Bain & Company and SARS: A Massive Failure of Governance and Integrity

In the illustration, there are two horizontal lines with three short horizontal lines and Bain & Company logo appearing at the extreme left and at the center, respectively. Below this, appears a colored photo and a textbox to the left of the photo. The photo shows a partial view of two ladies, seated and smiling. An opened laptop on a circular table facing the girls is also visible. The following text appears on the textbox appearing to its left:

About Bain.

What We Believe.

We believe that bold steps define the future. That the ambition to lead requires the courage to adapt. And that doing the right thing is rarely easy, but always worth it.

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We seek out people and clients who challenge themselves to be exceptional—and champion that spirit in others. We’re guided by True North, our unwavering commitment to always do the right thing by our clients, people and communities.

We define a bold ambition with clients, then work together as one team to create such high levels of value that we set new standards of excellence for our industries.

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We have a passion for results aligned with our clients’ success, and a commitment to the highest level of professionalism and ethical standards in everything we do.

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We have a deep intellectual honesty, and the candor to tell it like it is in straightforward language. We remain open to the possibility that current beliefs could be wrong.

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We combine bold thinking with a practical approach that focuses on getting the job done, turning decisions into action and delivering results.

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We work as one global team—both with each other and our clients—to direct our collective energy toward achieving the extraordinary.

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Passion for Results (heading)

Results, not reports (subheading)

We opened our doors on the principle that clients should get results—not just reports—from their consultants. We broke the rules by developing customized strategies that helped clients beat their competition. We continue to work with ambitious clients who want to define the future, not hide from it.

The cartoon shows a male standing on the steps holding a spiral bound report titled NUGENT INQUIRY INTERIM REPORT. Another male named MOYANE is looking sideways with a hammer in his hand. The speech bubble near him shows the following texts: FIRE ME?… I STILL HAVE WORK TO DO! The words FIRE and WORK appear in bold. Text SARS appear in bold and italics on the top right corner. Boxes with texts SYSTEMS, e-FILING, and STAFFING are also visible. At the bottom left appears the date 18-10-18. Below it appears the text DAILY MAVERICK. Further below appears the signature of Zapiro. Damaged computers and computer gadgets are visible in the background.

The illustration is as follows:

The text SARS 2.0 – Executive summary appears at the top. Below, on the left, are two textboxes, with associated texts appearing on their right.

The textbox on the top reads, In the decade, SARS modernisation program has delivered results … The text In the decade, SARS modernisation program has delivered results … appears italicized.

The textbox on the bottom reads, … but to achieve our ambition and make the difference, SARS needs to address key strategic concerns. The text but to achieve our ambition and make the difference, SARS needs to address key strategic concerns is italicized and the phrase to achieve our ambition and make the difference appears italicized also.

The texts accompanying the textbox on the top read as follows:

• SARS has made a number of changes through the first Modernisation Program, eg.:
  • Relevant increase of individual and corporate taxpayers
  • Successful adoption of eFilling to facilitate collection process (>90% in SA)
  • Managed to run operations within the allocated government budget
• But significant challenges still need to be addressed:
  • Even if eFilling is a great innovation, it did not help to reduce cost of revenues ratio (high compare to peers at 1.1%). Moreover questions arise on potential discrimination (access to internet) and need to be addressed.
  • Key SARS programs, such as Customs, still need to be delivered – critical initiatives and structures to be put in place to support economic value creation, making customs a revenue machine (eg. US or Australia).
  • Illicit economy not under control.

The words Modernisation and Program are italicized. The phrases significant challenges still need to be addressed, did not help to reduce cost of revenues ratio, potential discrimination, Key SARS programs, Customs, still need to be delivered, and Illicit economy not under control appear in bold.

The texts accompanying the textbox on the bottom read as follows:

• In order to transform SARS into an innovative revenue and custom agency, SA government will have to run a profound strategy refresh and focus on execution to reach SARS real full potential:
  • Define clear KPIs to guarantee SARS focus on relevant drivers.
  • Deliver on the 3 main imperatives:
    • Increase economic value for South Africa.
    • Integration and collaboration with national and international counterparts.
    • Full fairness and transparency to taxpayers.
  • Develop the critical enablers to support imperatives deployment:
    • IT systems, and more specifically the enhanced SA Data Base, incorporated in the Phoenix Ecosystem.
    • Enforcement structure and tools to support day-by-day imperatives respect.
    • Organisation and skills.

The phrases transform SARS into an innovative revenue and custom agency, profound strategy refresh, focus on execution to reach SARS real full potential: clear KPIs to guarantee SARS focus, 3 main imperatives, Increase economic value, critical enablers, support imperatives deployment, IT systems, enhanced SA Data Base, Phoenix Ecosystem, Enforcement structure and tools, Organisation and skills and words Integration, collaboration, fairness, and transparency appear in bold. The phrases to achieve our ambition and make the difference, transform SARS, innovative revenue, and custom agency are underlined also.

The illustration displays the following information:

The word Message appears at the top left. Below it, appears a thick black line.

Below the line appears the following text:

From: Massone, Vittorio [/o=Bain/ou=exchGLOBALSERVICES/cn=Recipients/cn=09VMA]

on behalf of Massone, Vittorio [/o=bain/ou=exchglobalservices/cn=recipients/cn=09vma]

Sent: 4/4/2014 7:40:58 AM

To: Franzen, Fabrice [fabric.franzen@bain.com]

Subject: RE:

Be ready for SARS! ! ! ! Tom passes by for a coffee next Friday morning, if you want to say hi to him

Below this appears the text Original Message with dashed lines to its left and right.

From: Franzen, Fabrice

Sent: Friday, April 04, 2014 9:38 AM

To: Massone, Vittorio

Subject: RE:

Congrats!

Below this appears the text Original Message with dashed lines to its left and right.

From: Massone, Vittorio

Sent: Friday, April 04, 2014 9:37 AM

To: Franzen, Fabrice

Subject: Re:

Thank you Fabrice, it went very well

Sara is aa go, right after the elections

central procurement agency: he loves it, wants an implementation plan

wants to accelerate Phoenix

asked us to organize a workshop with the new cabinet of ministries after the elections (sort of new strategy by sector + RDO/mobilization)

So I’d say very well..

I’ll update the team on next call

Thank you

V.

The illustration displays the following information:

The word Message appears at the top left. Below it, appears a thick black line.

Below the line appears the following text:

From: Beaumont, John [/O=BAIN/OU=EXCHLONDON/CN=RECIPIENTS/CN=03JBM]

Sent: 8/28/2014 6:48:33 AM

To: Timpano, Stephane [stephane.timpano@bain.com]; Massone, Vittorio [vittorio.massone@bain.com]

CC: Franzen, Fabrice [fabrice.franzen@bain.com]

Subject: RE:

I would imagine Alexis would be the Manager.

Question for you Vittorio is Partner team and specifically do you want Neville to play OVP role

Below this appears the text Original Message with dashed lines to its left and right.

Below Original Message appears the following:

From: Timpano, Stephane

Sent: Thursday, August 28, 2014 8:41 AM

To: Massone, Vittorio; Beaumont, John

Cc: Franzen, Fabrice

Subject: RE:

Vittorio,

that’s a great news.

The last thinking was to start with 1 team (M+4 to +6), for 3 months to do fundamentally 2 things:

1) run a full operational/strategic assessment of SARS

assist Tom in starting properly his new role (direct “CEO” support work)

We will be then able, based on the operational/strategic assessment, to build up the platform for a broader SARS transformational program (6–12 months plan)

Let’s discuss team face to face later

stephane

Below this appears the text Original Message with dashed lines to its left and right.

Below Original Message appears the following

From: Massone, Vittorio

Sent: Thursday, August 28, 2014 8:04 AM

To: Beaumont, John

Cc: Franzen, Fabrice; Timpano, Stephane

Subject:

Guys,

Just had a call and heard that the Sars announcement should happen tomorrow or Monday

Meeting later in the office, to discuss also procurement process

Fabrice/Stephane, how many teams did we say? Can we please think about Managers, with and without Galactica? I guess we should have a few weeks to ramp up (procurement process) but we’ll need to have a rst contingent to start working asap.

Thank you

Vittorio.

The illustration displays the following information:

The word Message appears at the top left. Below it, appears a thick black line.

Below the line appears the following text:

From: Franzen, Fabrice [/O=BAIN/OU=EXCHPARIS/CN=RECIPIENTS/CN=06FFR]

Sent: 12/3/2014 6:32:48 AM

To: Massone, Vittorio [/O=BAIN/OU=EXCHGLOBAL SERVICES/cn=Recipients/cn=09VMA]

Subject: RE: Alert: SARS

I agree……

From: Massone, Vittorio

Sent: Wednesday, December 03, 2014 8:23 AM

To: Franzen, Fabrice

Subject: Re: Alert: SARS

Now I’m scared by Tom.. This guy was supposed to be untouchable and it took just a few weeks to make him resign.. Scary..

From: Franzen, Fabrice

Sent: Wednesday, December 03, 2014 06:11 AM GMT Standard Time

To: Massone, Vittorio

Subject: FW: Alert: SARS

Goodbye Barry Hore…

From: emailednews@email.global.factiva.com [mailto:emailednews@email.global.factiva.com]

Sent: Wednesday, December 03, 2014 8:01 AM

To: Franzen, Fabrice

Subject: FW: Alert: SARS.

The from email id: emailednews@email.global.factiva.com [mailto:emailednews@email.global.factiva.com] appears underlined.

Below this appears D, in bold, on the extreme left. DOW JONES appears beside D in bold. To its right appears the text FACTIVA. To the right of FACTIVA appears the textbox labeled ALERTS.

Below it, appears a thick black horizontal line. Two more black horizontal lines appear below this thick line. Text Scheduled Alert appears between the first two lines. Text Alert: SARS appears between the next two lines

Texts appearing below these lines read as follows:

News24.com | R3m worth of counterfeit goods seized. This appears in bold.

News24. Tuesday 02 December 2014 15:46 GMT 186 Words 2014

(Document WC9) (Document number lacks clarity)

Johannesburg – Police last week seized counterfeit goods valued at around R3m and illicit cigarettes worth about R470 000. Western Cape police said on Tuesday.

The table titled Table 1.1: Tax Register, 31 March 2007–31 March 2017 consists of two parts; the upper part represents the year-on-year growth in numbers and the lower part represents year-on-year growth in percentages.

The data represented in the upper part of the table are as follows:

The lower part of the table is titled Percentage year-on-year growth (in bold). The data represented in the lower part of the table are as follows:

The following bulleted points appear below the table in italics:

1. Excludes cases where status is in suspense, estate and address unknown.

2. The tax year for individuals starts on 1 March and ends at the end of February the following year.

3. The tax year for companies is normally the financial year of the company for financial reporting purposes.

In the illustration, the following text appears in bold at the top: Bain & Company Statement: SARS Commission of Inquiry – September 2.

Below this appears the following texts:

2 September 2018 – In light of new questions being raised during last week’s testimony before the SARS Commission of Inquiry and from media inquiries, Bain & Company is now undertaking a deep and extensive investigation, led by our global leadership and external counsel, into all matters relating to our work with SARS. We want to be absolutely certain that we entered into our SARS engagement in full compliance with applicable procurement laws and that our investigation’s findings are accurate and unassailable.

We want to be completely open and transparent, as we believe that is what the people of South Africa deserve. However, given the Commission of Inquiry is continuing its investigation we cannot publicly discuss anything that would in any way affect the ongoing work of the Commission.

Bain continues to stand by the value and rigor of its work – not as a point of pride– but out of a sense of mission that our South African associates wanted to bring to that organization. We worked hard because we wanted to help SARS become an even better organization and we believe our work could help to do that.

We have listened with concern to the testimonies of SARS employees who feel they have been mistreated and disrespected, at their frustration and pain and the consequences this has had on the lives of these individuals and their families. We are dismayed by the way our work has been used to further a different agenda than was intended. In our recommendations, there was no need for any lay-offs or terminations. This didn’t turn out to be the reality when the model was implemented. We are deeply sorry for how this turned out – we wish we had known then what we do now.

We contend that this could have been avoided. Through the various Commission testimony, we now know that essential elements of delivering a successful operating model were not systematically addressed, causing the failure at SARS.

As we stated in our testimony, Bain believes that the success of an operating model for an organization is a function of defining and implementing all elements of the model correctly: leadership, organization structure, accountabilities and decision processes, governance forums, core values/ways of working, capabilities, business processes, and IT systems. We raised this with SARS, but Bain’s contracted work on the operating model covered only one aspect, organizational structure, whilst SARS handled internally all other aspects of the process. This point must not be lost nor is the fact that the design principles for this structure was presented to and reviewed by SARS’s independent Advisory Board instituted by the Finance Minister.

In hindsight, as we reflect on our role at SARS there are several places where we could have done better. We could have listened better. We could have pushed SARS harder to acknowledge and address the risks we raised. We could have been more aware of agendas that could have diverged from the mandate we were given. These are lessons we have already taken to heart.

These last few weeks have been difficult. There is a growing frustration within our firm that we did not recognize the possibility that we may have been used to further a political or personal agenda. We always go into our work presuming our clients have good intentions. We are now questioning these beliefs as it relates to SARS.

As a firm, we stand by the work we produced and the dedicated effort of our employees who wanted nothing more than to make SARS a better place. We will continue to cooperate with the Commission of Inquiry to support a process aimed at restoring SARS to the once credible institution it was known as. The text 2 September 2018 appears in bold.

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Below this appears the following text in bold: Bain & Company Statement: SARS Commission of Inquiry – September 10.

Below this appears the following text:

10 September 2018 – Bain & Company prides itself on helping our clients achieve sustainable results. Our work on the organization structure at SARS did not achieve this and we are deeply troubled by the pain suffered by employees of SARS and their families.

To understand what happened, we launched an independent investigation led by the global law firm Baker McKenzie. The investigation is focusing on understanding the facts relating to people, processes, and governance that resulted in us getting and accepting the work.

Our own internal review established that our engagement with SARS did not meet our standards for delivery of sustainable, positive results for our client. We do not want to benefit from work that was used to further a different agenda than was intended.

Bain & Company’s global Board yesterday approved to set aside all of the R164M of fees plus interest, from our work with SARS. This money will be used either as prescribed by the Nugent Commission of Inquiry or – in the absence of such prescription – for the benefit of South Africa. In the latter instance, we will seek guidance from civil society, government, and business leaders on how these funds can best be used.

We continue to cooperate voluntarily with the Nugent Commission of Inquiry. Tiaan Moolman, a long serving member of the Bain partnership, will take over day to day operations of Bain South Africa to allow Vittorio Massone to focus his time on cooperating with the Commission. He remains a partner of Bain & Company.

To reinforce the independence of the investigation and Bain’s commitment to addressing any new facts, we have established an oversight committee made up of senior global Bain partners and outside directors. Athol Williams, a Bain alumnus and a respected independent advisor, will chair this committee on an interim basis. He is a distinguished academic in the area of corporate responsibility, a corporate leader and lifelong social advocate. Bain’s contract with Mr Williams calls for him to do what is right for South Africa, without restrictions.

Bain continues to be committed to our people, our clients and to South Africa. We are actively exploring additional ways to be part of the solution to creating prosperity in the country. We will be seeking guidance from multiple stakeholders in this process.

While external stakeholders and Bain leadership await the outcome of the independent investigation, we acknowledge that the desire for answers will continue to build. Please be patient with us as we take the necessary steps to answer questions raised. The text 10 September 2018 appears in bold.