7 June 2002

South Africa: Dave King: Founder of Specialised Outsourcing

broadcast transcript

Joining us now is Dave King. You will know him as the founder of a company called Specialised Outsourcing. It's now changed it's name to Enterprise Risk Management. He was also a big shareholder through various companies in MICROmega, which is also listed on the JSE. He resigned form that company about two weeks ago, after it emerged that he was in a tax dispute with the SARS ? a figure of around R2.5bn is what SARS wants from Dave King and various companies with which he has been associated. Dave King did go to court today. The story we've received, Dave, is that you paid a cheque of R4.7m to SARS. Why did you do that?

DAVE KING: The cheque, in fact, was for the amount of close to R4.4m and the reason I did that is based on arguments that we've been having this week. My counsel advised me that I'd accept it on a prima facie basis. So if one takes the whole, I think it's almost a R2.5bn tax claim, that by my own admission I had said there is some merit on a lifestyle basis for about R4.3m of it, which I felt that I could understand where they were coming from. I still felt that I would win when we finally went to tax court. And they just said, look Dave, on a good-faith basis, why don't you at least tender and pay the demand, that you are given the benefit of the doubt ? not that you can't fight it, but at least give them that money up front. And they just thought that would be a good decision on my part. So I accepted their advice and paid the R4.4m today.

MONEYWEB: But the South African Revenue Services said, if you were prepared to admit that you owe them R4.4m, why not pay them the R16m they believe you owe them, because of penalties and interest as well?

DAVE KING: Yes, I think my view was that this is a without-prejudice payment, that the penalties would not apply under the circumstances. We still feel we will win when it goes to the tax court, and therefore we felt that the penalties and interest were certainly not justified. So that was the basis of paying the R4.4m as opposed to the R16m.

MONEYWEB: We also believe that SARS has won a right to sequestrate you. What is the position there?

DAVE KING: Yes, that is correct. We, I must say, were very, very surprised about that. It's a bit of a shock for us, and I think really, for every South African taxpayer. We had taken a view, quite some months ago, that with the various threats that SARS was making ? it really relates to the whole R2.5bn,and I don't think that one should necessarily focus on the R16m. That should be a short-term situation, but perhaps SARS feel a little bit more confident that we felt, as a point of principle the whole basis of the Receiver being the judge and the executioner, because he is in a situation where he could go along to any person, the man in the street, and say we believe you've been under-ringing in your till in your business, and we think you owe us R200,000. And he could come and assess you for a million rand, knowing you can't pay it ? and on the basis of that assessment, he can get a certificate and sequestrate you. I think our view was that this is constitutionally flawed. How can you possibly sequestrate someone on an amount that they still have the chance to fight. And I think we felt very, very strongly that there's a level of abuse, and I've gone on record as saying, based on my experience with the Receiver, it really amounts in my opinion to extortion. I've used that word ? and we just took the view and said, this thing is so outrageous.

It's not just me. I mean, I might have the resources to fight them, but we felt for every single person in South Africa who is suffering this level of abuse, because it is outrageous. If you can come along and sequestrate someone merely because you say he owes you that amount of money, what happens in three years' time if he wins the case. You can give him his money back, but how do you give him his life back in terms of the sequestration?

MONEYWEB: What happens now with regard to the sequestration, Dave? Do we see furniture trucks moving into your house tomorrow?

DAVE KING: No, no, when it comes down to my personal life, there is no real impact on me. I guess we're in the situation where we, I must say, were very, very surprised. There were arguments today, very complicated arguments, there was a lot of counsel involved, there were constitutional issues. Yes Judge Shongwe, in the space of one minute, kind of summed it up and gave his verdict. So we were, I must say, shocked by that, we would have thought at least to have considered it for some time. There were a lot of issues brought to bear. And where we are now, we just have to go to the Constitutional Court. We always felt that this might end of in the Constitutional Court and I guess that is where it is going to end up, although we did feel, based on arguments today, that we had a really good case ? and this whole abuse by the Receiver of Revenue should stop.

MONEYEWEB: When do you expect to go to the Constitutional Court with this matter than? Will it cover the entire matter, the R2.5bn or simply the sequestration?

DAVE KING: The R2.5bn, I think, is a bit of a red hearing. I don't think the Receiver expects to get anywhere near R2.5bn. But this is the type of numbers.

Maybe in my case, the R2.5bn is the equivalent of a million rand for someone else, but basically what the Receiver does is it raises an amount of money which is so large, that they essentially try to force you into settlement. I told the Receiver in a meeting, I said this is absolute extortion, you are chasing people out of South Africa. I've poured significant investment into this country. You are just chasing lots of people away out of the country.

MONEYEWB: You say that they created the figure of R2.5bn to try and force a settlement. Have they offered you a settlement?

DAVE KING: After the R2.5bn was raised ? the principle I've gone on at this stage really has been one of a bigger issue, not necessarily focusing on my type of case, because I don't want to really air my tax case ? it really has to be dealt with in the tax court. It's always been my view, if you believe you are due R2.5bn, we have been fighting for two and half years ? my goodness, why haven't we gone to the tax court? But the fact is, immediately after issuing the assessment for R2.5bn, there were certain discussions initiated regarding settlement. I thought that was outrageous, because certainly they are not expecting to get anything like R2.5bn. That's just a big number to frighten you, to bully you and to beat you up.

MONEYWEB: A separate issue, Dave ? we did see a statement out from Enterprise Risk Management , formerly Specialised Outsourcing, that the company will cooperate with the Department of Trade & Industry, into management of Specialised Outsourcing pre-March 2000. Have you been part of any DTI investigation?

DAVE KING: Not in the least. In fact, my call on that one is quite frankly every time that Dave McLean seems to have some sort of business problem for some reason, he manages to bring me into it. They've obviously got another problem and it's not something I've been affected by, but I'm quite used to my name being kind of pulled out of the hat every time they seem to have a problem. So I'm not spending any time on that one.

MONEYWEB: But the Department of Trade & Industry has confirmed that it is in fact doing this investigation. Is it a waste of time?

DAVE KING: I think it's interesting to see the wording of that. I've seen a couple of press releases coming out from Dave McLean before, and very often there's a very poor correlation I think between the press release and what's actually happening. And I would think this DTI thing may in fact be related to them getting [indistinct], and I think there's a whole bunch of things going on regarding Umgeni. My understanding is the various reports coming out that Dave McLean is not looking good in these reports regarding his action at the time of this whole cancellation of the Umgeni contract, and I think it's probably more in relation to that than to anything else. But given that I haven't seen it, and certainly no one has spoken to me in that matter for probably about a year, it's not something that is causing me any personal concerns.

MONEYWEB: Back to the tax issues, very briefly. Monday morning happens, where does the Dave King tax case go from here?

DAVE KING: I think there are two issues. I think on the Dave King tax case, I think the time that we spent in the last few months has not really been on the Dave King tax case. I took a view, going back to February, when we felt it was extortion and abuse, and we really felt that on behalf of not just myself, but really all taxpayers in South Africa, that we could go ahead and that we could in fact could make a difference now. As I say, we did expect it to do better today than the outcome, and we now have to go to the Constitutional Court. But there are big-picture issues here, and I think fixed investment in South Africa, the way the Receiver has been going aggressively at debt structuring, I think you are finding the whole fixed investment base in South Africa is falling away.

MONEYWEB: Dave, the Constitutional Court is next, when do you expect to get into the tax court, if at all?

DAVE KING: I would be very surprised. I've been saying for about a year and a half now, if the Receiver feels so strongly about the R2.5bn, why don't they go to the tax court? My view has been quite simple, let's go to the tax court. If you establish a liability, it will be paid, it will be paid. But we have no indication from the Receiver at this stage that there is any intention of going to the tax court and, quite frankly ? and I know I'm saying this on record ? I think the Receiver would be extremely embarrassed was he ever to take the assessment he's given me to the tax court.

MONEYEWEB: Dave King, the former chief executive of Specialised Outsourcing and also a former director of MICROmega with the latest developments in this tax case. This morning he handed over a cheque for nearly R4.4m to the taxman.

He says it was done with no prejudice, he also says it was done as a gesture of good faith, and he is being sequestrated. The details around that are a little fuzzy at the moment, but he plans to go to the Constitutional Court and the gauntlet has been laid down to the taxman that, if he really does believe that Dave King owes him nearly R2.6bn, let him take him to the tax court and prove it.

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