Barclays Africa, one of the continent’s largest banks, has fired KPMG as its auditor over the firm’s work linked to the Gupta business family and a high-profile bank failure.
South Africa’s second-largest lender by market capitalisation, which is rebranding after separating from the UK’s Barclays, on Thursday, dropped a recommendation to reappoint KPMG at its annual meeting on May 15.
In a statement, the bank said that “ongoing and more recent developments were evaluated by the board, which decided that it is no longer able to support the reappointment of KPMG”. KPMG has lost a number of big corporate clients in South Africa since last year over its work linked to the Guptas.
The family is accused of using a friendship with Jacob Zuma, the former president, to advance their business interests by influencing his government’s decisions.
Both the Guptas and Mr Zuma have denied any wrongdoing. Several partners, including the chief executive, left KPMG South Africa over the Gupta scandal and the firm apologised for mistakes over its role. KPMG also carried out a dubious inquiry into alleged wrongdoing at the country’s revenue service that was used to tar Mr Zuma’s political opponents. KPMG was then ensnared in a scandal over its audit of Linkway, a company at the centre of claims that the Guptas used a state-funded dairy project in South Africa’s Free State province to launder money.
The Guptas left South Africa shortly before the ruling African National Congress forced Mr Zuma to resign in February under a cloud of corruption allegations. Mr Zuma was succeeded by Cyril Ramaphosa who has pledged to end endemic graft in government. D amage to KPMG’s reputation in South Africa has been compounded by the firm’s auditing work for VBS, a mutual lender that collapsed in March. Regulators revealed evidence of a hole in the bank’s deposits and irregular lending, despite KPMG giving VBS a clean audit.
In April, South Africa’s auditor-general barred KPMG from government work, citing “significant reputational risks” from being associated with the firm. “We are disappointed by, but fully accept, the decision” by Barclays Africa, a KPMG South Africa spokesperson said. “We have implemented far-reaching changes over the past seven months to all aspects of the firm including governance, quality and risk management.” Other South African companies have abandoned KPMG, including Sasfin, a broker, and African Rainbow Minerals, a miner.
But Nedbank, another of the country’s big four lenders, said it would be reappointing KPMG because it was required to have the same auditor as its corporate parent, Old Mutual. Under rules set by South Africa’s central bank, banks must retain two auditors although they are not required to draw them from the Big Four of KPMG, EY, Deloitte and PwC.
Standard Bank, the second-biggest bank by market value, has said it is monitoring its ties to KPMG. “We realise that to build a KPMG that we and South Africa can be proud of, one that has quality and integrity at its heart, we must be prepared to adopt and embrace significant change to our culture and partner conduct,” Nhlamu Dlomu, KPMG South Africa’s chief executive, said last month in light of the VBS scandal.