Statement issued by Pravin Gordhan
15 September 2017
Although I welcome the withdrawal of the KPMG “SARS” report, I am surprised by the scant regard shown for their role in the “capture” of the revenue service and the huge damage that it has done to the livelihoods and reputations of a very professional, honest and loyal group of public servants. It is unfortunate that a company with the stature of KPMG, with a responsibility and obligation to be objective, has been found to be wanting. This is exacerbated by their collaboration with the Gupta family.
So let me categorically state, that which KPMG ought to have had the integrity and honesty to state:
– The Research and Investigative unit created in the South African Revenue Service (SARS) was legal.
– Its activities in detecting and combatting the illicit tobacco trade and other efforts aimed at bringing an end to tax evasion, were within the law.
– KPMG had no basis, except subservience to a malicious SARS management, to malign a number of individuals and facilitate, I repeat, the capture of a vital state institution.
The witting and over-enthusiastic collaboration of senior KPMG personnel (whether in current employment at KPMG or not) and their collusion with nefarious characters in SARS, in fact directly contributed to “state capture” and gave legitimacy to the victimization of good, honest professionals and managers. It should and must be remembered that this was about attacking SARS as an institution with the main intention being to capture it.
These are the symptoms of deteriorating levels of governance and the gravity of state capture. The saddest consequences about this is the negative impact it has had on the lives of all those that were and continue to be persecuted – if the latest actions of the Hawks and NPA are anything to go by.
KPMG international did not implement its own criticism of KPMG South Africa – that those affected by their alleged findings should be given a hearing. Did they talk or even attempt to contact the senior officials who were victimized at SARS? Why has there been no direct contact with myself, to convey a sincere apology? This is typical colonial arrogance and KPMG has not done enough. One would have expected KPMG to have the courage to admit, in the face of their own investigation, that the establishment of this unit was in fact legal. This option still remains open to them.
I note their “regret” but doubt whether this is adequate and proportional to the damage that KPMG has done. I will be seeking legal advice in this regard. Whilst there has been personal consequences the real issue that confronts us is the significant damage to our hard won democracy, to our state institutions and ultimately to the South African people for whom we seek a better life.
South Africa has been severely affected by the ills of state capture, and by the individuals and institutions that either enable or seek to implement it.
This may be a small step in the right direction to hold corporates accountable for their wrong doings as well as the beginning of what reparations will be to make things right. KPMG has a lot more to do to convince South Africans that they will undergo a genuine change in culture and ethics and are prepared to take total ownership for the damage they have caused or contributed to.
If they are truly remorseful they must provide equivalent employment to Ivan Pillay and others as a corruption fighting unit within KPMG itself.
To South Africans, I say take strength in your collective action to hold accountable, all those responsible for the demise of the quality of our democracy and the decimation of state institutions.
Gordhan slamming the SARS report and author KPMG on 14 December 2015
” … In December 2014, KPMG South Africa was engaged by the South African Revenue Service to perform an extensive document investigative review which resulted in the ‘Report on Allegations of Irregularities and Misconduct’. A version of the report dated 3 September 2015 was leaked and made public on 4 October 2015. The report was accepted as final on 26 January 2016.
This mandate involved an extensive document investigative review and a collation of the documentation. At a later stage, this mandate was extended to the provision of a report which included conclusions, recommendations and legal opinions. As a result, during the course of the engagement, the scope of the work changed. KPMG International has concluded that KPMG South Africa did not properly grasp the new risks associated with this change and consequently the appropriate consultation with risk management did not take place.
Importantly, quality controls associated with the version of the report dated 3 September 2015 were not performed to the standard we expect. Specifically, in this instance, our standards require a second partner to review the work done; however, the final deliverable of this work was not subjected to second partner review.
The SARS Report refers to legal opinions and legal conclusions as if they are opinions of KPMG South Africa. However, providing legal advice and expressing legal opinions was outside the mandate of KPMG South Africa and outside the professional expertise of those working on the engagement. KPMG South Africa acknowledges that such opinions should have been caveated as recommendations of legal advisors and not formulated in the manner contained in the report.
Furthermore, the language used in sections of the report is unclear and results in certain findings being open to more than one interpretation.
As a result, it is possible to read sections 12.1.1, 12.1.2 and 12.1.3 of the “Executive findings and conclusions” contained in the report in a way which suggests that Pravin Gordhan knew, or ought to have known, of the establishment by SARS of an intelligence unit in contravention of the rule of law that was “rogue” in nature. This was not the intended interpretation of the report. To be clear, the evidence in the documentation provided to KPMG South Africa does not support the interpretation that Mr Gordhan knew, or ought to have known, of the “rogue” nature of this unit.
We recognise and regret the impact this has had. KPMG South Africa had no political motivation or intent to mislead.
The partner responsible for the report is no longer with the firm.
Given the failure to appropriately apply our own risk management and quality controls, that part of the report which refers to conclusions, recommendations and legal opinions should no longer be relied upon.
KPMG South Africa has contacted SARS and offered to repay the R23 million fee received for the extensive work performed, or to make a donation for the same amount to charity.
The Forensic practice has since made changes to certain of its controls and methodologies. For example, before accepting contentious engagements, discussion with, and approval by, the firm’s Executive Committee is required. In addition, prior to finalising an investigation report, engagement teams are required to provide anyone who is the subject of the report an opportunity to respond to relevant findings… “