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Our Ref: T Malatji/M00022 Your Ref: 7/2-024085/16 Date: 22 May 2019

Direct Tel: 011 072 2600 Direct Email: tmalatji@mkinc.africa

THE OFFICE OF THE PUBLIC PROTECTOR

175 LUNNON STREET
HILLCREST OFFICE PARK
HILLCREST
PRETORIA

BY HAND DELIVERY

Dear Adv Mkhwebane,

MINISTER GORDHAN’S APPROVAL OF MR PILLAY’S EARLY RETIREMENT

1 THE PURPOSE OF THIS LETTER

1.1 We act on behalf of Minister Pravin Gordhan. He has asked us to make representations
to you on his behalf in response to your letter dated 30 April 2019. These are thus his
representations in terms of section 7(9) of the Public Protector Act 23 of 1994.

2 YOUR DECISION TO INVESTIGATE AN OLD MATTER

2.1 The subject of your investigation is Minister Gordhan’s decision of 12 August 2010, to
approve Mr Ivan Pillay’s early retirement from the South African Revenue Service
(SARS) with full pension benefits, and Mr Pillay’s subsequent reappointment under a
fixed term contract.

2.2 Section 6(9) of the Public Protector Act provides that you may not entertain a complaint
more than two years after the event, except where, in special circumstances, you
exercise your discretion to do so.

2.3 Paragraph 8 of your letter of 30 April 2019 mentions generic circumstances that may be
taken into account and a few facts peculiar to this case.

2.4 Will you please clearly specify:-

2.4.1 the “special circumstances” that justified your decision to entertain an old complaint;
and

2.4.2 the reasons why you exercised your discretion to do so?

2.5 Minister Gordhan reserves his rights to make further submissions to you once you have
complied with this request.

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3 MINISTER GORDHAN ACTED HONESTLY AND WITH GREAT CARE

3.1 The evidence makes it clear that Minister Gordhan acted perfectly honestly and in good
faith at all times. He made it clear in his evidence. It is borne out by all the other
evidence described in your letter. It was made particularly clear by Mr Magashula’s
evidence, recited in paragraph 13.1.1.57 of your letter, that Minister Gordhan had
indicated to him at the time that he would only consider Mr Pillay’s request “if he was
convinced that it was legally possible and permissible for him to take such a decision”.

3.2 Minister Gordhan also acted with extraordinary care. Your letter makes it clear that he
sought and obtained advice from at least the following people:

3.2.1 He obtained an opinion from Mr Vlok Symington, a pension’s expert in SARS.1

3.2.2 He had a number of discussions about the matter with Mr Magashula, the Acting and
later the appointed Commissioner of SARS, who recommended that he [Minister
Gordhan] approve Mr Pillay’s request.2

3.2.3 He also sought the views of Mr Andrew Donaldson, the Deputy Director-General at
Treasury who had “vast experience in pension related matters”.3

3.2.4 Minister Gordhan asked Ms Minee Hendricks to discuss the matter with Ms Rebecca
Tee, a legal advisor at the National Treasury.4

3.2.5 Minister Gordhan also consulted Mr Kenny Govender, the Acting Director-General for
the Department of Public Service and Administration (DPSA), at the time.5

3.2.6 Minister Gordhan consulted Mr Michael Olivier, the chair of the SARS Remuneration
Committee, whose task it was to advise the Minister on remuneration matters.6

3.3 Minister Gordhan took three months taking advice and contemplating Mr Pillay’s
request.7

1 Paragraphs 13.1.1.3, 13.1.1.26, 13.1.1.71, 13.1.1.72 and 13.1.1.97 of your letter.

2 Paragraphs 13.1.1.22, 13.1.1.25 and 13.1.1.57 of your letter.

3 Paragraph 13.1.1.25 of your letter.

4 Paragraphs 13.1.1.27 and 13.1.1.97 of your letter.

5 Paragraph 13.1.1.28 of your letter.

6 Paragraphs 13.1.1.29 and 13.1.1.99 of your letter.

7 Paragraphs 13.1.1.30 and 13.1.99 of your letter.

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3.4 All the people whom he consulted confirmed that it would be competent, lawful and
appropriate for him to approve Mr Pillay’s request. There was not a single dissenting
voice. Minister Gordhan thus had every reason to trust that he could lawfully and
properly approve Mr Pillay’s request.

3.5 You accordingly owe it to Minister Gordhan, unequivocally, to exonerate him of the
scurrilous accusations that you attribute to the anonymous complainant, in paragraphs 3
and 4 of your letter:

3.6 Minister Gordhan was not guilty of any “maladministration”. He acted honestly and in
good faith on the best available legal advice.

3.7 He did not violate section 86 of the Public Finance Management Act 1 of 1999. He was
not even subject to the section. It only applies to an accounting officer or accounting
authority with the meaning of PFMA. It, in any event, only applies to wilful misconduct.

3.8 Minister Gordhan is also not guilty of any dishonesty. He manifestly acted honestly at
all times.

3.9 You are accordingly called upon the exonerate Minister Gordhan of all the complaints of
misconduct anonymously made against him.

3.10 The highwater mark of your findings against Minister Gordhan is that you disagree with
the legal advice he was given, and upon which he acted. That does not constitute
misconduct of any kind. We submit, in any event, for the following reasons, that your
legal opinion is mistaken.

4 YOUR PROPOSED ADVERSE FINDINGS

4.1 Three technical points:

4.1.1 Your letter proposes to find that Minister Gordhan’s approval of Mr Pillay’s retirement
was unlawful on three legal-technical grounds. We shall address each of them in
turn. We submit that they are all mistaken.

4.2 Mr Pillay indeed retired:

4.2.1 You propose to hold that Mr Pillay did not in fact retire because he continued in an
employment relationship with SARS.8

4.2.2 It is common cause that Mr Pillay terminated his permanent employment with SARS
and was reappointed under a fixed term contract. He, in other words ceased to be
permanently employed under his original contract of employment and became
temporarily employed under a new fixed term contract.

8 Paragraphs 13.1.1.112 to 13.1.1.12 of your letter.

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4.2.3 The termination of Mr Pillay’s permanent employment with SARS constituted a

retirement within the meaning of the Public Service Act (PSA) of 1994:

4.2.3.1 Section 8(2) says that public service employees may be permanently or
temporarily employed.

4.2.3.2 Section 8(3) makes it clear that the provisions of section 16, relating to retirement,
only apply to permanent employees.

4.2.3.3 A permanent employee, who retires under section 16, may accordingly take up
temporary employment with SARS thereafter. It does not contradict or undo his
retirement. He remains retired in the sense that his permanent employment has
been terminated.

4.2.4 Mr Pillay thus retired in the sense that his permanent employment was terminated in
terms of section 16. His temporary employment thereafter did not contradict or undo
his retirement in any way.

4.2.5 We attach an affidavit by Mr Kenneth Govender to the Hawks, dated 14 September

2016, in which Minister Gordhan’s understanding of Mr Pillay’s retirement is
confirmed. I also enclose the legal opinion by SARS’ own attorneys, MMM attorneys,
dated 5 November 2014, in which the lawfulness of the early retirement is confirmed.

4.2.6 Your conclusion that Mr Pillay in fact did not retire is accordingly mistaken.

4.3 The section under which Minister Gordhan acted

4.3.1 You suggest that Minister Gordhan’s decision was unlawful because he purported to
act under section 16(2A) of the Public Service Act. You accept that he had the
power to take the decision under section 16(6), but contend that he invoked the
wrong section.9

4.3.2 Your conclusion is mistaken for the following reasons:

4.3.2.1 Minister Gordhan made it clear that he obtained advice from all concerned that it
was competent for him to approve Mr Pillay’s request. It is also common cause
that the advice was correct in that he had the power to do so under section 16(6).
Minister Gordhan’s decision was not tied to any particular provision. Mr
Magashula’s letter variously mentioned section 16(2A) and section 16(2)(a) but
that was clearly not Minister Gordhan’s concern. He dealt at all times with the
substance of the request which, he had been advised, was perfectly lawful and
permissible. That was the basis on which he made his decision.

9 Paragraphs 13.1.1.133 to 13.1.1.142 of your letter,

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4.3.2.2 It is as a matter of law irrelevant, even if SARS cited the wrong provision in their
memorandum to Minister Gordhan. The Supreme Court of Appeal articulated this
principle in Howick’s case as follows:

4.3.2.3 “Under the doctrine in Latib's case, where an empowering statute does not require
that the provision in terms of which a power is exercised be expressly specified,
the decision-maker need not mention it. Provided moreover that the enabling
statute grants the power sought to be exercised, the fact that the decision-
maker mentions the wrong provision does not invalidate the legislative or
administrative act.”10 (our emphasis)

4.3.2.4 Minister Gordhan’s decision was thus valid even if the SARS memorandum cited
the wrong section.

4.4 Minister Gordhan’s approval of Mr Pillay’s pension benefits

4.4.1 Your last point is apparently that Minister Gordhan’s approval of Mr Pillay’s
application was unlawful because he approved the request from SARS for Mr Pillay
to retain his full pension benefits. Your point seems to be that that is an automatic
consequence of section 16(6)(b) and not something subject to the Minister’s
discretion.11

4.4.2 But that is pure semantics without substance. The Minister approved Mr Pillay’s
retirement under section 16(6). The consequence of his retirement was that he
retained his full pension benefits. In other words, what the Minister approved, was
indeed Mr Pillay’s retirement with full pension benefits.

5 Conclusion

5.1 Minister Gordhan’s decision was perfectly lawful. Your proposed finding to the contrary
is mistaken.

5.2 Amongst other legal opinions that contradict your proposed finding(s), we wish to refer
you to the Final Report of the Commission of Inquiry Into Tax Administration and
Governance by SARS, specifically “CHAPTER 6: THE RESIGNATION OF SENIOR
EMPLOYEES”, from paragraph 17 onwards:

“[17] One of the early steps taken by Mr [Tom] Moyane [the former SARS
Commissioner], which must have been in about mid-October 2014, was to cause Ms
Kumalo, the Chief Officer for Human Relations, to obtain an opinion from SARS’
attorneys on the lawfulness of a payment received by Mr Pillay from the pension fund
upon taking early retirement, and his subsequent reappointment under contract. In

10Howick District Landowners Association v Umngeni Municipality 2007 (1) SA 206 (SCA) para 19. Also
see Shaikh v Standard Bank of SA 2008 (2) SA 622 (SCA) paras 17 and 18.

11 Paragraphs 13.1.1.143 to 13.1.1.148 and 13.1.1.163 of your letter.

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essence, in the event of early retirement, a member is entitled to the benefits that have
accrued to him or her, less a penalty calculated according to a formula. If the member
retires with the full benefit that has accrued, the employer must make up the penalty to
avoid an actuarial shortfall in the fund. That is what occurred in his case…”

“18… The opinion furnished by SARS’ attorney on 5 November 2014 was that the
arrangement was indeed lawful…”

5.3 Justice Nugent further observed that:

“[5] I reported in my interim report that that was brought about by at least reckless
mismanagement on the part of Mr Moyane. We have heard much evidence since then.
What has become clear is that what occurred at SARS was inevitable the moment Mr
Moyane set foot in SARS. He arrived without integrity and then dismantled the elements
of governance one by one. This was more than mere mismanagement. It was seizing
control of SARS as if it was his to have…”

5.4 What the Commission of Inquiry concluded was that Moyane implemented and oversaw
the destruction of SARS as an institution with the assistance and guidance from private
companies like Bain & Company Inc. [See Chapter 3].

6 REMEDY

Paragraph 18 of your letter contemplates the possibility of undisclosed remedial action

in the event of an adverse finding against Minister Gordhan. We trust that you will
afford him an opportunity to address you on any proposed remedy before determining it.

Yours faithfully,

MALATJI KANYANE INC

PER: T Malatji