South African billionaire Christo Wiese's tax battle with SARS escalates

Key Point

• South African billionaire Christo Wiese faces potential personal liability for helping a company allegedly dodge a $52 million tax bill.
• South African Revenue Service (SARS) accuses Wiese of assisting in moving assets to avoid the tax debt.
• Supreme Court decision opens new chapter in Wiese’s ongoing fight with South African tax authorities.

South African billionaire Christo Wiese, one of the continent’s richest, continues his legal fight with the South African Revenue Service (SARS) after the Supreme Court of Appeal (SCA) opened the next chapter in their ongoing dispute.

SARS is holding Christo Wiese and associates personally liable for allegedly helping Energy Africa, a company he later acquired, dissipate assets to dodge a potential tax bill. The SCA decision paves the way for the next phase of the fight between Wiese, his associates, and the tax agency.

Energy Africa faces potential tax bill as SARS accuses company of asset stripping

Energy Africa, with a potential tax liability of around R940 million ($52.35 million), is accused by SARS of disposing of its only valuable asset, a R217 million ($12.1 million) loan claim, to obstruct tax collection.

The case hinges on a provision in the Tax Administration Act that allows SARS to hold individuals liable if they’re aware of a potential tax debt and take steps to impede its collection. Wiese and his associates argue a formal tax assessment is needed before a debt exists, and SARS can’t invoke this provision until then.

How a 2007 restructuring led to a $52 million tax dispute

The dispute stems from the 2007 restructuring of Tullow Oil. Energy Africa, then part of Tullow’s African operations, sold shares in a subsidiary to Tullow Overseas Holdings. Wiese later acquired Energy Africa.

In 2012, SARS audited the 2007 transaction and notified Energy Africa of a potential tax adjustment, including capital gains tax of R453 million ($25.23 million) and a dividend withholding tax of R487 million ($27.12 million).

Wiese and his former directors contested the findings on April 15, 2013. Just four days later, on April 19, 2013, Energy Africa distributed its sole asset, the loan claim, to another company, Elandspad, in a move seen by SARS as an attempt to avoid the potential tax liability. This pre-empted the formal tax assessment.

Retail titan’s billionaire status

Christo Wiese, a leading figure in South Africa’s business landscape, built his retail empire, Pepkor, on offering bargain prices. He expanded the business across Africa before South Africa-based furniture retailer Steinhoff International acquired Pepkor for $5.7 billion in cash and stock in 2015.

Wiese stepped down as Steinhoff chairman in December 2017 after the company disclosed accounting irregularities. The scandal caused Steinhoff’s share price to plummet, briefly stripping Wiese of his billionaire status. However, he regained his billion-dollar fortune in 2022 by settling his dispute with Steinhoff for cash and stock, including a 5 percent stake in Pepkor.

Today, Wiese remains a key figure in Shoprite, Africa’s largest retailer. He owns an 11.5 percent stake in the company, which translates to 68,083,200 shares. This $1 billion stake forms the cornerstone of his $1.4 billion fortune, solidifying his position as one of Africa’s wealthiest individuals and a prominent South African billionaire.