Munich Re Africa Terminates Partnership With KPMG

Yemisi Izuora.

Munich Re Africa says it is terminating its relationship with KPMG South Africa, as the investigations into KPMG’s conduct in respect of South Africa’s Gupta family continue.

Nico Conradie, CEO of Munich Re Africa, told Commercial Risk Africa: “Our local board of directors met on 7 September 2017 to discuss Munich Re in Africa’s ongoing relationship with KPMG South Africa as our external auditors.

“At the conclusion of that meeting, the board resolved that a decision would only be made once additional information had been obtained through inter alia the KPMG International investigation.

However, he added: “On 15 September 2017, KPMG International released a summarised statement relating to the outcomes of their investigation. Based on our board’s assessment of this new information now at hand, our board has resolved not to retain KPMG South Africa as the external auditors of Munich Re, Africa beyond 2017.”

The 15 September statement from KPMG had said: “As has been widely reported, various allegations have been raised with respect to KPMG South Africa’s work on behalf of the Gupta family and work performed in 2014-2015 on the ‘Report on Allegations of Irregularities and Misconduct’, which KPMG South Africa produced for the South African Revenue Service (SARS report).

“As a result, KPMG International has conducted a comprehensive investigation. While the investigation did not identify any evidence of illegal behaviour or corruption by KPMG partners or staff, this investigation did find work that fell considerably short of KPMG’s standards.”

KPMG South Africa announced a series of leadership changes, changes in the governance of KPMG South Africa and enhanced quality control procedures in certain areas.

Nhlamu Dlomu was appointed to succeed Trevor Hoole as CEO.

On 22 September, John Veihmeyer, chairman, and Bill Thomas, chairman elect of KPMG International, moved in, announcing an independent investigation.

Mr Veihmeyer said: “Given the significance of the issues involved in this matter to the country of South Africa, and the damage our actions have caused, the public deserves to know the full facts as quickly as possible. That includes not just what, but why they occurred. That is why there will be an independent investigation to provide the full and frank disclosure the South African public deserves.

“As a first step, we announced a set of significant actions last week. But we recognise that we need to do much more to restore trust with South Africa.

“The investigation will be led by a senior South African legal figure, who is completely independent of both KPMG South Africa and KPMG International. We are in active discussions to identify a credible, senior, independent legal figure to lead the investigation. The leader of the investigation, along with the scope, terms of reference and proposed timeline will be announced very shortly. Our preference is for the investigation to be completed as quickly as possible.

“The investigation will determine if there is any evidence to suggest KPMG South Africa partners or staff were complicit in illegal activities by the Gupta family and their businesses, and whether there were any failings or collusion in the work performed and conduct of KPMG South Africa in relation to the SARS report.”

“In addition, we have received other valuable input as to actions we need to take to regain public trust, and we will actively seek to address them.”

In what appears to be a further bid to rebuild confidence, Mr Thomas added: “KPMG International’s work in South Africa is not finished. We will continue to give our full support to the South African firm. KPMG South Africa is an important part of our global network and we will provide all our support, in whatever form is needed, to ensure the stability and future success of the South African firm.

“We now have a very strong team of senior, experienced leaders from KPMG International in South Africa, including an interim chief operating officer and chief risk management partner for KPMG South Africa.

“Their work includes a review of the entire KPMG South Africa client portfolio to ensure the firm is doing business with the right people.”

The two global KPMG leaders concluded: “KPMG International’s support will continue for as long as is needed to restore trust, rebuild confidence and ensure that KPMG can once again earn the respect and trust of South Africans.”

Add Comment