Today’s Questions for South Africa
Be Aware – South African Government Invasions of Privacy
A recent radio discussion covered the development of technology in modern society, and its advantages and dangers. One of the sceptics, a university Professor, stated that he believed that technology must continue to progress, but warned that users of technology should take the trouble to be aware of the dangers it posed. As an example, he warned that the use of the internet is tracked by search engines, providing a, sometimes, very comprehensive record of your purchases and interests. A program is available that takes your name and searches the social networking sites for it, recovering photographs with that name attached to them. When these elements are put together, it is possible for a person or body who is interested in you to build a complete record of you and your activities. The Professor asked the question: “Are we aware of the risks as well as the benefits of the technological developments that are becoming increasingly part of our everyday lives?” He advocated that the Government should take steps to ensure that its citizens are protected against the threats posed by the technology.
What the learned Professor overlooks is that, in many cases, the Government creates the threats. There are many aspects of Government and legislation that are overlooked, and a cynic may well be advised to question whether it is desirable that Governments be given the responsibility to ‘look after’ us in this regard. Let us look at a few examples of real situations where Government has proven it is not trustworthy.
Legislation exists that makes it compulsory for a ‘financial adviser’ to report discussions with a client in which mention is made of a desire to reduce the client’s tax burden. This legislation does not require that the desire be to utilise unlawful means. It is not even necessary for the discussion to result in action being taken. This has the effect that it is no longer possible for a legitimate taxpayer in South Africa to hold a discussion with a qualified professional with the objective of achieving a lawful and legitimate objective without the discussion being reported to the ‘authorities’! Such reporting can only have as its objective the placing of the unwitting citizen on a ‘watch list’ or even becoming the subject of an active investigation into his financial affairs.
A client managed a mine on behalf of foreign investors who had invested substantial funds to bring the mine into operation and to develop a new technology for the optimal treatment of the mineral. During a discussion with some senior officials of the Department of Mines, the client was asked what the company’s intentions were regarding the inclusion of ‘previously disadvantaged’ shareholders in the mining company. His response was that several discussions had been held with various potential candidates, but no result had been achieved as the candidates were universally seeking a donation of the shareholding, required substantial salaries without doing anything for them, and could add nothing regarding management skills, technology, marketing or any other aspect that would make them desirable participants in the business. The Department officials suggested strongly that active steps be taken to introduce shareholders ‘acceptable to the Government’ into the company, regardless of their ability to add any value to the business. The client was shown a list of five names that were stated to be ‘acceptable Black shareholders’. The client then asked what would happen if he did not agree to hand over a substantial share of the company for no consideration. He was told that “We will tax you out of existence!”
A short time later, the company was visited by two officials of the South African Revenue Services (SARS), who demanded to inspect the books of the company. All accounting information was provided and all questions answered as fully as possible. Neither the company nor any of its shareholders or officials had ever had any conflict or dispute with SARS previously. After about two hours, the officials stated that they were satisfied, and left. About three weeks later, a notice was received from SARS demanding payment of ‘arrear VAT and penalties’ amounting to over R21 000 000.
Legal advice was sought from the firm’s attorney and Senior Counsel, and it transpired that the actions of the company had been faultless. Although SARS claimed that VAT was due on export sales, no VAT was, in fact, payable on such exports. The legal advisers mentioned that SARS habitually made such unlawful demands, and many companies were ‘blackmailed’ into making settlements to SARS to avoid the protracted disputes, involving the locking up of large sums and the dedication of considerable senior management time to resolving the dispute. The client’s company had several foreign shareholders, including a number of Germans, who instructed the client to do whatever was necessary to comply exactly with the law, including, if necessary, paying the full amount actually due or fighting the case to a lawful conclusion. Notice was therefore issued to SARS object ting to the demand.
After a few weeks, without any form of notification to the company either by SARS or the company’s banks, cheques issued by the company were returned unpaid. On enquiry, the company was informed that the South African Reserve Bank had frozen the company’s bank accounts, as well as the bank accounts of all other companies which had some of the same Directors. When approached for reasons for this action, the Reserve Bank refused to provide any information, but a private conversation with a Reserve Bank official disclosed that the action had been taken to ‘support the demand by SARS’. An urgent legal action was launched to require the Reserve Bank to lift the freeze. This action was complicated because the Reserve Bank referred in its response to its Regulations, which were not publicly available. This complication was resolved when a friend of the client was able to obtain a photocopy of the Regulations from a family member who worked in a bank. One day before the Court hearing of the urgent action, the Reserve Bank’s representatives legal representatives agreed, in a meeting with the company’s legal representative, to lift the freeze if the company agreed to pay its own legal costs. When asked what the alternative would be, the Reserve Bank stated that it would use every delaying tactic available to prevent resolution of the matter for as long as possible! Confronted with this situation, the company agreed to a consent order lifting the freeze on its bank accounts and paying its own costs.
Within a couple of days, an order was presented to the company’s attorney appointing that firm as collection agent for SARS. The effect of this was that any payment made to the attorney of any nature whatsoever by or on behalf of the company was to be paid over immediately to SARS in settlement of the demand by SARS against the company. The effect of this was that the company would be unable to pay its legal costs, and was so, effectively, deprived of legal representation. When the foreign shareholders were notified of this, one of them was so incensed that he established a fund with the attorney to cover all legal costs, which, at this stage, were running into millions of Rands . SARS then demanded of the attorney that he hand over all records of dealings with the company, including documents and records of discussions relating to the present case. The attorney refused to do so, as these records were protected by law. He was then informed by SARS that a VAT investigation would be opened against him, which would entitle SARS to inspect these records. His response to this threat was to inform SARS that any attempt by SARS to obtain access to his confidential records in this way would attract an immediate Supreme Court action for an interdict against SARS to prevent it acting in such a way.
The Court action against SARS was successful, and SARS withdrew the demand for the ‘arrear VAT and penalties, but a new demand for a lesser amount was served immediately after the withdrawal. This was successfully contested, but a further reduced demand was served by SARS, which was also successfully contested. This happened twice more, before a final demand for R8 000p was paid by the company, in respect of an illegitimate demand by SARS, in the interests of obtaining release of the very large sum of VAT refund to which the company was entitled and which was being withheld by SARS until the series of SARS demands was settled. SARS applies a principle that any demand by SARS must be paid in full before an objection may be heard.
Only a few weeks after the ‘end’ of this affair, the Department of Mines served a notice that the mining licence of the company had been terminated, demanding an immediate cessation of mining activities. This demand was also contested in the High Court on the basis that the Department had no right to terminate the mining licence, as no breach of it had occurred. This action was also successful.
As a result of this long series of illegal actions by the Government, and abuse by several organs of Government of the powers granted to it by a series of statutes, the shareholders in the mining company withdrew all investments made by them in South Africa, amounting to some US$154 000 000 and creating over 300 sustainable jobs, most being in the production of goods or services for export. They have publicly declared that they would not ever consider making any further investment in South Africa , and have advised their numerous business associates not to invest in the country.
In each of these activities by Government, it was clear that the protection of the rights of its citizens was not a consideration for Government. Information that was confidential to the citizens was used by Government officials in a manner that was both illegal and contrary to the interests of the country as a whole.
Other reasons for citizens to be concerned about putting large amounts of confidential information in the hands of Government is the notorious inability of Government employees to understand the need for maintenance of security of such information. Two examples spring immediately to mind.
In the 1970s, when South Africa was at war, an associate parked his car near the Military Headquarters in Pretoria . Walking down the street, he noticed that about eight palettes of paper were standing on the sidewalk, with many documents, particularly computer printouts, spilling onto the sidewalk. Unable to constrain his curiosity, he looked at what these papers might be. To his amazement, they were listings of equipment, details of men with their units, locations, and home addresses, with an evaluation of their preparedness for action! He walked to the entrance of the building, intending to bring this breach of security to the attention of a senior officer. The security was impressive, and he was unable to talk to anyone as he did not have an appointment. He read about the situation in a newspaper several days later. These highly confidential documents had been openly displayed on a public sidewalk for at least several days!
In another example, when the ‘new’ identity documents were issued, my partner and I applied for ours. After several months, the document had not yet arrived, so I telephoned the Department of Home Affairs, and was informed that the documents were at the local Post Office. On Saturday morning, we went to the Post Office, and were led into a room in which were seven long boxes with envelopes containing Identity Documents. We were requested to find our documents, and the Post Office official left the room. We were left there unattended. To this point, we had not been asked to prove our identity in any way. We leafed through the several hundred documents contained in the boxes, and found ours. Leaving the room, we walked down the short passage to the Post Boxes, and went to the counter where we had initially reported, where we waited several minutes for an official to notice us. We told her that we had found our Identity Documents, she turned to serve another customer, and we left, taking our documents with us. There was no security of any form over the Identity Documents, and we could easily have removed several dozen unnoticed.
With the proliferation of information collections around the world, it is entirely reasonable for any citizen to be concerned about what will happen to information collected in any way. Governments eavesdrop on telephone calls, with automated equipment scanning millions of conversations for key words. When these are picked up, the conversation is recorded. Do you know what the key words are? Certainly they cover words related to terrorism and crime, and probably cover tax, foreign exchange transactions and money transfers. What else do they cover? Many perfectly innocent conversations include these key words. Does this mean that every person uttering the words ‘bomb’, ‘explosive’, ‘Dollars’ and others of similar suspicious nature automatically become the subject of a surveillance program? Is it necessary to force attorneys, accountants and financial advisers to become State snitches, as in the old East Germany ?
With the spread of use of face recognition software and the ubiquitous placement of surveillance cameras, under the umbrella of ‘protection of the public’, we are all subject to an almost minute-by-minute recording of our activities. The introduction of automated road toll collection systems, using chips or licence plate reading technology, is an expansion of this surveillance capability. The recording of flights and trans-border travel on computers ensures that the information is available for ever. The ability of cellphones to record our position at all times that they are switched on is another invasion of our privacy. With the recent enforced registration of the name, identity and address of each cellphone user, it is now simplicity itself for the State to keep a running record of our locations, who we call or are called by, and what is said. Would you disclose details of every conversation, no matter how innocent, to a trustworthy friend, never mind a faceless burocrat with undisclosed, and probably unknowable, motivations?
To reinforce this concern, we must all be aware that senior officials and politicians are constantly in the Press in an unfavourable light. The President has been charged with corruption, the Commissioner of Police was jailed for corruption, the current Commissioner of Police is facing an enquiry into the illegitimate signature of a large lease agreement, a Lt. General of Police Crime Intelligence has been arrested on suspicion of murder. The list goes on. Would you put unbounded trusty in the honesty and integrity of these people or the governmental bodies they lead?
With the abysmal record of the State in keeping its nose clean, do we have any assurance that this information is not being used against us?
A question that any thinking person must ask is “Who is protecting us against those who claim to be protecting us?”