Cape Town - Former finance minister Pravin Gordhan said on Friday he will seek legal advice, after KPMG retracted parts of its report into the SA Revenue Service (SARS) intelligence unit, which was incorrectly dubbed the “rogue unit”.
“I note their ‘regret’, but doubt whether this is adequate and proportional to the damage that KPMG has done,” he said in a statement. “I will be seeking legal advice in this regard.”
“The witting and over-enthusiastic collaboration of senior KPMG personnel (whether in current employment at KPMG or not) and their collusion with nefarious characters in SARS, in fact directly contributed to ‘state capture’ and gave legitimacy to the victimization of good, honest professionals and managers. It should and must be remembered that this was about attacking SARS as an institution with the main intention being to capture it.
"This is typical colonial arrogance and KPMG has not done enough. One would have expected KPMG to have the courage to admit, in the face of their own investigation, that the establishment of this unit was in fact legal. This option still remains open to them."
This follows an investigation by KPMG International into the South African unit. It concluded that its report into the SARS investigative unit – contracted by SARS Commissioner Tom Moyane – was wrong to suggest that Gordhan “knew, or out to have known, of the establishment by SARS of an intelligence unit in contravention of the rule of law that was ‘rogue’ in nature”.
KPMG said in a statement on Friday that the evidence in the documentation provided to KPMG did not support this interpretation.
“We recognise and regret the impact this has had. KPMG South Africa had no political motivation or intent to mislead,” it said. “The partner responsible for the report is no longer with the firm.”
“Given the failure to appropriately apply our own risk management and quality controls, that part of the report which refers to conclusions, recommendations and legal opinions should no longer be relied upon.”
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KPMG said it has offered to repay SARS the R23m fee it received for the work performed, or to make a donation for the same amount to charity.
It is believed Moyane used the KPMG report to purge deputy commissioner Ivan Pillay and former group executive Johan Loggerenberg and force out spokesperson Adrian Lackay.
It is believed their exit was due to an investigation into the illicit cigarette trade, which Pillay had started when he was acting commissioner.
“KPMG’s SARS report was a hatchet-job, a weapon to create political division and deal with those fighting against state capture and the looting of state resources,” Save South Africa said in a statement on Friday. “It provided ammunition for a purge of some of our finest and honest leaders and government officials.”
Full statement by Pravin Gordhan:
Although I welcome the withdrawal of the KPMG “SARS” report, I am surprised by the scant regard shown for their role in the “capture” of the revenue service and the huge damage that it has done to the livelihoods and reputations of a very professional, honest and loyal group of public servants. It is unfortunate that a company with the stature of KPMG, with a responsibility and obligation to be objective, has been found to be wanting. This is exacerbated by their collaboration with the Gupta family.
So let me categorically state, that which KPMG ought to have had the integrity and honesty to state:
- The Research and Investigative unit created in the South African Revenue Service (SARS) was legal.
- Its activities in detecting and combatting the illicit tobacco trade and other efforts aimed at bringing an end to tax evasion, were within the law.
- KPMG had no basis, except subservience to a malicious SARS management, to malign a number of individuals and facilitate, I repeat, the capture of a vital state institution.
The witting and over-enthusiastic collaboration of senior KPMG personnel (whether in current employment at KPMG or not) and their collusion with nefarious characters in SARS, in fact directly contributed to “state capture” and gave legitimacy to the victimization of good, honest professionals and managers. It should and must be remembered that this was about attacking SARS as an institution with the main intention being to capture it.
These are the symptoms of deteriorating levels of governance and the gravity of state capture. The saddest consequences about this is the negative impact it has had on the lives of all those that were and continue to be persecuted – if the latest actions of the Hawks and NPA are anything to go by.
KPMG international did not implement its own criticism of KPMG South Africa – that those affected by their alleged findings should be given a hearing. Did they talk or even attempt to contact the senior officials who were victimized at SARS? Why has there been no direct contact with myself, to convey a sincere apology? This is typical colonial arrogance and KPMG has not done enough. One would have expected KPMG to have the courage to admit, in the face of their own investigation, that the establishment of this unit was in fact legal. This option still remains open to them.
I note their “regret” but doubt whether this is adequate and proportional to the damage that KPMG has done. I will be seeking legal advice in this regard. Whilst there has been personal consequences the real issue that confronts us is the significant damage to our hard won democracy, to our state institutions and ultimately to the South African people for whom we seek a better life.
South Africa has been severely affected by the ills of state capture, and by the individuals and institutions that either enable or seek to implement it.
This may be a small step in the right direction to hold corporates accountable for their wrong doings as well as the beginning of what reparations will be to make things right. KPMG has a lot more to do to convince South Africans that they will undergo a genuine change in culture and ethics and are prepared to take total ownership for the damage they have caused or contributed to.
If they are truly remorseful they must provide equivalent employment to Ivan Pillay and others as a corruption fighting unit within KPMG itself.
To South Africans, I say take strength in your collective action to hold accountable, all those responsible for the demise of the quality of our democracy and the decimation of state institutions.
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