South African Banks Urge KPMG to Produce Results of Gupta Probe

Updated on
  • KPMG hasn’t done enough to restore reputation: Standard Bank
  • Firm has apologized for work that didn’t meet its standards

Nedbank Group Ltd. and Investec Plc are among South African lenders stepping up pressure on KPMG LLP to provide the results of an independent investigation into the work it did for the politically connected Gupta family.

Nedbank has “impressed on the new management the urgency with which this needs to be completed,” said Raisibe Morathi, chief financial officer at the Johannesburg-based lender. “Nedbank has a zero tolerance to corruption and we expect our service providers and clients to conduct themselves in an ethical manner.”

Losing an auditing role for one of the country’s biggest banks may have a knock-on effect among the other lenders. KPMG last month said an internal investigation found its work for companies associated with the Guptas fell short of its own standards. Munich Re of Africa, Sasfin Holdings Ltd., Sygnia Asset Management and Hulisani Ltd. are among companies that have stopped using the accountancy firm’s services. KPMG’s probe didn’t find evidence of illegal behavior or corruption.

KPMG’s South Africa Chief Executive Officer Nhlamu Dlomu said the terms of the independent inquiry would be announced on Oct. 12 and the eventual findings will be made public. The firm is seeking to “restore trust, rebuild confidence and ensure that KPMG SA can once again earn the respect and trust of South Africans,” she said Wednesday.

Apart from the independent investigation, the firm is being probed by the country’s regulatory body for auditors and the South African Institute of Chartered Accountants. KPMG’s internal report resulted in the withdrawal of the findings of its report on the country’s tax agency, while eight senior executives quit in the wake of its work for the Gupta family, who have been accused of wielding undue influence over state contracts and cabinet appointments. The Guptas have denied wrongdoing.

Reputational Harm

“We do not consider that KPMG has yet taken sufficient action to begin to restore its reputation,” Standard Bank Group Ltd., Africa’s biggest lender by assets, said in an emailed response to questions. “The conduct of some KPMG partners, and of the firm itself, has been incompatible with the Standard Bank Group’s values and ethics.”

The country’s central bank is waiting for the outcome of the independent investigations into KPMG’s conduct before making final decisions, while Barclays Africa Group Ltd. and Old Mutual Plc are also reconsidering their relationships with KPMG. The auditing regulator said on Tuesday KPMG hadn’t fully cooperated with its investigation.

“Old Mutual is deeply concerned about the conduct of some of KPMG partners and employees in South Africa,” Africa’s biggest insurer said on Wednesday. “While we acknowledge the actions already taken and the commitment by the new KPMG management team to reforming its South African business, we do not believe these steps are yet sufficient. We will keep our relationship with KPMG under careful review.”

Disapproving Clients

Standard Bank will also give KPMG the chance to complete the process of investigation and then evaluate “the extent to which KPMG’s remedial actions have restored their reputation and our trust in their ability” as auditors before making a final decision, the lender said.

“We disapprove of the events that have occurred at KPMG and believe that it has taken them too long to provide information and fully disclose matters of public concern,” said Ursula Nobrega, a spokeswoman for Investec. “The board urges KPMG to ensure that the investigation is independent and transparent, and that the findings are taken seriously and recommendations implemented speedily.”

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