POINT OF NO RETURNS
SARS nails high-flying Eskom contractor for millions in tax evasion
The tax collection agency says businessman Solomon Lamola has not submitted personal tax returns since 2011. Together with his two companies, he owes millions of rands in outstanding tax payments.
A fleet of 45 vehicles. Six properties, of which two are mortgaged. A further 59 properties. And shareholdings in 10 companies that are not tax-compliant.
This is an early count by the South African Revenue Service (Sars) of assets that are owned by Manyeleti Consulting and Magogudi Construction, companies that do business with Eskom and which are solely controlled by Solomon Lamola.
An industrial engineer, Lamola is the sole director of Manyeleti Consulting (a provider of management consulting services) and Magogudi Construction (a provider of construction and property development services) – both companies provide industrial cleaning, maintenance and repair services at Eskom’s generation division and power stations.
Eskom confirmed to Daily Maverick that Manyeleti Consulting and Magogudi Construction entered into contracts with Eskom in 2022, which will run until 2026 and 2027 with the respective companies.
SARS has now nabbed Lamola and his entities for failing to submit personal and company tax returns since 2011, resulting in the fiscus being owed millions of rands.
The tax collection agency also suspects Lamola to be part of a syndicate linked to fraudulent and corrupt schemes in the transport, sale and export of coal to Eskom and other suppliers.
The assets owned by Lamola and the companies he controls are subject to an audit because, on 11 December 2023, the High Court in Pretoria upheld a provisional preservation order that SARS initially secured on 24 October. The preservation order is against Lamola and his two entities.
The effect of the preservation order is that SARS, working with a court-appointed curator, took charge of bank accounts, premises and all other assets owned by Lamola and the companies he controls.
The order also blocks Lamola from selling any of his assets and those of the companies he is linked to while the tax agency continues with a probe into tax evasion and seeks to recover outstanding tax payments.
Fightback against SARS
Lamola and his companies challenged the terms of SARS’ preservation order, seeking it to be rescinded or reconsidered.
Lamola argued that SARS violated sections of the Tax Administration Act when his tax affairs and those of his companies were disclosed in the agency’s court documents when it initially sought the preservation order.
The High Court in Pretoria dismissed this argument, agreeing with the argument advanced by SARS that the Tax Administration Act contains a general prohibition against the disclosure of taxpayer information to someone who is not an official of the tax collection agency. SARS maintained that its preservation order application was served to implicated individuals (Lamola and his entities) and not published publicly.
Lamola and his two entities also argued that they have faced financial hardship since the curator took over their assets and bank accounts.
They have accused the curator of not making debit order payments timeously and honouring contractual obligations at Eskom. Furthermore, the salaries of over 300 workers at Manyeleti Consulting and 85 workers employed by Magogudi Construction are not being paid on time – making it difficult for Lamola’s companies to trade effectively.
About this argument, the court made the following finding: “No evidence in support of these allegations were included in the papers [of Lamola and his associated companies]”.
The court also dismissed other arguments raised by Lamola and his two entities that proper processes were not followed by SARS when securing the preservation order and lumping him and his companies together with other alleged tax evaders.
Tax debts
SARS has accused Lamola of not submitting his personal income tax returns from 2011 to 2023, thereby owing the agency R5.9-million.
SARS said that as the sole director of Manyeleti, between 2018 and 2022, Lamola under-declared the company’s income, putting the outstanding tax bill at R107.5-million.
Over and above this tax bill, SARS found that Manyeleti did not comply with pay-as-you-earn (PAYE) tax and Unemployment Insurance Fund payments that were deducted from the pay of workers but never handed over to the relevant authorities.
The PAYE tax prejudice to SARS is calculated at R10.8-million. On the tax debt of Magogudi Construction, SARS has calculated its liability at R67.2-million.
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During court proceedings, Lamola and his two entities never challenged SARS’ charges of not being compliant with tax filings or amounts that are due, inferring that there is veracity to the agency’s claims.
On Lamola’s character, the court made a finding that he hid assets and those of his companies “on a grand scale to evade tax and consequently a means to hide income”.
Links to coal-smuggling syndicate
The court proceedings also unveiled a link between Lamola and his entities to members of an alleged coal smuggling syndicate known as Golden Royal Construction (Pty) Ltd.
The link between Lamola and the alleged syndicate is a property in Roodepoort, Johannesburg, now occupied by the mother of his children. SARS established that the Roodepoort property was, as of 11 October 2023, the listed registered address of Golden Royal Construction.
SARS conducted a search-and-seizure operation on the property and found that while it was Golden Royal Construction’s registered address, Magogudi Construction was the registered owner. It is also known as the Struben property.
“The Struben property is now registered in the name of a trust, the SM Lamola Family 2 Trust [linked to Lamola]. From the title deed attached to the founding papers [for the preservation order]… the Struben property was, as recently as April 2023, transferred from the third applicant [Magogudi Construction] to the Trust 2 for the sum of R3.4-million],” the ruling from the High Court in Pretoria reads.
Eskom response
Daily Maverick asked if Eskom had conducted due diligence on Lamola and the companies linked to him, and whether they were compliant with tax obligations, before doing business with them.
The power utility responded: “Eskom checks the tax compliance status of suppliers prior to entering into contracts with them. For both of these suppliers [Manyeleti Consulting and Magogudi Construction] awards were made in 2021 and 2022 and Eskom confirmed their tax compliance status at the time of contracting. There have been no forensic investigations pertaining to these suppliers.
“[The] Eskom Vendor Management department follows up with suppliers to inform them to correct tax compliance when it expires. In this instance, there was no need for an investigation.”
In other words, Eskom did not detect any red flags regarding the tax compliance status of the companies when it entered into business with them.
Asked if Eskom plans to terminate its contracts with Manyeleti Consulting and Magogudi Construction now that SARS had found them to be non-compliant with tax obligations, the power utility said: “In instances where a supplier/contractor compliance status changes while doing business with Eskom, suppliers do get notified; the supplier is then provided [a] specific period to resolve their tax status.
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“Eskom engaged these suppliers [Manyeleti Consulting and Magogudi Construction] through our vendor management.” The outcome of these engagements is not known.
The lawyer acting for Lamola, Manyeleti Consulting, and Magogudi Construction told Daily Maverick that the High Court decision had been appealed.
“As the attorneys on record in this matter, it is to be noted that the details of our clients should not have been published. The Tax Administration Act 2011 affords all taxpayers confidentiality of their tax affairs. The publication of the judgment denied our clients the legislative confidentiality,” said a representative of Faber Goertz Ellis Austen Attorneys, which acts for Lamola, Manyeleti Consulting and Magogudi Construction. DM
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“The publication of the judgment denied our clients the legislative confidentiality”
The above appears to be trying to escape via a technicality rather than because of actual innocence.
…in which case fry I say.
When the matter became subject of the courts, obviously the privilege to privacy falls away. That argument of confidentiality is unsustainable. Only government agency that is keeping this country afloat, just my thought
Afloat? It’s the prime thievery of cash from citizens to support the corrupted government. Why do you thik5it has such draconian powers? Not because they work for the greater good, they are the thugs collecting from us to support the politicians who pay themselves whatever they feel like, and plunder the rest. If you want to look after the poor, try the church down the road from you.
This case aside, ask yourself. Where’s Juju? Zuma? Mashatile? The entire cabinet? In terms of their tax compliance? The price for political office in ‘serving’ the people must be that you lose the rights to tax confidentiality when it is tax that pays you.
AGREED!!!
Surely Eskom asked for a tax clearance certification. I thought that was pretty much standard?
Surely you jest by suggesting that ESCOM should have bothered themselves by asking for something as trivial as a tax clearance certificate?
….. except where the appointed contractor is a friend/cousin/brother-in-law of the senior official in Supply Chain Management, and as long as the monthly cheques keep coming.
“ Faber Goertz Ellis Austen Attorneys” successfully added to the blacklist of bankers, lawyers, accountants, consultants and providers that choose to do business with the very people that are destroying our country.
Somebody should go look how this crowd got a tax clearance certificate.
Somebody should go look how the property deals cleared the check on source of funds.
I’ve always said that, like with Al Capone, the undoing of the corrupt will not be criminal convictions but income tax. Once SARS is done with penalties and interest and its own criminal charges, Lamola will be cooked.
Heads must roll at Eskom’s Vendor Management unit!
I thought SARS had moved to the go to jail solution for naughty taxpayers, or lack of tax payments.
Just another criminal connected to criminals within Eskom.
Lock him up
If this man and his companies are robbing Eskom, robbing SARS, robbing his staff and robbing UIF- nice catch SARS.
Why has it taken SARS so many years to catch on to this guy?
It’s “funny” how we that are on PAYE get ruthlessly audited but this guy can go 13 years without audits. He probably spent his bribe money on drugs.
No personal return since 2011 and personal control of a bunch of companies that aren’t tax compliant doing parastatal work? Anyone here that isn’t toight like a toiger with the ANC been able to pull that off? Glad to hear that SARS is doing something but if this isn’t proof that they treat the connected differently to the rest of the punters I don’t know what is. Eskom doing business with non tax compliant businesses is about as shocking as a very flat battery.
Does this mean that it is standard practice at Eskom for the entity to do business & procure services of companies that are not tax compliant?
Corruption on a grand scale. When on earth are these corrupt elements going to be nailed and sent to prison where they belong? NPA, Sharmila Batohi, when are we going to see corrupt people in orange overalls?
Now this is wonderful action being taken by SARS and should be an example that all the other corrupt contractors, executives and politicians will be following shortly with the necessary prosecution outcomes thereafter.
One wonders about Eskom’s diligence regarding tax compliance…… I am being very generous!!
Just waiting for the “if I’m guilty I’ll pay it back” line! Works with the anc all the time!
Follow the paper/money trail..
All leads to the guilty parties, no matter how clever they think they are!!
I am not holding my breath, as there are top ANC officials involved…
Sooo… They’ve not paid over PAYE contributions (a criminal offense of fraud/theft, one count for every month it was not done)? They’ve not paid over UIF contributions (a criminal offense of fraud/theft, one count for every month it was not done)? And he is the sole director? So why is this person still not charged with fraud and arrested on however many counts of fraud? Why is SARS only going about this with civil actions, why are there no criminal actions at all? And why did this take 12 years to come to the fore?
Here is a quote from a SARS media release for a small company director sentenced to 5 years imprisonment and a total of R600 000 in fines for the same type of fraud of a piddly R5.9 million:
“SARS Commissioner Edward Kieswetter said companies and their directors would face criminal prosecution if they transgressed the law and tried to defraud the fiscus of any revenue that was due to the state.”
Nope, wrong, lies, rubbish, Kieswetter – you don’t have the balls to do it. Only some companies and some directors will face this, others with loads of money or with a bit of prestige, will never face criminal prosecution. Think Jacob Zuma and decades of non tax compliance.
Let’s see if SARS actually manage to bring this case to a successful conclusion with full penalties, recovery of monies owed and sufficient evidence for criminal prosecution. Can anticipate push-back, complex forensic accounting skills absent and cases ultimately thrown out. Many similar cases where there have been such seizures of assets with great fanfare and nothing heard since. SARS have so many tools at their disposal and we can read and see flagrant displays of untold enrichment every day but SARS have been MIA on all but a very few. Along with the other statutory institutions: FIC and SARB and the banking council/sector, accountants and auditors and their professional bodies, SARS have let the nation down by their failure to act and destroyed hope amongst law-abiding tax-payers for even-handed treatment of all. If the NPA cannot bring cases to court why aren’t SARS using their powers-shameful?!
When the authorities are gouging at the trough, how the hell are we ever expected to believe that they will catch the criminals?
Why am I not surprised – this is standard practice nowadays,
Lamola will get a slap on the wrist, pay an insignificant fine and then get a position in parliament, if julias’ SARS case is anything to go by.
Quite correct Gerry
maybe he is just another zuma supporter targeted by the anc? Firepool? But this may be a sign of better times infighting among the elite
This gangster owes the fiscus R200,000,000.00 (R200M), gulp!
This is no small change in any language.
A citizen that steals food will face the law with arrest, incarceration……..
It seems that the higher the amount involved the more privilege the gangster has to avoid incarceration.
Should the question be asked as to the complicity of Eskom employees to keep this deal lubricated and unchallenged?
The man has not paid tax since 2011 but Eskom says when he entered into 2 contracts, in 2021 and 2022 respectively, he was compliant. Someone at SARS must have issued them the tax the clearance certificate fraudulently. The competing bidders at that time, if any must sue.
No tax celarance certificate? Well that’s not surprising and just means that someone, high up in Eskom, is in on the deal taking a backhand to ignore the compliance and push the deal through. SARS and/or the NPA should be investigating that side as well. De Ruyter noted in one of his interviews that he often saw fancy BMW’s and Porches leaving the parking lot driven by Eskom employees and it is obvious as to where they got the money.
Is “bottom feeding” not a more apposite term than “high flying”?
Did no one read De Ruyter’s book? This stuff is absolutely par for the course. Eskom is a bottomless trough. De Ruyter illustrates clearly how it works. He’s gone & nothing seems to have changed. The ANC remains a thieving cancer on the South African taxpayer. I hate to say, but the country is truly in a death-spiral. I have come to the conclusion that irrespective of who rules, the corruption is too ingrained at every level.
I hope that both SARS and the NPA can see these matters through to successful prosecution and conviction!?
Why is he not arrested for fraud- he could not have had a valid tax clearance certificate- something every buisiness must supply to the SOE’s with every tender, yearly