Wednesday, October 20, 2021

Botswana faces financial ruin as KPMG row festers

Botswana Government is crossing fingers that the South African authorities do not strip KPMG South Africa of its license.

Sunday Standard has turned up information showing that the government is monitoring investigations into the group’s ties to the controversial Gupta family.

There are fears that should KPMG South Africa be stripped of its license, Botswana’s economy could be crippled as the country’s biggest banks, parastatals and big corporations in the private sector are audited by Botswana KPMG.

Sunday Standard can reveal that Botswana Accountancy Oversight Authority Board Chairperson Michael Lesolle and Chief Executive Officer Duncan Majinda recently held a meeting with Botswana KPMG authorities in an effort to ‘appreciate’ the envisaged impact of the scandal in Africa.

Majinda confirmed the meeting in an interview with Sunday Standard.  He said the Office of the President, the Accountant General and financial institutions “were really worried that KPMG South Africa will have an impact on us because KPMG Botswana audits 70 percent of our banks.”

The KPMG South Africa controversy was recently the subject of intense discussion and scrutiny within the government enclave and Office of the President as assurance and explanation was sought from relevant authorities.

KPMG South Africa came under heavy criticism in 2017, for the role it played in the audit of Linkway Trading, which was allegedly used to channel taxpayers’ money to fund a lavish Gupta wedding in 2013.

The auditing sector regulator said if found guilty, the KPMG employee could face sanctions in terms of the Auditing Professions Act.

According to Majinda the Ministry of Finance had requested that it should be furnished with information on the allegations relating to KPMG scandal in South Africa.

“We had to explain to the Ministry of Finance and Development Planning as to what was happening to KPMG South Africa and KPMG Botswana.  The Ministry was really concerned about the alleged scandal in South Africa,” he said.

Majinda explained that should the South African authorities strip KPMG South Africa of their trading license this would also affect operations of KPMG worldwide.

He said many financial entities in Botswana were also enquiring about the alleged scandal in Africa because they provide audit services to a number of high profile entities in Botswana.

“My answer was that I was just waiting for an answer like you. But I also assured them that I consulted with the regulatory authority in South Africa and they told me that the issue (outcome of the investigation) is likely to take more than 18 months. My major concern is that should KPMG South Africa be closed it is going to impact on us,” he said.

Majinda added that “that is why I keep in touch with regulators in South Africa.”

He further stated that “the Chairman and I went to KPMG Botswana. We sought to know what is it that we are hearing in the newspapers. They said they were also waiting for the outcome of the investigations as the allegations unfold. If they decide to close KPMG South Africa we are impacted.  Banks are complex institutions; they will be impacted.”

Majinda expressed fears that Botswana was sitting on a ticking time bomb. He explained that should South African authorities pull the plug on KPMG South Africa, “our country might explode. If they close KPMG South Africa then it becomes a problem for us.”

He said “no matter how good KPMG here is, if KPMG South Africa closes down, there is nothing they can do because they are not independent of the KPMG across the world and my concern is the magnitude of impact of KPMG in the financial arena.”

When asked to comment on reports that Botswana KPMG was also facing allegations of misconduct, Majinda said they were keeping tabs on the issue as it unfolds. However, he said they could not investigate the alleged misconduct because the complainant chose to approach the courts seeking redress.

Last year there was panic at the government enclave following reports that liquidator, John Little was accusing KPMG Botswana of misconduct in signing off the books of Kingdom Bank Africa Limited (KBAL) which is currently under liquidation and has filed a law suit of close to P200 million against the audit firm on behalf of creditors.

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