Coal-smuggling syndicates whose modus operandi includes hijacking deliveries of high-grade coal to Eskom and swapping them with lower-grade product are being targeted by the South Africa Revenue Service (Sars) for alleged tax crimes amounting to R500m.
Sars said on Thursday a “massive inter-governmental search and seizure operation across five provinces was carried out to break the back of a sophisticated criminal syndicate of alleged coal smugglers”.
The smugglers play a major role in exacerbating the energy crisis and load-shedding, Sars said.
They operate by diverting coal trucks on their way to power stations to designated coal yards where high-grade coal is replaced with low-grade or substandard product. The high-grade coal is exported or sold to willing buyers while the low-grade coal, often blended with scrap or other material, is delivered to power stations where it causes damage and leads to prolonged outages.
Sars was the lead agency in Thursday’s search and seizure operations acting on information received about a host of tax crimes allegedly committed by members of the syndicate. Suspects include former Eskom employees who facilitated procurement fraud and other individuals involved in the diversion of coal. The loss of revenue to the fiscus because of their tax crimes amounted to more than R500m.
Sars said the syndicates and related entities are active in Gauteng, Mpumalanga, the Free State, KwaZulu-Natal and Limpopo.
“It is because of such naked greed the country has experienced unprecedented load-shedding which harms business, undermines foreign direct investment and leads to job losses, all of which negatively affect revenue collection,” said Sars commissioner Edward Kieswetter.
Eskom welcomed the operation and the collaboration with Sars and law enforcement agencies in identifying and disrupting the criminal networks.
“Eskom will provide the required support to ensure successful prosecution and that stiff sanctions are meted out,” said Eskom spokesperson Daphne Mokwena.
Sars was able to establish links between the individuals and related entities for contraventions such as nonregistration for income tax, VAT and/or PAYE, as well as failure to submit tax returns, under-declaration of income, claiming undue VAT refunds and fraud.
Before stepping down in February, former Eskom CEO André de Ruyter said he believed the power utility was losing R1bn a month to corruption, much of it due to coal theft.
De Ruyter detailed the challenges Eskom faces in a submission to parliament’s standing committee on public accounts in April. He said given Eskom’s spend of about R132bn a year on buying primary energy, the bulk of which is coal, even a 5% loss on coal would equate to losses of about R500m a month.
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