Johannesburg – South Africa’s complex set of problems is unravelling, exposing the bad in the country, including “shenanigans” at the South African Revenue Service (SARS), former finance minister Trevor Manuel said on Tuesday.
Manuel was speaking in his capacity as chair of emerging markets at the Old Mutual Investment Group's Tomorrow conference in Sandton. In his address he spoke about elements investors need to consider for the future, and made reference to recent developments in the country related to state capture.
“For a while we have seen the weakening of institutions to the point of their destruction,” said Manuel.
“In this country we are seeing the first unravelling of the Gordian knot,” he said, referring to a legend associated with Alexander the Great, a famous king of Ancient Greece. When Alexander could not undo the knot, he took a sword to it. Manuel said South Africa's sword may be an email dump called “#GuptaLeaks”.
“We see the unravelling of what has been bad in the country. We see the challenges facing KPMG right now … We see challenges facing McKinsey. We see all the shenanigans in SARS.”
He said this unravelling is necessary to put the country on a “footing” where people can take the right decisions.
Strong, competent revenue service
When asked about the way forward for the country, following the “”unravelling” of the knot, Manuel said a “strong, competent” revenue service is needed.
“For the bulk of us, we want a strong competent revenue administration that can deal with issues equitably.”
Manuel said that in the past tax rates had been managed down for a long period of time, even if it was not always going to be a continuous line.
“We were able to manage tax rates down because the administration was competent. It’s been weakened and compromised,” said Manuel.
Referring to reports that SARS had missed its first-quarter revenue target by R13bn, Manuel said the current deficit is growing in “leaps and bounds” and expenditure management is out of control. “What it does, is take money needed for investment and growing the economy off the table.”
Manuel went on to say it is concerning that based on everything the #GuptaLeaks have revealed, not a single investigation is being initiated.
“We can’t live in an environment where our institutions and criminal justice cluster are compromised.
“Nor can we live in an environment where the crimes against state unit will go after the former finance minister and leave alone everything the #GuptaLeaks present.” There is something “fundamentally wrong” with the situation, Manuel said.
On Monday SARS Commissioner Tom Moyane held a briefing following audit firm KPMG’s decision to withdraw parts of the "rogue unit" report. The firm said that failure on its part to “appropriately apply” its own risk management and quality controls, part of the report referring to conclusions, recommendations and legal opinions can no longer be relied on.
Moyane said SARS was “taken aback” by the “aberrant and unethical” conduct of KPMG, and that KPMG should be held accountable. He also said it brings into question the quality assurance of other reports KPMG has been in charge of.
KPMG has suffered major backlash since, with analysts calling for more corrective steps to be taken against the firm. Financial services group Sasfin on Tuesday announced in a note to shareholders that it has dropped KPMG as a sponsor, and will now make use of Deloitte’s services.
When asked about the competency of the institution, Moyane said that SARS has competent leadership. “We have collected revenue, met the target and surpassed the target. And we are proud of the work… We have men and women who are capable. Men and women running this institution and have all the experience to run a tax administration.”
He went on to say that at no point has the revenue service failed South Africans. “We are grateful that we can report to stakeholders and all taxpayers that we do our work openly, without fear or favour. And we treat all taxpayers without any favour whatsoever.”
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