SCORPIO

VBS Scandal: The matter of SARS v Kabelo Matsepe (feat. South African people’s Constitutional Rights)

By Pauli Van Wyk 4 August 2021
Caption
Seven suspects in the VBS Mutual Bank fraud case appear at the Palm Ridge Commercial Crimes Court after CFO Phillip Truter turned state witness on 8 October 2020 in Palm Ridge, South Africa. (Photo: Gallo Images / OJ Koloti)

SARS has informed VBS fixer Kabelo Matsepe that his ‘behaviour is considered to fall within the “intentional tax evasion” category’ and that the taxman’s Criminal Illicit Economy Activities division is now claiming R61m in unpaid and undeclared tax for the fiscus.

Pauli Van Wyk

But first, a note on the public’s rights to information and open court procedures after Daily Maverick was denied access to attend the virtual court hearing on Tuesday.

Scorpio was denied access to attend the court hearing of SARS v Kabelo Matsepe, in which the taxman asks for the sequestration of Matsepe.

Denied in that SARS representatives declined to provide this journalist with the link to the online court procedure, denied in that our requests (email, phone calls, WhatsApp messages) to the defendant were ignored by his attorney and denied in that the relevant registrar of the court was telephonically unavailable — perhaps because of the Covid-19 pandemic — to tend to the request for access.

Between this passive-aggressive approach/inefficiency/cowardice, the rights of every South African to be informed about an important matter — the fraud perpetrated against VBS Mutual Bank and what SARS and a key roleplayer have to say about their part in it — heard in an open court, was denied.

The Constitutional Court has, more than once in the past, confirmed that the “default position (of our courts towards freedom of information) is one of openness and disavowed an approach that proceeded from a position of secrecy”, while focusing on the “constitutional imperative of dispensing justice in the open”.

The issue of court access should, as an attorney involved in this issue rightly highlighted, be directed to the court. We are, however, in the middle of a pandemic. Inefficiencies in court, as is in the state apparatus in general, are also well established by now. In these times, courts seem to not operate as efficiently or as accessibly as they constitutionally should. In the absence, however, of a court officer available to grant access, the “default position is one of openness” and an approach “from a position of secrecy” should be “disavowed”. 

There is no space for any officer of the court to argue differently.

It is in the interest of open court principles and the Constitution that the media should be afforded access to the hearings — even by an attorney for one or the other side. 

We can spell out why: Journalists are there to safeguard not only the public’s rights, but also their clients’ rights. One would hope that this simple point would be well understood by now in democratic South Africa.

The principle of an “open courtroom” is constitutionally entrenched. Section 34 of the Constitution states that “everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court…”

A fair trial requires that it must be held in an open court. Because people cannot take time off work to go to sit in court to be informed, they rely on journalists to do this job for them. That is why Section 16 of the Constitution, which relates to media freedom, starts with “everyone has the right to freedom of expression…”

These provisions protect, importantly, the right of the public to receive information.

Case law is further saturated with examples supporting the principle of open courts, open justice, free access to information and the rights of journalists to report unhampered and unharassed on any matter in open court.

The Supreme Court of Appeal in the Sanral matter of 2015, held that: “It may be said that the right to public courts, which is one of long standing, does not belong only to the litigants in any given matter, but to the public at large…” 

Crucially, our apex court stated in the case of Mamabolo in 2001, that:

“Since time immemorial and in many divergent cultures it has been accepted that the business of adjudication concerns not only the immediate litigants but is a matter of public concern which, for its credibility, is done in the open where all can see. Of course this openness seeks to ensure that the citizenry know what is happening, such knowledge in turn being a means towards the next objective: so that the people can discuss, endorse, criticise, applaud or castigate the conduct of their courts.’ 

The case Daily Maverick wishes to report on is a sequestration matter to be heard in open court. There is important information to communicate — least of all that it is important for justice to be seen to be done. And in the case that Matsepe may argue he is being treated unfairly, this also gets highlighted in open court.

Daily Maverick’s insistence on reporting from the court is in fact an insistence on protecting the rights of the public, of our readers, of Matsepe and of SARS.

Daily Maverick will report this issue to the high court, to the Chief Justice and to SARS Commissioner Edward Kieswetter. In the meantime, we will let Judge Visvanathan Ponnan of the Supreme Court of Appeal have the last word. On behalf of a full Bench in the Van Breda judgment of 2017, after exhaustively researching international case law on tensions between the right to freedom of expression and the open justice principle, on the one hand, and the right to a fair trial, on the other, he had this to say: 

“The right of the media to gather and broadcast information, footage and audio recordings flows from s16 of the Constitution. The right to freedom of expression is one of a ‘web of mutually supporting rights’ that holds up the fabric of the constitutional order. The right is not limited to the right to speak, but also to receive information and ideas. The media hold a key position in society. They are not only protected by the right to freedom of expression, but are also the ‘key facilitator and guarantor’ of the right. The media’s right to freedom of expression is thus not just (or even primarily) for the benefit of the media: it is for the benefit of the public…

“Free speech goes hand in hand with open justice. The latter is a fundamental principle of the common law and has been described as ‘one of the oldest principles of English law’.

It is often expressed by the maxim that ‘justice should not only be done, but should manifestly and undoubtedly be seen to be done’. The principle is multifaceted. It insists that trial proceedings be conducted publicly in open court and ordinarily, that is how trials in our criminal justice system are held. The principle of open justice is one which strikes at the very heart of what South Africa has been, and is still, trying to achieve in the post-apartheid era.

***

This report on the matter of SARS v Kabelo Matsepe is based on the court record available so far, which includes both parties’ affidavits, heads of argument and annexures.

***

The High Court in Pretoria on Tuesday ruled in favour of SARS by granting a provisional sequestration order against the estate of VBS loot beneficiary Kabelo Matsepe, arguing that Matsepe is insolvent and cannot pay his tax bill of R61-million, which includes non-disclosure penalties. The taxman described Matsepe’s conduct as “intentional tax evasion” and took a dim view on excuses of why he ignored their assessments — excuses which ranged from death in the family to depression and consequential forgetfulness.

It is now for Matsepe to persuade the court by December this year that he should not be sequestrated.

Matsepe describes himself as a legitimate Limpopo businessman linked to the ANC. He argues that his business with VBS is legitimate and guided by a contract in which he provided “marketing and capital raising services” in exchange for a “commission”.

Investigating the VBS matter, advocate Terry Motau and law firm Werksmans described Matsepe as a “fixer”, a front for ANC Limpopo leader Danny Msiza and one of the main looters that stole the bank into insolvency.

The National Prosecuting Authority has charged Matsepe, along with 13 others, with a long list of crimes that include fraud, money laundering and theft.

Now SARS is adding tax to Matsepe’s woes.

His main argument seems to hinge on the assertion that SARS holds Matsepe liable for debt incurred by his company Moshate Investments. Matsepe says he did not receive the VBS money, which he claims are legitimate payments for work done, in his personal capacity. The funds were rather received by Moshate Investments. Therefore, Matsepe argues, he should not be sequestrated and SARS’s “disingenuous” and “very opportunistic” actions should rather be directed towards the company.

SARS’s main argument is that a series of letters and tax assessments addressed to Matsepe in his personal capacity had been ignored since March last year. He failed to object to these within the allowed 30 business days, in any event received more time to reply than provided for by law and did not apply to court to have the assessments reviewed and set aside or nullified. Therefore the assessments, in terms of the relevant tax laws, have become final and must be paid.

In the face of reams of case law, SARS says, Matsepe’s arguments are rendered “irrelevant”. He failed to object and must now pay the final tax assessments.

SARS sharply summarised Matsepe’s arguments, saying that, “because he does not agree with the assessments, they impose no liability on him to pay his debt to SARS”.

The court sided with SARS on Tuesday. It is now for Matsepe to offer arguments — new or old — by December in a last-ditch attempt at convincing the court of his innocence.

It is however a throwaway line in SARS’s papers and the taxman’s letter to Matsepe dated 20 November 2020 that should make his co-accused and the alleged “hidden hands” behind his power and riches sit up and take notice.

Included in SARS’s heads of arguments is this line: upon the sequestration of Matsepe’s estate he may be “interrogated and an investigation of his affairs may be conducted in which still further assets may be revealed”.

All indications are that SARS is aware of allegations that Matsepe merely fronted for the Limpopo ANC leader Danny Msiza, and possibly other powerful players.

If the court ultimately agrees with SARS that Matsepe’s estate must be sequestrated, SARS may be in a position to eye a new prize: a deep dive into widespread malfeasance at the bank — a door opened to it by provisions in the Insolvency Act. In this way, rumours of Matsepe’s backers may be further aired and tested. Egging SARS on, for example, will certainly be the question of Matsepe’s extensive and mounting legal fees, and who is paying.

Underlying this is SARS’s November letter to Matsepe wherein a SARS auditor and manager accuses him of “intentional tax evasion” by using a company “vehicle” to “conceal the true and full extent of your income in order to evade tax”.

SARS further states that Matsepe failed to submit income tax returns and did not declare substantial income for the periods 2016 to 2018.

Matsepe further did not register as a VAT vendor and submitted no VAT returns when he was liable to do so for periods between 2015 and 2018.

It seems SARS’s Criminal and Illicit Economy Activities division has found its teeth, sharpened them since its recent inception and is not about to take its eye off the prize. DM

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All Comments 7

  • One would think that SARS would be proud of its efforts in this case and welcome media coverage!
    Notwithstanding this, the SARS’s Criminal and Illicit Economy Activities division is certainly acting where Bhatoyi and company are failing – and getting results.
    Take their cash away and they are left with nothing and then jail them. If Matsepe is suffering from depression and consequential forgetfulness, imagine the suffering of his hundreds of poor victims.

  • In the end SARS will be the end for most of these corruption scandals.

    The company that received the funds either did not pay tax and VAT on the revenue or deducted as expenses transfers to people that do not qualify expenses. So it goes down the line. That second guy received his R10m but doesn’t have tax affairs in order.

    Penalties and interest wipe out the crooks.

    One thing we do need is that SARS can look through companies. Johnny starts and runs a company, the tax liability should not stop with the by then bankrupt company – it should follow the directors and shareholders.

  • Nice article I thought. Bit of a long lament about access to the courts in the beginning but very informative. I’m sure that dialing in to the session would have provided sound bites but I think the article stands on its own without that.

    • The access to courts is a big issue though. Personally I am glad that Pauli highlighted that.
      And I really hope that this is addressed.

  • Fantastic article! Let us hope that this matter is but a forerunner for others, where the monetary punishment for fraud and looting of the state, is enforced!

  • It will be interesting to hear Mr Kieswetter’s response. Why would SARS representatives not provide the link to the virtual court proceedings ?

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