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Hulisani drops KPMG due to reputational risk

Barclays Africa, Investec, and Old Mutual still considering relationship with auditor.

A South African broker and an energy investment firm fired KPMG on Tuesday, two of a host of local firms weighing whether to ditch the auditor to distance themselves from a scandal involving business friends of President Jacob Zuma.

Sasfin and Hulisani, both relatively small financial companies based in Johannesburg, announced they would drop KPMG due to reputational risk.

KPMG, one of the biggest and most influential names in accounting, cleared out its South African leadership on Friday after it found that work done for firms owned by the Gupta family “fell considerably short” of its standards. It found no evidence of crimes or corruption, however.

“In view of the well-publicised concerns recently raised with regard to KPMG as well as Sasfin’s commitment to good governance in respect of auditor independence and auditor tenure, Sasfin has decided to put its audit out to tender,” the company said in a statement.

Read: Sasfin fires KPMG in wake of Gupta scandal

Hulisani said it would ask shareholders to approve its decision to replace KPMG with PwC at a meeting next month. Fund manger Sygnia fired KPMG a month ago.

Several South African companies approached by Reuters over the last week, including blue chips Barclays Africa and Old Mutual, said they were considering cutting ties with KPMG.

“They’ve placed their clients in a difficult position. If their audits were not up to standards on the Gupta account, why should I believe they were up to standard on my account?,” Sygnia chief executive Magda Wierzycka told Reuters on Monday.

Read: Sygnia fires KPMG

“What happens to KPMG from this point onwards really depends on what corporate South Africa does.”

Barclays Africa, South Africa’s third largest lender by market value and one of KPMG’s biggest clients, has met the firm to request more information on its internal investigation before making a call on whether to sever ties.

“After carefully considering the further information requested and the findings, (Barclays Africa) will be in a position to make a decision as to whether to continue to engage KPMG as its external auditors,” the bank said.

KPMG is the third global firm to face questions about its work for the Indian-born Gupta brothers, who have been accused by an anti-graft watchdog of unduly influencing the awarding of government contracts.

Consulting giant McKinsey is being investigated by South Africa’s parliamentary committee on public enterprises, and the British business of public relations agency Bell Pottinger collapsed last week following a scandal over a racially-charged political campaign it ran for the Guptas in South Africa.

The Guptas and Zuma 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.

Board meetings called

Anglo-South African investment bank and asset manager Investec’s audit committee was due to meet later in the week to make a recommendation to the board on whether to keep KPMG.

Mining company Sibanye Stillwater, whose chief executive Neal Froneman has called for Zuma to step down, and Africa’s biggest properly group Growthpoint will also hold board meetings to decide on whether to keep the firm. They declined to give exact dates for the meetings.

“The report came out of Friday so it would be premature to say we will fire them. The board will meet in due course to make a decision,” spokesman James Wellsted told Reuters.

Other companies considering whether to drop KPMG include Anglo-South African insurer Old Mutual and its banking unit Nedbank.

“Old Mutual is committed to doing business ethically and maintaining the highest standards of governance,” spokesperson Ursula Westhuizen said. “We understand that the conclusions of KPMG’s review will be available at the end of this month and we look forward to its publication.”

South Africa’s Institute of Directors, which represents all company directors in South Africa, earlier this month suspended ties with KPMG and, among other things, declined to sponsor a golf day set for October.

Read: Institute of Directors cuts ties with KPMG

Save South Africa, a civil society group, has called on local companies to fire KPMG.

Iraj Abedian resigned as a director of Germany’s Munich Re’s African unit because the unit would not fire the accounting firm.

Daunting task

KPMG’s South African unit traces its roots to Johannesburg’s gold rush days in the late 19th century, when Scottish-born Alexander Aiken established a practice as a public accountant and auditor. KPMG acquired the firm in the 1980s.

New chief executive Nhlamu Dlomu, who replaced Trevor Hoole on Friday, faces a daunting task retaining both government and private sector clients and convincing them that it can still carry on auditing large corporations despite the Friday purge.

Read: KPMG clears out top leadership over Gupta scandal

KPMG did not respond to email requests for comment and spokesman Nqubeko Sibiya said Dlomu would not be available for interviews as she has just started her new role.

“On the one hand you could say they’ve cleaned up shop, but on the other hand, they’ve dismissed the entire executive team. Who is there to serve the existing clients and take on those leadership roles?” said Sygnia’s Wierzycka.

Andrew Cranston, former KPMG Russia head, has been brought over to replace chief operating officer Steven Louw.

In addition to Hoole, Louw, chairman Ahmed Jaffer and five senior partners who all resigned on Friday, the accounting firm also plans to dismiss Jacques Wessels, the lead partner on audits of Gupta-linked firms.

The South African tax collection agency, Sars, said on Monday it would cut all ties with KPMG, accusing it of “unethical” and unlawful” behaviour.

Read: Sars plans legal action against KPMG for reputational damage

KPMG acknowledged “flaws” in a report that it compiled for SARS which implied that former finance minister Pravin Gordhan had helped set up a “rogue spy unit” when he was head of the service. 

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Hulisani- I have never heard of them. Are they that new crowd from Koffiefontein, close to Jacobsdal?

INFORMATION

Nature of business
Hulisani Ltd. was incorporated on 13 October 2015 as an investment holding company focused on energy projects ranging from Coal and Gas to Solar PV, Concentrated Solar, Wind and Hydro. Hulisani’s investment strategy is to pursue the acquisition of, or investments in, direct or indirect minority stakes in companies operating in the energy sector. Hulisani will invest in opportunities that meet Hulisani’s investment criteria of (amongst others)– expected returns; counterparty risk; inflation beating ability of cash flows; quality and experience of management; environmental considerations and geographical location primarily in Sub-Saharan Africa

Company email
info@hulisani.co.za

Company website
https://www.hulisani.co.za

Transfer secretary
Computershare Investor Services

Company secretary
ER Goodman Secretarial Services CC

Postal address
PO Box 784583, Sandton, 2146

Registered address
4th Floor, North Tower, 90 Rivonia Road, Sandton, 2196

Company tel
087 806-2425

Company fax
010 001-8300

Major shareholders
Government Employees Pension Fund, Eskom Pension and Provident Fund, SAMWU National Provident Fund, 27Four Investment Managers

Companies are doing; what parliament could not ( via the secret vote of no confidence).

Actually not. They are attacking KPMGs new management who are essentially defenseless. They do not attack the gang in Saxonwold or the chief thug in the Union Buildings as this unsavory pairing know how to fight and win! All the noise yet the ANC strongly supports the oily number 1 and his de facto en commandite partners in Saxonwold.

KPMG is a soft target and corporates can now act so concerned and shocked etc. etc. The substance of the thievery and dishonesty is not some look the other way auditor-it is the real criminals who destroyed Bell Pottinger, KPMG etc. while the billions are banked in Dubai with the de facto consent of the majority of South Africans

“They are attacking KPMGs new management who are essentially defenseless”

Very good comment.

It is ONLY Sygnia that can be said to have a degree of guts in this sorry saga.

The rest are just gutless holier-than-thou cows.

That Iranian economist Aber-whatever is particularly poor wanting boycotts to destroy destroy destroy. Somehow one is not surprised at his comment and from whence it comes.

Far more than the usual suspects are being tainted by this sorry tale of corruption. Methinks that many should just plain shut-up lest they be hoisted by their own petard.

are they also going to hop to another corrupt audit shop?

Yarwell no fine – My views:
I think Investec is now caught between a rock and a hard place as they understand KPMG was the auditor for the thief (JCI) and the victim (Randgold) – and – KPMG was appointed as accountant and forensic auditor for both!
Investec’s loan shenanigans pertaining to the 5.46 million Randgold Resources shares (stolen by JCI from Randgold) where they used a fictitious ‘’script lending’’ agreement to lend R 2702 million to the thief JCI (IBUK).
It soon became clear that the loan had been a massive ‘’money laundering’’ scheme, yet KPMG somehow failed to ‘’pick this up’’ despite the materiality of the transaction.
Noseweek (215) I think rightly asked 12 questions in this publication that arose during the KPMG’s involvement, that they need to answer.
My view is also whether that greed for fees at the cost of a defenceless and emasculated audit client, Randgold? – or is the reason far more sinister?
I don’t believe that Investec will drop KPMG as accountant and auditor as the minority Randgold shareholders methinks can’t wait for this to happen. The new auditor will have a field day in ‘’opening’’ this can of worms!

‘’Bloom, do me a favour. Move a few decimal points around. You can do it. You’re an accountant. You are in a noble profession. The word count is part of your title’’

Line from ‘’The Producers’’ (US 1967)

….should read R 270 million and not R 2,702 MILLION…

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