Sars paid KPMG R23m for 'rogue' unit probe

Company was to perform a more detailed forensic investigation based on recommendations of Sikhakhane report

Sars paid KPMG R23m for 'rogue' unit probe

7 June 2016

Cape Town – The South African Revenue Service (Sars) paid KPMG over R23m for its highly-contested probe into its investigation unit which was founded when Finance Minister Pravin Gordhan was Sars commissioner.

The information was submitted on Tuesday by Gordhan on behalf of Sars, in response to a written Parliamentary question tabled by Economic Freedom Fighters MP Floyd Shivambu.

Gordhan, who was reportedly almost arrested last month as a result of the unit’s probe, said he was unable to verify the content of the Sars response.

“KPMG investigated the allegations made in respect of an investigative unit within the Sars,” it said.

“An already existing panel was utilised for this purpose that was previously appointed through an open tender process,” it said.

“The terms of reference of … (KPMG) was to perform a forensic investigation based on the recommendations of the Sikhakhane report to institute a more detailed investigation and to provide evidential support to the findings made.”

“The cost incurred for the mandated work was KPMG -  R23 131 265.30.”

Gordhan slammed KPMG report

One of Gordhan’s first acts when he was reappointed as finance minister in December 2015 was to criticise the report, which had previously been leaked to media.

The leak alleged that the Sars unit ran a brothel and spied on President Jacob Zuma, among other things.

“It's allegations that have no foundation. They are based on a leaked document that even I haven't seen," Gordhan said. "I would like to request … (the media to) stop reporting on rumours.

"Where is this mysterious report? KPMG has a cheek to say he [Gordhan] doesn’t know anything but he should know. I thought forensic people are supposed to come up with facts. What does that say about the reputation of KPMG?" Gordhan asked.

Hawks nag Gordhan for answers

Following this outcry, the Directorate for Priority Crime Investigation (Hawks) sent Gordhan a list of questions relating to the unit. This was just ahead of his Budget Speech in February and it allegedly resulted in the minister threatening to quit due to political interference.

When Gordhan eventually answered the questions on March 30, he said the Sikhakhane finding that the establishment of the unit contravened the National Strategic Intelligence Act was wrong and based on a “superficial and clearly mistaken reading” of the aforementioned act.

“The unit was an essential part of Sars’ enforcement strategy as it is with most tax and customs administrations globally,” he said.

The Hawks, who are in the process of investigating the unit, have emphasised that the probe is not investigating Gordhan.

S&P warns ANC about ‘festering’ political issues

Analysts believe Zuma is putting political pressure on Gordhan as the prudent Treasury chief keeps a tight lid on the country’s precarious fiscus. The Presidency has continuously denied such an allegation.

Gordhan was praised this week for the role he played in preventing rating agencies Moody’s and S&P downgrading South African to junk status.

However, S&P warned in its review on Friday that a lack of political cohesion among the executive branch is concerning.

“Political tensions have increased in South Africa since the removal of former Finance Minister Nhlanhla Nene on December 9, 2015; the Constitutional Court ruling against President Jacob Zuma on March 31, 2016; and periodic disputes between key government institutions and within the ruling African National Congress (ANC),” it said.

“We believe that these political factors - if they continue to fester - could weigh more on investor confidence than inconclusive labour or mining sector reform.”

This article first appeared on Fin24, see here