Management Shambles Leaves South African Tax Agency in Disarray

(Bloomberg) -- The South African Revenue Service, once one of the nation’s most effective institutions, is in dire straits after more than four years of shambolic management by commissioner Tom Moyane, evidence presented to a judicial commission of inquiry shows.

The tax agency has repeatedly missed its collection targets since then-President Jacob Zuma appointed Moyane in September 2014, placing the state’s finances at risk and eroding investor confidence. South Africa’s new leader, Cyril Ramaphosa, suspended Moyane in March and appointed a panel headed by retired Judge Robert Nugent to investigate his time in office when he fired or reassigned about 200 senior managers and halted a systems overhaul.

Management Shambles Leaves South African Tax Agency in Disarray

A climate of fear and distrust continues to prevail at SARS, which is dogged by low morale and a lack of investment in training and new technology, Mark Kingon, the agency’s acting commissioner, told the panel in the capital, Pretoria, on Friday.

“I remain, even today, very concerned about the health of our organization,” he said. “Our executive leadership is broken and unstable and wracked by division.”

Zuma Ally

Moyane was closely allied to Zuma, who was forced to quit 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.

Nugent said in an interim report released on Tuesday that Moyane was guilty of “reckless mismanagement” and should be immediately dismissed.

Moyane’s decision to halt a modernization drive resulted in the degeneration of the tax agency’s systems as technology advanced, and his restructuring of its operating model benefited delinquent taxpayers, Nugent said.

He also accused Moyane of gutting SARS of its experienced senior management, destroying its large business center and damaging its relationships with other state institutions and international bodies.

‘Tragic Consequences’

“The day Mr. Moyane took office was a calamity for SARS. Almost immediately, and then continuously for the next 18 months, SARS was thrown into turmoil, with tragic consequences for the lives of many people, tragic consequences for the reputation of SARS, and tragic consequences for the country at large,” Nugent said. “We stress that the replacement of Mr. Moyane is not a panacea, but only the first necessary measure without which there is no possibility of rectifying the damage that has been done to SARS.”

Read more about the role Bain & Co. played in the tax agency saga.

Kingon said that despite the damage done to the tax agency, it still has committed employees and continues to function. While significant investment is needed to prevent the collapse of the electronic tax filing system, that risk isn’t imminent, he said.

“This situation is not totally bleak,” Kingon said. “The time is to move on. We cannot afford a mess at SARS as a country. To go back to where we were would be a disaster.”

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