Bring­ing KPMG to book will not solve our prob­lems

Black­list­ing will harm pro­fes­sion­als who had noth­ing to do with any of the sor­did sagas

Sunday Tribune - - BIG ISSUE - Vic­tor Kgo­moeswana

OVERNMENT or busi­ness sec­tor? That was the choice a Gfa­ther gave his son who was “con­sid­er­ing a ca­reer in or­gan­ised crime”. The prob­lem with crime is that a patsy gets sac­ri­ficed while the master­mind re­mains un­touched.

KPMG, while not in­no­cent in the SA Rev­enue Ser­vice rogue unit re­port it has since re­tracted, was but an ac­com­plice in an eco­nomic or­der that keeps steer­ing us to the same grimy place.

Ev­ery scam, racket, in­clud­ing those that rip off Africans in re­source-rich but poor coun­tries through con­flict min­er­als fu­elling civil wars, has a clean-look­ing multi­na­tional en­ter­prise or busi­ness celebrity at its core. Wheel­ers and deal­ers who thrive on their crim­i­nal schemes, these high­fly­ers do so with the help of cor­rupt govern­ment of­fi­cials.

Their fraud­u­lent busi­ness ac­tiv­i­ties con­tinue in­side en­ter­prises au­dited and ad­vised by the likes of KPMG, EY, PWC and Deloitte – the big four. We can name a few ex­am­ples of mul­ti­mil­lion rand set­tle­ments, way higher than the R23 mil­lion paid to KPMG by Sars for a non-re­port; which KPMG is will­ing to pay back to the client or to a char­ity.

We must ask why Sars needed an ex­ter­nal pro­fes­sional ser­vices firm to prove the ex­is­tence of its own rogue unit. The an­swer is: such firms are re­spected, right­fully so, for their depth of pro­fes­sional ex­per­tise and in­tegrity.

They hire pro­fes­sion­als, from char­tered ac­coun­tants, tax lawyers, IT to ac­tu­ar­ial and foren­sic spe­cial­ists, who can find a nee­dle in a haystack when no­body knows where the haystack is. They use years of pro­fes­sional train­ing, ex­pe­ri­ence, fancy data min­ing tools, pa­per trails, in­ter­views and lit­er­a­ture to un­cover stuff that sent Al Capone to jail. Still, some of them get com­pro­mised. When a part­ner of a firm such as KPMG de­liv­ers a re­port to the client, they are com­monly al­ready eye­ing an op­por­tu­nity to cross-sell and on-sell. The part­ner will be think­ing: Due to the gaps I de­tected in do­ing my work, what other ser­vice can I sell to the client? This usu­ally hap­pens even be­fore the first as­sign­ment is ac­cepted, so that the re­la­tion­ship can be mas­saged to ren­der the client amenable to a fur­ther sales pitch af­ter­wards.

High stakes, this pro­fes­sional ser­vices in­dus­try is. Some ex­ec­u­tives or di­rec­tors in or­gan­i­sa­tions such as Sars or their po­lit­i­cal prin­ci­pals, ma­nip­u­late the com­bi­na­tion of the firm’s ap­petite for more work to feed their greed or to set­tle per­sonal scores by cor­rupt­ing pro­fes­sion­als within firms like KPMG.

In Fe­bru­ary, Citibank agreed to pay R69.5m for forex rig­ging. This, as big con­struc­tion com­pa­nies agreed to a R1.5 bil­lion mea culpa set­tle­ment for rip­ping us off build­ing Fifa World Cup 2010 venues.

Arcelor Mit­tal agreed to pay R1.5bn in Au­gust last year for price-fix­ing. For its hand in bread price and milling cartels, Tiger Brands paid R98.7m in 2007. Ger­man car maker Volk­swa­gen, which also owns Audi, was fined $4.3bn (R57bn) for fal­si­fy­ing its car­bon emis­sions data. Two weeks ago, Pe­tra Di­a­monds was bust at the Julius Ny­erere In­ter­na­tional Air­port try­ing to siphon $25.9bn of di­a­monds – their value was un­der­de­clared – out of Tan­za­nia.

Global Wit­ness es­ti­mates that the Demo­cratic Repub­lic of Congo loses more than a $1bn a year in un­paid taxes and roy­al­ties.

All these com­pa­nies have ex­ter­nal and in­ter­nal au­di­tors, tax ad­vis­ers and con­sul­tants from the big four in one form or an­other.

All the anti-com­pet­i­tive, fraud­u­lent and cor­rupt prac­tices went un­de­tected (no, they were over­looked by some part­ner in these firms) to pro­tect their pro­fes­sional busi­ness in­ter­ests.

Did we call for their sus­pen­sion or black­list­ing? No, be­cause that would mean black­list­ing our­selves for be­ing ben­e­fi­cia­ries and pas­sive on­look­ers.

Black­list­ing KPMG will sim­ply pun­ish thou­sands of its in­no­cent pro­fes­sion­als who had noth­ing to do with the Sars saga when we know that the real is­sue is not the R23m.

KPMG is not blame­less; its in­ter­na­tional boss said so, and its top South African lead­er­ship has re­signed. But it is dis­hon­est to pre­tend clos­ing one pro­fes­sional ser­vices firm will solve our prob­lems. Arthur An­der­sen closed in 2002 af­ter the En­ron scan­dal, yet we are still where it left us.

Kgo­moeswana is au­thor of Africa is Open for Busi­ness; me­dia com­men­ta­tor and pub­lic speaker on African busi­ness af­fairs and a weekly colum­nist. @Vic­torafrica


Fraud­u­lent ac­tiv­i­ties con­tinue to be iden­ti­fied in­side en­ter­prises au­dited and ad­vised by KPMG.

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