Cape Town - Economists have warned that top audit firm KPMG cutting ties with the Gupta family over allegations of “state capture” could lead to an exodus of other companies from doing business with the family.
Iraj Abedian of Pan African Capital said on Friday while KPMG was doing damage control over its associated report on the so-called rogue unit at Sars, the decision was a major announcement.
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Finance Minister Pravin Gordhan has questioned the KPMG Sars report, saying he was never given a chance to respond to the claims against him.
However, Abedian said the decision by the auditing firm to cut ties with the Gupta family was a huge blow for the family.
It would be difficult for other companies to do business with the Gupta family following the departure of KPMG.
“Any reputational firm of advisers, financiers and auditors would have to think twice to work with the Guptas,” said Abedian.
The Guptas had not been convicted in any court of law for any offence, but their brand had been damaged by the scandals.
Deputy Finance Minister Mcebisi Jonas dropped a bombshell two weeks ago, saying the Guptas had offered him the position of his then-boss Nhlanhla Nene in December.
But this has been strenuously denied by the family.
Chief economist at Efficient Group Dawie Roodt said the KPMG move was a blow to the Guptas. He said it was a vote of no confidence in the family by a big firm.
“It’s important to understand why a company has auditors. An auditor checks your financial statements; a company will approach an auditing firm depending on what they want to achieve.”
He said most companies on the Johannesburg Stock Exchange would approach one of the big five international firms because of their reputations.
But these auditing firms would walk away if there was a scandal swirling around their customers.
This was exactly what had happened with the Guptas being dropped by KPMG, said Roodt.
Political Bureau