Sunday Times

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

- By RAY NDLOVU ndlovur@sun­day­ Business · South Africa News · KPMG Corporate Finance · Gupta family · Bloemfontein · Bloemfontein Celtic F.C. · London · East London · Deloitte · PricewaterhouseCoopers

● 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

Khaya Sit­hole

Char­tered ac­coun­tant

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 ?? Pic­ture: Esa Alexan­der ?? Out­go­ing CEO Nh­la­mulo Dlomu will be re­placed by some­one from out­side the au­dit­ing firm, KPMG said this week.
Pic­ture: Esa Alexan­der Out­go­ing CEO Nh­la­mulo Dlomu will be re­placed by some­one from out­side the au­dit­ing firm, KPMG said this week.

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