Whither KPMG?

With Sygnia having fired the first salvo, the question of whether other clients will follow suit arises.

KPMG’s major local clients appeared to react with mixed feelings on Friday in the wake of the news that asset manager Sygnia has dumped the firm as its auditor.

Sygnia CEO Magda Wierzycka told City Press on Friday that while she had nothing against the KPMG team working on her company’s account, saying they had given “nothing less than excellence and dedication”, she believed that companies that showed complacency, which aids and abets corruption, should be made to pay.

“We do not think that there is anything that KPMG could do at this stage to change our mind,” she said.

“We made a recommendation to the board that it be replaced.”

She said South Africa was going through a difficult political period, requiring that business no longer sit on the fence.

She added that, in a few months’ time, the country’s future could take a turn for the worse – depending on what transpired at the ANC’s December elective conference – and business needed to face this reality and do its part in dealing with organisations which knowingly worked with people who were complicit in state capture, or were involved in other spheres of government to offer services that compromised their integrity.

Asked what would make Sygnia reconsider its position in the future, Wierzycka said it would depend on what KPMG did with the money paid for services rendered to Gupta-related businesses that it knew belonged to taxpayers.

“I would take every cent and donate it to civil society structures or charity,” she said.

“That would go a long way to fix their wrongs ... They know where the money they were paid with comes from.”

In April 2016, KPMG resigned as auditors and advisers to Gupta-owned Oakbay Group entities, saying its last sign-off as auditors was in respect of the February 2015 year-end.

Trevor Hoole, the CEO of KPMG in South Africa, said: “We are disappointed with the decision by Sygnia. During a meeting with Magda Wierzycka, I firmly reiterated our commitment to fully cooperating with the Independent Regulatory Board for Auditors (Irba), and to ensuring that the firm continues to uphold our values at all times. Given the ongoing Irba inquiry, there are limitations on what we can say publicly at this point.”

The Mail & Guardian newspaper reported that Sygnia fired KPMG over its alleged role in state capture as well as unhappiness about KPMG’s role in probing allegations of a “rogue unit” at the SA Revenue Service.

Vuyo Lee, the chief marketing officer at Old Mutual, said: “Old Mutual is committed to doing business ethically and we take allegations of financial irregularities and money laundering very seriously. For this reason, we are monitoring and engaging with KPMG and other service providers whose names have been implicated in the Gupta leaks.”

Lee added that Old Mutual would decide on an appropriate course of action once “we have assessed the outcome of the review by Irba”.

KPMG is also the auditor for Investec and Standard Bank. Both companies have stated that KPMG is still their auditor, while leaving the door open if future developments bring new information to light.

Leon Kok, the financial director of Redefine Properties, said: “We are aware of the allegations against KPMG. We expect our stakeholders to demonstrate an unyielding commitment to the highest ethical standards. We are monitoring the developments and will assess the situation once more information becomes available.”

Ursula Nobrega, a spokesperson for Investec, said: “We have engaged with KPMG on this matter [state capture and the Guptas] and note their statement issued in response to a number of questions in this regard. At this stage, we are comfortable with their response. We will, however, assess the outcome of the review by the Irba, and at the time decide if any particular action is warranted.”

Irba has been probing KPMG’s involvement in the Oakbay Group since June.

Standard Bank spokesperson Ross Linstrom said: “Standard Bank is committed to doing business ethically and in accordance with all applicable laws, and expects all of its counter parties to be similarly committed. We exit relationships where that commitment is lacking.

“Unless it is required by law, we do not comment on individual cases when this occurs.”

Gold Fields spokesperson Sven Lunsche said: “Our relationship with KPMG has been good and they have acted independently. The accusations against them have not impacted our relationship with them.”

Regarding the Gupta wedding, which took place in 2013, KPMG said that the attendance by some of KPMG’s partners was approved at that time by the company’s risk management team and executive committee.

“The accommodation and travel costs were borne by KPMG,” said Hoole.

“We are satisfied that our independence was not impaired at any stage. We will cooperate fully with Irba in their investigation and give a detailed account of our actions, which, we restate, were in accordance with professional and ethical standards. Consistent with our values, we have acted with integrity in our dealings with the Oakbay Group.”

Asked whether there was concern about KPMG’s reputation and whether the company was working on a strategy to assure its other clients that they should stay, KPMG responded by saying its lawyers were looking into the matter.

“We have also taken note of the pending investigation on the part of Irba into matters relating to KPMG and other issues relating to this matter,” it said.

“We will make an announcement when the findings of our lawyers have been completed.

“The ethics, governance and quality of the South African auditing firms have been globally respected for many years. It is extremely important that the behaviour and conduct of our auditing firms continues to justify the respect, trust and confidence that they have earned,” the company said.

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