The appointment of a new board of directors at the Independent Regulatory Board for Auditors (Irba) is expected to be completed this week, as Finance Minister Tito Mboweni moves to interrogate the circumstances around the appointment of Jenitha John as Irba CEO.
The outgoing board, whose term came to an end in early May, oversaw the recruitment and selection process for the new CEO.
In April, just days before the entire board stood down, it announced that John, who had been chair of the Tongaat audit committee and a director of the besieged sugar company for nine years to March 2019, would take over from outgoing CEO Bernard Agulhas with effect from end-May. The Tongaat share price collapsed at the end of 2018 in the midst of allegations of accounting irregularities dating back years that resulted in overstated revenue figures as well as exaggerated cane and plant valuations.
John’s appointment sparked widespread criticism and led to lobby group the Organisation Undoing Tax and Abuse (Outa) and the DA calling for an inquiry into the appointment process.
In a press statement issued last Friday, National Treasury said the minister has noted the concerns raised by various organisations.
“It should be noted that the power to appoint the CEO in this instance resides solely with the Board of Directors [BoD] of Irba, in terms of Section 9 of the Auditing Profession Act of 2005. The outgoing board oversaw the entire process and notified the minister of finance after making the appointment, as the minister has no statutory role in the employment of Irba’s CEO.”
However National Treasury added that to ensure the integrity of Irba, which, it said, is a critical regulatory agency for the audit profession, the minister will hold discussions with the BoD to consider the concerns raised.
“If any impropriety is found, the minister will require the BoD to review the appointment of Ms Jenitha John subject to the required due processes.”
John, whose full-time job was as chief audit executive at FirstRand, was also a non-executive director at Nampak and Adcock Ingram as well as senior vice-chair of the US-based Institute of Internal Auditors (IIA). She resigned from FirstRand, Tongaat, Nampak and Adcock Ingram in mid-2019.
Last week IIA CEO Richard Chambers congratulated South Africa on appointing John describing her as a “great choice” for Irba CEO. In a glowing statement carried on the IIA website Chambers said: “I was truly delighted when Irba’s board of directors recently named Jenitha John as the regulator’s next CEO.
“It seemed only natural that Jenitha, one of the most widely known and respected auditors in the world, would be selected for this important role.”
Revealing a crucial development that was previously unknown to the South African investment community, Chambers said that far from being culpable in the Tongaat accounting debacle: “As early as 2018” she had been calling for an independent third-party review of Tongaat’s financial practices, “Much to the chagrin of some of the company’s senior executives at the time.”
The claim has prompted calls for the Tongaat board to reveal evidence of these calls.
But John’s 2018 action has also been dismissed as being too little, too late. “By 2018 most of the investment community knew there were serious problems at Tongaat; a number of analysts and shareholders had raised concerns much earlier,” said one bemused Tongaat shareholder.
The need to remove any concerns around John are particularly critical at this juncture given that the three biggest cases on Irba’s calendar currently are Tongaat, Steinhoff and African Bank.
Deloitte, with which John worked closely as chair of Tongaat’s remuneration committee, was the auditor in all three cases.