All you need to know about the Gordhan-SARS-Hawks drama

We fried our brains working out WTF is going on between Pravin Gordhan and the Hawks, and answered the questions South Africans have been asking.

Why is my news feed full of updates about Pravin Gordhan?

This began on Tuesday evening, after The Daily Maverick broke the news that Finance Minister Pravin Gordhan (not Zuma’s weekend special) and other South African Revenue Service (SARS) officials have been ordered to report to the Hawks headquarters on Thursday morning.

What exactly do the Hawks want from Gordhan?

Well, they certainly won’t be sitting down to a cup of tea. Gordhan, and three others, were called to the Hawks’ offices to answer questions related to a unit at SARS that was meant to infiltrate crime syndicates, but seems to have taken on a life of its own.

But this drama been going on for a while, right?

Indeed.

Although the Hawks had initially said they were not investigating the minister earlier this year, he and the former officials were sent letters informing them of the charges they will face for their alleged involvement in the unit on Monday. According to The Daily Maverick, Gordhan was informed that he, along with the others, would be receiving a “warning statement” given to an accused person before they are charged with an offence and to warn them of their rights in terms of the Constitution.

In March this year, Gordhan had answered the Hawks’ 27 questions about the establishment of a SARS unit while he was the commissioner. The Hawks reportedly demanded he answer questions about the unit, but refused to tell him what exactly he was being investigated for.

Let’s backtrack here. When exactly did this all start?

“It’s such a long drawn out saga that trying to identify where it all began; it’s tricky,” said Lawson Naidoo from the Council for the Advancement of the South African Constitution (Casac).

It began around 2007:

In his role as SARS commissioner, Gordhan set up an investigative unit known as the National Research Group.

What exactly was wrong with the unit?

The unit reportedly specialised in infiltrating crime syndicates. It is accused however of numerous transgressions, including illegally intercepting e-mails and phone calls of taxpayers, paying agents from a secret cost centre and conducting physical surveillance and house infiltrations to spy on taxpayers.

The Sunday Times reported that it ran a brothel, spied on top cops and eavesdropped on politicians. However, the newspaper later issued an apology for some of its reporting.

Members reportedly posed as bodyguards for top ANC politicians in a bid to infiltrate the organisation, probed non-tax related matters such as taxi violence and were used to fight business battles on behalf of friends and relatives of senior SARS officials. The unit was also allegedly ordered to follow three top SARS officials in order to find information on them and destroy their careers.

So why hasn’t anyone raised a red flag before?

The unit is actually the subject of three separate probes – by the Hawks, the Office of the Inspector General of Intelligence, and SARS – and it is believed the unit violated the National Strategic Intelligence Act, which states that only the military, police and intelligence structures can gather covert intelligence.

What’s the spy unit doing now?

The unit was later shut down by Tom Moyane, Gordhan’s successor at SARS, in 2014 after a report released by the Sikhakhane panel of inquiry stated that the unit was involved in illegal intelligence gathering.

And why is the rand affected by all this?

As economist Musa Manza pointed out back in February, international investors scare easily – more so when there’s a hint of political or social instability in SA. So when your finance minister is being investigated by the police’s specialist crime unit, you know shit’s getting real.

Manza said the recent decline in the rand, which fell by 5.7% against the US against the US dollar over the last week, is quite likely due to the re-emergence of the investigation into Pravin Gordhan and the SARS “rogue unit”. Not because of Gordhan and the “rogue unit” for their own sake, but because what these seemingly politically motivated machinations suggest about the management of the economy.

“Any talk of instability, or changes to policy and management of the economy sound the alarm bell for investors. Investors who feel things may worsen then sell their South African assets – in a bid to cut their losses – this results in less demand for South African assets- foreigners sell rands, buy other currencies and invest outside SA. This results in a weakening rand,” said Manza.

Apart from the rand crashing, the announcement “unleashed extraordinary market turmoil; tarnished the credibility and reputation of the National Treasury amongst the country’s investor base; and placed the economic livelihoods of millions of South Africans, from across the socioeconomic spectrum, in jeopardy,” economist Goolam Ballim told The Daily Vox.

What if Gordhan gets arrested (imagine!)?

It would be bad news for South Africans.

“The rand will decline probably to between R18 and R20 (per dollar) very quickly. It would do so because the markets will believe that something is fishy,” economist Mike Schussler told Fin24.

Manza explained: “If Gordhan is replaced, it is likely to signal to investors that the stability and sobriety that characterises the management of the country’s finances is no more. This will result in a major sell-off of South African assets, resulting in an even weaker rand and higher borrowing costs for the country. If his replacement is unable to pull the rabbit out the hat and demonstrate a continuation of Gordhan’s level-headed and prudent management of the country’s finances, the rand will weaken even further. A weaker currency will put upward pressure on consumer prices – lower buying power of your rand.

If Gordhan is replaced with a pliable individual willing to approve procurement and policies not in the best interests of the country (nuclear power and bail out for SAA), this will further hurt both the rand and the economy, reducing financial space for government to respond to the country’s massive social needs. It could also precipitate a credit ratings downgrade which would further hurt the rand, consumer prices and economic growth.”

But do the Hawks actually have a case?

According to Professor Pierre de Vos, the Hawks don’t really have a criminal case against Gordhan.

“Many of the ‘facts’ leaked to the media about the SARS investigative unit (most of it published in the Sunday Times) turned out to be false. Moreover, the Press Ombudsman ordered the Sunday Times to retract all stories about its SARS ‘rogue unit saga’ and to publicly apologise in writing to former SA Revenue Service commissioner Pravin Gordhan and the others implicated.

This means that there are no prima facie evidence in the public domain that might counter the perception that the Hawks investigation has a political – and not a legal or factual – basis,” de Vos noted.

De Vos further explained that the establishment of an investigative unit within SARS can’t possibly constitute a criminal offence that could legally form the basis of a criminal investigation by the Hawks.

“Although Section 3 of the National Strategic Intelligence Act prohibits state departments from gathering departmental intelligence ‘within the Republic in a covert manner’ it does not state that it is a criminal offence to do so.

This means a person who acts in breach of section 3 of the National Strategic Intelligence Act is not committing a criminal offence. It is the equivalent of ordering a Streetwise 2 from KFC – maybe not a wise thing to do, but certainly not a criminal offence.”

So this thing has been going on for years. Why are the Hawks only reaching for Gordhan now?

“Given that Gordhan is seen to be holding the line against state capture by politicians and their powerful backers, suspicions are swirling that the move made this week against Gordhan and other former SARS managers may either be related to attempts by big corporate tax dodgers to avoid paying billions of Rand in taxes, or it may be a ham-handed attempt by powerful politicians and their friends to discredit those who stand in their way of looting the Treasury,” wrote de Vos.

Surely Gordhan is a quarter to having a heart attack, right?

Probably not. The finance minister and his legal team have clapped back at the Hawks with a statement setting out all the reasons why Gordhan will not show up.

Featured image via GCIS on Flickr

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