The Pretoria division of the Gauteng High Court has confirmed a Section 163 (preservation) order granted to the South African Revenue Service (SARS) in September last year against luxury car-loving businessman Thabiso Hamilton Ndlovu and several companies that have been described by the presiding judge as “mere fronts”.
In a ruling emailed to the parties on Monday, the acting Deputy Judge President of the Gauteng division, Roland Sutherland, found that Ndlovu’s reasons for challenging the provisional order – including that he was busy sorting out his tax affairs when it was issued – had insufficient tread.
Sutherland said the argument that Ndlovu and his companies were “intent on paying what shall fall due” was “belied by the duration of the non-compliance” with SARS.
The judge further found that the opinion for a preservation order as put forward by SARS was “wholly reasonable and appropriate”.
“The delinquency in the rendering of the tax returns is an obvious and strong indication that the taxpayer is, at best, irresponsible and, at worst, is hiding income. When the conduct occurs over several years the inference of deliberate resistance to the payment of tax becomes even stronger,” said the judge.
He said that the “spendthrift behaviour of Ndlovu” in acquiring five luxury cars “at virtually one go” was “evidence of consumption on such a grand scale and gives rise to the inference that the assets under his control are unlikely to be deployed to the fiscus and are more likely to be devoted to immediate and extravagant gratification of material wants, depleting what is available to pay tax liabilities, present and future”.
As previously reported by Daily Maverick, the 32-year-old Ndlovu was thrust into the limelight and consequently caught SARS’ attention during South Africa’s hard lockdown in May last year.
Ndlovu had taken to social media to post images of some of the high-end vehicles he had purchased for himself and his family, valued at about R10.5-million.
Outraged social media users flexed their fingers and took to their devices to drag the young businessman – whose companies and those of his business acquaintances (“mere fronts”) sell goods to the state, including to the National Health Laboratory Services (NHLS) – for insensitively flaunting his wealth. This, at a time when thousands of South Africans were losing their jobs as a result of the lockdown, or succumbing to Covid-19.
The NHLS has been engulfed in its own tender irregularity scandals regarding the awarding of personal protective equipment (PPE) procurement contracts, which is being investigated by the Special Investigating Unit (SIU).
Nevertheless, Ndlovu ended up posting an apology that did not hit the warm and fuzzy parts of SARS: The provisional order resulted in several assets being seized, vehicles being removed and bank accounts being frozen – a common move to preserve what is possibly owing to the taxman.
As described by the judge: “Apparently, there are people at SARS who trouble to follow social media. They looked into his tax affairs and were impressed that Ndlovu had spared SARS the burden of reading any tax returns since 2016. They referred the big spender to the Illicit Economy Unit who have a keen interest in mismatched income and expenditure phenomena.”
Ndlovu is the sole director of Hamilton Holdings Pty Ltd and the sole member of Hamilton Projects CC, both of which opposed the preservation order together with Mok Plus One Pty Ltd, Abompetha Pty Ltd, Feliham Pty Ltd and Ndlovu himself.
It was Ndlovu who deposed answering affidavits on behalf of the respondents.
According to Judge Sutherland, Ndlovu had described Mok Plus One director Sechaba Mokone and Abompetha directors Thuthuka Kunene and Kagiso Sekgaolelo as “entities and persons who… have a close relationship with him and collaborate in business”.
Too, the sole director of Feliham – Felicia Sekete – had been identified as Ndlovu’s fiancée. Ndlovu also described her and the company as business collaborators.
But, according to Judge Sutherland: “The common cause facts as adduced in evidence bear out a symbiotic relationship among the respondents. The probabilities are that they are all alter egos of Ndlovu.”
Hamilton Holdings, Mok Plus One, Abompetha and Feliham were awarded contracts to supply goods to the NHLS as part of Covid-19 management measures “at virtually the same time”, according to Sutherland. Another company, Kgodumo Mokone Trading Enterprises, also received a “similar contract”.
Sutherland described all of the companies as part of the “Ndlovu circle”, in which Ndlovu had an “evident interest”.
The judge deemed the allegations that the Hawks were investigating the possible impropriety of the contracts as being of no relevance to the ruling on the preservation order.
He further said that “nothing turns on whether SARS knew or not” that days prior to the provisional preservation order being issued, the Hawks were going to raid the properties of the respondents.
“No part of SARS’ case is premised on any unlawfulness in the contracts between the NHLS and any of the respondents,” he said.
After a dive by the Illicit Economy Unit into Ndlovu’s affairs, said the judge, which included his bank accounts, “flows of money to and from one or the other of the respondents and to elsewhere and other incongruent cash flows into one or other respondent which did not ostensibly have a rational business purpose” were found.
“No less interestingly, the tax and VAT affairs of the several respondents were not in order. Not only were returns outstanding, some for several years, but the income streams, especially payments from the NHLS contacts to the several respondents could not be matched with the VAT that would, by inference, be due and payable. Moreover, some of the respondents had declared themselves to be dormant yet were supposedly trading during the period of dormancy.”
Of the NHLS transactions, “the four respondents who had contracts had received huge sums from NHLS”, said the judge.
“What was not visible,” said the judge “was any money paid by these respondents to produce or acquire the goods sold.”
He said it was found that Mok paid R17.7-million to Ndlovu; Abompetha paid a total of R17.46-million to Ndlovu; and Feltham paid R14.99-million into the same Ashburton Investment bank account into which Hamilton Holdings made a R30-million deposit.
“In addition, after the order was granted, it was discovered that Kgodumo had a contract with NHLS and paid the proceeds to [Hamilton Projects]. Of these funds, R20-million” was moved to the Sue and Ed Trust to acquire a property in Bryanston, Johannesburg. A new contract was drawn up to have the property registered in a company seemingly unrelated to Ndlovu. But the “controlling mind ” of the transaction was found to be Ndlovu.
According to a SARS estimate based on the available data, the likely revenue due from tax and VAT is as follows:
The revenue service also found that Ndlovu owed tax for the 2017 to 2021 years of R36.84-million, of which R23,341,292 was only due in 2021.
The respondents’ tax affairs were found to be non-compliant regarding provisional tax and VAT, said the judge, and although there had been a dispute over the scale of non-compliance, this was not pivotal to the order.
Sutherland also brushed off an argument by the respondents, saying that bank statements had not been attached for the judge’s scrutiny, thus rendering the allegations unsubstantiated.
“The notion that the judge would, in this context, scrutinise the bank statements to check the arithmetic is far-fetched; the criticism is misplaced.
“What was set out was an account of the various respondents’ tax status, their degree of compliance and a summary account of the mismatch between declared income and apparent tax liability.
“This pattern of behaviour married to the conspicuous consumption and cash flow movements are all aspects that inform an impression, which in my view, reasonably, is one that the respondents are splurging without regard to making provision for paying what they owe to the fiscus,” said Sutherland.
Daily Maverick contacted Ndlovu for comment and was told he would respond via email. That did not happen. Upon further engagement, Ndlovu told Daily Maverick: “Shucks, I have been in meetings all day” and referred us to one of his lawyers. The lawyer did not answer Daily Maverick’s calls. Ndlovu then said he would alert the lawyer to Daily Maverick’s calls. The phone continued to go unanswered.
When Ndlovu’s lawyer eventually answered the phone, he said he would “take instructions” and get back to Daily Maverick. He finally replied: “Thank you for your enquiry. Kindly note that we are currently considering the contents and reasons of the judgement by the High Court. We shall announce our clients’ position and intention as soon as is reasonably possible.” DM
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