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Abu Dhabi, UAEFriday 22 June 2018

KPMG execs in South Africa leave over Gupta

Similar to the start of the PR agency Bell Pottinger demise, KPMG forces out South African bosses

KPMG is the latest company to be dragged into the Gupta scandal in South Africa. Sarah Dea / The National
KPMG is the latest company to be dragged into the Gupta scandal in South Africa. Sarah Dea / The National

Global auditor KPMG cleared out its South African leadership on Friday after damning findings from an internal investigation into work done for businessmen friends of President Jacob Zuma.

KPMG's investigation into its work for the Guptas, accused by a public watchdog of improperly influencing government contracts, did not identify any evidence of illegal behaviour or corruption. But it did find that work done for Gupta family firms "fell considerably short of KPMG's standards", the auditor said in a statement.

It became the third global firm to be damaged by work carried out for the Indian-born brothers, after public relations agency Bell Pottinger - whose British business collapsed this week - and consultancy McKinsey.

Both Mr Zuma and the Guptas 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, but the scandal is one of many that have dogged the Zuma presidency.

"This has been a painful period and the firm has fallen short of the standards we set for ourselves, and that the public rightly expects from us," KPMG's new South African chief executive Nhlamu Dlomu said.

"I want to apologise to the public, our people and clients for the failings that have been identified by the investigation."

KPMG said it would donate the 40 million rand (US$3m) it earned in fees from Gupta-controlled firms to charity and refund 23m rand it earned compiling a controversial report for the South African tax service.

South African chief executive Trevor Hoole, chairman Ahmed Jaffer, chief operating officer Steven Louw and five senior partners all resigned.

"I absolutely understand that ultimate responsibility lies with me," Mr Hoole said in a statement.

KPMG is also seeking to take disciplinary action to dismiss Jacques Wessels, the lead partner on audits of Gupta-linked firms, it said. Wessels did not answer a call to his mobile phone seeking comment.

Andrew Cranston, former chief executive of KPMG in Russia, has been appointed as interim chief operating officer.

Mmusi Maimane, the leader of the opposition Democratic Alliance, called for a criminal probe.

"While I welcome these resignations, anyone who is involved in state capture must be criminally prosecuted," said Mr Maimane, using a term denoting illicit outside influence on government decision-making.

"KPMG must be subject to a full investigation both locally and internationally," he told Reuters.

The audit firm is still under investigation by South Africa's IRBA, the auditors' regulatory body. Its lightest sanction is a caution or reprimand; the heaviest would be removal from the auditors' register, which would have a devastating impact on KPMG's African business.

The three Gupta brothers, Atul, Ajay and Rajesh, came to South Africa in the early 1990s and built a commercial empire stretching from computers to mining and media.

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Read more:

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The family has employed Zuma's son Duduzane as a director of one of its subsidiaries. The brothers have rejected the public watchdog's accusations of corruptly influencing Zuma.

The turmoil at KPMG follows the placing into administration of the British arm of Bell Pottinger on Tuesday, after clients deserted it because of a backlash over a racially charged political campaign it ran for the Guptas.

Global consultancy McKinsey is also being investigated by South Africa's parliament over whether it knowingly let funds from state power utility Eskom be diverted to a Gupta company as a way of securing a $78m contract to advise Eskom.

McKinsey is carrying out its own investigation, but has denied wrongdoing.

The Gupta scandals have piled pressure on Zuma and opened a deep divide in the ruling African National Congress, the party that has ruled since Nelson Mandela swept to power at the end of apartheid in 1994. It is due to elect a new party leader in December.

David Lewis, chief executive of Corruption Watch, an NGO that has been at the forefront of efforts to expose alleged wrongdoing by the Guptas and those around them, said he doubted that KPMG had really turned over a new leaf.

"Good riddance - it's great they've gone," he said. "But it's got to go to the culture of the firm, quite frankly. I doubt that people of that seniority were conducting themselves in a manner that doesn't reflect the culture of the firm."