KPMG's woes in South Africa deepen as all its public sector audit work is terminated

KPMG has been kicked off public sector contracts in South Africa as the accountancy giant’s woes in the country deepen.

The consultancy has been mired in controversy in South Africa over the last year, over its past links to companies run by the billionaire Gupta family and most recently for alleged shortcomings on the audit of collapsed bank VBS.

Today South Africa’s attorney general, Kimi Makwetu, issued a statement saying all audit mandates between the government and KPMG had been terminated with “immediate effect”.

Mr Makwetu said: “Recent media reports relating to the external audit of VBS Mutual Bank and the conduct of KPMG audit partners are some of the reasons that prompted the decision."

KPMG South Africa chief executive Nhlamu Dlomu said: “Every client is important to us and the announcement by the auditor general has come at a time when we are taking significant steps towards building a firm that is in tune with the needs of our country.

“It is very much our hope that this announcement will prove to only be a temporary break in the relationship.”

We recognise that we have damaged the trust of key stakeholders and that further and deeper changes are needed to regain that trustKPMG South Africa chairman Wiseman Nkuhlu

The shake-up was prompted by an internal investigation into the work KPMG had done for Gupta family businesses, which found it had fallen “considerably short of KPMG’s standards”. It said it had found no evidence of illegal or corrupt behaviour.

On Sunday KPMG said two further partners had left the company as part of a separate investigation into its audit of VBS and said further changes would follow.

KPMG chairman Wiseman Nkuhlu said: “We recognise that we have damaged the trust of key stakeholders and that further and deeper changes are needed to regain that trust.”

Several UK and American firms have been damaged by the scandal surrounding the Guptas, with City PR agency Bell Pottinger forced into administration due to the reputational fallout from a dirty tricks campaign it ran for a firm linked to the family. Management consultancy McKinsey has also faced criticism in South Africa for work it has done for Gupta-linked companies.

The Guptas have been accused of buying influence with South Africa’s former president Jacob Zuma. Both the Guptas and Mr Zuma have repeatedly strongly denied wrongdoing and said they are the victims of a “politically motivated witch-hunt”.