PwC called upon to identify specific issues in Tongaat Hulett's finances
Following a sudden financial decline that saw its value drop to its lowest level for more than two decades, South African agriculture and agri-business firm Tongaat Hulett has appointed global professional services firm PwC to examine the anomaly in its finances that caused the decline.
In the last week of February, the comprehensive assessment of Tongaat’s finances that was initated by its new CEO Gavin Hudson revealed a number of “issues.” As per announcements from the firm, the problems with its finances will expectedly cause it to report losses of a whole year.
As a result, the firm has reportedly entered deliberations with creditors in South Africa, and has begun work on devising a plan for restructuring. Nevertheless, the news has not sat well with the general public, and shares of the company have gone into a distinct nosedive.
The firm’s stock fell by 18% early last week, and subsequently registered a dip of 28%, taking the overall decline since the start of this year to a total of 65%. Currently, the company’s value has dropped to R2.4 billion. The firm has gone into damage control mode, and has called upon PwC to help with the process.
The Big Four accounting and advisory firm is expected to evaluate the firm’s books, and identify the poor practices that have contributed to the requirement to restate the financial information from before. To help with the process, Tongaat has urged it staff to save all records to be handed over to PwC for review.
A number of possible explanations have been put forth for the anomalies in the firm’s finances, and fingers have already been pointed at Big Four accounting and advisory firms Deloitte and KPMG, given that the former provides external audit services to Tongaat while the latter provides internal audit services.
Others have attributed the company’s decline to its rapid entry into the land conversion and development sector, particularly in and around the North Coast. Since the start of the year, the market in that region appears to have stagnated in terms of demand and investment, which might have dented revenues for the company.
The “scandal” unfolding at Tongaat is the latest of several amongst some of the largest businesses in the country. South Africa currently has the highest rate of economic crime in the world, and a number of firms – from Steinhoff to Trillian – have come under their spotlight due to financial malpractices.
