The Tax Man

The interest of Pravin Gordhan’s career lies not in its exemplary decency, but in a more complicated problem that confronts citizens of many countries: how to maintain one’s honesty when forced to act in close proximity to corruption? And another question from political science: are there situations for which democracy is no cure?

Pravin Gordhan and South Africa

Pravin Gordhan and Jacob Zuma, June 2016.

In July 1989 a friend visited our house in Durban. More or less unremarked when he left was a Toshiba laptop that he had placed in plain view on the round table in our living room. It was equipped, although we didn’t know it, to transmit encrypted messages between clandestine operatives inside South Africa and their controllers in Lusaka.

Our visitor, Pravin Gordhan, had been trained as a pharmacist at King Edward VIII Hospital, the largest public facility on the continent, where my parents worked. Like many individuals at that time Gordhan maintained a public profile, as a community organizer, while pursuing a clandestine life as a member of the Communist Party and the armed wing of the African National Congress. On account of his visible political leanings, nevertheless, Gordhan was dismissed from his employment, as my mother would be. They maintained their relationship beyond the hospital; my mother sent her patients to his pharmacy around the corner from her surgery to fill their prescriptions.

Gordhan was arrested in 1981 on the first of three occasions. In 1986 he went completely underground, sometimes wearing wigs and sunglasses, or the long shirt and cap of a conservative Muslim, and relying on tips from sympathizers to stay a step ahead of the Security Branch. My mother, for example, treated Indian policemen for their skin conditions free of charge and was often rewarded with warnings of an impending raid or some more general crackdown. In 1990, six months after Mandela’s release, Gordhan was apprehended and charged with terrorism; the government suspected he was helping plan an insurrection alongside the negotiation process. Granted amnesty the next year, Gordhan emerged as a senior lieutenant in the peace Mandela made and, in the next two decades, as the nation’s most trusted civil servant.

During his four years on the run Gordhan fell under the broad authority of Jacob Zuma, chief of intelligence for the ANC, although Zuma has since pointed out that they never worked in close concert. Today the two men may be the oddest couple in any administration in the world. Zuma occupies the Presidency, protected by many of the former spies he once directed. Gordhan is the finance minister forced on Zuma by the collapse of confidence in the president’s leadership in December of last year when two previous finance ministers were removed in quick succession and the bottom fell out of the stock market. If you believe what you read in the newspapers, despite the centrality of his office, Gordhan is in danger of arrest for the fourth time at Zuma’s instigation, in a rare case of a president destabilizing the economy of his country almost as an afterthought.

Gordhan holds the confidence of civil society from the trade unions to the banks, from far left to the white right, along with the remnants of responsible stewardship in the ruling party who see in him a chance to restrain the voracious appetites of the president’s friends and family. Zuma’s various nephews, mistresses, and cronies have made hay while the sun shines. They control the board of the national airline, buy uranium mines in preferential deals, acquire television stations and newspapers with the help of Chinese investment and turn them to the circulation of propaganda, import train cars that turn out to be too tall for the rail network, siphon money from the deployment of municipal electricity meters. Above all they seek out and sign government contracts so vast that they threaten the viability of the fiscus, especially if Zuma can sign into law a $100 billion tender with Rosatom, the Russian State Atomic Energy Corporation. Borrowed money would pay for reactors the country doesn’t need and cannot afford as ratings agencies have moved its creditworthiness ever close to junk status.

The duel between Zuma and Gordhan began in earnest in February 2016, just days before the finance minister made public a budget to restore economic confidence. Rumors of possible charges against Gordhan circulated in the press and online, simultaneously leaked, denied, disseminated, confirmed, and rejected “with contempt” by the Office of the President and Zuma’s loyalists at the Hawks, South Africa’s Directorate for Priority Crime Investigation, even as they were assembling the case. The Hawks, which were supposed to pursue high-level corruption independent of political considerations, had replaced an agency known as the Scorpions, with the identical mandate, that had erred by coming too close to Zuma himself, under the previous administration, and being painted as a tool for resolving the ruling party’s internal disputes. There were reports of a Gordhan dossier prepared by auditing firm KPMG, along with the joint efforts of the police general in charge of the Hawks, three police colonels, two senior prosecutors and an advocate to bring Gordhan to book.

For a decade from 1999 Gordhan served as Commissioner of the South African Revenue Service (SARS), during which time tax revenue roughly doubled. This unprecedented boom in collection underwrote fifteen years of civil peace: a welfare state rose, in what may be the world’s most unequal society, cutting the ratio of income between top and the bottom tenth by the astonishing factor of ten. In his capacity as Commissioner, despite a solid reputation for probity, Gordhan is alleged to have authorized “Operation Sunday Evenings,” a program under which a SARS “rogue unit” is variously supposed to have run a brothel, to have spied on the National Prosecuting Authority, to have broken into Zuma’s residence in Forest Town to plant listening devices, and to have given out excessive retirement bonuses to allies.

The country’s largest newspaper, the Sunday Times, ran a series of article supporting these charges; the editor, Phylicia Oppelt, resigned when nothing more untoward came to light than the fact that Gordhan had allowed a small team to investigate cigarette smuggling. The Press Ombudsman required the Sunday Times to “retract all the texts which were in dispute,” and apologize unreservedly to Gordhan: It turned out that the main source for the Sunday Times reports was Rudolf Mastenbroek, a disgruntled former SARS official, who was Oppelt’s ex-husband. The KPMG dossier, discredited before ever being published, presents a major risk to the auditing firm’s global credibility, which it has tried to reduce by severing links with the most compromised of Zuma’s associates, the Guptas. Senior members of the ruling party complain about the campaign against the finance minister, but the significance of internal dissent is hard to judge given the parade of scandals and outright catastrophes since the end of Mandela’s presidential term in 1999.

It is impossible to entirely disentangle the rogues’ gallery of double agents and broken hearts who have been at work in the prosecution of Gordhan, but the characteristic figures are the obese nephew of the president, Khulubuse Zuma, held personally responsible by the Appeals Court for illegally stripping $100 million from Pamodzi Gold and putting five thousand miners out of work, and a family of Indian emigres, the Guptas, who are known to be close to the president. Credible sources have spoken of suitcases filled with money that the Guptas offer newly prominent politicians at their Johannesburg mansion, which despite its helipad and cricket pitch has been valued for municipal tax purposes at around $30,000—the price of a modest house in many townships. They seem to have foreknowledge of cabinet-level decisions and have even offered their guests positions in the national cabinet, Gordhan’s position among them, long before anybody, including the occupant, knows the vacancy exists.

In recent months the Guptas have decamped to Dubai under the glare of publicity, subtracting the note of comic brazenness from the mayhem and degeneration that the ruling party has created in every national institution. Their departure has also broken the symmetry of Gordhan and the Guptas, ethnic Indians, who stand on opposite sides regarding the circulation of what Indians around the world know as black money. The opposition between state maker and state breaker, however, is more significant than any play on stereotypes. 2016 has seen the irreducibility of the conflict between Gordhan, who has done as much to make the state viable as anyone besides Mandela, and the man who continues to be his organizational superior, Jacob Zuma, who has gone further than anyone in advancing his own interests along with those of his friends, coming as close to ruining the state as his party allows.

In 1988 the African National Congress escalated the ambitions of its armed campaign beyond the limited acts of sabotage and terrorism of previous years. Operation Vula (“Opening the Door”) was supposed to prepare for a seizure of power on the model of Nicaragua, unrealistic as it seems and seemed at the time.

Vula required secure communications between cells inside the country and their commanders in Zambia and London. Afraid of inheriting a backdoor in any code created by a third party, the party turned to its own boffins, Tim Jenkin and Ronnie Press who, along with the spy Ronnie Kasrils, experimented with acoustic modems and touch tone phones. They prepared electronic calculators to encrypt communications using a classic one-time pad, creating coded signals that could be played over pay telephones, ultimately switching to Toshiba laptops when calculators proved too slow and cumbersome. It was a Toshiba T3100, as far as I can ascertain, with a sullen red screen and ten megabytes of memory, that Gordhan placed on our dining room table in 1989.

At the time rumors of Mandela’s possible release were rife. An endgame of negotiations was moving faster than the grinding conflict in the townships and on the borders. One afternoon not long after Gordhan’s visit a number of security policemen came to our house in an attempt to seize position papers relating to the principles according to which any such negotiations would proceed. My father did in fact possess a copy of the documents in question, but he had the presence of mind to have my mother hurl them into the garden where they went unnoticed during a particularly thorough search of the cupboards. Before he left the captain in charge asked us about the purpose of the laptop. My thirteen year old sister, I explained in an unusual moment of inspiration, used it to play video games (although at the time I had never met a girl who did). Computers had not yet been identified as an obvious target of any investigation. The policemen left without having the good luck to find out about Vula’s cipher-making protocols a year ahead of their eventual discovery.

In subsequent months, however, the security police’s view of my family darkened when an operative printing subversive pamphlets skipped the country just ahead of a raid. My mother, forewarned by her contacts, warned Gordhan to avoid the scene, but a good deal of evidence was uncovered, including a secondhand photocopying machine. The serial number was traced back to a small organization, the Community Research Unit, run with Scandinavian human rights money. The organization tracked the number of children in police custody. My father, a pediatrician, was its titular head. The investigators concluded, incorrectly, that he had been running a cell in his own right. In December they placed a limpet mine on the door of our house, demolishing the entire façade in a timed explosion. Luckily, no one was hurt, though for many years afterwards my mother would routinely wake up in the middle of the night and find that the electronic clock in her bedroom read 3:02 am: the exact minute of the explosion.

On February 11, 1990, Nelson Mandela walked out of Pollsmoor Prison. There was no orderly transition to democracy four years later, though it is often remembered that way. In fact, as in Israel and Palestine, the scale and namelessness of political violence rose along with the possibility of a settlement. Unknown hands fired machine guns at Soweto commuter trains. Black-on-black violence escalated, phalanxes from mining hostels descending on townships or mourners from a political funeral taking vengeance on the opposing side as Zulus engaged in a civil war fueled by the security forces. Rogue acts of terrorism took many lives in churches, train stations, and parks, including that of Stanford graduate Amy Biehl.

The justification for pursuing Vula as an insurance policy looked strong but its logic frayed over time. Senior agents who had been smuggled into the country had to be smuggled out of the country, so they could enter openly through an airport or border post and then take their place in the complex negotiations. The security forces caught the trail, arresting Gordhan and many others in July 1990 and charging them with terrorism and treason. Vula became irrelevant as the African National Congress became the dominant force in the country well before it took possession of the state.

In retrospect Vula was only one clandestine enterprise in a far more capacious underworld. Political scientists studying the rapid degeneration of a ruling party once graced by Mandela point to the sheer quantity of illegal activity and illegal actors in the country before 1990: the role of mercenaries and sanctions busters, torturers and smugglers employed by the state, local officials enriching themselves before the end of the regime, drug runners and arms merchants, and, at street level, the variety of thugs and gangsters who ran townships and homelands, poor suburbs, and prisons. Tax evasion was almost universal. Even municipal property valuations were secretly altered so that non-white home owners paid a disproportionately large fraction of city revenue.

It was the imbalance between legal and illegal that Gordhan set out to reverse during his tenure at the Revenue Service, and in his first term as finance minister, from 1999 to 2014. From drawing up rules prohibiting officials bidding for state contracts, to prosecuting cases of tax evasion and removing luxury cars and first-class travel as perks of government, he tried to create a new framework for the economy and to enhance the mores of public service. Gordhan’s Treasury became a primary center of power, able to set rules and supervise or override inefficient ministers and departments. The more the majority party deteriorated, the more the confidence of investors and the middle class came to rest in the discipline brought by Treasury and, behind it, Gordhan’s great authority and credibility. Treasury was at once the establishment and the loyal opposition as it became clear that the attachment of the rural poor to the African National Congress would not be altered. The party would rule “until Jesus comes back,” as Zuma has been known to say.

Gordhan’s successor in 2014, Nhlanhla Nene, maintained the confidence of the markets and continued to resist the demands of Zuma’s friends and allies to sign lucrative contracts and government commitments. In consequence Nene was replaced as finance minister on December 9, 2015 by a cat’s paw, David van Rooyen, who arrived at Treasury with two minions of the Guptas. Van Rooyen managed three days in his new position while every economic indicator fell precipitously. The handful of businessmen with a line in to the government joined with the remainders of trade union and Communist organizations to force the president to change course. Nene refused to return, but Gordhan agreed, giving South Africa its third finance minister of the week.

At first the president seemed chastened as almost every national institution—from the Constitutional Court and the Public Protector—to elders of his own party and opinion writers in every newspaper rebuked his personal and political conduct. By February, however, the half-veiled conspiracy against Gordhan was underway, giving further proof, if if were needed, of the dangers posed to the country by a genius for intrigue combined with an inclination to degrade. The latest reports suggest that the professionals at the National Prosecuting Authority have refused to accept the case as laid out by the Hawks, and that a conflict between the two organizations may unfold. In any event a public proceeding may prove less useful to Zuma than the rumors, demands, denials, and ultimatums that have pressured and undermined Gordhan and his professional team at the Treasury. The president is very much at home in his own kind of underground life, which didn’t end in 1990. Accounts attested over decades tell of his tolerance for bribery and even rape, for cronyism and the misappropriation of public money, and he openly disparages the “clever blacks” who criticize his rule. In many ways the interest of Gordhan’s career lies not in its exemplary decency, but in a more complicated problem that confronts citizens of many countries: how to maintain one’s honesty when forced to act in close proximity to corruption? And another question from political science: are there situations for which democracy is no cure?

In 1999 when Gordhan was appointed to head the Revenue Service, I had the chance to ask him why he thought moral change was possible in a country in which rates of sexual assault, for example, are two or three hundred times higher than in India or China. “Tax morality,” he replied, “can be changed separately,” and cited countries with high levels of lawbreaking that had nonetheless transformed their cultures of tax avoidance and evasion. In the short run Pravin Gordhan was right. In the long run, however, his optimism that human nature can be improved strand by strand, that communities can be improved by oversight and public regulation, is being tested in South Africa in 2016 as never before.

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