Bain sets aside fees from South Africa tax authority work

Bain will set aside millions of dollars in fees from South Africa’s tax authority after evidence that its advice on a restructuring was used to pursue a political vendetta by an ally of the former president, Jacob Zuma.

The management consultant said that it was offering to repay R164m ($10.8m), plus interest and value-added taxes, after an internal probe found within a week of investigating that its work for the South African revenue service (Sars) “fell short of our operating principles”.

Like McKinsey and KPMG, Bain has come under fire in South Africa for work allegedly facilitating the breakdown of independent institutions under Mr Zuma’s corruption-hit presidency, which ended earlier this year.

McKinsey and KPMG have moved to repay fees for work tied to alleged looting of state contracts by the Guptas, a business family enjoying Mr Zuma’s friendship.

In recent weeks a judicial inquiry in South Africa has heard evidence that Tom Moyane, Mr Zuma’s appointee as head of Sars, used Bain’s advice on a restructuring in 2015 to purge internal opponents and degrade what was formerly regarded as a world-class tax collection authority.

Last week former Sars employees called for Bain to repay its fees after the company’s head in South Africa, Vittorio Massone, told the inquiry that “we might have been used” by Mr Moyane.

Bain said on Sunday that an additional reason for setting aside fees was that “we do not want to benefit from work that was used to further a different agenda than was intended”.

Bain added that it would follow the inquiry’s decision on what to do with the money it has set aside, or use the amount “for the benefit of South Africa” if the inquiry gives no guidance.

“In the latter instance, we will seek guidance from business, government and civil society leaders on how these funds can best be used,” it said.

Mr Massone, who also admitted Mr Moyane had asked for Bain’s advice on Sars a year before he was appointed its head, will step back from day-to-day operations to focus on the inquiry, the company said.

Turmoil under Mr Moyane has led to Sars missing revenue collection targets by R50bn, increasing pressure on South Africa’s already badly strained state finances.

After the ruling African National Congress forced Mr Zuma to leave office this year, his successor, Cyril Ramaphosa, sacked Mr Moyane and instituted the inquiry.

The inquiry also heard evidence from a South African Treasury official that the Bain contract might have been irregularly awarded by Sars.

Mr Moyane denies wrongdoing, as do the Guptas and Mr Zuma.

Bain said it has also appointed an oversight committee of senior partners while the South African investigation continues.