Gartner Comes Under Fire at South African Tax Agency Probe
(Bloomberg) -- Gartner Inc. has become embroiled in a management scandal at South Africa’s tax agency after it emerged that the U.S. information technology research company secured an almost 200-million-rand ($13.9-million) contract without proper procurement procedures being followed.
The South African Revenue Service hired Gartner to assess its information technology and modernization programs, one of several initiatives spearheaded by Commissioner Tom Moyane that failed to produce the desired results and coincided with the agency repeatedly missing its collection targets. President Cyril Ramaphosa suspended Moyane in March and appointed a panel headed by retired Judge Robert Nugent to investigate his time in office.
Gartner never inquired how it had secured its contract without having to bid for it and relied on the tax agency to ensure that it complied with state procurement rules, Neville Willemse, the company’s senior managing partner in South Africa, told the commission on Tuesday.
“We would understand it is their responsibility to do that,” he said. “That satisfied us that the correct process had been followed.”
Willemse also said Gartner drew up terms of reference for the project together with Rangewave Consulting (Pty) Ltd., which was subcontracted to do part of the work and received about 40 percent of the fees, without Gartner having ever spoken to SARS officials. Rangewave is owned by a close friend of Moyane’s, Johannesburg’s Business Day newspaper reported on Oct. 18.
Johnstone Makhubu, the tax agency’s head of finance, told the commission last week that the process of awarding the contract to Gartner and Rangewave was improper and the tax agency had “thrown out the rule book” in the process.
Nugent and members of his panel questioned Willemse at length about the contract and indicated they weren’t satisfied with his responses.
Michael Lithgow, a Gartner executive who oversaw its work at SARS, said a committee outside South Africa had been put in place to ensure best practice compliance, and the project didn’t produce value for money because the tax agency didn’t properly implement it.
“As a professional, I am upset that the effort we put into this may not have delivered what all parties hoped for,” Lithgow said. “There was a vast amount of turbulence in SARS at the time we were doing this engagement. Nobody was sure they had a job.”
In August, Nugent’s commission heard testimony from then-finance Minister Nhlanhla Nene, who disclosed that Bain & Co. was paid 164 million rand to help restructure SARS, and that the project had served to weaken what was once an efficient organization. The Boston-based company responded by removing the head of its South African business and initiating an independent probe into the work it did for the revenue service.
Read more about the role Bain & Co. played in the tax agency saga.
Moyane was closely allied to Jacob Zuma, who was forced to quit as president in February under pressure from the ruling African National Congress after a scandal-marred tenure that lasted almost nine years.
Opposition parties have accused Moyane of deliberately weakening the tax agency to protect senior politicians who failed to declare all their income. Moyane denies any wrongdoing and has challenged both the legitimacy of Nugent’s commission and his suspension in court.
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