Nedbank becomes latest client to terminate contract with KPMG SA

Global professional services firm KPMG’s operations in South Africa have taken yet another hit, this time in the form of a contract termination from one of the country’s major financial institutions – Nedbank. The major bank has replaced KPMG with fellow Big Four firm EY as its external audit partner.

The move comes amid a time of combined deterioration and comprehensive restructuring at KPMG South Africa, which has been ongoing ever since the Gupta scandal broke out last year. Fellow global management consultancy McKinsey was the first to lose out on business after the scandal, although KPMG’s woes began this year.

In May, another major banking institution Barclays South Africa announced the termination of its contract with KPMG, following which Old Mutual added Deloitte to its list of auditors alongside KPMG as a contingency measure. Now, KPMG has been dropped by Nedbank, effective from next year.

The decision to drop KPMG was made prior to the announcement, and the interim period was utilised to conduct a competitive bidding process for the position of external auditor. The process has now reached its conclusion, and KPMG’s Big Four rival EY has emerged as the new auditor.

“As a consequence, KPMG will rotate off the companies’ audits on conclusion of its external audit responsibilities for the year ending December 31, 2018, expected to be at the conclusion of the relevant AGMs,” read a statement from Nedbank, which dropped McKinsey from its list late last year 

KPMG South Africa’s Executive Chairperson Wiseman Nkuhlu expressed his views on the decision, stating that “It is always disappointing to lose a client, but we remain very proud of the work that we have performed for Nedbank over many years.”

Nkuhlu himself was only appointed to the firm earlier this year, as part of the firm’s protracted efforts to restructure its operations and – more importantly – reconstruct its reputation in the country. In June, the firm announced that it would cut as many as 400 professionals off its South Africa staff list, in addition to reinforcing local operations with international support.

Last month, as part of the same efforts, the CEO of KPMG South Africa Nlamu Dlomu stepped down from her position after being appointed only last year. The decision came after the firm began to lose its stream of business, which called for rapid and drastic action. The firm has also made cuts to several of its low priority business segments in the country.