Bain admits to ‘serious failure’ with Sars

Boston-based consultancy Bain & Company has admitted to failures in its work for Sars, saying its former partner Vitorrio Massone was aware of axed commissioner Tom Moyane’s appointment, and that the contract with the tax agency was “irregular”.

In a statement reacting to retired judge Robert Nugent’s final report on Sars, the company also concedes that it should have “walked away” when it became clear that Moyane had a “different agenda” to improving the capacity of the tax agency.

Nugent was scathing in his assessment of Bain’s work at Sars and showed in his report that Massone met former president Jacob Zuma at least 12 times and was informed that Moyane would be appointed commissioner and would need help revamping the tax agency.

Massone has since resigned and Bain has paid back the money it earned from Sars — amounting to R217m, including interest.  Nugent recommended that fraud charges also be brought against the company over the illegal way it obtained the Sars contract. 

The Bain restructuring resulted in the destruction of key Sars units, including its large business centre, its legal and compliance units, and its enforcement capacity.

Some 200 senior managers were displaced and a number of highly skilled employees left Sars, which all contributed to the R100bn hole in revenue collection over the last four years. 

Bain, in its statement, admits to three key mistakes: 

“First, we overstated the case for change by talking about the requirement for a ‘profound strategy refresh’ ... Second, when Mr Moyane disregarded our proposed organisational structure changes and developed his own answer ... we consented to a scope of work that we knew impaired our ability to deliver appropriate results,” the company says. 

“Third, it is also clear that while we started the work in good faith (still believing, misguidedly, that everybody’s intention was to improve Sars), by late 2016 we either knew, or should have known, that Mr Moyane had a different agenda. It was a mistake not to walk away also at this point, instead seeing out our contract through March 2017.”

Bain says some responsibility lay with Massone, who “displayed poor judgment” in drawing the company into the Sars assignment, and then failing to adhere to company principles, especially around transparency. 

The company says it should have exercised more oversight over Massone and should have had better public-sector protocols in place. “In hindsight, there is evidence to suggest that Mr Moyane was pursuing a personal political agenda at Sars. Proper due diligence on Mr Moyane may have identified this risk.”  

Bain also admits that it was “naive” about South African politics and worked on Sars “without a full appreciation of the political environment and the agendas that individuals were pursuing”. 

After Massone’s resignation in November, Bain appointed a new SA head, John Senior. To make amends, it will participate in any other judicial inquiry to explain what happened at Sars, will set up a public-sector working group, and develop a public-sector risk function. It will also create a South African advisory board to oversee its operations in the country. 

The company notes, “Sars has been a humbling episode for Bain. We have let SA and ourselves down, and it is our earnest desire to make good our wrong.”  

marriann@businesslive.co.za