Open letter to Gordhan: Reputations at stake – SARS, FSB need your attention

Financial journalist Allan Greenblo has written an open letter to South Africa’s Finance Minister Pravin Gordhan, asking for a couple minutes of his hurried schedule. Greenblo says there are two stars in South Africa’s financial firmament – the South African Revenue Service and the Financial Services Board. But both are in need of some attention as certain issues, which if not addressed, could tarnish this reputation. The choice is yours Mr Finance Minister. – Stuart Lowman

By Allan Greenblo*

Allan Greenblo (Today's Trustee)
Allan Greenblo

Dear Finance Minister Gordhan

Sorry to bother you, since you already have so much on your plate, what with keeping your boss off your back and trying to sweet-talk the ratings agencies and everything. But there are two other matters, not entirely small, to which I’d like to draw our attention for if or when you have a moment.

Kindly try to find the time because both matters, although entirely unrelated, can splash egg from your plate to where you wouldn’t want it. This wouldn’t be good for any of us.

First is the integrity of the tax system. It even has a coincidental affect on retirement funds, seeing that the nice guys at National Treasury have been pushing so hard on reforms to stimulate savings with tax incentives. The more tax you can swish in, the more there is to swish back for noble projects.

Profuse apologies for raising that nightmarish word “Nkandla”, however one chooses to pronounce it, but the issue here is whether President Zuma is liable for fringe-benefits tax on the R200m-odd that government has lavished on his private residence.

Some folk who’ve looked at the law, and claim to know it, are adamant that he is liable. In fact, I haven’t come across anybody who suggests that he isn’t. However, I didn’t ask your friend Tom Moyane at SA Revenue Services. Since it’s been said that he, as commissioner, reports to you, as minister, it’s probably more important to hear what you think and what you propose to do; whether Moyane likes it or not.

Pravin Gordhan, South Africa's finance minister, speaks during an interview in London, U.K., on Thursday, Mar. 4, 2010. Gordhan said he is “disappointed” by the response of developed countries to the government’s plan to seek about $4 billion in loans from the World Bank. Photographer: Chris Ratcliffe/Bloomberg*** Local Caption *** Pravin Gordhan
Pravin Gordhan, South Africa’s finance minister.

Please let’s have here no ducking and diving behind taxpayer confidentiality. All that’s required is an assurance – or in your case, a reassurance – of the principle that all taxpayers are treated equally before the law. That’s just to clear the way in case President Zuma doesn’t quite grasp the concept.

The thing is that SARS, from the days when you ran it, was a star in the firmament of our financial system. This continues to be recognised, as a factor in maintaining the status of our sovereign credit, despite contentious departures of senior staff who’d enjoyed your trust. Now the problem is with those who seem not to enjoy your trust.

In particular, it arises from the way this fringe-benefits issue over Nkandla is to be handled. In its judgment, the ConCourt ruled that National Treasury had to determine only the “reasonable costs” of the non-security improvements – the cattle kraal etc – and then only the “reasonable percentage” of these costs that Zuma must pay personally.

At most, then, the amount that he does pay would be relatively small against the total cost of all the security and non-security for which his employer (government) has paid. At best for him, then, the amount he pays reduces his tax liability.

But the costs determination by National Treasury, as per the ConCourt ruling, cannot release him from his fringe-benefits obligation, as per SARS requirements. They’re separate matters. Unless Zuma is above the law, it would seem that he remains liable for tax inclusive of penalty interest.

Alternatively, perhaps SARS has a discretion. If so, it would need to explain – through you, unfortunately for you – the authority from which such discretion is derived and the basis on which it is applied. This has nothing to do with taxpayer confidentiality. It has everything to do with public policy.

Read also: Allan Greenblo: Zuma’s Nkandla tax shock – Pay SARS the money

Should you find fault with my reasoning, do tell. It’ll deserve headlines for the elucidation of all taxpayers. The many fans of President Zuma will hope that the tax liability won’t force him into insolvency and thus disqualify him automatically from continuing in his high office.

The other star in our firmament is the Financial Services Board, soon to be absorbed under the new ‘twin peaks’ regime into the Financial Sector Conduct Authority. Unfortunately, again for you in the sense of further complicating your life, the transition is due to take place against the backdrop of litigation instituted by FSB deputy executive officer Rosemary Hunter. For formalistic reasons, as I understand it, you had to be cited as first respondent.

But maybe, after all, this isn’t really so unfortunate. As a journalist, much as I prefer that dirty laundry is aired in public, perhaps the opportunity has been created to settle the litigation before it reaches court.  This is not only to reduce costs, given the teams of lawyers being engaged, but also to obviate the cross-examination of relevant FSB officials.

Whatever the merits, even the most upright citizens cannot anticipate that they’ll emerge wholly unscathed from witness-box rigours. Whatever the outcome of an open-court process, quite possibly followed by appeals, there must be a real risk of the FSCA being born under perceptions less than pristine. This is a danger to be avoided unless you’re prepared to take the chance that the FSB officials will be thoroughly vindicated prior to their transfer (under s285 of the FSCA legislation) to the market-conduct authority.

Read also: Allan Greenblo: Who’s the boss? FSB leadership crisis, Sars Wars returns.

Now, all sorts of ugly things are being said about Hunter. FSB executive officer Dube Tshidi wants “scurrilous and scandalous” accusations against him to be struck from her founding affidavit. He describes her as an “angry, distrustful and even vengeful woman”.

Where respective parties are effectively calling one another liars, under oath, it appears not to leave much room for negotiation towards a settlement. But it does nonetheless support my argument that a settlement is preferable to a full-scale dust-up. Still to enter the ring are other respondents such as Abel Sithole who chairs the FSB board and who happens also to be principal executive officer of the Government Employees Pension Fund.

Can cooler heads yet prevail? Is there anybody with status and credibility, and no vested interest apart from seeking a fair resolution, who might possibly intervene?

My suggestion, modestly submitted for your consideration, is Mcebisi Jonas. His no-nonsense approach and independence of mind, following the Gupta imbroglio, are testimony to his reputation. As your deputy minister, he also chairs the Public Investment Corporation whose major client is the GEPF. So he’d have experience in pension-fund matters, especially on governance, that lie at the heart of the current FSB dispute.

If I may take the suggestion a little further, it is that he starts some dipstick research amongst those who pay the FSB levies; in particular, retirement funds and their members. Questions might be asked about their happiness or otherwise with FSB service, where it’s seen to succeed and fail, how expeditiously it responds to complaints, and how effectively target audiences act upon its communications.

The outcome of such an exercise might also help you with the key personnel appointments you’ll need to oversee in the change from the FSB board structure to the FSCA commission structure. We could have a repetition of the same old bureaucratic regimen in dolled-up clothing, or an infusion of talent that inspires greater confidence than swathes of costly injunctions lending themselves to tick-box compliance.

At bottom, what counts is trust in the regulator; whether it stands to be enhanced or diminished. The choices are yours, Mr Minister.

  • Allan Greenblo is editorial director of Today’s Trustee (, a quarterly magazine mainly for principal officers and trustees of retirement funds.
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