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SARS tip-offs lead to successful multi-province coal smugglers search-and-seizure operation

SARS tip-offs lead to successful multi-province coal smugglers search-and-seizure operation
A truck transports coal towards the Eskom Holdings SOC Ltd. Kendal coal-fired power station in Mpumalanga, South Africa, on Friday, May 5, 2023. Debt-strapped Eskom is currently implementing daily blackouts because its dilapidated power plants are unable to supply enough electricity to meet demand and it doesn't have the money to invest in capital equipment. Image: Bloomberg

Inter-governmental cooperation and information-sharing has resulted in a major breakthrough in the investigation of a sophisticated coal-smuggling syndicate, potentially saving the fiscus R500-million and preventing further damage to Eskom's ability to generate electricity.

In a welcome move towards repairing the broken utility that is often referred to as ‘Eishkom’, a massive inter-governmental search and seizure operation across five provinces was carried out on 12 October, 2023.

The operation, intended to “break the back” of a sophisticated criminal syndicate of alleged coal-smugglers, was led by the South African Revenue Service (SARS) after information regarding a host of tax crimes allegedly committed by members of the coal-smuggling syndicate became available.

Regulatory authorities have attributed the success of the operation to the inter-governmental cooperation and information-sharing under the auspices of the NatJoints Energy Safety & Security Priority Committee tasked with unmasking and bringing criminals to book.

Read more in Daily Maverick: Introducing the four crime cartels that have brought Eskom and South Africa to their knees

In this particular case, an estimated R500-million loss of revenue to the fiscus, has been prevented. The alleged coal smugglers and their related entities are active and have a presence in Gauteng, Mpumalanga, KwaZulu-Natal, the Free State and Limpopo.

In a media statement, SARS said the suspects targeted on the day included former Eskom employees who facilitated procurement fraud, as well as other individuals involved in the diversion of high-grade coal.

Read more on Daily Maverick: Eskom’s broken heart — inside the leaking procurement systems that keep South Africa in the dark

SARS managed to establish links between individuals and related entities and confirmed the following possible gross contraventions from a tax perspective:

  • Non-registration for income tax, VAT and/or PAYE.
  • Failure to submit tax returns.
  • Under-declaration of income.
  • Claiming undue VAT refunds.
  • Making false submissions (fraud)

The uncovered operations

The sophisticated network of coal smugglers is suspected to consist of local and foreign nationals. Coal trucks destined for power stations are diverted to designated coal yards where high-grade coal is replaced with low-grade or sub-standard product. The high-grade coal is then exported or sold to willing buyers. The low-grade coal is often blended with scrap or other materials and then delivered to power stations.

The low-grade coal damages the infrastructure at the Eskom power stations, which is a major factor in crippling the power utility’s ability to generate electricity for the South African grid. Late last month, Eskom signalled that it hoped to limit rolling blackouts to stage four in the coming summer months. However, that remains to be seen.

SARS Commissioner Edward Kieswetter commended the country’s law enforcement agencies for the massive breakthrough in ongoing investigations.

“It is because of such naked greed that the country has experienced unprecedented load shedding, which harms business, undermines foreign direct investment and leads to job losses — all of which negatively affect revenue collection,” he said, adding that SARS will continue to pursue taxpayers involved in intentional and wilful non-compliance — without fear, favour or prejudice.

In May this year, Lt Gen Peter Jacobs, divisional commissioner for crime intelligence at SAPS, told Parliament that the SAPS intelligence team had uncovered the presence of criminal syndicates operating in the coal supply line, where coal that was en route to Eskom was diverted and dumped at illegal coal yards. The intelligence team had raided several illegal coal yards and identified their owners. For example, the team found that one farm of about 400 hectares contained 28 sub-coal yards, which were rented out to various people. DM

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  • Matthew Quinton says:

    Gotta giggle at the “sophisticated” network comment.

    Gotta giggle at the fact that SAPS didn’t add any value.

    Gotta giggle at the fact that the “sophisticated network” is “suspected to consist of local and foreign nationals” which means that actually at the time of the writing of this article, no one has a cooking clue of what it really going on or who is doing it.

    A truck leaves a coal mine… along the way the coal is dumped and chap coal and scrap replaces the coal and this mess is then loaded into the power station.

    With all due respect, an 11-year old of reasonable intelligence could spot this. The fact that it takes a “NatJoints Energy Safety & Security Priority Committee” to do something as simple as track a series of OPEN TRUCKS from the coal load-on to the coal load-off makes me want to just cry and the mind numbing stupidity of the muppets we have running things.

    Camera + Tracking Device = Problem solved… then just have an AI which checks the footage and if it notices that the delivery didn’t follow a set pattern in raises an alarm.. DONE!!

    • Clive Soldin says:

      Gotta agree with you Mathew.

      With good, solid, honest managers who do their job and look for solutions, your simple solution above will work, detect irregularities and put the thieves (from henchmen to fat cats) in jail for a long time. Hey SAPS/NPA ?

      With absent electricity crippling SA, you would think political WILL would be a given.

    • Brian Kritzinger says:

      Indeed an easy issue to solve, but there is no political will to do so because the money flows right to the top echelons of government. Arrange for a few “massive inter-governmental” operations from time to time to fool the public into thinking there is something being done about it, but make no substantive effort to solve the ongoing problem permanently.

    • Groot Koos says:

      It is not that simple. Over the years Eskom have tried many solutions to track and trace coal and truck drivers and corrupt Eskom employees always find a way to sidestep this.
      The camera and tracking device solution have been tried. At one stage trucks were tagged with RFID tags to ensure that the same weight of coal that was loaded at the mine is delivered to Eskom. Drivers deliberately drove over the RFID readers to destroy them and Eskom employees sabotaged the computers.

  • steve woodhall says:

    Great… but I’ll get excited when the minister(s) enabling this and skimming off a cut are exposed, deposed, reduced to penury, and jailed.

  • Josie Rowe-Setz says:

    It seems as if what de Ruyter reported over and over again has been heard. Glad its happening but it raises the question…uf he had not resigned and made it all public, are we to assume that nothing at all would have been done?

  • What is actually more toxic is the DAILY systemic corruption at every municipality and gaslighting to undermine customers, ordinary people. The jobs of “civil servants” ‘to serve’ and do a job or duty, not a favour but just simply their job! Their jobs literally exist because of taxpayers & the ordinary people who simply want to live their lives & not have a constant crusade for service delivery, pleading for service yet being intentionally tired out and broken down because of bureacratic ego and manipulation. Citizens are cheated monthly with overpaying and inflated “costs” that are never justified or are simply intentionally obscure(d), convoluted or requests ignored. One has to become rude otherwise you are simply silenced. If you don’t pay a bill you get a creditors notice and are made to feel like a criminal. However if the municipality needs to give you a refund or admit a mistake you have to wade through redtape incessantly and there is absolutely zero accountability or work ethic. This kind of drop by drop corruption is like a disease deep within the rotten roots of decades old power play of people who constantly undermine and bully and bite the very hand that feeds them! Without customers there is no need for you bureaucrats! As Desmond Tutu said “The so-called ordinary people, God’s favourites, are sick and tired of corruption, repression, injustice, poverty, disease and violation of their human rights.” On every level victimisation and bullying is normalised.

  • Denise Smit says:

    They have read Andre de Ruiters book. The followed up on the Fivas investigation report would be my guess. No police results. Denise Smit

  • Alley Cat says:

    But a roaring silence on the 2 members of useless Cyril’s cabinet who are implicated continues. Typical ANC, go after the small fish so that they can claim they are doing something but sweep the big fish under the carpet. Do they think we are ALL stupid?

  • Glyn Morgan says:

    Took the relevant authorities rather long to find what the public have known about for years!

  • Tim Elliott says:

    Why the hell has it taken this long to do something? It’s been happening under our noses for how long. Carte Blanche uncovered a story months ago.

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