READ: 5 key findings the PP made against Pravin Gordhan

The minister has always maintained that the so-called ‘rogue’ unit was above board and had ministerial approval.

FILE: Public Enterprises Minister Pravin Gordhan at a press briefing at Lethabo power station. Picture: Abigail Javier/EWN

JOHANNESBURG - Public Protector Busisiwe Mkhwebane on Friday made several damning findings against Public Enterprises Minister Pravin Gordhan related to the South African Revenue Service (Sars) and its so-called rogue unit during his time as the tax collection agency’s commissioner.

Mkhwebane said her investigation into the establishment and activities of the unit should not be viewed as “stifling the effectiveness and efficiency of Sars in their investigations into tax evasions and the curbing of the illicit economy”, but to ensure that Sars doesn’t infringe on the mandate of the State Security Agency (SSA).

The unit was called the High Risk Investigations Unit, and was alleged to have carried out rogue operations, such as bugging the National Prosecuting Authority's offices. The unit was set up to investigate high-profile tax offenders.

The complaint was lodged by the Economic Freedom Fighters and an anonymous person.

Gordhan was the Sars commissioner in 2007 when the intelligence unit was set up, and he has always maintained that the unit was above board and had ministerial approval from then finance minister, Trevor Manuel.

Here is a summary of the findings made by the public protector:

1. Sars ‘rogue’ unit

The public protector found that the allegation that Gordhan during his tenure as the commissioner of Sars established an intelligence unit in violation of the South African Intelligence prescripts was substantiated.

“In terms of the national legislation, Sars is not mentioned as one of the National Intelligence Structures established in terms of the National Strategic Intelligence Act (NSI Act) and can only work with other law enforcement agencies within the principles of co-operative government in achieving it objectives,” Mkhwebane said.

Mkhwebane said the tax agency under the guidance and management of Ivan Pillay – who was the general manager of the enforcement and risk division – established an intelligence unit without the involvement of the National Intelligence Agency (now known as the SSA). Pillay is also a former deputy commissioner of Sars.

The public protector also found that prior to Gordhan sending a memorandum to the finance minister at the time, Trevor Manuel, about the establishment of the intelligence unit, Sars had already began operating a unit that gathered information covertly.

Mkhwebane said: “However, as the Accounting Officer, Mr Gordhan should have been aware, and I believe, was aware, that the unit had already started operating. Mr Pillay reported directly to Mr Gordhan as Commissioner of Sars. The establishment of the unit with the approval of Mr Gordhan as the erstwhile Accounting Officer was in breach of section 209 of the Constitution in terms of which only the President may establish such covert information gathering unit.”

She said Gordhan’s conduct as the Sars commissioner in the establishment of the unit at the time was improper and in violation of Section 209 of the Constitution, amounted to maladministration, and abuse of power.

2. Procurement of intelligence equipment

The public protector found that the allegation that Sars failed to follow proper procurement processes in the procurement of equipment that was used by the intelligence unit was substantiated.

“Although Sars failed to provide me with documents relating to the procurement of equipment for the Customs and Border Control Unit (CBCU), National Research Group (NRG) and subsequently the Special Projects Unit (SPU), evidence at my disposal confirm the existence of such equipment as well as the acquisition thereof.

“It is extremely impossible that a unit carrying out investigations on behalf of Sars would not have procured equipment necessary for the fulfillment of its duties and functions, as admitted to in so many instances and at so many levels. The only contention by Sars being that it was not conducting illegal operations,” Mkhwebane said.

The public protector said if the unit’s operations were lawful, she found it unclear why Sars and/or its former employees would keep the procurement of equipment “a guarded secret”.

“I can only come to the conclusion that proper procurement processes were not adhered to, and that such conduct amounted to the violation of the PFMA [Public Finance Management Act] and thus constituted improper conduct as envisaged in Section 182(1) of the Constitution and maladministration as envisaged in Section 6(4)(i) of the Public Protector Act.

“I am of the firm view that the failure and blatant refusal of SARS and its former employees to provide me with records of the procurement to confirm the purchasing of the said equipment and the whereabouts thereof is suspicious and unwarranted, and is aimed at perpetuating the narrative that there was no such intelligence unit at Sars,” she said.

3. Appointment of employees for intelligence unit

Mkhwebane found that the allegation that Sars failed to follow proper recruitment processes in appointing employees who worked for the intelligence unit was substantiated.

“Although Sars failed to provide me with a policy regulating the transfer of staff within Sars branches, as well as policy which regulates headhunting of for positions at Sars, evidence at my disposal point to some irregularity in the recruitment of personnel for the intelligence unit,” she said.

Mkhwebane said this was supported by sufficient information provided by Sars to an investigation conducted by her office into similar staff complaints as was raised by certain employees within the intelligence unit in 2014.

“The failure to advertise positions externally is a violation of Paragraph 8.7 of the Sars Recruitment and Selection Policy. The apparent denial of Mr Gordhan of any involvement or participation in the recruitment process of one or more of the unit’s employees is improbable. The Sikhakhane report confirms that Mr Gordhan played a role in the recruitment of Mr [Johann] van Loggerenberg.”

The public protector found that Gordhan, in approving the memorandum for the establishment and recruitment of staff for the unit as it was described, was improper and amounted to improper conduct.

4. Conduct by intelligence unit

Mkhwebane found the allegation that the unit carried out irregular and unlawful intelligence operations was substantiated.

The public protector said the conduct of Sars officials in unauthorised interception and surveillance was in violation of the Regulation of Interception of Communication and Provision of Communication and amounted to abuse of power.

“Despite denials by Sars, I have evidence before me which indicates that during June 2007 until November 2007 Mr Pillay and Mr Janse van Rensburg irregularly procured Mr Helgard Lombard and Mr De Waal and/or authorised Mr Lombard and Mr De Waal to intercept communication within the offices of the DSO and those of the NPA without an interception direction issued by a designated judge in terms of the Regulation of Interception of Communication and Provision of Communication.

“There is further evidence at my disposal of the unauthorised interception of private communications of prominent members of society, as well as surveillance by the intelligence unit of Sars for unknown reasons and/or purposes,” she said.

5. Meeting Ajay Gupta

The public protector found that the allegation that Gordhan violated the Executive Ethics Code by deliberately misleading the National Assembly by disclosing that he had met with a member of the Gupta family since taking office was substantiated.

“Mr Gordhan conceded to not having disclosed that he had actually met a member of the Gupta family and an associate of the family in 2010. He contended that at the time of his response to the Parliamentary question he could not recall as he had forgotten about the meeting at which Mr Ajay Gupta was present.”

Mkhwebane said she made the finding based on Gordhan’s affidavit to the Zondo commission. In the affidavit, Gordhan admitted that he remembered meeting Ajay Gupta after being reminded by Treasury director-general Dondo Mogajane. Mogajane was his chief of staff at the time of the meeting.

“I find this rather implausible when one considers the prominence of the subject of state capture in South Africa. I therefore find that his conduct in this regard is in violation of paragraph 2 of the Executive Ethics Code and accordingly amounts to conduct that is inconsistent with his office as a member of Cabinet as contemplated by section 96 of the Constitution,” Mkhwebane said.

Mkhwebane ordered President Cyril Ramaphosa to “take appropriate disciplinary action” against Gordhan within 30 days.

The public protector also ordered that the minister should face an ethics investigation in Parliament. She ordered the National Prosecuting Authority to finalise its prosecution into the "rogue" unit.