• +27 79 917 1869
  • This email address is being protected from spambots. You need JavaScript enabled to view it.


How Bain destroyed the South African revenue authority

Stephen York
Stephen York

Stephen York, Bain’s Managing Partner in South Africa, recently published a defiant “Appeal for Constructive Dialogue” in various newspapers in South Africa. This came on the back of the UK government’s ban of Bain from bidding for state contracts for 3 years due to its involvement in South Africa’s state capture project. South African public institutions should follow suit.

In its qualified public apology, Bain sets out to split hair over what was true and not true in the accusations levelled at it for its role in state capture. York, the company’s managing director, seeks the company’s atonement without taking full responsibility for its ethical failures. Even his reference to improvement of internal controls and governance system is too vague to be believable. If Bain does not think it colluded with politicians and the SARS commissioner to weaken the revenue authority, then whatever measures it has put in place are merely cosmetic.

York, and by extension Bain, seem not to gasp the gravity of the actions of the consulting firm in the destruction of value at SARS, and how just how bad a name this gives to global consulting companies and businesses. He confidently states that Bain’s business was about helping ‘South African organisations grow, innovate, and excel’ – a far cry from what actually happened in the relationship between the consultancy and the revenue authority.

Bain’s letter casts SARS leadership as duplicitous while framing the consultancy as a deceived rather than a colluding party, despite the fact that Bain was dancing with politicians even before Moyane’s appointment at SARS was confirmed.

In his ponderous letter, York blandly offers that Bain ‘regrets in playing any role in the damage to this critical institution’. It is not just that Bain played any role, but actively colluded with the then SARS commissioner in destroying governance, in flouting procurement rules in a self-serving manner, and fermenting a culture of fear and mistrust in that institution which set off a skills exodus. Bain may have repaid the fees with interest, but that does not fully compensate for value destruction whose effects will be long-lasting.

The Zondo Commission is clear in its portrayal of the precise role of Bain in state capture, and no amount of white-washing will change the facts about the company’s role in the reversal of South Africa’s fortunes. In discussing the relationship between SARS and Bain during that sordid state capture era, the Zondo Commission report notes that ‘The actors in question weakened and misdirected the revenue gathering function of SARS’.

The Zondo Report categorically states that ‘there was collusion between SARS, the Executive (including President Zuma) and the management consultancy, Bain and Company, with a planned and coordinated agenda to seize and restructure SARS, well in advance of the appointment of either Bain or Mr Tom Moyane, the former SARS commissioner’. This is serious stuff.

Given the fraught political climate in the country at that time, any consulting company doing work for sensitive state agencies should have put its guards up, ask tough questions, or walk away from the ‘opportunity’. Bain enjoyed proximity to political power and it stood to benefit financially. It thought the music would go on forever.

The SARS contract grew from just over R2 million to over R160 million inexplicably, and a way had to be found to corrupt the procurement processes even though the Bain team working at SARS had no demonstrable experience in working on tax issues.  Bain’s executives had politicians in their pockets; they had met with President Zuma about 17 times, according to the Zondo Report.

No doubt, at this point Bain saw itself as having captured a crucial state account and with more business to flow in its direction. It could not be outshone by its erstwhile competitor Mckinsey and Company, also implicated in the state capture report, which had seized the account of Transnet and Eskom. Bain saw SARS as a stepping stone to much wider access across various state-owned enterprises and to reshape ICT, energy and infrastructure.

In 2008 SARS was recognised as one of the best and efficient tax administration services in the world. Even by 2013 it was still winning accolades. SARS needed no intervention of a quasi-management doctor in the form of Bain whose role would turn poisonous.

Usually management consultancies come to fix broken institution: in this case Bain did the opposite. It found an efficient and well-respected organisation and rendered it dysfunctional. Management consultancies exist to breathe life to organisations rather than to act vampire-like, as Bain did. They promise to offer ailing companies turn around strategies, to fix bad management practices, and to support leadership teams. It is the practices of companies like Bain that gives consultancy firms a bad name and that cast a shadow on business ethics. Businesses are agencies that are supposed to create value in society.

When reading Bain’s non-apology by York, it still beggars belief that companies would take the sorts of risk Bain took in cultivating politicians and doing something that is outrightly unethical, if not criminal, in participating in the state capture project. There is the perverse idea among some businesses that “when you are in Rome do as the Romans do”, which is often taken to mean you must adapt to the temperature of values that exist in a country you operate in. According to this paradigm, if corruption is a prevailing norm, adapt rather than maintain a high standard. There is a higher way.

Multinational firms like Bain see the African continent as a hive of corruption and if they can get a piece of the action of the state account through surreptitious means, they can coin it quickly. To hedge, they use intermediaries to broker high level political relationships as Bain did through a shadowy company, Ambrobrite, which had no trading history, and was run by two creative artists from whom Bain believed could obtain “strategic advice” on the positioning of SOEs in South Africa. In return, Bain paid these brokers millions of rands.

There are important lessons for companies doing businesses in countries that are manifesting institutional voids and corrupt practices. It is important that companies do all they can to defend their values and guard against the lure of short-term success. Ill-gotten fame does not last, and a reputation that took years to cultivate can be destroyed in an instant.

Companies should be a force for good and help enrich public value than sow bad practices, which take years if not decades to weed out. Rather than projecting hubris, Bain should take seriously its responsibilities to stakeholders and be genuine about its journey to renewal. Its appeal for constructive dialogue is not an evidence of a contrite spirit.

This article appeared in the Mail and Guardian on the 26 August 2022


© 2023 Mzukisi Qobo. All Rights Reserved.