JOHANNESBURG - Imperial Holdings has given notice it would sever its relationship with accounting firm KPMG if investigations initiated by the Independent Regulatory Board of Auditors and the SA Institute of Chartered Accountants provided inadequate explanations of KPMG’s role in “state capture”.
Imperial chief executive Mark Lamberti told shareholders yesterday that its board was “deeply troubled” by developments surrounding KPMG and software giant SAP. KPMG, SAP and McKinsey have been linked to the controversial Gupta family and state capture. McKinsey is not a supplier to Imperial.
Lamberti said KPMG was a provider of secondary accounting and consulting services currently amounting to R13million a year across Imperial’s operations globally.
He said Imperial considered the firm’s involvement with the Guptas to be of secondary importance to the SA Revenue Service report, which contributed to criminal charges being brought against previous finance minister Pravin Gordhan and various respected Sars employees. However, Lamberti said the issue now of even greater concern to law-abiding South Africans was that doubt on the veracity of KPMG’s reports would be cast to undermine South Africa’s “already fragile” criminal justice system in the prosecution of corruption and “state capture” crimes.
“Given the severity of the impact of these issues on South Africa, we regard KPMG’s remedial actions to date as inadequate,” he said.
Raboijane Kgosana, the previous chief executive of KPMG, resigned from the Imperial board in September.
Lamberti said Imperial had advised KPMG that the group intended 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 and the independent investigation initiated by the SA Institute of Chartered Accountants.
“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,” he said.
Lamberti said Imperial had noted SAP’s aggressive response to the allegations of wrongdoing in their South African business and their recent update on the matter.
He said Imperial Holdings had advised SAP of its expectation, and received their confirmation, that they would take decisive and appropriate action against any executives or managers found to have dealt irregularly with any 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 contain details and assurances on how any similar wrongdoing will be prevented in future,” he said.
Turning to the group’s operational performance, Lamberti said despite challenging trading conditions, Imperial had over the past four months performed in line with expectations and ahead of the prior comparable period, while accelerating its progress towards the strategic and operational objectives described in its 2017 Integrated Annual Report.
These include the process to determine the viability and benefit to shareholders of unbundling and separately listing the group’s logistics and vehicle businesses.
Lamberti reiterated that a decision on whether or not a separation would take place of these two businesses would not be made or announced before early July next year.
He said their expectations at this stage for Imperial’s 2018 performance were unchanged and that it expected to increase revenues and operating profit with a double-digit growth in earnings a share.
Shares in Imperial rose 0.61percent yesterday to close at R202.63.
- BUSINESS REPORT