‘We cannot sit back and watch Drip be liquidated’: MEC’s plea for sneaker brand amid tax woes

Drip’s alleged struggles, which have led the business to the brink of liquidation, have prompted the Gauteng Economic Development Department to come to its rescue.

Gauteng’s Member of the Executive Council (MEC) for Finance and Economic Development, Lebogang Maile, has written to the Governor of the South African Reserve Bank (SARB), Lesetja Kganyago, to request a rehabilitative intervention for Drip Group.

“We cannot sit back and watch The Drip Group (Pty) Ltd, a company founded in the township of Ivory Park by a young black man who had the odds stacked against him, be liquidated,” said Maile.

Drip’s tax woes

In the letter to the governor, the MEC said he expressed unwavering respect and commitment to the rule of law. 

“Which extends to the respect of the investigative process that the SARB has undertaken in its legal matter with Drip which is under investigation for the contravention of the provisions of the Exchange Control Regulations, made under section 9 of the Currency and Exchanges Act, 1933 (Act No. 9 of 1933),” continued Maile.

Earlier this year, reports came out that the business was facing a R20 million debt. Seemingly responding to the alleged debt, Drip owner Lekau Sehoana, speaking at a launch of their new sneaker range, said: “I sleep so well at night, knowing that we’re able to actually not go down.”

Drip is currently facing challenges of non-compliance with domestic tax laws.

ALSO READ: Drip owner Lekau Sehoana addresses eviction rumours

Rehabilitate, don’t punish  

According to the MEC, if the law is rehabilitative it makes allowance for small business owners.

“It makes allowance for business owners, particularly of SMMEs (Small, Medium and Micro enterprises), to understand the depths of tax laws and other laws, which most are not exposed to and as a result, place their complete faith in third parties who, unfortunately, can take advantage of this limited understanding.

“The company provides employment to hundreds of people, many of them from historically disadvantaged groups that include women and youth.

“As a government, we must do everything possible to provide the necessary support to The Drip Group and other SMMEs that are facing challenges, particularly when such challenges arise from failures of compliance with legislation, which is not the same thing as blatant and intentional criminality,” said Maile.

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“In respecting the rule of law and wanting to maintain the very crucial principle of the separation of powers, it’s important that the law should never be punitive but rather, rehabilitative,” Maile continued.

The administrative non-compliance penalty for the failure to submit a return comprises fixed amount penalties based on a taxpayer’s taxable income and can range from R250 up to R16 000 a month for each month that the non-compliance continues.

ALSO READ: Lekau Sehoana shuts down Kiddies Republic store as it goes into liquidation

Township Economy Development Act

The MEC said the intervention for the sneaker brand is driven by the Township Economy Development Act (TEDA) which was signed into law by then Gauteng Premier David Makhura in 2022.

The Act seeks to open up new procurement and market opportunities for township businesses and create financing facilities for township-based enterprises.

“We have an obligation to equip such businesses with the necessary skills and ask that the government, private sector, and civil society all play their part in helping these businesses succeed.

Part of what that demands is that institutions such as SARB also assist us to equip these businesses with the requisite knowledge and skills rather than to apply a punitive approach,” said Maile.

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