Two more firms fire KPMG as corporate South Africa weighs links with auditor
09:38 pm
Gold prices inch up amid international economic, political worriesA South African broker and an energy investment firm fired KPMG on Tuesday, two of a number of local firms weighing whether to ditch the auditor to distance themselves from a scandal involving business friends of President Jacob Zuma.
Sasfin and Hulisani, both relatively small financial companies based in Johannesburg, announced they would drop KPMG due to reputational risk.
KPMG, one of the biggest and most influential names in accounting, cleared out its South African leadership on Friday after it found that work done for firms owned by the Gupta family "fell considerably short" of its standards. It found no evidence of crimes or corruption, however.
"In view of the well-publicised concerns recently raised with regard to KPMG as well as Sasfin`s commitment to good governance in respect of auditor independence and auditor tenure, Sasfin has decided to put its audit out to tender," the company said in a statement.
Hulisani said it would ask shareholders to approve its decision to replace KPMG with PwC at a meeting next month. Fund manger Sygnia fired KPMG a month ago.
Several South African companies approached by Reuters over the last week, including blue chips Barclays Africa and Old Mutual, said they were considering cutting ties with KPMG.
"They`ve placed their clients in a difficult position. If their audits were not up to standards on the Gupta account, why should I believe they were up to standard on my account?," Sygnia chief executive Magda Wierzycka told Reuters on Monday.
"What happens to KPMG from this point onwards really depends on what corporate South Africa does."
Barclays Africa, South Africa`s third largest lender by market value and one of KPMG`s biggest clients, has met the firm to request more information on its internal investigation before making a call on whether to sever ties.
"After carefully considering the further information requested and the findings, (Barclays Africa) will be in a position to make a decision as to whether to continue to engage KPMG as its external auditors," the bank said.
KPMG is the third global firm to face questions about its work for the Indian-born Gupta brothers, who have been accused by an anti-graft watchdog of unduly influencing the awarding of government contracts.
Consulting giant McKinsey is being investigated by South Africa`s parliamentary committee on public enterprises, and the British business of public relations agency Bell Pottinger collapsed last week following a scandal over a racially-charged political campaign it ran for the Guptas in South Africa.
The Guptas and Zuma deny wrongdoing and say they are victims of a politically motivated witch-hunt. The Guptas and their companies have not been charged with any crime.BOARD MEETINGS CALLED
Anglo-South African investment bank and asset manager Investec`s audit committee was due to meet later in the week to make a recommendation to the board on whether to keep KPMG.
Mining company Sibanye Stillwater, whose chief executive Neal Froneman has called for Zuma to step down, and Africa`s biggest properly group Growthpoint will also hold board meetings to decide on whether to keep the firm. They declined to give exact dates for the meetings.
"The report came out on Friday so it would be premature to say we will fire them. The board will meet in due course to make a decision," spokesman James Wellsted told Reuters.
Other companies considering whether to drop KPMG include Anglo-South African insurer Old Mutual and its banking unit Nedbank.
"Old Mutual is committed to doing business ethically and maintaining the highest standards of governance," spokesperson Ursula Westhuizen said. "We understand that the conclusions of KPMG`s review will be available at the end of this month and we look forward to its publication."
South Africa`s Institute of Directors, which represents all company directors in South Africa, earlier this month suspended ties with KPMG and, among other things, declined to sponsor a golf day set for October.
Save South Africa, a civil society group, has called on local companies to fire KPMG.
Iraj Abedian resigned as a director of Germany`s Munich Re`s African unit because the unit would not fire the accounting firm.DAUNTING TASK
KPMG`s South African unit traces its roots to Johannesburg`s gold rush days in the late 19th century, when Scottish-born Alexander Aiken established a practice as a public accountant and auditor. KPMG acquired the firm in the 1980s.
New chief executive Nhlamu Dlomu, who replaced Trevor Hoole on Friday, faces a daunting task retaining both government and private sector clients and convincing them that it can still carry on auditing large corporations despite the Friday purge.
KPMG Global Chairman John Veihmeyer apologised for the firm`s failings in South Africa and said further action would be taken if new information came to light.
"This is not who we are," he said in a statement on Tuesday.
The spokesman for KPMG`s local unit Nqubeko Sibiya said Dlomu would not be available for interviews as she has just started her new role.
"On the one hand you could say they`ve cleaned up shop, but on the other hand, they`ve dismissed the entire executive team. Who is there to serve the existing clients and take on those leadership roles?" said Sygnia`s Wierzycka.
Andrew Cranston, former KPMG Russia head, has been brought over to replace chief operating officer Steven Louw.
In addition to Hoole, Louw, chairman Ahmed Jaffer and five senior partners who all resigned on Friday, the accounting firm also plans to dismiss Jacques Wessels, the lead partner on audits of Gupta-linked firms.
The South African tax collection agency, SARS, said on Monday it would cut all ties with KPMG, accusing it of "unethical" and unlawful" behaviour.
KPMG acknowledged "flaws" in a report that it compiled for SARS which implied that former finance minister Pravin Gordhan had helped set up a "rogue spy unit" when he was head of the service.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
