The KPMG logo is seen at the company's head offices at La Defense business and financial district in Courbevoie
JOHANNESBURG - Auditing firm KPMG has  blamed the loss of lucrative  government contracts for its  decision to let go of 400 of its  staff as KPMG International  ramped up its scrutiny of the  local office’s work. 

KPMG South Africa chief  executive Nhlamulo Dlomu  said Auditor-General Kimi  Makwetu’s decision to sever  ties with the controversy-prone  firm left some of its regional  offices unviable. 

“It is important to note that  a significant work we did on  behalf of the auditor-general  was done through our regional  offices. The loss of the contract  has put the financial viability  of these offices at risk, hence  the difficult decision we took,”  Dlomu said. 

Yesterday, KPMG said it  would wind down its operations  in Bloemfontein, Mbombela,  Polokwane and East London. 

The firm has 12 offices  across the country. It said it  would also consolidate its  Pretoria office and Johannesburg  operations, charging the  restructuring would see it left  with with more than 130 partners  and 2 200 employees in  South Africa.

Dlomu said the retrenchments  would mostly affect its  back office staff, audit unit and  advisory unit. She said staff  from its financial services  unit – which was fingered in  the VBS Mutual Bank scandal  – would not be affected.  In April Makwetu withdrew  all government auditing contracts  from KPMG and Nkonki,  citing concerns over the firms’  audit standards. 

The contracts  covered every sphere of government,  from municipal to local  and provincial.  The firm has been battling  accusations of facilitating the  Guptas’ alleged tax evasion and  corruption. Another charge levelled  against KPMG relates to  a problematic report produced  by the firm for South African  Revenue Service (Sars).  The discredited report,  which KPMG has since withdrawn,  claimed that a rogue spy  unit was operating within Sars.  Iraj Abedian, the chief executive  of Pan-African Resources  Investment and Research  Services said KPMG’s demise  was nigh.

Too corrupted

“The brand is too corrupted to  recover. Now is the opportunity  for smaller firms to bulk up  and step up their game, so we  can see real transformation in  the sector,” Abedian said.  The scandals engulfing the  firm have seen it lose a number  of JSE-listed companies,  chief among them Absa, which  ditched the firm last month.  KPMG International said it
would “embed for an extended  period” a number of senior  KPMG partners from across  its international network into  board and executive positions,  as well as senior client service  roles. Bill Thomas, chairperson  of KPMG International, said  KPMG SA was an important  part of Its global network.  “The decision to embed  additional senior international  partners into the South African  leadership team is evidence  of the significant investment  KPMG International is providing  to help ensure KPMG South  Africa can continue to focus  on trust, quality and integrity,” 

Thomas said.  Aeon Investment Management  chief investment officer  Asief Mohamed said the KPMG  International’s intervention  would be a costly exercise. He  said the staff retrenchments  were inevitable following loss  of key clients for the firm.  “I would not be surprised  if KPMG International has to  put in at least R1 billion to fund  losses in its South African operations  due to losses of clients,”  Mohamed said 

- BUSINESS REPORT