McKinsey and KPMG accused of criminal breaches in South Africa

South Africa’s corporate registry has accused McKinsey, KPMG South Africa and the German software maker SAP of criminal breaches of company law as a scandal over the groups’ ties to the controversial Gupta family reignited.

A spokesperson for the South African Companies and Intellectual Property Commission, which oversees the legislation, said on Wednesday that it had filed criminal complaints against the three global corporations with South African police late last year.

The CIPC said the complaints followed an investigation into cases linking each of the companies to allegations that the Guptas had used a friendship with President Jacob Zuma to exert influence over state-owned businesses.

McKinsey, KPMG South Africa and SAP all apologised last year after their work with Gupta-linked companies was exposed in a series of leaked emails, with SAP also referring evidence of alleged corruption to the US authorities. Bell Pottinger, the British public relations firm, collapsed last year over its work with the family.

The spotlight has returned after South African police and prosecutors moved to pursue the Guptas weeks after Mr Zuma lost control of the ruling African National Congress to Cyril Ramaphosa, South Africa’s deputy president, who has promised a tough line on corruption, including prioritising prosecutions.

South African state prosecutors confirmed this week that they would enforce an order to seize assets from McKinsey over fees it earned from a contract advising Eskom, the electricity monopoly, on which it worked alongside Trillian, a company owned by a Gupta associate.

The CIPC said its case against McKinsey was based on a letter from the management consultant to Eskom appearing to present Trillian as its formal subcontractor before the state utility approved payments of fees to the company. McKinsey disavowed the letter when it emerged last year.

On Wednesday the consultant, which has already said it intends to pay back its R1bn ($80m) share of the R1.6bn Eskom fees, said it had not yet received official notification of the asset-freezing order.

McKinsey added: “We welcome all actions to resolve this issue and will continue to co-operate with the South African authorities and official investigations into these matters.”

KPMG South Africa is accused by the CIPC of “knowingly failing to appropriately apply its own risk management and quality controls” in preparing an investigation for South Africa’s revenue service that was used by Mr Zuma’s allies to discredit Pravin Gordhan, the service’s former head, who criticised the Guptas, before he was fired as finance minister.

“KPMG South Africa believes that there is no substance to the allegation,” a spokesperson for the firm said. “We will fully co-operate with any enquiries the police may have.”

A contract that SAP agreed with a Gupta-linked company in order to secure work with another state-owned group also contravened South African company law, the CIPC said.

Within weeks the ANC could transfer the state presidency to Mr Ramaphosa from Mr Zuma, who has long been accused of muzzling investigations into corruption through his control of key police and prosecutorial appointments. Mr Zuma and the Guptas have always denied involvement in corruption or obstructing investigations. (FinT, various)