I never thought I’d find myself wanting to outdo the EFF’s heckling of Zuma in parliament to ‘pay back the money’, but with Bain and Company, even greater reparations are in order for the immense damage they caused to SA. Bain weirdly seem to think protestations that they were unwitting partners in state capture and returning their fees is enough to exonerate them, but one (anonymous) businessman sums it up perfectly; “They’re now radioactive.” Here at least. Yet, like Bell Pottinger, the global PR agency that facilitated so many dirty tricks locally and elsewhere, Bain may yet implode. Zondo’s precise Phase One report leaves no room for doubt that outright greed and inside knowledge were at play. If a Bains employee at the time described Tom Moyane’s purge of SARS as “scary”, what kind of government did they think they were helping? This Financial Times analysis – which includes pertinent comment from whistle-blower Williams – pretty much blows Bains out of the water. It’s stomach-churning stuff and a cautionary tale for business, which too often exonerates such behaviour. – Chris Bateman
Moving On. For more of Zapiro’s magic, please visit www.zapiro.com.
Bain & Co, tax and Jacob Zuma: a tale of ‘state capture’ in South Africa
By Joseph Cotterill in Johannesburg
As the fiscal bulwark of a young democracy, South Africa’s revenue service was renowned as one of the continent’s most effective tax gatherers.
Yet, after several meetings with then-president Jacob Zuma, management consultant Bain & Co. won major work to restructure it from the ground up. As a result, it has this month been criticised in a judicial report as a corporate enabler of graft in South Africa.
With Bain’s knowledge, Zuma in 2014 appointed Tom Moyane, a close ally, as head of the revenue service, known as SARS. Moyane sacked key officials, substantially weakening the agency and crippling its ability to carry out investigations of tax evaders. Bain later secured a contract to advise SARS.
Bain’s work shines a light on the nexus between business and politics in South Africa and follows criticism of peers such as McKinsey and KPMG.
Raymond Zondo, the deputy chief justice, found that the Boston-based firm’s consultants helped Zuma undermine the post-apartheid nation through so-called “state capture” – the manipulation of public resources for private gain. Zondo has called for all Bain’s work in the South African public sector to be re-examined.
The purge of SARS was both “one of the few instances where President Zuma was himself directly and personally involved in the activities and plans to take over a government entity” and “a clear example of how the private sector colluded” on state capture, Zondo said.
“I don’t think that anyone [from Bain] was sent to South Africa with ill intent,” Athol Williams, a Bain whistle-blower, told the Financial Times in an interview after last week’s report. But as the opportunity to take advantage of weak institutions became clear, “it was just greed run amok . . . things that Bain did in South Africa, they would never do in the UK or the US”.
The weakening of SARS had huge economic implications in a highly unequal country of about 60 million. Zuma, who was jailed last year for defying an order to attend the enquiry and was replaced in 2018 by Cyril Ramaphosa, denies wrongdoing.
The allegations of wrongdoing triggered an earlier judicial inquiry. In 2018, Bain admitted “serious failure” at SARS and repaid its fees. Bain has said this latest report “mischararacterises” its work in South Africa. In a statement to the FT, it said it “became an unwitting participant in a process that inflicted serious damage on SARS, for which we apologise,” but “we did not in any way wilfully or knowingly support state capture at SARS or elsewhere”.
Over the past decade, Bain has worked closely with state companies and the private sector in South Africa. Vittorio Massone, the firm’s former South African managing partner, forged a close relationship with Zuma, meeting him on average every six weeks between 2012 and 2014, according to the report. An event management company owned by a soap-opera producer close to Zuma became Bain’s second-highest paid local adviser around the world, the report said.
Bain told the enquiry that its repeated closed-door meetings with the head of state were marketing meetings and that its work with Moyane long before his hiring at SARS was executive coaching. Bain told the FT that none of the meetings “resulted in any additional work or contracts being awarded to Bain” or payments being made. The firm said that “no one else at Bain was aware of the extent” of the meetings with Zuma before an internal investigation. Massone left the firm after “not being fully transparent”, Bain added. Massone did not respond to the FT’s request for comment.
In a sign of the close ties between Bain and the president, the consultancy knew of the appointment of Moyane to lead the agency before the public did. Moyane led a purge of SARS, defenestrating veteran officials with such gusto that one Bain executive called him “scary”, according to an email seen by the enquiry. Moyane has denied wrongdoing to the enquiry.
“Bain did not limit its plans just to SARS,” Zondo said. It also sought to parlay influence with Zuma into a role at the top of South Africa’s government.
Between 2012 and 2015, Bain laid plans “to restructure entire sectors of the South African economy” and centralise state procurement, the report said. “Central procurement agency: he loves it, wants an implementation plan,” Massone said in one email that the enquiry said referred to Zuma.
“In the light of the critical role that procurement abuse has played in state capture . . . this focus takes on an extra significance,” the report added. Much of the enquiry’s investigations focused on the abuse of procurement contracts to favour the Guptas, a business family with close links to Zuma. The Guptas have always denied wrongdoing.
“In cozying up to [Zuma], I think they [Bain] saw even more money to be made” and Massone was not a rogue actor, Williams told the FT. “In management consulting in particular, it is impossible to work in a vacuum. The [intellectual property] that Bain developed . . . Massone would have drawn on.” Zondo has praised Williams for his testimony, noting that he “rejected numerous attempts from Bain & Co to give him large sums of money in return for his silence”. Bain said his testimony was based on speculation.
Bain’s quest for influence even extended to Massone attending meetings to discuss the manifesto of the ruling African National Congress, according to the report. Yet, beneath these grand ambitions, “across Africa, Bain had no tax authority experience” and “knew that they did not have the necessary expertise”, the report said.
For now, South Africa’s business community is backing Bain. Last year, the firm was readmitted to Business Leadership South Africa, an industry group. Busi Mavuso, BLSA’s chief executive, said this week that “the work the firm undertook to redeem itself ultimately satisfied the board that it qualified to be readmitted”.
“It doesn’t send the right message,” said Karam Singh, executive director of Corruption Watch, a South African NGO. “Anybody and everybody can speak anticorruption,” but extracting real accountability from companies over state capture had proven hard, he said.
“We have made amends for this episode and continue to work to regain the trust of South Africa,” Bain said. After 2018, the firm took “comprehensive action to ensure that we do not repeat our past mistakes”, it added.
Bain’s future in South Africa may depend on decisions made by individual clients. “If you’re in the public sector, I think it’s impossible – they are radioactive,” said one business leader, who declined to be named. In the private sector, boards have to weigh up the reputational risk of working with Bain against the benefits of its consulting.
In the absence of government protection for whistleblowers – one from a provincial department of health was murdered last year – Williams is in hiding and spent this Christmas away from close family. He struggled to find work after he blew the whistle on Bain, which “fully trashed my reputation in the business community”.
“The business community is saying, let’s look to the future, let’s not look back,” he said. But he concluded: “Bain has made no amends for the damage it caused.”
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