Embattled auditor KPMG will be retrenching around 400 employees while its international parent will be dispatching senior executives to South Africa to help manage the fallout after the scandal-hit firm has bled clients and credibility over the last six months.
The firm announced in a statement on Monday it will close "certain regional offices" and will in future only operate out of four regional hubs in Johannesburg, Cape Town Durban and Port Elizabeth. A number of changes in the leadership team will also be rung, with executives from overseas to be "embedded" into the local leadership structure "for an extended period".
This follows the loss of a number of clients after an internal investigation found a number of irregularities in its dealings with the Gupta family. It also identified serious shortcomings in its investigation for Sars into the so-called "rogue unit" at the receiver. KPMG has since lost the business of companies such as Absa, while the SA Institute of Chartered Accountants last week also cut ties with it.
According to the KPMG statement, it will scale down its business and will operate a refocused advisory business and have a reduced footprint in the country. This is in line with the findings of a strategic review which took into account recent client losses and the "current demand for certain services".
KPMG's full statement:
KPMG South Africa today announces a reshaping of the business and further support from KPMG International to strengthen leadership capacity.
These changes follow a strategic review of the firm's activities and take into account recent client losses and current levels of demand for certain services. They are the latest in a series of initiatives announced by the firm in recent months to support its drive to restore KPMG's strength in South Africa.
We anticipate up to 400 people leaving the firm as a result of our plan to close certain regional offices, operate a refocused advisory business and scale back our internal business support to reflect our reduced footprint. We plan for the business to operate in future out of four hubs in Johannesburg, Cape Town, Durban and Port Elizabeth.
KPMG in South Africa will remain a business of significant scale with more than 130 partners and 2,200 employees, supported by the breadth and depth of skills and experience of the international network of KPMG of 200,000 people. It will continue to offer a wide range of the core services that our global, regional and local clients require.
The leadership changes will involve embedding in the firm for an extended period a number of senior KPMG partners from across the international network into board and executive positions, as well as senior client service roles. This is to further strengthen the leadership capacity available to the South African firm as it navigates the current challenges it faces, implements the enhanced internal procedures to which it has committed, and continues to serve our significant client base to the highest levels of quality. Further detail on these leadership changes will be announced in due course.
Nhlamulo Dlomu, chief executive of KPMG South Africa, commented:
"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. We are putting quality and integrity at the heart of the business and, from now on, the firm will be focused on doing fewer things better. I am confident that we have taken the right steps to reform and reshape the business. Now we need time for these to take hold.
It is a matter of great regret that, as a result, we will be parting company with loyal colleagues. We are taking all possible steps to ensure these changes are managed in a caring manner and that everyone is treated with dignity.
The firm has shown tremendous resilience throughout this period. The loyalty and commitment of our clients and colleagues has only added to our resolve in pursuing this path."
Professor Wiseman Nkuhlu, chairman of KPMG South Africa, commented:
"Since becoming Chairman, my priorities have been to rebuild relationships with society and to reassure clients of our professional rigour and integrity. Today's announcement, difficult but necessary, is part of our mission to restore KPMG's reputation and honour its legacy of 130 years' service in South Africa; to make it a firm that our people, our clients and the public can again be proud of.
The steps we have taken will enable us to best service the needs of clients, make a broader contribution to society, while establishing the platform that will allow us to again earn the right to grow in South Africa."
Bill Thomas, chairman of KPMG International, commented:
"KPMG South Africa is an important part of our global firm. 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."