Collateral damage during state capture should also be explored

Does repaying fees collected under dubious circumstances absolve companies from resultant damage?

My article titled A wolf in sheep’s clothing, published last week, concerned the possible danger of involving firms identified in the Zondo Commission’s first report in assisting the country repair the damage emanating from state capture. I noted specifically that one such company was readmitted to Business Leadership South Africa (BLSA) three years after being found involved in the destruction of the SA Revenue Service during the Tom Moyane years.

In a media release on 18 January, this company announced its withdrawal from BLSA. In noting the announcement by Bain & Company, BLSA notes:

“We reaffirm BLSA’s commitment to ensuring that all those involved in state capture are appropriately held to account. We hope that as a society we can collectively direct our attention to seeking justice and amends for the damage to our country during the years of state capture and reforming our institutions to ensure it never happens again.”

This does not explain why it allowed Bain to re-join in 2021 despite further evidence at the Zondo Commission.

The Nugent Commission findings

In a media release dated 17 December 2018, subsequent to the publication of the findings of the Nugent Commission, Bain & Company noted that “…it has become painfully evident that the firm’s involvement with the South African Revenue Service was a serious failure, for South Africa and Sars, and clearly for Bain too.”

The media release identified three significant mistakes:

• It overstated the case for change by talking about the requirement for a “profound strategy refresh” of Sars. Although there was scope for improvement, this did not justify the proposal of such a fundamental overhaul of the business.
• When it emerged that the Sars Commissioner disregarded Bain’s proposed organisational structure changes, the consulting firm, instead of walking away, consented to a scope of work which it knew impaired its ability to deliver appropriate results.
• Bain either knew, or should have known, by late 2016 that Moyane had a different agenda yet persisted in seeing out their contract until March 2017.

The blame game

Concerning liability, the media release notes:

“Clearly, some responsibility should lie with Mr Massone, who displayed poor judgement in drawing us into the Sars assignment in the first instance, and then did not adhere to some core Bain leadership values, especially around transparency, as the problems at Sars unfolded. It is for this reason that Bain and Mr Massone separated permanently in November.”

Concerning its own role, Bain notes, under the heading Failures of governance: “When an individual in charge of an office (office head) is also the lead adviser to a client (client head), as it was in the case of Mr Massone, the combination calls for more active global oversight than in other situations where either the office head or client head can perform degrees of oversight/challenge. In the case of South Africa, Bain also allowed dissenting voices to be ignored or side-lined. The commercial success and continued rapid growth of the South Africa office encouraged Bain global to trust Mr Massone and not to question his decisions and actions closely enough.”

Concerning its response to testimony at the Nugent Commission, Bain noted:

“After Mr Massone’s initial testimony, it became clear that he was not being fully transparent with the commission or with Bain, and so we hired global law firm Baker McKenzie to conduct a thorough, independent, forensic investigation. The work of Baker McKenzie identified almost 1 000 potentially relevant documents which were immediately submitted, unfiltered, to the commission.

“We also mandated Athol Williams, a respected academic, social advocate and Bain alumnus, to provide his own opinion on the independence and adequacy of the investigation by Baker McKenzie.”

Fast forward to 2022

The very same Mr Williams is again mentioned in Bain’s media release on Tuesday on its withdrawal from BLSA, but in less flattering terms:

“The report (Zondo Commission report part 1) relies heavily on the account of one individual who admitted to having ‘no first-hand knowledge’ of Bain’s work at Sars in his affidavits and testimony to the commission, and it considers no new facts. The individual was not a Bain employee at the time of the Sars work, which ran from 2015 to 2017. He re-joined the firm in 2019 after having left in 2010.”

Following the killing in August of another whistle-bower, Babita Deokaran, who had exposed alleged corruption in a different scandal, Williams fled the country, convinced that his protection was not guaranteed, according to an article in the BBC news.

Further calls for action

Legalbrief Today reports that the Black Management Forum has called for companies complicit in state capture to be prohibited from doing business in SA.

Treasury deputy director-general Ismail Momoniat called for scrutiny of all the US consultancy’s contracts with the public sector. Momoniat, who has previously criticised the firm for its failure to co-operate with the Nugent Commission, which was set up in 2018 to probe governance failures at Sars, told Business Day that many executives still at the firm bore criminal liability for the attempted destruction of Sars. “It should not stop with what they (Bain) have paid back,” Momoniat said, in reference to the R217 million it agreed to hand back for its botched restructuring of the tax agency. “Bain has a lot more to answer for. They need to provide details that they did not provide to the Nugent Commission on the actual meetings (with Moyane).”

Collateral damage

In case you were wondering how such resultant damage could be assessed, think merely of the 1% increase in value-added tax. Add to this the billions lost to Sars after the disbandment of the unit focused on the illegal tabaco trade, aided and abetted by the stupid ban on the sale of these products during the initial lockdown period, the effects of which will never be eliminated.

If ever there was an opportunity to regain the moral high ground, the first and subsequent releases of the Zondo report provided the means. Now we just need the will by government.

In Lighter Wyn