When Jacob Zuma climbed to the most astounding office on 6 May 2009, one trusted he would alter his way of life and comply with the traditions that must be adhered to. He didn’t, and neglected to present a government form for his first year in office. This was no exemption. He didn’t present a government form for the second year, either. Or, on the other hand the third or the fourth.
By 2011, the VIP Taxpayer Unit was again asking the president to get his duty issues all together. At the time, this unit announced specifically to Ivan Pillay, who was worried that Zuma’s rebelliousness would make political aftermath and make individuals pitch the South African Revenue Service against the president
He selected Mark Kingon to deal with this problem. Kingon, Pillay and [Gene] Ravele had gatherings with both [Zuma’s lawyer Michael] Hulley and Zuma – one was held in Durban – where the president’s onus to present his profits was (once more) disclosed to him. The lion’s share of consequent gatherings seem to have been amongst Kingon and Hulley.
There are two or three reasons Zuma would not like to present his government forms. The first was more than likely the scrape of the Nkandla updates. Much has been composed about Zuma’s Versailles; this sprawling image of defilement and scum that will perpetually be a holy place to his cataclysmic run the show.
Legally, Zuma owed millions of rands in tax on the fringe benefits that accrued to him because of these upgrades. He has always maintained that they were security-related and that he didn’t ask for them. He argued he was therefore not responsible for any taxes. As the extent of the upgrades became more apparent in 2012, the tax effects on Zuma became equally clear.
It thus wouldn’t have helped Zuma to argue that he didn’t ask for the upgrades – this didn’t matter either. The public protector later found that not all the upgrades were security-related and that Zuma had to pay for those.
SARS determined that Zuma was probably liable for taxable fringe benefits of around R145,185,235 relating to the upgrades. Taxation of this amount at a rate of 40% is R58,074,094. Because Zuma hadn’t declared these fringe benefits, a penalty of 10% – amounting to R5,807,409 – would have to be added, plus additional interest. This alone would have brought his tax bill for Nkandla to R63,881,503.
By October 2013, SARS had completed its preliminary inquiries into the upgrades and other aspects of Zuma’s non-compliance with tax laws. The file was kept with the VIP Taxpayer Unit, which deals with the taxes of prominent politicians, cabinet ministers and top civil servants, and locked away while SARS waited for Zuma’s tax submissions. Although Michael Hulley had promised that Zuma would submit his returns, nothing was forthcoming. SARS, mainly through Kingon, kept on nagging Hulley to comply, but Hulley just kept on giving SARS the runaround.
My sources tell me that by May 2015 Zuma had still not submitted his returns. They also gave a fascinating account of an incident in early 2011 when a “donation for Nkandla” arrived on a private jet at King Shaka International Airport outside Durban. When customs inspected the cargo, they found, among other things, medical equipment on board. The shipment originated in Russia and the sender was a man by the name of Vladimir Strzhalkovsky.
An internet search revealed that Strzhalkovsky is a former KGB agent who joined the ranks of post-communist Russia’s oligarchs and became one of the biggest businessmen in that country. He is the former CEO of Norilsk Nickel, the world’s largest nickel and palladium producer. Strzhalkovsky received a R1.4-billion payout in 2012 to step down from Norilsk Nickel.
What I discovered next was almost too fantastic, implausible and far-fetched. Have you ever heard of any head of state anywhere in the universe who was, while running the affairs of his country, also an employee of a private company?
In 2010, a SARS auditor in the Durban office of the revenue collector was doing a routine tax compliance check of a security company by the name of Royal Security. The company’s founding member and director is Roy Moodley, who is a public friend of Jacob Zuma and an ANC benefactor. The company has offices and security personnel in at least six provinces and says on its website it has three thousand clients and contracts with the police, First National Bank, Engen, Transnet, MTN and Telkom.
Employers are by law required to deduct tax from employees monthly and pay this over to SARS.
It was explained to me that SARS uses reconciliations to ensure that the tax that employers claim to have paid to SARS on behalf of their employees and the income declared by the same employees add up. It is a criminal offence for any employer to deduct tax from an employee and not pay this over to SARS.
The Royal Security payroll reconciliations that the SARS official scrutinised included the tax years 1 March 2009 to 28 February 2010. From what I could establish, Royal Security was not under SARS investigation and it seemed at face value to have been tax compliant.
However, one of the Royal Security employees on the reconciliation raised a red flag because the auditor was unable to determine whether tax had been deducted from his salary and paid to SARS. The employee was remunerated at an amount of R1-million per month. Income tax on that salary bracket would have been around R400,000 per month. The employee was JG Zuma, which didn’t raise any unusual suspicions from the official until he searched for the details of the taxpayer on the SARS mainframe. Access to the employee’s tax records and employment history was blocked.
JG Zuma, employed by Royal Security, was none other than Jacob Zuma, the fourth president of democratic South Africa.
At his 60th birthday bash at Durban’s International Convention Centre in February 2014, the son of the flamboyant security tycoon Chockalingam “Roy” Moodley told the attendees that his father was the most powerful man in the country. Nobody blinked, not even Jacob Zuma, who was the guest of honour and sat at Moodley’s table.
When the president delivered the keynote address at the horse-racing- themed bash, he said to Moodley: “You’re a friend, comrade.” He then bumbled in true Zuma style: “We have something to do with you during elections which we have discussed with you. It will be impacting on people in different ways. I want him to impact on certain people in a few months. Your friends and colleagues here vote well.”
Zuma and Moodley come a long way. When the ANC leader was inaugurated as president in May 2009, Moodley was one of his VIP guests.
There have for years been rumours that he has been bankrolling both Zuma and his family.
He is also reportedly a generous contributor to the ANC and was previously ward chairperson of the organisation’s Umhlanga branch in KwaZulu-Natal.
When public protector Thuli Madonsela did her “State of Capture” report, she submitted a list of 42 questions to Zuma. One of the questions was about his relationship with Moodley. Zuma refused to answer her. Their friendship has nonetheless been public, warm and beneficial. Moodley is an avid racehorse owner (he had 51 winners in the 2014/15 season) and in 2010 Zuma famously won R15,000 at the Durban July and was pictured flaunting the cash alongside Moodley. The two were again pictured together at the 2016 Durban July.
The “JG Zuma” tax query from the Durban auditor at the regional office in Durban caused consternation at head office in Pretoria.
My sources said that Royal Security ultimately paid the taxes due to SARS on behalf of the “employee” (JG Zuma) and the matter, at least from the company’s perspective, was laid to rest. Moodley paid the tax via bank transfer.
They said – and this is the crux of the matter – that Zuma was employed at the security company for at least four months after becoming president. It means that for the first months of his presidency, Zuma’s boss was Roy Moodley. These payments to Zuma must give Moodley an iron hold over Zuma.
What Zuma allegedly did was dishonest, unlawful and unconstitutional. He came close to losing his presidency after the Constitutional Court ruled in 2016 that he had failed to uphold the constitution. But this is much worse.
Zuma was in deep trouble, because the officials that dealt with Zuma’s tax affairs – Oupa Magashula before he left SARS, Ivan Pillay, Mark Kingon, Gene Ravele and Johann van Loggerenberg – would have treated Zuma no differently from any other taxpayer.
During the meeting between Pillay and Zuma in February 2014, the SARS acting commissioner apparently stressed to the president that he could not continue to drag his feet on the Nkandla tax issue and that, unless he submitted his tax returns and declared the fringe benefit, SARS would have no choice but to advance the case to the next level.
According to internal SARS notes of the meeting, Pillay told him that whatever his answer was to be regarding Nkandla, he needed to do his tax planning on the effects of the Nkandla benefits and do so properly and soon. Otherwise it would become a problem and SARS did not want to be drawn into political fights.
Zuma was once again noncommittal about his returns and undertook to give the matter his attention.
A full-scale probe of Zuma’s tax affairs posed a mortal danger to him because he couldn’t afford to pay the taxes, which could ultimately have resulted in his sequestration – which would have spelt the end of his presidential reign. A South African president cannot be an unrehabilitated insolvent.
Secondly, had it come out that he was also an “employee” of a private company in the first few months of being president, he could have been “impeached” and removed from office.
Even if a generous sponsor was prepared to settle Zuma’s massive tax bill, it would have unleashed donations tax. If Zuma got a loan to pay his tax bill, he would have had to show how he was repaying the loan. Through a mixture of ignorance and arrogance, the president had spun himself into a cocoon from where there was no escape.
When the Constitutional Court ruled in 2016 that Zuma must repay R7.81-million for the non-security upgrades at Nkandla, he had to scrounge South Africa’s northernmost outpost to find an institution that would lend him the money. VBS Mutual Bank was set up in the former “independent” Republic of Venda and specialised in home loans for residents in the area. Zuma has a woeful credit record. Any credible financial institution would red-flag and reject his application.
My SARS sources said: “We know that Zuma fears the corruption charges. That’s common knowledge. But that’s nothing in comparison with his potentially huge tax bill, the fact that his household may have received proceeds of smuggled tobacco, and those payments allegedly made by Roy Moodley. And there are others too, the Guptas and so on. He would never have survived it. He could even have been sequestrated ultimately. That was his biggest fear. And he knew these guys hardly lost cases in court.”
There was, of course, the last and final solution for Zuma; the ultimate way out of his tax problems. This is the one I am suggesting was the reason for the upheaval at SARS and the removal of the “Gordhan Four”.
The first step for Zuma was to appoint his pal Tom Moyane as SARS commissioner. He, in turn, purged the place of anybody who could cause trouble. That, of course, wouldn’t have been enough, because what if they talk, or what if they enter the system in another way? No, they had to be branded as dishonest, criminal even, crooks, untrustworthy – just in case any of them decided to say something nasty about Zuma.