RYK VAN NIEKERK:  Business Leadership South Africa suspended auditing firm KPMG pending the outcome of an independent investigation into the firm’s alleged involvement in state capture.

On the line is BLSA’s CEO, Bonang Mohale. Bonang, welcome to the show. Why did you suspend KPMG’s membership?

BONANG MOHALE:  In the recently-launched contract we were clear about the six things that we want South Africans to hold us accountable to and to ensure that we deliver upon. The last one there says that we are going to combat and root out state capture. We then signed an anti-corruption oath, which says we are not going to do anything that is anti-competitive [e.g.] price fixing, market allocation, collusion… that we are going to comply with the law and that we are going to proactively cooperate with the authority to ensure that we have a new culture and new ethos of ethical and moral leadership. 

Based on that, and based on the process that we have followed, which involved extensive engagement with  KPMG, the board decided to suspend KPMG from the membership of Business Leadership South Africa. Its conduct was deemed to be inconsistent with the values of BLSA; the firm acted unprofessionally and immorally and, for that matter, was party [to] this project of state capture.

RYK VAN NIEKERK:  Bonang, KPMG International released a lengthy statement last week in which it said it did an investigation and found no criminal or even corrupt activities within the group. What you are saying is that you don’t believe that report.

BONANG MOHALE:  No, we believe it. And so does KPMG International because, based on that report, we feel they did absolutely the right thing by cleaning out the entire leadership of KPMG. Based on that report, they decided it would be better to return the R23 million that Sars had paid them for that report, which in their own minutes … sells short of their own standards. Based on that report we said, we impose a further penalty onto ourselves of R40 million that we then give to an NGO.

So even they themselves know that the law is not the only standard for leadership. African morality comes into it. KPMG has disappointed themselves, the entire country, profession and entire business community. So, having followed that process, we were quite comfortable [with the decision] at that point, pending the outcome of an independent commission, independent of KPMG, independent of the auditing profession. Perhaps when the facts change, we might change our mind. But where we are at the moment we accept the fact that there are 3 400-odd good men and women that work for KPMG who themselves have probably not acted in a manner that aids and abets state capture, that also KPMG itself as a company is an asset to the South African economy. So now they, by their actions, have chosen not to be members of BLSA.

RYK VAN NIEKERK:  But KPMG International didn’t find any wrongdoing with any of their employees. Why then, if you believe the report, suspend them if there was no wrongdoing?

BONANG MOHALE:  Why don’t you ask KPMG International why they fired the CEO and the CFO and certain others if they didn’t find any wrongdoing?

RYK VAN NIEKERK:  Well, that’s what the statement says.

BONANG MOHALE:  That’s the statement and we applaud [the fact] that they have taken action – and it’s three actions that are outlined based on that. In our consultation with KPMG we said that management 101 [requires] that you tell the truth, the whole truth, and you tell it quickly. Clean out the troubles of what you know has happened, come clean and treat South Africans with confidence and then we start a new style based on moral leadership.

RYK VAN NIEKERK:  Have you met Pravin Gordhan subsequent to the release of the KPMG International report?

BONANG MOHALE:  No, we haven’t.

RYK VAN NIEKERK:  I think the key of KPMG’s involvement in potential state capture was that report or the findings of that report that were retracted last week without any explanation whatsoever. Don’t you think there should more information put out in the public domain as to why KPMG actually pulled the recommendations of that report?

BONANG MOHALE: That’s exactly why the independent inquiry is necessary. So we are agreeing with you that we need to empty out the cupboard, because up until now we are not convinced about everything that transpired. Evidence that we go further and say where wrongdoing might have been committed by individuals, those people must face proper consequence management.

RYK VAN NIEKERK:  The suspension of KPMG sends a message that BLSA is not happy with their ethical conduct. What does that mean for the other members of the BLSA who use KPMG as auditors? Do you expect those companies to take similar steps?

BONANG MOHALE:  Our statement is actually quite explicit. We are saying we [will] leave it to our members as to how they are going to respond as individual companies, in their engagements and within their geographies.

RYK VAN NIEKERK:  Your engagement with KPMG – you said you had extensive interaction – over what period was this, and what was the tone of those meetings?

BONANG MOHALE: Very supportive, understanding, cordial. [We engaged on] what happened, why did it happen and what are we going to do to ensure that it never happens again.

RYK VAN NIEKERK:  Who will conduct the independent investigation?

BONANG MOHALE:  First of all, the auditing profession has its own regulators. KPMG themselves have also released a statement that they are going to have their own investigation. And second, they themselves have already given a statement that they are also going to ensure that this happens. So it’s up to KPMG and the regulator.

RYK VAN NIEKERK: If I understand you correctly, you are saying that KPMG has done the right thing, they fired their top management structure in South Africa, they’ve done an internal investigation which found no wrongdoing, but still you want them to come out and clean the cupboard? 

BONANG MOHALE:  No, that’s not what I said. What I said is that their actions in agreeing to be party to a project of state capture is unacceptable. We have said in the statement that we found their behaviour unethical and unprofessional. Their own report says, the report that we produced for Sars, through which we were paid a disproportion R27 million, is below our own standards. Putting all of this together, we then say that KPMG’s actions have demonstrated that they have totally not delivered of the new PSA.

RYK VAN NIEKERK:  Have you had interaction with representatives of SAP and McKinsey?

BONANG MOHALE:  Yes, we have.

RYK VAN NIEKERK:  And what were the outcomes of those interactions?

BONANG MOHALE:  Once you have sinister processes, we will announce the same way we have done today.

RYK VAN NIEKERK:  They are not members of the BLSA, are they?

BONANG MOHALE: SAP is our member, McKinsey is not but we have extensive engagement with McKinsey, because they are business and this has an effect on the totality of business.

RYK VAN NIEKERK:  You did say that SAP was a member. Is there any potential or any discussion at the moment to suspend them as well?

BONANG MOHALE:  When we have completed our process we’ll determine what action we are going to take.

RYK VAN NIEKERK:  Thank you. That’s was Bonang Mohale, the CEO off the Business Leadership South Africa initiative