According to the latest annual report, the South African Revenue Service (SARS) plans to pay Microsoft nearly R1.6 billion over three years to renew software licenses and support, as well as nearly R1.2 billion to IBM under contracts approved without open tenders.
The contract with Microsoft, valued at R1.58 billion, involves renewing the Microsoft enterprise license and SARS' unified support services for three years, amounting to approximately R526 million annually. Similarly, the contract with IBM, worth R1.17 billion, extends equipment maintenance, software, technical support, and professional services for the same three-year period.
Both agreements are listed in SARS' annual report for the 2025/2026 financial year under 'procurement by other means'—meaning deviations from standard competitive selection—as 'single source (restricted auction)' awards. Both purchases were made based on framework agreements pre-approved by the Agency of State Information Technology, which allows government departments to acquire goods from approved suppliers without conducting their own tenders.
Other technology deals approved outside of open tenders in 2025/2026 include a two-year contract with Vodacom worth R141.6 million, effective from April 2026, an upgrade to the Software AG subscription worth R95 million, expenditure on Dell EMC maintenance and support amounting to R63.8 million, and a three-year security assessment and penetration testing from Orange Cyberdefense worth R55 million.
These expenditures come as SARS implements artificial intelligence on both sides. According to the annual report, an internal employee assistant named Pulse was launched in December 2025. Furthermore, SARS informed the Parliamentary Portfolio Committee on Finance that it has deployed Microsoft Copilot, according to the transcript of the meeting published by the Parliamentary Monitoring Group.
AI Assistant
Lwazi, the assistant on the SARS website and app, answered over 2.7 million taxpayer queries by the end of March 2026, achieving a positive rating of 82.9%. This figure is cumulative since Lwazi's launch on November 15, 2024. The previous annual report indicated a total of 805,000 by the end of March 2025, implying about 1.9 million queries in the 2025/2026 financial year.
Taxpayers are also moving to other digital channels. In 2025/2026, SARS processed 4.4 million requests via WhatsApp and 22.4 million requests via USSD, a text menu service operating on basic phones.
In its own annual report, SARS lists insufficient funding among its main risks, warning of the impact on its 'legal mandate' and committing to developing a business case for an alternative funding model.
Finance Minister Enoch Godongwana allocated 'an additional R7.5 billion within the MTEF' (Medium Term Expenditure Framework) in his budget speech in May 2025, as reported by TechCentral, when this allocation was first presented in March 2025.
Commissioner Johnstone Makhubu, who took over from Edward Kisvetter on May 1, 2026, told parliamentarians that SARS and the National Treasury are exploring the use of the infrastructure budget mechanism—a mechanism usually applied to finance large public infrastructure projects—to cover expenses ranging from R7 to R10 billion for a modernization programme, similar to what Transnet has done, according to the Parliamentary Monitoring Group's report. SARS has also requested approximately R6.3 billion in the medium term for operational costs, partly to replace aging staff whose average age is 47.
Makhubu also informed parliamentarians that cryptocurrency assets are increasingly used for money laundering out of the country, according to this group. Regulations ensuring the implementation of the OECD Crypto-Asset Reporting Framework, requiring crypto service providers to report their clients' transactions to tax authorities, were published on November 28, 2025, and SARS expects to implement this structure in the 2026/2027 financial year.