SAFTU rejects KPMG’s apology with contempt

The South African Federation of Trade Unions rejects with contempt the ‘apology’ from KPMG accounting firm for the damage they inflicted on the whole country as a result of their 2014 report on a SARS ‘rogue unit’, which they now admit was a litany of lies.

From the outset - as journalist Marianne Thamm prophetically predicted as early as 3 December 2015, when the report was first leaked in the media - “the current SARS ‘rogue’ unit saga, which threatens to destabilise the country's revenue service, has all the hallmarks of a ‘black propaganda’ campaign. The aim is to plant stories, confuse and obfuscate truth, and ultimately create confusion in the public realm to achieve a desired result”. 

Nearly two years later she has been proven correct.

The firm’s half-hearted apology for "work that fell considerably short of KPMG’s standards”, the dismissal of its nine top executives and the offer to repay R23 million to SARS, cannot begin to match the harm that this criminal act - of releasing baseless allegations that SARS had been running an illegal ‘rogue unit’ - inflicted on the people of South Africa.

It contributed to the sacking of senior SARS officials, the down-grading of the economy by ratings agencies, with the consequent loss of thousands of jobs, and the continued threats by the Hawks to bring charges against Pravin Gordhan and other former leading figures in the Treasury and SARS.

It undermined confidence in SARS and a loss of billions of rands of revenue which could lead to both higher taxes and austerity spending cuts to make up the shortfall.

Most importantly KPMG’s report played a crucial part in the conspiracy by crooked business interests and corrupt politicians to take control of financial institutions in order to pave the way for the looting of state resources. 

SARS became the first institution to fall into the hands of these looters, followed by the Treasury and the South African Reserve Bank, the Financial Intelligence Centre and the Public Investment Corporation could be next.

These looters were able to exploit KPMG’s reputation as a sound, global institution  to give a veneer of authenticity to its bogus allegations and provided them with an excuse to get rid of potential whistle-blowers within SARS.

Yet KPMG now limply admits to nothing more than that it simply failed to "appropriately apply our own risk management and quality controls”. 

As Natasha Marrian writes in Business Day (18 Sept 2017), the KPMG Report “makes no mention of the fact that it played a central role in the capturing and destruction of SARS, which will affect every taxpaying South Africans… KPMG did not simply provide a report that caused individuals to be kicked out of an institution, it enabled a complete overhaul of the institution and it did so intentionally”.

The ‘apology’ fails to explain why KPMG did not interview any of those implicated in its report, including SARS senior executives Ivan Pillay‚ Johann van Loggerenberg and Pete Richer. 

It does not explain why SARS’ attorneys had sent them a memorandum which in effect told KPMG what findings and recommendations to make and told them to make clearer findings of guilt against certain individuals. These recommendations were copied and pasted into their final report. As Marrian says: “This does not sound like poor quality control, but fraud”!

SAFTU calls on the SA Institute of Chartered Accountants to take action to protect the auditing profession, and deal with KPMG, fine them and use the money to sponsor black students in accountancy.

SARS commissioner Tom Moyane is understandably devastated by KPMG’s about-turn and feels betrayed by the withdrawal of its findings‚ conclusions and recommendations and has predictably blamed the company for the public relations disaster he now faces - the “shoot the messenger!” response. 

He has even made the preposterous statement that KPMG have only disowned parts of their report, that the bulk of it is still correct and that his charges against the former officials are still justified. 

But he cannot possibly expect anyone to believe that the very same report, whose own authors now admit was flawed can be trusted to be accurate about anything, let alone be used to justify prosecuting those it accuses. 

On the contrary it reinforces the suspicion that Moyane and others were indeed just using KPMG as a fig-leaf to cover up the fact that they were in league with the Guptas in a strategy to take control of SARS.

We now know that KPMG had been auditing Gupta-related entities for 15 years. When it audited Linkway Trading, a Gupta company, it failed to comment on the R30m earmarked for an agricultural development project in the Free State, which was diverted to pay for the Gupta wedding at Sun City, at which former KPMG chief executive Moses Kgosana and other partners were present! 

KPMG in the UK was the auditor for Rolls-Royce during almost all of a 24-year period in which employees secretly paid off middlemen and officials in 11 developing countries to win lucrative business including Russia, Iraq and China.

Rolls Royce agreed to pay £671 million to UK, US and Brazilian authorities to settle allegations of bribery and false accounting concerning a period lasting 24 years from 1989 to 2013 but stopped using KPMG just days before it reached a settlement with the Serious Fraud Office.

KPMG joins US business consultants McKinsey, German IT company SAP and British PR firm Bell Pottinger as big international companies who are now proved to have been deeply involved in, and getting rich from, dealing with corrupt criminals.

This supports the view of SAFTU which has consistently argued that corruption is not a problem confined to one maverick family and a small circle of crooked politicians, but an inherent feature of the capitalist economic system, which is structurally corrupt. 

It is based on the pursuit of profit through the exploitation of workers and consumers and is made worse by the spread of monopolies and mergers, which have created unaccountable monoliths. These collude to manipulate prices, win contracts through bribery, overcharge consumers, rob workers of the wealth their labour creates, capture state entities to win contracts and undermine democratic and constitutional structures.

Mainstream business and the media have long tried to portray the Guptas and their political cohorts as just ‘mavericks’, and are now trying to condemns even these big Gupta-linked corporations caught with their fingers in the till, as just more mavericks, and that the system as a whole is still run honestly and fairly. But this is getting harder to swallow, as more and more evidence emerges of the number and size of the companies involved in corrupt activities.

SAFTU will continue to condemn all the thieves and cheats who blatantly rob the public through bribery and corruption, but insists that they are just extreme examples of a capitalist system which is corrupt from top to bottom and which has to be replaced by a democratic socialist economy, based on the ideas of the Freedom Charter.

The country’s wealth must be owned and democratically controlled by the workers, communities and the people of South Africa as a whole so that it can be used to transform the lives of all the people and not just a wealthy elite.

Statement issued by Zwelinzima Vavi, SAFTU General Secretary, 19 September 2017