The SA Revenue Service (Sars) is spending taxpayer money “like water” and wasting money on a number of things. So said retired Judge Robert Nugent on Friday.
Nugent, who heads up the commission of inquiry into tax administration and governance at Sars, was reacting to evidence revealed at the inquiry about Luther Lebelo, Sars group executive for employment relations.
It was found that Lebelo had spent almost R1 million of Sars money to build a defence for himself in preparation for his appearance before the commission.
Lebelo gave testimony at the inquiry last month and is set to appear again on Monday.
“Spending ... taxpayers’ money for that purpose ... to my mind is outrageous,” Nugent said.
The revelations of Lebelo’s expenditure drew gasps of surprise from those attending the inquiry, which is being held in an auditorium at Sars’ headquarters in Pretoria.
Other costs that have been under scrutiny for wasteful expenditure at Sars include the R204 million spent with consulting firm Bain & Company – of which Bain has offered to repay R164 million – and R200 million spent on work by Gartner Consulting.
In addition, KPMG received R24 million related to its probe of the “rogue unit” allegations – the money was refunded to Sars this year.
This evidence came to light on Friday during the testimony of Sars acting commissioner Mark Kingon, who has been in his position since March 19, after Tom Moyane was suspended as Sars commissioner.
The inquiry’s evidence leader, Advocate Carol Steinberg, revealed that on July 9, Lebelo made an application for external legal services.
“That resulted in work being done by [David] Maphakela of Mashiane, Moodley & Monama [Inc] in excess of R759 000 in one month – and that work was to prepare Mr Lebelo to give evidence before this commission,” she said.
Lebelo was trying to claim further costs for consuling Maphakela and this could take the total legal costs to nearly R1 million, Steinberg said.
During his testimony on Friday, Kingon said he did not authorise this expenditure. He said it was Sars’ chief legal officer, Refiloe Mokoena – who has been suspended over her alleged approval of millions of rands in refunds made to the Guptas – who did so.
“I will not normally get involved in the approval of legal costs. That is the domain of the chief legal officer,” said Kingon.
“We had a specific process in place with regard to the approval of legal support to people who appear before you [Nugent]. They went through our corporate legal team … That was not done in this case.”
Kingon said the external legal costs “weren’t appropriate”. When Steinberg asked Kingon if this was “worthy of a disciplinary”, he said: “I have not engaged Mr Lebelo on this specific matter. I would owe it [to him] to do that first.”
Sars cannot afford costs like this, Kingon said. “There is something wrong,” he added.
Steinberg said taxpayer money was spent in an attempt by Lebelo to clear “his own name”.
“It baffles us [Nugent commission] why this amount of money needs to be spent,” she said.
“It is unacceptable,” Kingon said. “That money ... could have been used to employ two people on my front lines.”
To which Nugent responded: “I can emphatically say that Sars is not right at the moment.”
Speaking about human resources, of which Lebelo is a part, Kingon said: “[The environment of fear and distrust] was compounded by certain arbitrary and unsympathetic human resource processes.”
Kingon went on to tell the Nugent commission: “Rarely, if ever, has Sars had to contend with weak leadership, blemished integrity, total public distrust of our organisation, serious operational lapses and breaches of the higher purpose.
"I don’t think we have ever experienced, in my history of being in this organisation [for more than 34 years], a moment like we are in today.
“I hope in my tenure here we never have to face this again. It is a first for us.
“Having our credibility and our effectiveness under question – in the public domain – is severely damaging not only to the country, but to our organisation.”
In contrast to Kingon’s description of the current crisis at Sars, Moyane has painted the revenue service he led as having “record-breaking and unprecedented performances” in court papers filed with the Constitutional Court as part of an application to halt both the disciplinary inquiry instituted against him and the Nugent commission, which is reviewing the governance of the tax collector under Moyane’s tenure.
“For example, I was the first and only commissioner of Sars in the history of the institution to reach the psychologically important revenue milestone of R1 trillion and to break that hitherto elusive barrier three times in a row,” Moyane said in his court papers.
This week, President Cyril Ramaphosa released the findings of the interim report, compiled by the Nugent commission, which has heard about 70 witnesses so far. The report states that Moyane’s tenure was characterised by “reckless” mismanagement, and that this “ought not to be permitted to continue”.
“We consider it imperative that a new commissioner be appointed without delay to remove the uncertainty at Sars and enable it to be set on a firm course of recovery, so as to arrest ongoing loss of revenue,” the interim report notes.
“We stress that the replacement of Mr Moyane is not a panacea, but only the first necessary measure without which there is no possibility of rectifying the damage that has been done to Sars.”
This week, Nugent defended the interim report’s recommendations, saying Moyane was given an opportunity to voice his side of the story but declined to do so.
Ramaphosa has given Moyane until Friday to respond to the commission’s recommendations.
Nugent emphasised the need to urgently rebuild Sars. “We say, if you [Ramaphosa] can remove him [Moyane], remove him … That is a matter for the president to decide,” Nugent said.
On Friday, Kingon said: “Current and past Sars people have had to contend with job displacements, retrenchments, resignations, dismissals triggered by ... recommendations of various investigations. People’s lives have been wrecked here.”
“Our executive leadership is broken, unstable, wrecked by division and distrust,” he added. “The commission of inquiry is a watershed moment in Sars’ history.”
During his testimony, Kingon issued an “unreserved” public apology on behalf of Sars.
“I would like to unreservedly say sorry, on behalf of the Sars leadership, to our taxpayers, our many stakeholders – including the president of the country, the minister of finance as well as the deputy minister of finance, government as a whole – our former and current staff members and their families, and the citizens of our country, for falling short of the high standards of performance we’d always set for ourselves and not living up to the Sars values and higher purpose.
"For poor communication, the unfair treatment and fear and pain that staff members may have been subjected to.”
Kingon said he might not have had enough courage to speak up during the bad times at Sars. “Integrity is the most important aspect we need in leadership,” he added.
Regarding the urgent “secret trip” that Moyane took to Russia in November last year, Kingon said no one in the Sars leadership team knew about that trip. “I sent a letter to [Moyane] on August 21. I sent a reminder on August 28. I’m still none the wiser.”
Kingon said he fully supported the Sars inquiry and did not support any views that the commission was biased.
He said Sars’ IT infrastructure had deteriorated over four and a half years of neglect. “Our eFiling system is not about to collapse tomorrow, but if we don’t do something, we are going to go there. We are 40% behind.”