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Another firm dumps KPMG as Gupta fallout widens

Sep 19 2017 21:11
Renee Bonorchis and Sam Mkokeli, Bloomberg News

Johannesburg - Hulisani Ltd, which invests in energy projects, became the third corporate to replace KPMG, as more businesses announced they were dumping the firm because of work it did for the politically connected Gupta family.

Hulisani said on Tuesday it wanted shareholders to vote to appoint PricewaterhouseCoopers as its auditors. KPMG audited Hulisani’s full year results, which were published in May.

Hulisani joined financial services firm Sasfin who on Tuesday dropped KPMG as its independent sponsor and said it was searching for a new auditor, while fintech firm Sygnia terminated KPMG's services in July.

Sasfin said an an emailed statement its decisions were based on “the well-publicised concerns recently raised with regard to KPMG”. Deloitte & Touche has been chosen as a sponsor, which provides advice and services related to a company’s listing on the Johannesburg Stock Exchange. The role as Sasfin’s auditor, which KPMG held for the past 18 years, has also been put out to tender, it said.

Eight top executives at KPMG’s South African office quit on Friday after it was implicated in an accounting scandal linked to the wealthy Gupta family, who are friends of President Jacob Zuma and stand accused of looting billions of rand while exerting undue influence over the state.

The country’s biggest banks including Barclays Africa Group, Standard Bank Group, Nedbank Group and Investec have said they’re scrutinising their relationships with KPMG. On Tuesday evening KPMG International's chair John Veihmeyer "sincerely apologised" for what went wrong with KPMG South Africa, saying "this is not who we are”.

More terminations

Sygnia CEO Magda Wierzycka said last Thursday other corporates may follow suit after the fintech firm cut ties with KPMG in July, but cautioned that getting rid of an auditor and finding a new one wasn’t an easy process.

The Institute of Directors in Southern Africa has suspended co-branding activities with KPMG, including sponsorship of its golf day.

Africa’s biggest insurer Old Mutual was talking with KPMG “at the highest level”, the London-based company said on Tuesday.

“We note KPMG’s announcement and will continue to engage with them on this matter.”

Hulisani met KPMG to find out what was happening before deciding that they will recommend to investors that the firm be asked to resign as its auditor, Chief Executive Officer Marubini Raphulu said by phone. The company was concerned about the reputational risk of being associated with the Guptas even though KPMG couldn’t be faulted for its audits, he said.

“We like to do business in an ethical way,” Raphulu said.

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