Former Sars boss ‘knew new operating model didn’t work’

Testimony presented at the Commission of Inquiry into Tax Administration and Governance at the SA Revenue Service (Sars) suggests that former Sars chief operating officer Jonas Makwakwa acknowledged the new operating model implemented at the tax collector did not work, even though he headed the steering committee that worked with Bain to introduce the model.

Fareed Khan, executive responsible for the compliance division within the enforcement unit, said he wrote to Makwakwa in March 2018 amid fear that a crisis was brewing in his department.

It appeared that Makwakwa did not fully appreciate the design or structure that was provided to Khan’s team in terms of the new operating model.

Makwakwa questioned why the compliance division, which was meant to deal with higher volume, lower value cases, dealt with large business refunds.

Khan said he had to point out that the new operational structure moved the large business refunds into the compliance space, even though the division was ill-equipped to manage complex corporate structures and the refunds they were entitled to.

Makwakwa also criticised a new centralised auditing structure, which was consciously implemented due to the increased workload of senior managers.

Khan said: “We had this operating strategy that mitigated some of the risks that were created by the structure and the chief officer at the time was unhappy with that – rightfully.”

Because of these issues, and because Khan wanted to protect his staff, he wrote to Makwakwa. He noted that the chief officer had seemingly not been fully appraised of the impact and consequences of the new operating model, and the way his division had to adapt to ensure compliance.

According to Khan, Makwakwa then acknowledged he did not envisage this impact on the division. “He suggested that he wasn’t even aware that business was not adequately consulted in the process.”

Makwakwa did, however, make a commitment to address it, but resigned soon afterwards.

In an e-mail read at the hearings, he tells Khan that his criticism “is not on individuals but on the operational set-up which I can see is hampering smooth operation of the business”.

In what evidence leader Carol Steinberg described as “quite a gracious e-mail”, Makwakwa said: “Please don’t misunderstand me – I’m not criticising you and your people. It is the operating model that doesn’t work.”

President Cyril Ramaphosa appointed the commission in May as part of an effort to stabilise and restore Sars’ credibility.