For Moyane and Zuma, Bain was a team player

Bain & Co’s managing director in sub Saharan Africa Vittorio Massone met Tom Moyane to discuss changing SARS months before Moyane’s “surprise” appointment as Commissioner at the revenue service in September 2014. Massone and his team spent several days — tens of billable hours — in around late 2013 to compile a document on changes Bain & Co would suggest at SARS.

For free.

To a man without an official government position and ostensibly no political power.

(Bain & Co’s expensive resources were splurged on Moyane after he was kicked out as Commissioner of Correctional Services in September 2013, then acting as a lowly adviser at Sita, the State Information Technology Agency.)

Massone made this stunning concession — under oath — late on Friday afternoon while questioned by retired Judge Robert Nugent during public hearings at the Commission of Inquiry into SARS. Massone shocked the Friday drudgery out of the about 70 souls listening to his testimony, to the point where Nugent had to quieten the gasps and whispered comments over “the f**ker!” heard from SARS officials.

Their horrified reaction was warranted. The question this set of facts leaves is staggering:

From who did Moyane derive the power to bargain with the top Bain & Co official in Southern Africa about a contract to rejig SARS at a time when no one ought to have known Moyane would eventually be appointed as SARS Commissioner?

This question is compacted with testimony from Treasury official Solly Tshitangano who found SARS’ contract with Bain & Co was illegal and possibly rigged to benefit Bain & Co.

Scorpio may be able to shine some light on where Moyane derived his bargaining power from:

Massone met then President Jacob Zuma at his homestead in Nkandla around December 2013, two Bain insiders told Scorpio. Two additional sources — another Bain insider and one official working for Bain’s opposition in the consulting market — claimed that Massone’s visits to “Zuma’s residences” was an open secret that he often “boasted” about. At least one of these sources committed to provide their version to the Commission of Inquiry into SARS if called upon.

The result of Bain & Co’s meeting with Zuma, they said, was a dubious Telkom contract and ultimately the contract that contributed to the ruination of SARS. Moyane has often bragged about his close relationship with the Zuma clan, which had several clashes with SARS since 2008.

Zuma’s lawyer Dan Mantsha could not be reached for comment — he did not answer several phone calls nor react to SMS messages.

Bain & Co declined to react to specific questions, but said: "New questions have been raised...causing us to need to extend and deepen our internal investigation. We cannot provide answers to questions which we ourselves do not have answers to. We will share all the information we have as soon as we can – as you know, we have been collaborating voluntarily with the Commission of Inquiry and wish to continue to do so to ensure that we cooperate fully with a process aimed at restoring credibility to SARS."

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Vittorio Massone has had two torrid weeks. On Thursday and again on Friday he attempted to justify the work his Boston-based consulting firm had done at SARS. He came armed with files full of PowerPoint slides and “quotes” he and his team worked hard to compile over the previous couple of days, because somehow Bain & Co did not keep proper records of their dealings with SARS.

Massone’s files supposedly proved that SARS was a department in desperate need of Bain & Co’s help before Moyane took over the reins in September 2014. Bain & Co was the saviour that designed the “best” model. When it all fell apart, it was the fault of the SARS leadership under Commissioner Tom Moyane, Massone argued, while Bain & Co was an actual victim, just like SARS.

Reality found no hold on Massone’s testimony. When Bain & Co had completed their review, SARS had just been benchmarked against the best revenue services and agencies in the world, and managed to win international accolades.

An eloquent description by evidence leader, advocate Carol Steinberg, described a report card given to SARS by the International Monetary Fund’s tax administration diagnostic tool. The report card shows “As and Bs and B-plusses. You know, if your child came home from school with this report card you’d give them a present… now why did you present a diagnostic that looked like the child was failing at school rather than getting As?" said Steinberg.

Massone replied that it was not Bain & Co’s “intention” to suggest that SARS was “broke or a mess or a bad institution”. He refused to concede any part in the devastation at SARS since his teams operating model had been installed.

Bain & Co international, however, realises the “mess” they’re in. Over the weekend the firm announced its intention to internally investigate the allegations of misconduct and possible collusion amid calls that the firm must pay back the money it received in the contract.

(Read Massone’s testimony on Thursday.)

To review and design a new operating model, Bain & Co was paid about R200-million, according to SARS, and R164-million, according to Bain & Co (SARS is investigating the discrepancy in reported figures based on Scorpio’s questions.) An operating model is akin to the blueprint sketch for building a house.

This contract was rigged, said the highly regarded Tshitangano from the Treasury’s Office of the Chief Procurement Officer. Testifying on Friday before the Commission of Inquiry, Tshitangano said the contract process was marred by errors.

Tender documents prove Bain & Co won the initial contract only because the firm offered a 50% discount — a highly unusual tactic that raises a red flag in Tshitangano’s mind. (Read the testimony of Tshitangano and Massone on Friday here in full.) The contract was then illegally extended. According to Tshitangano there is a very real possibility that Bain & Co colluded with SARS officials to get the contract. Tshitangano also observed that the taxpayer possibly paid more than it would have if SARS had advertised the tender in an open bid process.

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During last week’s public hearings session, the Commission of Inquiry into SARS was testing whether Bain & Co’s came into SARS with a prescribed goal, such as, for instance, breaking a strong and robust institution that effectively withstood pressure from within and without, in order to make it more malleable.

Listening to evidence leader Steinberg and Judge Nugent questioning Massone was a bit like watching a tennis match between South African tennis star Kevin Anderson and a high school number one.

Massone dramatically conceded that he felt “very stupid” and apologised profusely for “mistakes” made — up to a point where he was told to stop.

“It’s not about apologies, we try to understand what has happened. Maybe later you can go and apologise, but this is an inquiry,” Nugent said bluntly.

Massone was forced into several important concessions, including that:

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  His Bain & Co team conducted interviews with 33 SARS officials in six days in early 2015 when doing a review on the SARS operating model;

  
  


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  The interviews were about 10 to 15 minutes long and that Massone himself thought it was inadequate;

  
  


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  Then head of SARS Commissioner Tom Moyane compiled the list of interviewees;

  
  


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  The list did not include key SARS officials at crucial revenue gathering or enforcement units; and

  
  


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  Bain & Co may have been “used” for ulterior motives.

  
  

Senior SARS officials told the Commission they felt Bain & Co entered into these interviews with a preconceived idea of what needed to be done, that the interviews were inadequate and without depth while being conducted by junior staff that knew nothing about SARS or tax.

These officials further testified that Bain & Co’s operating model made “no business sense”, but that it was clear to them certain senior officials were targeted by Moyane and his henchmen. In any proper investigation a testing sample of 33 interviews, out of a possible 14,000 SARS officials who worked at the service at the time, would be inadequate, these officials argued before the Commission.

Bain & Co further fell short on the calibre of officials it interviewed: Then Customs head Ray Viviers and senior manager in Enforcement (the investigative division going after delinquent taxpayers) Pieter Engelbrecht testified they were never consulted. Some officials, including senior manager in Compliance Fareed Khan testified that, out of frustration, he and his manager submitted a document to Bain & Co in the hope that their advice would be heeded. They say it wasn’t. *Sunita Manik, former head of the Large Business Centre, was also not consulted - even though the LBC was crucial to SARS' revenue collection capability. 

Steinberg, to the contrary, gave the impression that the Commission of Inquiry understands SARS better than Bain & Co ever did. According to Steinberg, she had to spend two days with a SARS official in order to understand the history of SARS and the way it developed over the past two decades. Steinberg further showed her mettle not only by displaying her in-depth knowledge of the complex organisation, but also in the way she questioned Massone.

Steinberg’s questions successfully showed that Massone did not understand SARS and couldn’t answer important questions about its inner workings. Massone further failed miserably in explaining why and how his team attempted to fix a SARS that wasn’t broken and why Bain & Co accepted a dodgy brief.

Massone’s mulish refusal to concede the point Steinberg had proved many times over, is described in the following exchange:

Steinberg: “Are you telling me if you came in tomorrow and were asked to do this exercise again you would make the same recommendation about the (SARS) structure?”

Massone: “Yes”

Steinberg: “I’m astonished.” (And she really did look it.)

Nugent: “But it sounds to me from what I’m hearing is that you could go into any tax authority and change it because there is no one model.”

Massone: “Yes.”

Nugent: “So… you can go into any tax authority and justify overhauling it, because there’s always problems. You can always make it different as you’ve just told me.”

Massone: “Yes.”

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The facts uncovered in the Commission of Inquiry, along with the investigative work by journalists, are starting to slot into one another like a mosaic picture. Up close the picture seems blurred and bizarre, but seems to come into focus when one steps away to view what has unfolded as a whole. That former President Jacob Zuma, suspended Commissioner Tom Moyane and consulting firm Bain & Co are not interlinked, and that they played the innocent role they insist on, is becoming all the harder to believe. DM

This article (indicated with an *) was amended at 13.15pm on September 4, 2018.