The public protector’s quest for Zuma tax records is a farce — here’s why

20 Nov 2019

Here’s why Public Protector Busisiwe Mkhwebane’s decision to investigate whether former president Jacob Zuma received payments from businessman Roy Moodley while he was president is a futile exercise and why she won’t find any trace of a Royal Security salary to Zuma after 9 May 2009 in his tax records.

When Jacob Zuma accessed his bank account at the end of May 2009, he must have been delighted. Not only had his first presidential salary been deposited into his account, but there was another “salary”: from Royal Security, owned by his crony Roy Moodley.

The cash-strapped Zuma had received similar “salaries” for several months in the run-up to his inauguration on 9 May 2009, but Moodley’s handouts should have stopped at the end of April.

How Zuma earned this second salary and the nature of his employment remain a mystery but, at that point, our president had two employers: the Republic of South Africa and Royal Security.

It is unconstitutional for the president to have another employer and it is unlawful for him to earn an additional income without declaring it to Parliament.

When Zuma stood in front of Chief Justice Pius Langa on 9 May 2009 and pledged in the presence of Nelson Mandela to “observe and maintain the Constitution of the Republic”, he was lying. He was already a constitutional felon.

* * *

The information about Moodley’s salary payments to Zuma is contained in my book The President’s Keepers, which was published towards the end of 2017.

Soon after publication of the book, then DA leader Mmusi Maimane requested Public Protector Busisiwe Mkhwebane to investigate whether Zuma had received payments from Moodley while he was president. Both Zuma and Moodley denied this had happened.

Moodley laid a host of criminal charges against me, among them criminal defamation. A police general investigated and found insufficient evidence to prosecute.

Despite this, Moodley’s “pet cop” in Durban obtained a warrant for my arrest by using false information and then attempting to lure me to KwaZulu-Natal to apprehend me.

On 21 October 2019 – two years after Maimane’s complaint – Mkhwebane subpoenaed Zuma’s tax information from SARS commissioner Edward Kieswetter. She said her investigation is based on the information in The President’s Keepers.

Kieswetter has refused to hand over any records, saying such action would contravene the Tax Administration Act and affect tax compliance. He has approached the courts for clarity on the matter.

Adversaries of the former president have supported Mkhwebane’s investigation. It comes two years too late, but they hope she will confirm the suspicion that Zuma was a constitutional delinquent as soon as he took office.

However, from the moment Mkhwebane’s subpoena to Kieswetter became public, I suspected her of having an ulterior and devious motive in launching this investigation.

When I wrote The President’s Keepers, I had two independent sources confirming Moodley’s payments to Zuma. They were not directly involved in the events, but were close enough to them for me to publish.

After publication, I met a source who was much closer to the case. He/she confirmed the information in my book but recalled the salary paid to Zuma to be less than R1-million per month.

Two weeks ago, I went in search of someone with intimate knowledge of these events. This person wouldn’t speak to me when I wrote my book but is now forthcoming.

I can now give a blow-by-blow account of the events surrounding Moodley’s salary payments to Zuma after he became president. I can also reveal why Mkhwebane’s investigation is a futile exercise and why she won’t find any trace of a Royal Security salary to Zuma after 9 May 2009 in his tax records.

I am convinced that Mkhwebane’s investigation is a fishing expedition to find evidence that may help Zuma in his criminal case. He faces charges of corruption, money laundering and racketeering and the Pietermaritzburg High Court has dismissed his application for a permanent stay of prosecution.

Zuma is desperate and needs new evidence to appeal the rejection of his application. Mkhwebane’s investigation may well prove to be the last ace up his sleeve.

* * *

The backstory to Zuma’s relationship with Moodley is vital. Since the former president’s return from exile in the early 1990s, he was in a perpetual financial predicament. The mid-2000 fraud and corruption investigation into Zuma and Schabir Shaik revealed that he was a serial debtor. Shaik went to prison for bribing Zuma.

A host of other benefactors funded Zuma’s lavish lifestyle and growing family. When Nelson Mandela handed Zuma R1-million his account was overdrawn by R400,000. French arms manufacturer Thint stands accused of bribing Zuma with R500,000.

Billionaire businessman and racehorse owner Roy Moodley is a long-time Zuma and ANC benefactor. Royal Security has offices in at least six provinces and contracts with the police, First National Bank, Engen, Transnet, MTN and Telkom.

Moodley’s cosy relationship with Zuma seemed to have served him well.

Moodley has been implicated in a disputed R4-billion IT tender dished out at the ailing Passenger Rail Agency of South Africa (Prasa). The tender was awarded to Siyangena Technologies, who in turn paid more than R500-million to a company of which Moodley is the only listed director.

Towards the end of 2017, a court battle revealed how, for the 10th successive year, the eThekwini metro council had rolled over a R50-million a month security tender to, among others, Royal Security – almost a decade after its contract had formally expired.

In March 2018, a businessman doing business with Telkom alleged that Moodley siphoned off R280-million in payments to the ANC in order to get tenders. He said he paid the money into Royal Security after Moodley allegedly claimed the company belonged to the ANC.

Moodley has always denied any impropriety in his relationship with Zuma or in his business dealings.

The revelations in The President’s Keepers were not the first time Zuma’s twin-salary lifestyle had been made public. In March 2014, Economic Freedom Fighters (EFF) CIC Julius Malema said at a manifesto launch in Limpopo that one of Moodley’s companies bankrolled Zuma after he was fired as deputy president in 2005.

Malema said Zuma remained on Moodley’s payroll for four months into his presidency in 2009. The Star quoted him as saying: “There is no president who must be under the employ of any company, but Zuma was employed for four months by Roy Moodley and he failed to declare. When Roy Moodley declared his finances to SARS, it was uncovered.”

* * *

This is the second time that Mkhwebane has served a subpoena on SARS to access Zuma’s tax information. Her first was served in October last year, just three weeks before Zuma launched his application for a permanent stay of his prosecution.

Is this a coincidence?

Mkhwebane’s second subpoena was served a week after the court dismissed Zuma’s application.

Is this also a coincidence?

The details of Mkhwebane’s first subpoena is contained in a recent affidavit from Kieswetter. He said that, after receiving the subpoena, SARS had told her the Tax Administration Act did not allow for disclosure of a taxpayer’s information to the public protector. Mkhwebane refused to accept the SARS explanation. The revenue collector advised her to seek a court order, but she said she didn’t have money to do so.

They reached an agreement that SARS would fund an independent legal opinion. They agreed on attorneys and two advocates, who jointly briefed them. The opinion was produced in April this year and found that the public protector could not have access to taxpayer information in the manner she wanted.

Mkhwebane was unhappy and said in a letter that the law’s exclusion of her office was “a storm in a tea cut (sic)”. She said she would get a second opinion but has yet to produce it.

Mkhwebane issued her second subpoena on 21 October 2019 and threatened Kieswetter with criminal action if he did not comply this time around. Mkhwebane said her investigation is based on the allegations in The President’s Keepers.

* * *

Following Mkhwebane’s recent subpoena to SARS, Zuma tweeted that he had no problems in her obtaining his tax information. He now says he has nothing to hide.

He has in the past been vehemently opposed to SARS handing his tax information to prosecutors. In a 2005 affidavit, Zuma opposed a similar request by the NPA and said only SARS could determine whether he contravened tax legislation.

Zuma is a serial tax delinquent. His pre-presidential tax affairs were laid bare when the NPA charged him with racketeering, corruption and tax evasion days after his election as ANC president in December 2007.

According to the indictment, Zuma failed to submit tax returns for nine years, from 1995 to 2003. The NPA alleged that he hadn’t declared any of the 583 Shaik payments.

In 2007, Zuma was convicted for contraventions of the Income Tax Act for failing to submit his returns and information, fined R500 and ordered to submit the information to SARS. He then pledged to sort out his tax problems because “it is the right thing to do”.

After becoming president, Zuma again failed to submit tax returns. In 2014, then acting SARS commissioner Ivan Pillay was begging Zuma to submit his outstanding tax returns.

I don’t know what happened with Zuma’s tax affairs after the great purge at SARS in 2014, but I would be very wary of accepting any compliance at face value.

The reason for this is the arrival of Tom Moyane as the new SARS commissioner in October 2014. Zuma and Moyane are old friends and the then president appointed him after he had retired as prisons boss. He had no tax experience.

Moyane suspended the executive committee and purged the tax collector of a host of top and experienced tax executives. Who knows what Moyane and his cronies did during their spate at SARS during a time when fear and terror reigned in the tax service?

Law-enforcement and intelligence agencies manipulated, hid and destroyed documents during the Zuma era. So it was, too, at SARS. Moyane hid exculpatory evidence from the NPA in the famous “Symington hostage drama” in 2016. It led to the NPA’s case against Pravin Gordhan falling apart.

Moyane concealed legal opinions advising him that Pillay’s pension pay-out was legitimate and the “rogue unit” formation and investigations lawful. Of late, recordings featuring Moyane and his deputy Jonas Makwakwa have surfaced, showing they were told that the “rogue unit” did not spy on politicians and did not have spy equipment, as Mkhwebane found in a report.

One of Pillay’s last public announcements at SARS in 2014 was that Zuma’s tax fringe benefits arising out of the Nkandla upgrades were being looked at. We have never heard a word of this again.

What else “disappeared”, was manipulated or withheld? Given Moyane and Zuma’s long history, can you imagine Moyane never had a sneak peek at Zuma’s tax matters?

* * *

Why would Mkhwebane not find any evidence of a Royal Security salary in Zuma’s tax records after he became president?

Here is the blow-by-blow account of what happened, and why Mkhwebane is on a futile exercise to find the evidence she claims to be looking for at SARS:

Before Zuma became president, he was on Moodley’s payroll at Royal Security and was paid a salary of between R120,000 and R140,000 per month.

The salary payments continued after Zuma’s inauguration on 9 May 2009.

Zuma spent the money and kept quiet about this. The payments then stopped.

In 2010, Royal Security submitted its annual reconciliation of its payroll tax returns to SARS, as required of any employer.

A SARS auditor in Durban did a routine tax audit of Royal Security’s payroll for the 2009/10 tax year. On the reconciliation was employee JG Zuma.

The auditor did a further enquiry and discovered Moodley’s employee might be the president. The official referred the matter to SARS audit group executive Jonas Makwakwa.

Then SARS commissioner Oupa Magashula took the matter over and assigned the case to the head of the VIP taxpayers’ unit, Mark Kingon.

SARS alerted Royal Security and queried the matter. The company paid income tax on Zuma’s salary to SARS.

Apparently Makwakwa was unhappy that Kingon was assigned the case, which caused friction between SARS executives. It was alleged that Makwakwa wanted to get involved in politically sensitive cases as this would have given him access to top politicians. These events were widely spoken of within SARS at the time.

SARS received a media inquiry about Royal Security’s payments to Zuma. Journalists directed similar enquiries to the Presidency, which alerted Zuma that his twin salaries might become public.

SARS launched an internal investigation about the leak and several top SARS officials underwent polygraph tests. There wasn’t enough evidence to act against anyone.

The journalist did not have enough information and ultimately did not publish a story.

Zuma called a senior SARS official to Nkandla to discuss the matter. The president’s then legal advisor, Michael Hulley, was also present. I do not know what was discussed other than that it related to the dilemma Zuma and Moodley faced.

They had to come up with a plausible explanation. Royal Security informed SARS that a finance department employee had “committed an error” by paying JG Zuma after April 2009.

Zuma offered to pay back the money he had received from Royal Security after becoming president. He only offered to rectify the situation after SARS discovered the transgression. Otherwise, he would have stayed silent.

Because of Royal Security’s explanation of an error, SARS reversed the transaction on Royal Security’s tax records and refunded the company for Zuma’s income tax deductions.

Royal Security provided no proof of Zuma’s resignation and neither the former president nor Moodley have to this day explained these events. Instead, they have both consistently issued bare denials.

In 2014, just before Moyane’s appointment, tax investigators discovered that Zuma had refunded Royal Security with money given to him by Moodley. The security tycoon had in effect repaid himself! The case seemed to have fallen through the cracks, along with so many other high-profile cases.

I was told that it is rare, but not unusual, for SARS to reverse transactions of this nature because mistakes with salary payments do happen.

The difference here is that Jacob Zuma, while president, received a salary from Royal Security. He must have known it was unlawful and unconstitutional, yet he spent the money and kept quiet. He also didn’t declare it to Parliament. He was obviously hoping to get away with it. He only offered to repay the money many months later after being caught out.

Therefore, the public protector won’t find evidence in tax records of payments from Royal Security to Jacob Zuma after April 2009. But Mkhwebane doesn’t need SARS records.

Where would one logically start an investigation into an allegation that the former president had been in breach of the constitution by earning an undeclared salary?

His bank account, of course. And that of Royal Security. The latter would show a debit; Zuma’s a credit. It is as simple as that.

And why hasn’t she subpoenaed me, the source of what she is investigating? How do you know this is true and what evidence do you have? Who should I speak to?

Neither did she subpoena the SARS officials that dealt with the matter: Oupa Magashula, Mark Kingon, Ivan Pillay, Gene Ravele and Jonas Makwakwa. Their names are in my book. The most direct answers, apart from their bank statements of the time, will obviously be from Jacob Zuma, Roy Moodley and Michael Hulley. And from Julius Malema, who has had knowledge of the payments since 2014.

Mkhwebane is notorious for turning wild allegations into fact in her reports, without interrogating the people at the centre of her investigations.

There are many examples of this. When she investigated the Vrede farm project, she ignored the testimony of officials at the centre of the fraudulent scheme: then Free State premier Ace Magashule and agricultural MEC Mosebenzi Zwane. She didn’t speak to the victims of the fraud either. This report was set aside by the High Court.

In her SARS “rogue unit” probe, she failed to interview the former head of the unit, Andries van Rensburg, executive for investigations Johann van Loggerenberg or enforcement chief officer Gene Ravele. She made a lame excuse of trying to subpoena Van Loggerenberg, but said she couldn’t find him – despite acknowledging receipt of a letter from his attorneys just a few weeks earlier.

* * *

Mkhwebane has launched at least seven investigations into SARS. This after having already investigated and reported on Ivan Pillay’s pension benefits and the SARS “rogue unit”. The obsession with SARS matters, some of which date back over two decades, is as palpable as it is obvious.

Kieswetter says in his affidavit: “The public protector, in her insistence on access to whatever taxpayer information she chooses, acts not only in excess of her powers, irrationally and unreasonably, but pursues extraneous or ulterior objectives.”

One of the charges the Scorpions investigated against Zuma in 2004 and 2005 related to his “failing to show gross income or material facts in tax returns in contravention of the Income Tax Act”.

Prosecutors attempted to gain access to Zuma’s tax records, but SARS refused to hand them over. Former Scorpions prosecutor Anton Steynberg said in a March 2006 memo that SARS was hesitant to become embroiled in a “politically charged and potentially damaging affair”. He said “more sinister motives cannot be excluded” and that SARS was “just being bloody-minded”.

Zuma attempted to use this memo and correspondence between then NPA head Vusi Pikoli and SARS as evidence of improper interference in the case against him. It didn't work. But it shows animosity existed between the NPA and SARS on the issue.

But the NPA documents show only what is on record at the NPA. The SARS records on this matter are protected in tax law. I believe Mkhwebane hopes that somewhere in Zuma’s tax information is hidden evidence that may benefit him in his quest to continue to attack his prosecution. Or at least buy him more time.

Tax officials would painstakingly have kept record of their interactions and meetings with the prosecutors. Zuma cannot access SARS documentation because of the provisions of the Tax Administration Act, but should records “accidentally” emerge during the public protector’s investigation into Moodley’s payments to Zuma, and she makes it public, it might afford him an opportunity to present new evidence to prolong his Stalingrad strategy.

As matters stand, it is not difficult to anticipate what the outcome of the public protector’s investigation is going to be. A proper investigation would certainly confirm Zuma received at least two salaries after his inauguration, simply based on his bank statements.

But I am convinced that her report is going to read something along the lines of:

“Having investigated and considered Mr Jacob Zuma’s tax records, I find the claims in The President’s Keepers to be unsubstantiated.

“The complaint by Mr Mmusi Maimane is therefore unsubstantiated.

“I direct the commissioner of the SAPS, NDPP and Hawks to institute an investigation within 30 days with a view to prosecute the author and any other person who may have been involved in the matter. It is defamatory and caused tremendous harm to the former president. Progress on these cases must be reported to my office on a weekly basis.

“It would be remiss of me not to mention another matter, and attach evidence of, which I came across during the course of my investigation relating to communications between the NPA and SARS during the investigation into Jacob Zuma and his financial advisor, Schabir Shaik. I do this because it is in the interest of justice...” DM

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