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By Hilton Tarrant

Moneyweb: Columnist

Imperial’s Lamberti lashes out at KPMG; state capture

Describes remedial actions to date as ‘inadequate’; Super Group gives auditor benefit of the doubt.

Imperial Holdings chief executive Mark Lamberti has lashed out at supplier KPMG, describing its “remedial actions” to date as “inadequate”, given “the severity of the impact of these issues on South Africa”. KPMG provides “secondary accounting and consulting services currently amounting to R13 million per annum across Imperial’s operations globally”. It is not Imperial’s auditor; this role is fulfilled by Deloitte.

In its CEO statement delivered at the group’s annual general meeting of shareholders on Tuesday, Imperial says it considers “KPMG’s involvement with the Gupta’s to be of secondary importance to the Sars report, which contributed to criminal charges being brought against the previous Minister of Finance and various respected Sars employees.

“The issue now of even greater concern to law abiding South Africans, is that doubt on the veracity of KPMG’s reports will be cast in order to undermine our already fragile criminal justice system in the prosecution of corruption and ‘state capture’ crimes.”

It says it has “advised KPMG that Imperial intends to conclude existing projects and withhold the award of any new business until the conclusion and publication of the investigations by the Independent Regulatory Board for Auditors (Irba) and the independent investigation initiated by the South African Institute of Chartered Accountants (Saica). Should these investigations provide inadequate explanations of KPMG’s role in ‘state capture’, or their actions to redress the situation, Imperial will sever its relationship with the practice”.

Moses Kgosana, the former CEO of KPMG South Africa, resigned from Imperial’s board on September 7. By mid-September, Kgosana had resigned as a director from the boards of Alexander Forbes, Transaction Capital, Massmart and Imperial. Lamberti has previously run (and founded) both Massmart and Transaction Capital. Kgosana resigned from the boards of AECI and Famous Brands on September 29. He no longer serves on the board of any listed company.

Two of the three multi-national professional services companies implicated in state capture allegations so far are suppliers to Imperial, KPMG and SAP. The company says its board is “deeply troubled by developments surrounding” the two suppliers. It notes that “McKinsey is not a supplier”.

Regarding SAP, Imperial says it has “noted SAP’s aggressive response to the allegations of wrongdoing in their South African business and their recent update on the matter. We have advised SAP of our expectation, and received their confirmation, that they will take decisive and appropriate action against any executives or managers found to have dealt irregularly with any South African government department or state-owned enterprise, or any intermediary purporting to act on behalf of such entities. We have furthermore communicated our expectation that their final report contains details and assurances on how any similar wrongdoing will be prevented in future.”

In South Africa, Imperial describes the economic environment thus: “Negative consumer and business confidence is exacerbated by political uncertainty and lacklustre governmental leadership, neither of which [are] likely to improve in the short term. We do not see the result of the December ANC electoral conference as either binary or definitive.”

Imperial’s position on KPMG is in stark contrast to that of smaller logistics and vehicle retail rival Super Group, which published its integrated report on Friday. KPMG South Africa is Super Group’s (external) auditor. In 2017, it paid a total of R37.4 million in professional fees to KPMG, of which 60%, or R22.4 million, were audit fees.

Super Group says, “the board, including members of the group audit committee, has had several meetings with KPMG SA. In addition, the chairman of the group, the chairman of the group audit committee, the group CEO and the group CFO met with a senior executive from KPMG International.

“The group has been advised that KPMG is committed to the implementation of an independent investigation into the several serious issues concerning KPMG’s activities in South Africa. KPMG has also assured Super Group that there was no corruption or collusion within KPMG.

“Super Group considers it fair and in the interests of justice to review the reappointment of KPMG as the group’s auditors after the outcome of the independent enquiry, in order to afford KPMG the opportunity to defend itself against the serious allegations that have been levied against it.

Super Group says its audit committee has “recommended to the board the reappointment of KPMG”.

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