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The toxic role of consultants in SA

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Several years ago John Micklethwaite and Adrian Wooldridge, both former journalists with The Economist, published The Witch Doctors, a brutal excoriation of the consultancy business and the damage it had inflicted on businesses in the name of “change management”, “quality” and “mastering chaos”.

In page after page, they detailed how consultants had sold business executives on the need for change – which they of course would administer – only to leave behind a trail of corpses. The advice being peddled by these gurus was faddish, unproven and often reckless.

Surveying the wreckage of SA’s public sector and the R24,6 billion spent on consultants in just eight government departments in the three years to 2013, one can only conclude that the consulting business has been good for consultants – but not for anyone else. To put this in some kind of context, then deputy Auditor General Kimi Makwetu (now Auditor General) issued a report in 2013 pointing out that 74% of the total spend in these eight government departments had gone on consultants. He urged much stricter controls on the use of consultants, but it is clear that this advice went nowhere.

Nicolaas van Wyk, CEO of SA Institute of Business Accountants (Saiba), points out another feature of the consulting scam that is rife in SA: the revolving door nature of the work. “Projects initiated by one firm are never completed, so the next consulting firm can come in and take over. This seems to be the way they agree to operate, so they are always generating work for each other.”

Appearing before the SA Revenue Services’ (Sars) commission of inquiry this week, IT consultancy Gartner explained how it had been brought into the tax agency within months of suspended commissioner Tom Moyane’s decision to freeze the modernisation programme. Last week the inquiry was told that Sars’ IT infrastructure was falling apart. Gartner was brought in to fix that as part of a dubious multi-phase project. It was paid R200 million for its efforts, but virtually nothing it recommended was implemented.

Then there are claims that Boston-based consulting firm Bain & Company had been instrumental “in the capture and destruction of the revenue service.” Evidence was led at the inquiry showing that Bain’s managing partner, Vittorio Massone, had been Tom Moyane’s executive coach prior to him taking over at the helm of Sars, and had recommended a radical refresh of the tax agency based just on publicly available information. He also recommended “neutralising” Sars’ then chief operating officer, Barry Hore. Within weeks of Moyane arriving at Sars, Hore resigned.

Things took a dramatic turn when Massone failed to arrive to give testimony at the inquiry, saying he was receiving treatment in Italy. Massone has since withdrawn from the inquiry, offering instead to file evidence by way of affidavit.

It was left to Gartner to take the heat at the inquiry. Business Day reports that Lithgow largely blamed the Sars leadership at the time for this. He said he wrote a letter to Moyane and ‘‘made it clear that unless we had strong, committed leadership, the transformation process would not work’’. He said there was resistance to change within Sars, and there were also ‘‘fiefdoms and factions’’ and people ‘‘would not co-operate’’.

The way in which Gartner and Bain secured their contracts was also highly questionable. Both firms worked closely with Moyane and the contract specs appear to have been written to suit their sales pitches. In Gartner’s case, the firm appeared unaware that writing specs for the contract eventually awarded to it was illegal. In total, both firms picked up fees of about R400 million from Sars. But it was Bain that is reckoned to have done most damage at the tax agency, getting rid of 200 skilled staff and overturning what had been a relatively functioning organisation.

The destruction at Sars has benefitted tax dodgers and delinquent taxpayers, wrote retired Judge Robert Nugent, who is chairing the inquiry. It desperately needs a new CEO with credibility and clout.

Given what we already know about consulting firm McKinsey’s fleecing of Eskom, and the havoc created by accounting firms and their consulting units, it’s reasonable to assume the future of Big Consulting in SA is bleak. No government department, state-owned company or private organisation will look at these witch doctors the same way again.