Bain Calls Its South African Tax-Body Work `Serious Failure’

JOHANNESBURG (Capital Markets in Africa) – Bain & Co., the Boston-based consultancy company that was hired to assist in restructuring South Africa’s tax agency in 2015, said it has become “painfully evident” that the firm’s involvement with the authority was a “serious failure.”

Not only was Bain’s hiring potentially irregular, but it overstated the need for change at the South African Revenue Service, allowed the former SARS head Tom Moyane to influence its work and didn’t walk away when it became clear Moyane “had a different agenda,” Bain said in a statement on its South African website.

The consultancy showed failures of governance, an absence of public-sector protocols and naivety about South African politics, Bain said, adding that it regrets that a former partner did not adequately co-operate with the Nugent Commission of Inquiry into SARS. “We have let South Africa and ourselves down,” the company said.

Bain is one of several multinational companies accused of helping politically connected individuals allegedly plunder state resources in South Africa. The local units of McKinsey & Co. and KPMG LLP have also come under fire, with KPMG retracting a misleading report it compiled for SARS. Both firms have issued apologies and repaid fees in an attempt to regain the trust of the South African public.

Bain didn’t have full appreciation of the political environment the tax service was operating in when it started at SARS, it said. The firm has returned all of the fees it earned for work done for the agency with interest. It has also changed the management and structure of its South African office.

President Cyril Ramaphosa is studying recommendations made in the Nugent Commission of Inquiry’s final report, his office said. The commission said the National Director of Public Prosecutions should consider prosecutions relating to the award of contracts to Bain.

Ramaphosa suspended Moyane in March, soon after replacing Jacob Zuma as president with a pledge to end graft in the government and state companies. Moyane, who was fired last month on the recommendation of the commission, was closely allied to Zuma, whose almost nine-year tenure was marred by scandal. The agency repeatedly missed revenue-collection targets after Moyane took over in 2014. Moyane has denied wrongdoing.

Source: Bloomberg Business News