MarketLine Blog

KPMG South Africa involved in “Zuptagate” scandal: Senior staff fired as audits fall “short of the quality expected”

In May 2017, a series of emails were leaked which showed a very close relationship between the Gupta family and the incumbent South African President Jacob Zuma. Opposition parties and civil rights groups claimed that this close relationship had resulted in a whole host of government contracts being given to the Gupta family without the proper procedures being followed.

In the midst of this scandal were caught major multinationals like KPMG, McKinsey, Bell Pottinger and SAP. All of them have been associated with the Gupta family’s activities in South Africa in recent times, and this association has brought the public limelight onto their activities as well. The first casualty to emerge was Bell Pottinger, whom anti-corruption activists claimed had incited racial hatred in South Africa to protect the interests of the Gupta family. A UK trading body subsequently accepted this claim and Bell Pottinger went into administration.

Whilst KPMG, McKinsey and SAP have thus far only conducted internal investigations into their South African operations, the casualty of Bell Pottinger has shocked many. The KPMG probe, whilst accepting flaws in the company’s South African operations and also admitting that senior staff members had a close relationship with the Gupta family, also stated that the company had not acted illegally. It is unlikely the South African opposition party the Democratic Alliance which seems to have fixated its 2019 election campaign around the issue of corruption, is likely to accept the findings of the KPMG internal probe. The same is likely true for the various civil rights movements currently campaigning against corruption in the South African government.

With Jacob Zuma serving his last term in office and an opposition party that is on the rise, the “Zuptagate” scandal is unlikely to fizzle out any time soon. This is bad news for KPMG and the other companies involved as a quick resolving of this issue is in their best interests. Already a number of clients have terminated their relationship with KPMG, and the longer this scandal and the negative press around it continues, the higher the likelihood that more and even bigger clients will drop KPMG and move over to one of its competitors or indeed to a new entrant.

Leave a comment

*Required fields. We will not publish your email address