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Et tu, KPMG?

IN 2016, KPMG was praised for bravely walking away from auditing Gupta-linked businesses, following what was suspected at the time of being a potential reputational stink the auditing firm would have spotted in Gupta-owned Oakbay’s kitchen.

In explaining the company’s decision to its employees at the time, CEO Trevor Hoole told them in an internal memo that "recent media and political interest in the Gupta family, together with comments and questions from various stakeholders… have required us to evaluate the continued provision of our services to [the Gupta] group".

He went on: “... we have decided that we should terminate our relationship with the group immediately. I can assure you that this decision was not taken lightly but, in our view, the association risk is too great for us to continue. It is with heavy hearts that we have reached our conclusion. There will clearly be financial and, potentially, other consequences to this, but we view them as justifiable.”

While such steps and announcements would never be taken lightly by firms that would have been earning hundreds of millions of rands from lucrative auditing services, reputation sensitive and values-driven companies would see them as a necessary pill to protect the current and future value of brand.

I wrote at the time that auditing firms are like gynaecologists who see parts of their clients’ worlds that no one else has the privilege to see. Respecting KPMG’s action and understanding that there would be issues of client confidentiality we’d all have to allow space for, we agreed at the time to allow KPMG the benefit of the doubt and left the matter there.  

That doesn’t mean, of course, that we’d have refused to listen had they offered to relate the juicy bits and tell us about the exact nature of the beast they spotted in the Gupta kitchen.

I also stated at the time that it was safe to assume that whatever scared KPMG - and subsequently Nedbank [JSE:NED], FNB, Standard Bank [JSE:SBK] and Absa - would have been of massive proportions, and possibly with links leading to places where an average citizen’s eye must never wander. I should have added “or they would go blind”.

Dialysis machines connected to our public finances

As part of the ongoing process to “connect the dots”, we now know that Gupta businesses are not just corner shops - well, not in that sense of the word - trading in pocket change.

Indications are that they operate more like a large dialysis machine connected to South Africa’s public funds and, in more recent weeks, our National Treasury following the 2017 Cabinet reshuffle. We also know that this recent move involved names compiled and approved elsewhere than in the corridors of power we have become accustomed to. The ANC deputy president, secretary general and treasurer general said as much before they were whipped back into line.

Following the exit of KPMG and the four big banks from all association with Gupta businesses, another firm, SizweNtsalubaGobodo, chose to stage what American first respondents are famously known for, i.e. run in the direction of danger, in the opposite direction taken by everyone else fleeing from the said danger.

We still wait for SizweNtsalubaGobodo to tell us what attracted them into the stinking kitchen and what it is that has kept them in there for so long. The clock is ticking. Going by the avalanche of leaks pouring out from Gupta closets, it’s safe to assume that it’s just a matter of time.

Even the VBS, the bank that rushed forward to provide President Zuma with the R7m to “pay back the money”, could not continue pressing down on its nostrils forever. It has recently announced its own exit from the Gupta kitchens.

Please explain, KPMG

Now, KPMG has a lot of explaining to do. It must tell us – if SizweNtsalubaGobodo doesn’t beat it to it - what made it run so fast from the Gupta kitchen. It must tell us how long it took from the time it realised that the Gupta kitchen wasn’t the right place – reputationally speaking – to hang around in to the moment it decided to act on its fears or suspicions.

Also, how much dining and partying did it take part in and what kind of odour-killing solutions did it recommend to the Guptas, before accepting the reality that its client was never going to take its advice seriously?

Has KPMG facilitated, as some suspect, financial wrongdoing by the Guptas? What responsibility, if any, is this audit firm prepared to take?

KPMG brand reputation in the balance

KPMG must do this, that is come out clean, because it carries a hitherto unblemished corporate brand that has been respected the world over. The reputational ramifications of it refusing to come out clean are potentially massive.

It will lose some existing clients and lose out on the possibility of new ones signing up for it for as long as it allows the dark cloud to hover above it. It will also be forced into spending precious resources and energy on the back foot, explaining itself unnecessarily to others.

Auditing services must never ever be suspected of getting involved in dodgy businesses. It is simply not worth it. 

All of this also happens at a time in South Africa when levels of gatvolness vis-à-vis the so-called big white businesses are particularly elevated. Many commentators and political opportunists continue to make the point that while public sector corruption receives, deservedly, harsh scrutiny and criticism, corruption in big private firms is often cushioned in fancy words such as “collusion”, with the companies getting away with a little slap on the wrist.

The resignation of Moses Kgosana is therefore unlikely to satisfy those who are baying for serious corporate blood. To some of them, KPMG must serve as the sacrificial lamb to demonstrate that all are equal before the harsh scrutiny of the media, civil society, and the law.

So, which way will KPMG jump? Will it kill the stink while it is still fresh, or will it continue to plead complete innocence in a world tired of bad guys playing victims? The choices it will make stand to either strengthen or blemish its long-standing brand reputation for years to come. 

* Solly Moeng is brand reputation management adviser and CEO of strategic corporate communications consultancy DonValley. Views expressed are his own.


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