Broke Malema owes taxman R15m
15 May 2012
Posted by: SAIT Technical
By Piet Rampedi (Business Report 14 May 2012)
JULIUS Malema owes the taxman R15 million from his Ratanang Family Trust, while a company partly owned by the trust, On-Point Engineers, is sitting with its own tax bill of R3m.
The former ANC Youth League president and the engineering firm underdeclared or failed to pay their income taxes.
Documents in possession of The Sunday Independent show that On-Point's sister companies – SGL Engineering Projects, Segwalo, Gwama Properties and Mminathoko Infrastructure – have also failed to pay income tax, let alone submit financial statements at times.
The companies had been awarded municipal contracts in Limpopo worth more than R400m since 2007.
Malema and On-Point are unlikely to afford their hefty tax bills because profits of millions of rand have reportedly been spent on luxury cars, properties and league activities.
The company cannot do business any more without a tax clearance certificate.
Millions of rand were withdrawn or transferred to the family trusts of Malema and his business confidante, On-Point's chief executive, Lesiba Gwangwa, who co-owns the company.
Malema allegedly used his trust to accept questionable income from companies that won Limpopo government contracts.
Gwama bought a string of properties worth more than R12m in 2010, partly funded by On-Point.
Malema and Gwangwa – or companies linked to them – owned cars, including a 2010 Jaguar valued at R1m, a Porsche Cayenne worth R1.4m, a Mercedes-Benz S-Class, a Jeep Wrangler and a Golf R valued at R400 000.
The Sunday Independent understands that On-Point, whose finances used to be healthy, cannot pay the R3m tax bill because there's only R665 000 left in its account.
The three-year-old firm has about 15 employees and a salary bill of R400 000 a month.
On-Point, which survived on government contracts, was plunged into a cash flow crisis after being investigated for alleged tender corruption by various law enforcement agencies, a move that made it impossible for it to do business.
Finance Minister Pravin Gordhan's placing of five Limpopo departments under administration compounded the problem.
On-Point has in effect been in charge of Limpopo's roads contracts, worth R3.6 billion, over three years, through its R51m project management unit contract.
Last year alone, companies linked to Malema and Gwangwa were awarded 57 contracts worth millions of rand by various municipalities, state entities and private companies owned by the former youth leader and Premier Cassel Mathale's business allies.
Despite making a profit of R10.2m last year, On-Point spent the money everything but the taxman.
According to its financial statements, the company's expenses include:
• R5.2m on properties acquired by Gwama.
• R2.1m cash withdrawals or transfers to the Ratanang and Gwangwa trusts.
• R2m on "strategic” expenses, a code name for league expenses, according to Gwangwa and Malema's associates who spoke to The Sunday Independent anonymously.
• R742 000 on travel expenses, including Malema's 2010 trips to Venezuela (to research the viability of nationalisation) and Italy, alongside the Limpopo government delegation led by Mathale.
• R1m for office equipment.
• R1m to pay directors.
• R147 000 VAT.
Malema and Gwangwa are also unlikely to meet their tax obligations because they are down and out.
"I do not know how Lesiba will pay his lawyers unless someone big assists him. They are broke. There is no income coming in… That is why Julius cannot afford his house. The tax bill on Julius is R15m and it comes from his family trust alone,” said a source.
The Sunday Independent reported last month that Malema was broke.
Malema said: "From my own calculations and the figure they sent to my accountant, it is not R15m. It is R27m. I do not understand how they arrive at that figure.
"But all these issues and the Hawks, we are dealing with them. We knew they will happen, especially if you take a political decision against the establishment.”
He said he had "no problem” with his and Ratanang's tax issues, adding "there is nothing that is not solvable”.
He referred all inquiries about On-Point's tax bill to the company.
Gwangwa referred The Sunday Independent to his lawyer, Mpoyana Ledwaba, who said his client was "not aware” of the R3m tax bill.
"This is news to our client. Our client was never notified of any tax amount due to Sars either by Sars itself or any law enforcement agency or any financial institution.
"Accordingly, Sars will be better placed to confirm these allegations,” said Ledwaba.
He added that allegations that "Gwangwa and/or any of the entities of which he is a director is/are bankrupt and/or squandered money and/or cannot meet its/his financial obligations when due and that it spent money wastefully on political activities and properties are devoid of all truth”.
Sars spokesman Adrian Lackay reiterated that "it does not and cannot comment publicly on the affairs of any taxpayer regardless of whether it is a business, a trust or individual”.
Taxpayer confidentiality extended "to whether or not a taxpayer is under investigation. Taxpayer confidentiality ends only when a matter is formally brought before a court of law, other than a tax court. It then becomes a matter of public record,” he said.