they seem to not want to”.
On another occasion Nugent said he would not force witnesses to testify before the commission.
It may be time for Nugent and the commission to rethink this strategy. Makwakwa and Moyane are not known to have ever defended themselves under oath in a forum where they did not control the outcome.
The SARS commission of inquiry and the recommendations ultimately offered to President Cyril Ramaphosa are crucial to SARS, taxpayers and the country. Makwakwa and Moyane have caused too much damage to the country and have done too much harm to their colleagues for them not be hauled before the Commission. DM