Lessons from KPMG: Be on Guard, South Africans Are On Your Case!

Moses came down from the mount with tablets inscribed with 10 commandments. Most of us know (most of) them, and most of us fail to live by (most of) them. But if Moses had turned them over and looked in the fine print on the back, he’d have found the 11th Commandment:

Don’t get caught.

That in essence summarises the rise and fall of the South African arm of the international accounting firm KPMG which has been caught with its hands in the slush fund jar. It stands accused of taking money from companies owned by the politically connected Gupta family.

Even more damaging is the charge that it submitted formal reports “confirming” that a “rogue” unit was operating inside the South African Revenue Service (SARS) – accusations that were used as the smoking gun to remove ministers and senior public officials who were seeking to hold the line against state capture.

KPMG has miraculously grown a conscience. Suddenly – having broken the 11th commandment – it was reborn as a hand-wringing, apologetic company living up to high ethical standards. It was now willing to fire its CEO and some senior managers, to reject its own findings and to “donate” Gupta-company earnings to education and anti-corruption NGOs. The latter gesture was a revolting display of supine reprehensibility – we got caught in corrupt deals so we’ll hand the profits over to anti-corruption NGOs. Really? Go to jail would be a better outcome.

KPMG isn’t alone. Throughout South Africa’s history, and across the globe, the litany of private sector corruption is breathtaking.

Private sector corruption

South Africans can recall an unending litany of private sector corruption. In the recent past, there was the case of Tiger Brands making bread more expensive so the poor would pay more to eat. Tiger Brands paid a fine and carried on trading. And a clutch of major construction firms were found looting monies for the construction of stadiums for the 2010 Fifa World Cup in South Africa. They also paid fines and carried on building. The list continues.

The private sector, contrary to those who believe that ‘market forces’ will regulate the ethics of capital, is not taking a strong line against corruption. Those on the front line include, more recently, the portfolio committees in parliament, and previously, the Public Protector and a dwindling cluth of Ministers, MECs and the like.

NGOs such as Corruption Watch, the Socio-Economic Rights Institute of South Africa and the Council for the Advancement of the South African Constitution, have by a long distance, been the most vocal campaigners in the area, and academics have worked with them to uncover the scale and identify the perpetrators of corruption. The media has also played a massive part in exposing corruption.

So let’s not fool ourselves that the private sector has set a benchmark for anything more than export-class venality.

South Africa’s state is corrupt – “captured” makes it sound as if this occurred against its will. But – it has found a multitude of willing partners in the private sector. The match between corrupt state and corrupt private sector is perhaps South Africa’s most functional display of “willing buyer, willing seller”.

KPMG executives have not set any benchmark for probity, as claimed by some – they simply acted when they got caught. Their focus was on maximising profits, even if it meant signing off on the use of public funds for a private Gupta wedding (among other sins of commission), and now buying their way out of the mess with a few heads rolling and dirty money being donated to NGOs. If this is the standard for the private sector, South Africans are in more serious trouble than initially thought.

The KPMG “apology” can’t come close to compensating for the damage done. Its report “confirming” that a rogue unit had operated in the South African Revenue Services fuelled developments towards state capture and triggered events that have had a disastrous impact on the country. These included the axing of ministers, deputy Ministers, and the subsequent haemorrhage of senior public servants from the state.

Everyone in South Africa is paying for the sins of KPMG.

Holding power to account

Governance is about the distribution of power in society, and the ability of citizens to hold power to account. This requires an engaged citizenry – whether in NGOs, ratepayer associations, street or block committees or faith-based organisations – who are sufficiently organised to call officials to account.

What is fascinating about South Africa is how engaged its citizen are. They kicked out the ruling party from running cities after just two decades of democracy and they’ve given the middle finger to e-tolls. They don’t behave the way they are told to. And they’ve reached a tipping point. When South Africans of all shapes, colours, sizes, creeds share simply being gatvol (fed-up), there’s trouble.

Ask the British public relations firm Bell Pottinger what it feels like. The company faces foreclosure following a concerted campaign – domestically and abroad – to shame it for stirring racial hatred.

Ask the Guptas how it feels now that all of South Africa’s banks have said they aren’t willing to touch their money.

South African residents and citizens have become acutely aware that they’ve been screwed. By many in the state, to be sure. But by as many or more in the private sector, for decades. And they’re sick of it.

The world is watching – South Africans brought down Bell Pottinger. They’re now going after the likes of McKinsey, KPMG and SAP, all of these companies tangled up by allegations of corruption.

The only way South Africans will ever get governance and accountability is by being organised, vocal, obstreperous, and demanding. So keep it this way – private and public sector are both on terms. And South Africans will hold them accountable, or if necessary, break them.

David Everatt, Head of Wits School of Governance, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.

Watch Carte Blanche’s investigation into what the KPMG saga means for the country and whether the auditing firm can survive the reputational damage. (Trailer below.) If you’re overseas, subscribe to Showmax to watch Carte Blanche just two days after it airs in SA.

https://www.facebook.com/carteblanchetv/videos/1587767407932843/