After McKinsey, KPMG has now been dropped by Barclays South Africa
After three of South Africa’s major financial institutions terminated their contracts with McKinsey & Company in light of the Gupta scandal, a similar fate might be awaiting global accounting and advisory firm KPMG. Barclays Africa, one of the four major banking firms, has announced that it will not renew its contract with KPMG.
There was no shortage of scandals in the South African business environment last year, and the consulting sector has been among those most negatively impacted. The news early this year has been dominated by the Steinhoff International accounting scandal, which has found Big Four professional services firm Deloitte tangled in legal proceedings.
A short while before Deloitte was implicated, however, fellow Big Four firm KPMG was accused of involvement in the high-profile Gupta scandal. To summarise the issue, a South African consulting firm by the name of Trillian – controlled by the Gupta family – was found guilty of illegally obtaining a contract worth R1.6 billion with a local power company by the name of Eskom.
The corruption scandal involved a number of high-profile actors, including the Gupta family, President Jacob Zuma’s son Duduzane, as well as consulting firms McKinsey & Company and KPMG. All involved parties have since been involved in a legal battle, which has not been good for business.
So far, management consultancy McKinsey & Company has faced the brunt of the fallout from the scandal. In the months following the scandal, Standard Bank and Barclays Africa both terminated their contracts with the consulting firm. A month later, Nedbank followed suit, making it the third of four major financial institutions in South Africa to drop McKinsey. The prestigious strategy firm has also been dropped by clients outside of the financial sector in the aftermath, including Coca-Cola and Sasol.
At the time of terminating McKinsey’s services, Standard Bank and Barclays Africa both stated that their relationship with KPMG was under review, and a decision would be made in due course. A decision has now been made by Barclays Africa – which opted to terminate its association with the global accounting and consulting firm.
The bank stated that its board “is no longer able to support the reappointment of KPMG,” and announced that the contract would terminate by the end of May, when the formalities for the 2017 audit will be complete. The decision follows another major contract termination for KPMG with the Auditor General of South Africa.
Since the scandal broke, KPMG has been proactive in its efforts to rebuild its operations. Alongside issuing a public apology, the firm has launched investigations into its personnel, and, most significantly, has restructured and restaffed its entire senior leadership in South Africa.
Commenting on the decision from Barclays Africa, a statement from KPMG read, “We are disappointed by, but fully accept, the decision, We have implemented far-reaching changes over the past seven months to all aspects of the firm including governance, quality, and risk management. “
