Bain & Co has been banned for three years from tendering for UK government contracts, over its role in state capture in South Africa.
The Financial Times reports that UK Cabinet Office Minister Jacob Rees-Mogg has written to Bain UK Managing Partner James Hadley, informing him of the ban, which will be applied retrospectively from 4 January 2022.
Initially, cabinet office officials reportedly rejected taking any action against Bain, but pressure from anti-apartheid campaigner Lord Peter Hain appears to have shifted opinion within government.
Whistleblower Athol Williams, a former senior partner at Bain, said it is time for the SA government and companies to follow the UK’s example:
— Athol Williams (@athol_williams) August 2, 2022
The Zondo report into state capture found that Bain colluded with former President Jacob Zuma and designed “a planned and co-ordinated agenda to seize and restructure Sars (SA Revenue Service),” well in advance of Tom Moyane being catapulted in as commissioner of the revenue service.
Things deteriorated even further when Moyane arrived at Sars in September 2014. He disbanded Sars’ entire executive committee on the “basis of an apparent Sunday Times exposé about a so-called Rogue Unit” that was set up to hunt down tax cheats.
The Financial Times says a letter from Rees-Mogg accuses Bain of being guilty “of grave professional misconduct which renders its integrity questionable”.
The consulting firm has won UK public sector contracts worth up to £63 million (R1.3 billion) since 2018, including £40 million (R814 million) worth of Brexit consulting work for the Cabinet Office, but the damage to the company will be mainly reputational.
The Zondo report details how Boston-based consulting firm Bain was brought in, and after a perfunctory diagnosis with little or no consultation with Sars operational managers or employees, a new operating model was devised and implemented. It was a disaster.
An investigation by retired Judge Robert Nugent found that operational managers were thrown into uncertainty about their jobs. Some 200 employees were eased out and forced to re-apply for posts in the new organisational structure.
Listen: BLSA responds to Bain’s withdrawal (read transcript)
Bain’s former managing partner Vittorio Massone and Moyane planned to restructure Sars without Bain even having stepped foot into the tax agency. Massone, then Bain’s man in Africa, made one short appearance at the Nugent Commission, never to be seen again in SA. The commission found that “indeed, the evidence of Massone, both the evidence he gave before us, and his evidence in a subsequent affidavit, is littered with perjury, both in what he said and in what he didn’t say.”
Research organisation Open Secrets has recommended charges be brought against Massone, for violating the Public Finance Management Act (PFMA). “As head of Bain South Africa, he colluded with state officials and politically connected individuals to secure Bain’s contract with Sars, indicating potential violations of the PFMA.”
The Nugent Commission says what occurred at Sars “can fairly be described as a premeditated offensive against the revenue service … Mr [Tom] Moyane’s (former Sars Commissioner) interest was to take control of Sars. Bain’s interest was to make money”.
Bain was accused by Open Secrets of implementing changes that would effectively gut the tax agency’s capacity to track, trace, and tax the very wealthy and the very corrupt.
Other consulting and accounting firms named in state capture are McKinsey, which agreed to repay R650 million earned from irregular contracts in SA, and auditor KPMG, which apologised in 2017 for its mistakes in doing work with businesses tied to the Gupta family.
The Financial Times says bans on companies bidding for public sector work are rare in the UK. It adds that Britain is the first Western country to impose such penalties on Bain for its role in state capture, and there is already pressure on the US to follow suit.
Bain’s response to Moneyweb’s request for comment is included below:
We are disappointed and surprised by the Minister’s decision. We will be responding to express our concern about the process and its outcome, where recommendations from the Cabinet Office were apparently overruled, and to address inaccuracies in the Minister’s letter. If necessary, we will then consider other options for review of the decision. In the meantime, we will continue to work with the Cabinet Office to ensure that we do what is required to restore our standing with the UK government.
Bain [has] apologised for the mistakes our South African office made in its work with the South African Revenue Service (Sars) and we repaid all fees from the work, with interest, in 2018. Bain South Africa did not act illegally at Sars or elsewhere, and no evidence to the contrary has been put forward. Neither Commission of Inquiry in South Africa has recommended any charges to be filed.
We have offered our full cooperation to the relevant authorities and will continue to do so.