UNACCOUNTABLE #21

Bain & Company – the KGB of consulting

By Open Secrets 16 February 2021

Bain & Company is one of several powerful multinational corporations at the centre of corruption and State Capture in South Africa. Bain enabled the wrecking of the South African Revenue Service, contributing to economic hardship for all South Africans. Placing profit over principle, Bain remains unaccountable and continues to dodge responsibility for serious economic crimes.

The erosion of the South African Revenue Service (SARS) means that the country lost any buffer to tackle the fallout from the Covid-19 pandemic. In short, Bain & Company (Bain) helped destroy SARS, which led to consistent failures to collect revenue over a number of years. Bain, working with a network of corrupt politicians and bureaucrats, has enabled the pillaging of the country’s future.

To get a better sense of this global consulting firm, we need to understand its origins. Bain is a global management consulting firm headquartered in Boston in the United States. Founded in 1973, Bain is part of the so-called “Big Three” consultancy firms, which include McKinsey (itself deeply implicated in enabling State Capture as previously outlined by Open Secrets) and Boston Consulting Group (BCG). Each of the “Big Three” firms ensures details of their operations remain secret. Consultants wield a great deal of power and this is often coupled with excessive and obscure fee structures. Consequently, even when destruction is left in a project’s wake, they see handsome profits. Critics say that this is part of a pattern of conduct where consulting firms, “take no credit and accept no blame”.

Bain has an army of 12,000 consultants operating in 37 countries across 59 offices and has grown considerably since it was founded. Despite being the newest and smallest of the “Big Three”, it still enjoyed an estimated revenue of $4.3-billion in 2020 (more than R60-billion). Like its competitors, Bain has a diverse client list that includes the world’s top corporations, state-owned enterprises and governments.

Bain opened its South African office in Johannesburg in 1997. Today, Bain & Co. Africa runs offices in Johannesburg and Lagos, Nigeria and proudly claims to have “collectively completed more than 350 projects throughout sub-Saharan Africa”. One of these was at the heart of State Capture and contributed to gutting SARS. 

‘Relationship consulting’ – main man Massone doing things the Bain way

Since the 1980s, Bain has been dubbed the “KGB of consulting” due to its notoriously secretive modus operandi. Bain’s business is built on “relationship consulting” which demands close ties developed with clients, typically among the powerful in business and politics. This approach is evidenced by the firm’s conduct at SARS, which left South Africa’s tax agency a hollowed-out shell. Bain reportedly raked in about R164-million from the havoc it wreaked at SARS. 

Prior to its destructive reign at SARS, Bain had been trying to secure lucrative public sector contracts for some time. A door was finally opened by Ambrobrite Pty (Ltd) and its two directors, prominent entertainment industry businessman Dumakude (Duma) Ndlovu and Mpumelelo Ngema, a close friend of Jacob Zuma’s.

Ambrobrite was registered as an events, communications and project management company. Its connection with Bain began as an informal relationship between Vittorio Massone, then managing partner of Bain South Africa, Ndlovu and Ngema. The relationship was formalised in November 2013 when Bain entered into a Business Development and Stakeholder Management contract with Ambrobrite (Pty) Ltd, which ran from 1 November 2013 to December 2016. According to the contract, Bain would pay Ambrobrite a monthly retainer fee of R100,000, and R200,000 in instances where Ambrobrite “exceeds expectations”. 

The contract explicitly states the purpose of the relationship as that which will, “drive commercial success for Bain & Company SA in the Government and State-Owned Enterprises sector”. 

In other words, Bain paid Ambrobrite’s two showman owners Ndlovu and Ngema a minimum of R100,000 every month for almost four years to be introduced to various figures in the public sector – at least R4.8-million over the period. When taken in context, and one considers the R255-million Bain earned in the public sector (Telkom tender and fees from SARS), the almost R5-million paid by Bain & Co to gain access to the public sector is clearly a well-calculated cost. This meagre “introduction fee” ensured high returns on investment for the consultancy firm. 

The relationship was a hit. It facilitated Bain’s connection with prominent figures in the public sector, chief among which included key architects of contemporary State Capture, former president Jacob Zuma and SARS commissioner Tom Moyane. 

Evidence shows that Massone first encountered Jacob Zuma on 11 August 2012. Dumakude Ndlovu was also present at this meeting. It was here that Massone presented a brainchild of Bain – Project Phoenix. Bain was ready to enter the lucrative public sector consultancy game and it had set its sights on the part state-owned telecommunications company Telkom, as a start. 

Within a year, Bain – with little public sector experience in South Africa – had secured a dubious R91.1-million contract with Telkom. According to multiple media reports, that first broke back in 2014, chief among which include reports by Bloomberg and Business Day. Telkom hired Bain without any formal proposals and there is no record of Bain bidding for the work. It seems that Bain applied its classic strategy of “relationship consulting” to bag the Telkom contract. It was a strategy it would later deploy to gain access to lucrative work at SARS. 

SARS & the Bain brain drain

Vittorio Massone first met Tom Moyane at the Bain office in Melrose Arch, Johannesburg, in October 2013. It was the first of several meetings, between October 2013 and August 2014, in which Moyane would receive “CEO coaching” from Bain. At the time, Tom Moayne had just been ousted as commissioner of Correctional Services, in September 2013, and had been appointed as an adviser to the State Information Technology Agency (Sita). To appreciate Moyane’s chequered public service career, it is worth recalling that in January 2019 the Zondo Commission heard evidence that he was a direct beneficiary of bribes by private prisons company Bosasa – at the time of his employment as chief of the country’s prison services.

It was during Bain’s “CEO coaching sessions” in May 2014 that Moyane was presented with a document it had authored, titled “TM First 100 Days”. It set out the changes Moyane was expected to implement once he became the new head of SARS. That same month, Zuma was elected to his second and final term as president. Four months later, in September 2014, Zuma announced Moyane’s appointment as commissioner of SARS. Massone, aided by his unique consultancy crystal ball, had thus discussed Moyane’s first 100 days at SARS at a meeting four months prior to the president appointing Moyane as commissioner of SARS. 

When Moyane took office he made quick work of appointing his old CEO coach Bain to conduct a review of the operating model at SARS. The Commission of Inquiry into SARS (led by Judge Nugent, and also known as the Nugent Commission) – which was established in 2018 and was tasked with investigating the demise of the tax agency – found that the appointment of Bain had been a foregone conclusion once Moyane was in office. In fact, Bain was so confident of the deal that it already had preselected teams ready to assist the new tax commissioner. Once again, either Bain was crystal ball gazing, or it found an inside track into procurement processes at SARS

Once appointed, Bain’s review of the SARS operating model was rushed and woefully inadequate. The consultants conducted a meagre 33 interviews with SARS employees over six rushed days and failed to consult a single senior official involved in the modernisation of SARS. According to evidence presented to the Nugent Commission, a senior official “was interviewed for only 15 minutes”. In other words, Bain made little effort to understand the basic structures and facts about the institution. It was ticking the boxes and in so doing it failed to substantively interrogate whether it was necessary to restructure SARS at all. Restructuring seems to have been a foregone conclusion.

Despite a clearly inadequate review, Bain proceeded to make a proposal that would effectively gut the capacity of SARS to track, trace and tax the wealth of the very rich and the very corrupt (often the same people, and corporations). As a first step, Bain recommended the culling of numerous key staff at SARS. In addition to a skills culling exercise, Bain recommended SARS overhaul its structure and introduce four new divisions.

Moyane pressed for a fifth structure, which was added. A key part of the restructuring saw the divisions that oversaw corporate tax and individual tax merged into a single division named Business and Individual Tax (BAIT) which reported to the commissioner. Jonas Makwakwa was appointed chief operations officer (COO) of the SARS BAIT unit, prior to which he had been SARS audit group executive. As the COO of BAIT, Makwakwa was in an extremely powerful position, in which he had operational control over all taxpayer (corporate and individual) affairs.

Makwakwa, worked close to and along with Bain, as Tom Moyane’s right-hand man, to execute the Bain plan and Moyane’s recommended changes that proved to be so detrimental to SARS.

In March 2018, after 22 years at the tax agency, Makwakwa resigned. He left following a great deal of controversy. It had become clear that Makwakwa had been engaged in a litany of suspicious activity, chief among which included: using his position to advance romantic interests, being on the receiving end of suspicious payments for a number of years, stuffing cash into ATMs, and unlawfully dishing out confidential SARS information

All of these “shenanigans” must be seen within the context of State Capture. Jacob Zuma and his allies needed the keys to SARS, which proved harder to capture than the intelligence and the criminal justice system. Bain’s restructuring of SARS provided the unfettered access, for the likes of Zuma and Moyane, to an essential state institution that was repurposed for the political and private gain of Bain and Moyane alike.

The findings of the Nugent Commission neatly sum up who would benefit from this assault on the integrity of SARS: “[w]e think what occurred can fairly be described as a premeditated offensive against SARS… Mr Moyane’s interest was to take control of SARS. Bain’s interest was to make money”.

In other words, according to a judicial commission of inquiry – Bain contributed to the gutting of SARS, and the implosion of South Africa’s public finance, which contributed to the suffering of millions for one reason only: profit. 

Bain – destruction in their wake

Until Moyane and Bain got their teeth into SARS, it had been deemed a “model state institution”. In the final report of the Commission of Inquiry into SARS, Judge Nugent noted that “SARS was on a trajectory that had earned it accolades domestically and abroad”.

Its success was vital to the country given that it faced the Herculean task of collecting revenue to enable South Africa’s democratic government to deliver on its promises and fulfil its constitutional duties. A well-governed, resourced and effective SARS is vital in the guarantee of crucial rights, such as the right to social security and, ultimately, to strengthening democracy. 

It is clear that Bain did not only have a negative effect on SARS’ capacity to collect revenue, but that it undid years of significant gains made by the tax agency. The restructuring at SARS spearheaded by Bain & Co led to enormous and rapidly escalating shortfalls in tax revenue collection.

Evidence presented to the Nugent Commission revealed that in the period after Moyane took over at SARS and contracted Bain, the service consistently failed to meet its revenue targets. The shortfall for 2014/15 was R7.335-billion; for 2015/16 R11.292-billion, and for 2016/2017 R30.709-billion. In 2018, the tax revenue shortfall at SARS contributed to the first VAT hike since democracy, disproportionately affecting the most vulnerable in our society. All this is the legacy of Tom Moyane and his CEO coaches at Bain during its foray into public sector consultancy.

How has Bain responded to these accusations? In December 2018 it issued what could be described as a half-hearted apology for its role in the destruction of SARS. This followed the release of the final report of the Nugent Commission. However, true to form of all great management consultancies – Bain failed to take full responsibility, but admitted that the firm should have been aware that Tom Moyane “was pushing a personal political agenda”.

Bain, in an attempt to square its debt with South Africa, paid back the money it earned from its work at SARS with interest, which amounted to R217-million. However, considering the damage Bain caused at SARS and to the wellbeing of South Africa’s people – its tab would be much larger when calculating the social damage it and other enablers have incurred. Its tab, therefore, remains unsettled.

The apology by Bain is described as half-hearted precisely because it continues to evade responsibility and paints what the consultancy did at SARS as a mistake, a misguided error of judgment as it were, which could have been avoided if they had done the due diligence. 

Bain’s man in South Africa, Vittorio Massone, disappeared to Italy under the guise of a medical emergency after one short appearance at the Nugent Commission, never to be seen again under South African skies. This former member of the Council at Business Leadership South Africa, according to his website on which he flashes his smiles and airbrushes over his role in the destruction of SARS, is now vice-chairman of Italian management consultancy, Alkemy, which is listed on the Italian bourse.

True to form, Bain remains unaccountable

In 2019, Bain hired business ethics expert Athol Williams in an attempt to reform its tainted public image in South Africa. With a wealth of experience in the field of business ethics and as a previous partner of the consultancy, Williams was brought in as a fixer at Bain and supposedly to review the company’s processes and ethical standards in the wake of its complicity in State Capture. However, a mere six months later, Williams resigned his plum posting and publicly accused the firm of not being transparent with him and the Nugent Commission. 

Williams claims that Bain was transparent with neither him nor the Nugent Commission about the role it played in enabling State Capture in South Africa. Williams has also blown the whistle on an offer by Bain to pay his relocation fees to the United Kingdom (presumably to keep him far away from South African corruption investigators) and threatened him with legal action. Williams has reportedly described his life as a living hell, thanks to Bain.

Bain has vehemently denied that it was not transparent with Williams, about the internal investigation it conducted and denied withholding any information from him. Bain has also rejected the allegation by Williams that it has made any attempts to “coerce him or influence him through monetary levers or otherwise”.

Considering the notorious modus operandi of global auditing and consulting firms and the treatment of whistle-blowers who speak out against private sector enablers of State Capture and corporate crimes, such intimidation by Bain, if indeed true, is unsurprising. Turning on a powerful corporation such as Bain and the big consultancy cash, which buys one’s silence, comes with personal consequences. 

Bain has also neither been honest with the people of South Africa nor has it fully disclosed the extent of its role in State Capture. Despite what seems to be considerable pushback on the part of Bain, Williams has made it clear that he is “prepared to spill the beans at the Zondo Commission”. Bain has applied to the Zondo Commission for leave to cross-examine Williams.

It is essential that companies such as Bain are made to appear at the Zondo Commission and fully account for their unethical conduct and the role they played in State Capture and corruption and, if required, face subsequent prosecution. Little changes when corporations are left to self-correct – only legal accountability will change a culture of practice embedded in companies such as Bain. DM

Open Secrets is a non-profit organisation which exposes and builds accountability for private-sector economic crimes through investigative research, advocacy and the law. Tip-offs for Open Secrets may be submitted here.

Previous articles in the Unaccountable series are:

Unaccountable 00001: Dame Margaret Hodge MP – a very British apartheid profiteer; Unaccountable 00002: Liberty – Profit over Pensioners

Unaccountable 00003: Dube Tshidi & The FSCA: Captured Regulator?

Unaccountable 00004: Rheinmetall Denel Munition: Murder and mayhem in Yemen; 

Unaccountable 00005:National Conventional Arms Control Committee: handmaiden to human rights abuse?

Unaccountable 00006: Nedbank and the Bank of Baroda: Banking on State Capture.

Unaccountable 00007: HSBC – The World’s Oldest Cartel

Unaccountable 00008: FNB and Standard Bank- Estina’s Banks

Unaccountable 00009: McKinsey – Profit over Principle

Unaccountable 00010: Jacob Zuma – Comrade in Arms

Unaccountable 00011: Thales – How to buy a country

Unaccountable 00012: John Bredenkamp – Agent of BAE Systems

Unaccountable 00013: Fana Hlongwane – Agent of BAE Systems

Unaccountable 00014: BAE Systems: (Profit) Before Anything Else

Unaccountable 00015: The BAE Corruption Bombshell

Unaccountable 00016: Deloot- How Deloitte gets away with it.

Unaccountable 00017: EY- Incompetent, Negligent or Criminal?

Unaccountable 00018: KPMG at the heart of State Capture 

Unaccountable 00019: IRBA – soft-touch audit regulator in turmoil

Unaccountable 0020: Credit Suisse – An enabler of mega-looting in Mozambique

Gallery

Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

All Comments 9

  • Prominent American politician, Mit Romney, founder and director of Bain, should be sent a questionnaire, and perhaps his political opponents alerted. Foreign Fat Cats such as Romney and “Lord” Bell of Bell Pottinger think nothing of damaging our democracy for the sake of lining their own pockets.

  • The author / s of this article is / are to be congratulated. Twice over. First, for ferreting out the details of Bain’s reprehensible practices, its sociopathic avarice, and its subsequent attempts at whitewashing and soft-pedalling its own culpability.

    Second, for presenting those details in an eminently readable article that weaves a clear and coherent narrative with a lucid, easy-to-follow storyline. This is something several DM hacks really struggle to get right, and instead the reader is too often left reeling and confused in the wake of a salvo of scattershot factoids lacking a cohesive thread that contextualises and interrelates them to one another.

  • Minor correction: Bain has a history of public sector work in South Africa. Bain had a close relationship with SAA imported CEO Colman Andrews (who was the co-founder of Bain Capital with Mitt Romney. On assumption of his position as SAA CEO, in 1998, Bain landed in South Africa with a neat annuity stream.

    • Thanks for an elucidating article, revealing Bain & Co as the bane of incompetence. Consultancy seems to offer excellent ways of collecting fees/making profit without any need for accountability. Resonating well with the general lack there-of in our governing systems.

  • It would be interesting to know what proven case studies Bain has in South Africa (or elsewhere)? They were never a substantial (results) consulting firm. To classify them (and BCG and McKinsey) as the Top Three is a joke. EY and Accenture eat all three before 9AM every day.

  • DM168 Analysis

    Grabbed: Who is top cop Khehla Sitole and will he hold on to his job?

    By Marianne Thamm