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South Africa: KPMG's South Africa bosses purged over Gupta scandal

2017/09/17

World auditor KPMG cleared out its South African leadership en masse on Friday next 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, identified no evidence of crimes or corruption, but found that work done for Gupta family firms "fell considerably short of KPMG's standards", the auditor said in a statement.

In particular, it acknowledged "flaws" in a statement that it compiled for South Africa's tax service, which implied that former finance minister Pravin Gordhan had helped set up a "rogue spy unit" at the same time as he was chief of the service.

Gordhan, subsequently sacked as finance minister by Zuma, said the statement had damaged South Africa's young democracy, and that he was considering legal steps.

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

Both 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 a lot of that have dogged the Zuma presidency.

"FAILINGS"
"I want to apologise to the public, our people and clients for the failings that have been identified by the investigation," said KPMG's new South African CEO, Nhlamu Dlomu.

KPMG said it would donate 40 million rand ($3 million) earned in fees from Gupta-controlled firms to education and anti-corruption groups, and refund 23 million rand it had received for the tax service statement.

The chief executive of KPMG South Africa, Trevor Hoole, its chairman, Ahmed Jaffer, chief operating officer Steven Louw and five senior partners all resigned.

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

KPMG as well plans 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 CEO of KPMG Russia, has been appointed as interim chief operating officer.

The announcement stunned hundreds of KPMG staff crammed into an auditorium in its Johannesburg chief offices and others listening in via video link from Cape Town and Pretoria.

"Everybody is just dumbfounded," said one employee, who asked not to be named. "They're obviously trying to show that responsibility stretches to the top. But right presently I don't think anybody knows what to think."

Gordhan, one of the Guptas' harshest critics, lamented the damage done to the credibility of the tax service, an institution that has been vital to South Africa's stability and economic increase in the two decades since apartheid.

"Whilst there have been personal consequences, the real issue that confronts us is the significant damage to our hard-won democracy, to our national institutions and from presently on to the South African people," he said in a statement.

CALL FOR INVESTIGATION
Mmusi Maimane, leader of the opposition Democratic Alliance, called for a criminal probe into "national capture", a term used to refer to the Guptas' alleged undue influence over government decision-making.

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

The firm is under investigation by the IRBA, a South African regulatory body, and could be removed from the auditors' register, an outcome that would have a devastating impact on its 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.

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.

On Tuesday, the British arm of Bell Pottinger folded next clients deserted it because of a backlash over a racially charged political campaign it had run for the Guptas.

McKinsey is as well being investigated by South Africa's parliament over whether it knowingly let funds from the national power utility Eskom be diverted to a Gupta company as a way of securing a $78 million arrangement to advise Eskom.

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

The Gupta scandals have piled pressure on Zuma and opened rifts in the African National Congress, the party that has ruled since the end of apartheid in 1994. It is due to elect a new party leader in December.

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