KPMG: A reputation in need of repair
Nhlamu Dlomu, the new CEO of disgraced auditing firm KPMG SA, hopes to meet SA Revenue Service (Sars) commissioner Tom Moyane in an attempt to iron out their differences over the fallout from the Gupta state capture debacle.
This is one of many meetings Dlomu will have to have in an attempt to repair the firm’s battered image following its withdrawal of a report it compiled in 2015 on the tax authority’s alleged rogue unit.
That report, based on "an extensive document investigative review", resulted in the firm purportedly finding that former finance minister Pravin Gordhan knew, or ought to have known, of the establishment by Sars of an intelligence unit — in contravention of the rule of law — that was "rogue" in nature.
KPMG’s half-hearted attempt at an apology for its misdemeanours — and the resignation of its CEO and seven partners — are only the start of a long journey towards redemption. Investors and consumers of companies that it audits, including Investec, Standard Bank and Barclays Africa, are starting to ask questions about their association with KPMG. Sasfin this week dropped KPMG as its JSE sponsor and auditor after a relationship spanning 18 years. Hulisani followed suit a few hours later.
The evidence in the documentation provided to KPMG SA [by Sars] does not support the interpretation that Gordhan knew, or ought to have known, of the ‘rogue’ nature of this unitKPMG
Despite withdrawing its findings on the Sars rogue unit, KPMG is quick to absolve itself of any reputational and economic damage that its actions may have caused.
Questioned for this article, KPMG spokesman Nqubeko Sibiya declined to comment on whether the company accepts responsibility for the reputational damage to SA as an investment destination.
He would also not comment on any damage KPMG’s actions may have caused the people who were fired from their employment at Sars, nor on accepting responsibility for the credit downgrades SA suffered after Gordhan was hounded out of his job. "This was not the intended interpretation of the report," says KPMG.
The finding, together with other spurious allegations against Gordhan, were used by President Jacob Zuma to fire the finance minister in March. Soon thereafter, credit rating agencies cut the sovereign credit rating to junk status.
"To be clear, the evidence in the documentation provided to KPMG SA [by Sars] does not support the interpretation that Gordhan knew, or ought to have known, of the ‘rogue’ nature of this unit. We recognise and regret the impact this has had. KPMG SA had no political motivation or intent to mislead," it says.
While protesting its innocence, it is worth noting that KPMG not only lent the credibility of its brand to the allegations against Gordhan and the hounding of him, but that the firm has since January 2016 stood by its report to Sars. In all this time it must have realised that the report could have dire consequences for the country.
In the wake of the collapse of British public relations firm Bell Pottinger, which, alongside KPMG, worked for the Gupta family, the public as well as corporate SA want vengeance.
KPMG has audited Gupta companies since 2002 and, in the process, earned R40m, which it has said it will donate to anticorruption not-for-profit organisations.
However, after investigating itself, KPMG gave itself a clean bill of health. "The investigation concluded there was nothing to indicate that in the delivery of these tax services, KPMG SA, its partners or staff, were involved in any activities of the Gupta family involving potential money laundering, tax evasion, corruption or any other illegal activity," it said.
Gordhan himself is seeking legal advice to deal with what he calls a halfhearted apology. Sars, on the other hand, insists the report stands. It is also seeking legal advice for what it calls defamation by KPMG.
KPMG’s work also affected ordinary people, whose reputations have been severely damaged.
"KPMG, I have only one question. Where do I go to get my name back?" asks Yolisa Pikie, a former Sars employee hounded out for being part of the alleged rogue unit and for his alleged close proximity to Gordhan.