Superstar investor Warren Buffett famously said, “You see a cockroach in your kitchen; as the days go by, you meet his relatives,” in his annual letter to Berkshire Hathaway shareholders.
Buffett was referring to the phenomena that, in the world of business, one piece of bad news is often followed by more bad news.
This is seen particularly vividly in South Africa’s state capture inquiry, and the companies that were linked to corporate corruption.
The best example is KPMG, where red flags were first raised as part of the #GuptaLeaks emails about the Free State’s Vrede dairy project.
KPMG allegedly turned a blind eye to millions earmarked for the Vrede dairy project being diverted to pay for a lavish family wedding at Sun City.
When the scandal first broke, KPMG defended its work, saying it stands by its work done and audit opinions issued.
This was, however, only the start of a string of scandals where KPMG was involved.
KPMG, through its SARS rogue spy unit report, was directly responsible for the firing of former finance minister Pravin Gordhan.
According to the report, Gordhan was endorsing an illegal rogue unit that conducted covert operations under “Project Sunday Evenings”.
KPMG later withdrew all of the report’s findings‚ recommendations, and conclusions, but the damage done to the once proud and efficient SARS was tremendous.
In the latest scandal, KPMG is directly involved in the collapse of VBS Mutual Bank – where over R2 billion was looted from the financial institution.
Forensic investigator Advocate Terry Motau, who probed corruption at VBS, said KPMG should be forced to take responsibility for the role it played in VBS’s collapse.
The fallout at KPMG started soon after the scandals came to light, with many companies dropping the firm as a partner.
In June, KPMG announced that it will be closing offices in South Africa and will have to lay off 400 people.
Earlier this month, KPMG said its South African CEO Nhlamulo Dlomu, who was appointed to strengthen the company after the scandals hit, will step aside to make space for a new CEO.
KPMG said given the scale of the reputational challenges it’s facing, its board has decided that a new chief executive from outside the firm will optimise prospects of rebuilding trust.