7 JULY 2001


The South African Revenue Service (SARS) has cracked a scam involving local businessmen who served as a conduit supplying the local electronics market with goods that had falsified customs clearance records in an operation that netted the entity a total of R67m in revenue.

The scam involved under-valuation of declared import goods, double invoicing, the importation of semi-knocked down components and non-payment of VAT. In some instances, the declared values of the imported goods were as low as fifteen per cent of the actual purchase price.

The Pretoria Commercial Crime court sentenced the following people who will repay outstanding customs duties and taxes due to the SARS:

In a similar operation earlier this year, the following have already started repaying outstanding customs and taxes as part of their sentences:

These convictions follow an investigation into the electronics industry the SARS launched, revealing an intricate web of fraudulent operations linking manufacturers, importers and exporters and their suppliers to the retail chain.

The electronics industry consists of nine major manufacturing firms employing about 9 000 workers. It contributes about two per cent to the GDP, excluding software and services, and generates a turnover of about R7.7 billion in the retail sector. This is made up of R3.6 billion in home audio-visual and television appliances, with R2.5 billion in big appliances and R1.6 billion in small electrical appliances. The brown goods sector, which has been the focus of investigation, employs roughly 2 500 workers.

The impact of shady operations to the industry has been immense. Operations such as round tripping formed another manifestation of the scam. It involved unscrupulous traders who avoided payment of anti-dumping duties on imports from suppliers getting involved in unfair trade practices. This resulted in a considerable loss in customs and VAT income for the government. In addition, it placed huge pressure on the profit margins of legitimate and law-abiding manufacturers and traders as production and retail costs were seriously under-cut.

However, since the crack down into the industry, the Commissioner for the SARS, Mr Pravin Gordhan confirmed that: "the impact of the SARS investigations has been an extremely positive one. A new stable business climate has been created facilitating open and fair competition between firms."

A leading story in the Business Times sketches Profurn's performance in the market and its links to the electronics industry scam. SARS would like to put on record that the management of Profurn has been very open and co-operative with us during our investigations. Furthermore, these have been concluded and we have reached a settlement months ago. "SARS has no current investigations proceeding at Profurn," added Gordhan.

The SARS probe into the electronics industry was prompted by the high risk that the sector posed to revenue loss as well as information that pointed to the prevalence of fraud and corruption provided by the players in the industry. "We have almost concluded our investigations into the electronics retailing industry. However, there are still a few outstanding matters with a few companies,"’added Gordhan.


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