June 4, 2018 / 9:06 AM / 15 days ago

KPMG to lay off 400 employees in South Africa in latest shake-up after scandal

JOHANNESBURG (Reuters) - Global auditor KPMG said on Monday it will axe up to 400 staff in South Africa in its latest shake-up following a corruption scandal in the country, which saw it lose several major clients.

The offices of auditors KMPG are seen in Cape Town, South Africa, September 19, 2017. REUTERS/Mike Hutchings/Files

The auditor has taken a number of steps since last September to help restore the reputation of its South African business, including changes to corporate governance and management and measures to improve risk management.

On Monday it said it plans to have just four business hubs in South Africa - in Johannesburg, Cape Town, Durban and Port Elizabeth - and will appoint some executives from KPMG International to KPMG South Africa’s board.

It will close small regional offices in Mbombela, Bloemfontein, Polokwane and East London, resulting in the lay offs, KPMG South Africa’s CEO Nhlamulo Dlomu said during a conference call.

KPMG’s South African unit has been under close scrutiny since 2017 over work done for a company owned by the Gupta family - who have been accused of using their links to former president Jacob Zuma to influence government decisions and the awarding of tenders - and more recently for small lender VBS Mutual Bank.

The Guptas and Zuma have denied any wrongdoing.

Dlomu said the offices that will close were quite dependent on audit work carried out for the Auditor General, who said in April that he would terminate all government contracts with KPMG following the scandals.

“Because of the losses we’ve seen there, it has become difficult to retain those offices and so we are refocusing the business to be able to respond to some of the losses that we’ve seen in the client environment,” Dlomu said.

After the auditor general cut ties with KPMG, Barclays Africa, one of KPMG’s biggest clients, decided to stop doing business with the company.

More than 12 other clients have severed ties with KPMG since last year, with South African micro lender Finbond last month becoming the latest firm to drop the auditor.

TRUST AND INTEGRITY

The business units affected provide advisory and internal support services.

KPMG expects to wrap up the process by the beginning of August, Dlomu said.

“These hard decisions were necessary to put the firm on a more sustainable footing, while ensuring we continue to offer our clients the best service and support,” Dlomu said in a statement.

A number of senior KPMG partners from across its international network will be appointed to the board and executive positions at its South African unit as well as to senior client service roles, the company said.

“Today’s announcement 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,” KPMG International Chairman Bill Thomas said.

The KPMG logo is seen at the company's head offices in Parktown, Johannesburg, South Africa, September 15, 2017. REUTERS/Siphiwe Sibeko/Files

Editing by Joe Brock and Susan Fenton

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