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SARS nails high-flying Eskom contractor for millions in tax evasion

SARS nails high-flying Eskom contractor for millions in tax evasion
Ray Mahlaka
By Ray Mahlaka
9 Jan 2024
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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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