KPMG SA: not many takers for ‘poisoned chalice’
‘People skills’ were not enough to keep first black female in hottest of KPMG’s hot seats
● Nhlamulo Dlomu’s appointment a year ago as chief executive of KPMG SA, the country’s third-largest accounting firm, was first met with scepticism. Her legacy, as she left the helm of the South African unit this week, will be one of a well-meaning executive unfortunately handed a poisoned chalice.
Dlomu, a black female executive with “people skills” and head of human resources at the South African branch, had no accounting qualifications. This was used by critics against her from her first day in office to question her ability to steer the embattled firm.
At the time of Dlomu assuming the hot seat, nine senior executives at KPMG SA had been fired, amid a fallout over work done for the controversial Gupta family by the accounting firm for 14 years, between 2002 and 2016.
The parent company, KPMG International, then moved quickly to remove the “black sheep”, the former chief executive Trevor Hoole. Dlomu had ahead of her the unenviable triple task of winning back lost market confidence, averting a staff exodus and keeping the firm’s client base intact.
But just a year into the job, on Wednesday this week, KPMG International announced that Dlomu would no longer be the chief executive at its South African unit. She would instead be moved to assume a “global role”.
“Given the scale of the reputational challenges facing both KPMG and the industry, the board has decided that a new chief executive from outside the firm, with strong industry experience, will optimise prospects of rebuilding trust,” it said in a statement.
Dlomu described as “challenging” her stint at the helm of KPMG SA over the past year.
“Although it has been challenging, we have managed to stabilise the business. This would not have been achieved without the loyalty of our clients, the commitment of KPMG partners and staff, as well as the invaluable input of the business community, civil society and the larger South African public,” she said.
Khaya Sithole, a chartered accountant and industry commentator, said Dlomu’s elevation to the top job had mainly been to fill a leadership vacuum that had hit the accounting firm.
“When they put her in the role it was for balance and there was a vacuum in the leadership, so having a person not from the audit business meant she was also good for the optics. Her background was in human resources and in dealing with people, but her tenure faced problems — and the VBS scandal was the biggest. As she leaves, the question that must be asked is if there is an improved view of the firm,” Sithole said.
As far back as June, it was clear that Dlomu’s days were numbered, amid indications that there was no end to the bloodbath at the firm. KPMG International said that due to client losses at its South African unit it would restructure and retrench 400 employees. As a result, the head count in SA fell from 2,700 to 2,300 employees as at the end of July.
Regional offices in Mbombela, Bloemfontein, Polokwane and East London were closed. Though the regional offices were mainly involved in audit work, there were also job losses in the firm’s consulting and administration divisions.
Rival firms Deloitte and PwC are widely seen by industry observers to have been the “biggest beneficiaries” of KPMG SA’s troubles.
“There haven’t been many disclosures of the actual numbers, but obviously being the biggest in the industry, Deloitte and PwC have benefited the most and also attracted KPMG clients,” an industry expert said.
The trust deficit will continue to plague the firm. Aware of this, KPMG International said there would be no rush to appoint a new chief executive.
Though KPMG International said it would look for someone from outside, Sithole said it would be a “recipe for disaster” to appoint a person with no understanding of the challenges faced by the local industry.
“They will most likely have to try to find an indigenous person, that is a South African, a local who has been part of the industry at an international scale, to take over. But the pool of potential candidates is limited … and at the moment, there is nothing attractive in the job,” said Sithole.
In the interim, Wiseman Nkuhlu will be KPMG SA’s executive chair.
Dlomu’s background is human resources. The question that must be asked is if there is an improved view of the firm