KPMG faces un­cer­tain fu­ture in SA

More dis­tance them­selves from tar­nished firm

The Sunday Independent - - BUSINESS REPORT -

THE fu­ture of em­bat­tled KPMG in South Africa re­mains shrouded in un­cer­tainty af­ter a week of high drama, with more cor­po­rates and busi­ness bod­ies dis­tanc­ing them­selves from the au­dit­ing firm amid calls for it to pro­vide full dis­clo­sure.

Leon Ayo, the south­ern Africa chief ex­ec­u­tive of Odgers Berndt­son, said on Fri­day that it was alarm­ing that the bedrock of South Africa’s cor­po­rate sec­tor had been found want­ing in keep­ing to the tenets of good gov­er­nance.

He said that KPMG would find it dif­fi­cult to re­gain its for­mer stature.

“The world of the audit pro­fes­sion is a highly com­pet­i­tive one. While KPMG scours to re­store its rep­u­ta­tion, com­peti­tors will be chas­ing its clients and look to eat into the firm’s bot­tom line,” said the boss of the ex­ec­u­tive search firm.

“KPMG In­ter­na­tional is too big a brand to want to taint its image by state cap­ture al­le­ga­tions. It is pos­si­ble that the firm might be con­sid­er­ing ditch­ing its South African op­er­a­tions to save face,” Ayo said.

On Mon­day, SA Rev­enue Ser­vice (Sars) com­mis­sioner Tom Moy­ane said he had rec­om­mended that the gov­ern­ment black­list the firm as the fall­out over Sars “rogue unit” re­port con­tin­ued.

Moy­ane said the rev­enue ser­vice would in­sti­tute le­gal pro­ceed­ings against KPMG for rep­u­ta­tional dam­age, in­clud­ing but not lim­ited to a civil claim, and would re­port KPMG to the rel­e­vant statu­tory audit bod­ies, both lo­cally and in­ter- na­tion­ally.

Busi­ness Lead­er­ship SA (BLSA) chief ex­ec­u­tive Bo­nang Mo­hale said on Fri­day that KPMG would do so­ci­ety a con­sid­er­able ser­vice if it as­sisted through full par­tic­i­pa­tion in an in­de­pen­dent in­quiry.

“We are deeply con­cerned by the un­eth­i­cal and un­pro­fes­sional con­duct that KPMG en­gaged in South Africa.

“The firm be­came a party to the pro­ject of ‘state cap­ture’, which has harmed our coun­try, vic­timised cer­tain in­di­vid­u­als and has dam­aged the rep­u­ta­tion of the busi­ness,” Mo­hale said.

He was com­ment­ing af­ter the BLSA de­cided to sus­pend the mem­ber­ship of KPMG pend­ing the out­come of an in­de­pen­dent in­ves­ti­ga­tion into the the firm’s in­volve­ment in con­duct re­lated to state cap­ture in South Africa.

BLSA’s sus­pen­sion came as an­other blow for the em­bat­tled au­dit­ing firm af­ter Hulisani and Sas­fin this week cut ties as clients be­cause of rep­u­ta­tional risks, and sev­eral other clients an­nounced that they would be re­view­ing their re­la­tion­ships with the firm.

The firm’s in­creas­ing iso­la­tion trig­gered its ad­mis­sion last week that it had fallen short of stan­dards when it au­dited the books of Gup­taowned com­pa­nies and part of the Sars re­port on the al­leged “rogue unit”, which refers to con­clu­sions, rec­om­men­da­tions and le­gal opin­ions.

KPMG is the sec­ond multi­na­tional firm to face in­tense scru­tiny for work done for the con­tro­ver­sial Gupta fam­ily.

Ear­lier this month, em­bat­tled Bri­tish pub­lic re­la­tions firm Bell Pot­tinger had its mem­ber­ship of the Pub­lic Re­la­tions and Com­mu­ni­ca­tions As­so­ci­a­tion (PRCA) ter­mi­nated.

The UK-based PRCA said that Bell Pot­tinger would not be el­i­gi­ble to reap­ply for cor­po­rate mem­ber­ship of the as­so­ci­a­tion for a min­i­mum pe­riod of five years.

Min­is­ter of Fi­nance Malusi Gi­gaba on Fri­day weighed in on the woes fac­ing the au­dit­ing firm.

He said that the re­cent de­vel­op­ments in­volv­ing KPMG fur­ther high­lighted the risks posed by mar­ket dom­i­nance and con­cen­tra­tion of a few firms in key in­dus­tries and of­fered yet an­other op­por­tu­nity for in­tro­spec­tion and re­forms.

“It is, there­fore, war­ranted and critical that the rel­e­vant law en­force­ment and bod­ies such as the In­de­pen­dent Reg­u­la­tory Board for Au­di­tors (IRBA) look into this mat­ter to iden­tify and sanc­tion those re­spon­si­ble for any wrong­do­ing,” Gi­gaba said.

The IRBA is al­ready in­ves­ti­gat­ing KPMG over al­le­ga­tions that it turned a blind eye to al­leged money-laun­der­ing ac­tiv­i­ties by Gupta-owned com­pa­nies which it had au­dited for the past 15 years.

Today is Na­tional Her­itage Day, when South Africans seem un­per­turbed by the high meat in­fla­tion as they unite around a tasty braai. Ka­los Mh­langa, Al­bazino Ngonyama and Sfiso Nh­lapho braai at Tinty’s south of Jo­han­nes­burg. Ka­belo Khu­malo

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