The heartbreaking collapse of a pioneering black audit firm

Nkonki stood for black excellence, and the spirit of the founders has energised generations

There’s a lot that the Gupta family lieutenant Salim Essa has to answer for — but the most heartbreaking must be the collapse of auditing firm Nkonki this week. On Sunday Nkonki Inc announced it was going into voluntary liquidation after auditorgeneral Kimi Makwetu said last week that it and KPMG would no longer work for his office. Essa’s involvement is a convoluted story: in a nutshell, he connived with an Nkonki partner to position Nkonki as an accomplice to the Gupta empire by giving its various shady deals the stamp of auditor approval. The investigative hub ama Bhungane has revealed the anatomy of this audit capture and Makwetu came down heavily on the company.

Most of Nkonki’s work is in the public sector, so it cannot survive. Although the impact on offices affiliated to Nkonki Inc is unclear at this stage. About 180 staff will be without work as the firm winds up operations, but what is truly devastating is that Nkonki always had meaning beyond an auditing and advisory firm. It stood for black excellence, and the can-do spirit of the founding partners has energised generations. Started in 1992, what was then the Filtane Nkonki Accounting Consultancy got going with a R5-million contract from the then Bisho government. Later, brother and sister Mzi Nkonki and Sindi Zilwa formed Nkonki & Nkonki. It became Nkonki Sizwe Ntsaluba, a black behemoth in a still lily-white profession. Zilwa, the youngest Businesswoman of the Year, was an inspiration for women who want to be accountants and start their own businesses.

As Business Day’s former financial editor Phakamisa Ndzamela has written, Nkonki was a business legend from Mthatha. So the firm’s demise under the weight of state capture and at the hand of the state can’t be allowed to become a footnote of our corporate history.

It’s big. And sad. Yes, the Guptas and specifically Essa are the villains of the piece here. Everything they touched turned to dust.

This week I went to McKinsey for a meeting in the grand building owned by the multinational law firm Hogan Lovells. It should be an example of South Africa being a node of the global economy, but the building now stands for something else. Both McKinsey and Hogan Lovells got caught in the spokes of the state capture wheel and I couldn’t help but wonder whether my misspent tax money was paying for all this Sandton glitz.

McKinsey signed up to a dodgy R1-billion contract with Essa at

Eskom and in the ensuing investigation its systems were found to have failed. Many consultants have quit in light of this and a head honcho in the South Africa office, Vikas Sagar, left the firm.

Hogan Lovells is facing an investigation by the Solicitors

Regulation Authority in the UK for its role in helping an alleged money-launderer at SARS get his job back after allegedly soft-soaping the investigation into his actions. Global PR company Bell Pottinger has folded after exposure of its disinformation work for the Guptas went viral.

The lessons of all these lapses in corporate governance are still being tallied, but the meaning of Nkonki is more layered than the other examples. Nkonki has battled for all its history to get work from the private sector and so it became, in the main, a public-sector auditor. This made it beholden to work from the state and, arguably, blunted its auditing pen. Nkonki sponsored awards for integrated reporting in state-owned companies and crafted its corner in the public sector.

This was because the private sector is a closed shop to firms outside the Big Four auditor and advisory firms. Mitesh Patel, the partner who sold Nkonki down the river, noted last year that of the 353 audit partners who sign off on the financial statements of all listed companies, only nine were black Africans. This should not excuse Patel’s actions in aiding audit capture, but it does suggest that in a closed industry the requirements of audit vigilance can give way to turf war.

The Independent Regulatory Board for Auditors’ efforts to institutionalise mandatory audit firm rotation have met a wall of opposition in big business. Nkonki has been through many iterations and I hope big hearts and deep pockets in black business will ensure its name and legacy survive.