Makwakwa’s mystery mega stash: Law firm clarifies probe into SARS No. 2

SARSJOHANNESBURG — The South African Revenue Service (SARS) is finding itself stumbling from one saga to the next. Apart from missing its revenue collection target by R51bn recently, internal matters at the tax collector appear to be heating up. One example of this is the bizarre return of SARS’ second-in-command Jonas Makwakwa to his post. Here’s the backstory. Makwakwa was suspended when reports emerged last year that the Financial Intelligence Centre (FIC) had flagged several of his transactions as being suspicious or unusual. Investigative journalists amaBhungane, published a report in September 2016 detailing how Makwakwa “received unexplained cash deposits and bank transfers into his FNB account totalling R1.2-million between 2010 and (2016)”. Investigators further flagged three cash deposits, totalling R450 200, to Makwakwa’s girlfriend Kelly Ann Elskie, who also works at SARS. The tax collector then suspended Makwakwa and Elskie in September 2016 and launched a probe into the matter. SARS hired law firm Hogan Lovells in October 2016 to investigate. Fast-forward to a year later to October 30, 2017, and SARS made a surprise announcement to say that Makwakwa would be returning to work. (Elskie has also reportedly returned to work.) Despite Hogan Lovells advising that Makwakwa should face disciplinary action; Advocate SC Terry Motau, in a subsequent hearing, found no wrong-doing. What’s emerging now, though, is that Hogan Lovells’ probe was very limited in scope (see their statement below) and that it didn’t even look into the FIC’s flagged transactions. In light of this, lots of questions will be asked about the SARS decision to reinstate Makwakwa. – Gareth van Zyl

Press statement from Hogan Lovells:

Hogan Lovells’ role in the Makwakwa investigation

Hogan Lovells was instructed by South African Revenue Services (SARS) in October 2016 to conduct an independent investigation into allegations against Mr Jonas Makwakwa and Ms Kelly Ann Elskie. This was in response to a report by the Financial Intelligence Centre (FIC), which identified various financial transactions involving Makwakwa and Elskie, which the FIC deemed to be suspicious or unusual.

Jonas Makwakwa
Jonas Makwakwa

The scope of the investigation conducted by Hogan Lovells was limited to identifying whether any misconduct had been committed by Makwakwa and Elskie as employees of SARS. It did not seek to directly investigate the financial transactions identified by the FIC. We understand that all criminal related allegations arising from the FIC report were referred to the relevant authorities for investigation.

As a result of that independent investigation, Hogan Lovells produced a report which contained recommendations for the management of SARS. One of those recommendations was that disciplinary action should be taken against Makwakwa for non-disclosure of external interests. No action was recommended against Elskie. SARS subsequently followed its own internal disciplinary procedures which included charges relating to Makwakwa’s breach of his suspension conditions and the failure to disclose. A hearing was convened and chaired by an independent senior counsel, Advocate Terry Motau SC. The findings of that internal enquiry acquitted Makwakwa of all charges.

Press statement from SARS on Makwakwa’s return:

Jonas Makwakwa to return to SARS

SARS wishes to announce that after approximately a year in suspension, Chief Officer: Business & Individual Tax (BAIT), Mr Jonas Makwakwa, will return to the organisation with effect from 1 November 2017.

In September 2016, the Financial Intelligence Centre (FIC) submitted a report to SARS containing some serious allegations against Mr Makwakwa.

Advocate SC Terry Motau
Advocate SC Terry Motau

SARS sought an outside legal opinion on the matter. The Commissioner, Mr Tom Moyane took the decision to suspend Mr Makwakwa pending an independent investigation into the allegations.

To ensure transparency, independence and integrity of the process, a renowned international law firm, Hogan Lovells was appointed to investigate the matter.

Hogan Lovells submitted an investigation report which recommended that disciplinary action be taken against Mr Makwakwa. The law firm, Hogan Lovells then appointed a highly esteemed and renowned senior counsel, Advocate Terry Motau, to chair the hearing.

SARS wishes to confirm that, Advocate Motau, SC has submitted the final report which found that Mr Makwakwa was not guilty of any of the charges levelled against him.

This concludes the disciplinary action against Mr Makwakwa. As result SARS will immediately implement the outcome of the hearing as is. He will return to SARS to resume his position as CO: BAIT with effect from 1 November 2017.