All KPMG partners - even those who have jumped ship - could be held liable for a potential claim of R1.89 billion following the firm's disastrous audit of VBS.
The firm has indemnity insurance, but it may not pay out in case fraud was committed.
Meanwhile, KPMG International will send foreign execs to South Africa to prop up the firm.
The already deeply troubled KPMG South Africa could be liable to pay a claim exceeding R2 billion because of its work on VBS Mutual Bank – and its individual partners could be personally liable for the money.
 
Last week, advocate Terry Motau recommended that the SA Reserve Bank and VBS' curators launch "an auditor's liability claim" against KPMG for damages. The same report found that at least R1.89 billion in "gratuitous payments" from VBS went to 53 individuals – not counting legal and other costs that have been mounting since the bank was placed in curatorship.
 
And much of that money, experts agree, could be sought from KPMG, which signed off on the VBS books.
 
While there is a limit on liability for advice work – an audit firm typically may have to pay back twice their fee – there is no limit on how much could be claimed back for losses due to audit work, a senior partner at one of the biggest audit firms in South Africa confirmed to Business Insider South Africa, on condition of anonymity.
 
And because KPMG is a partnership, everyone who was a KPMG partner at the time of the audit would be liable for the amount. This means that the many KPMG partners who have jumped ship in recent months could still face a claim.
 
KPMG South Africa has professional indemnity insurance to cover the liability. However, depending on the terms of the contract, the policy may not pay out if it was found that the KPMG partner committed fraud – and that is unequivocally alleged.
 
"I accordingly find that Malaba committed fraud," Motau summarised one of his findings, referring to former KPMG senior partner Sipho Malaba, alleged to have received more than R33 million from VBS irregularly. Malaba has slammed the report and may take legal action. 
 
Business Insider asked KPMG if its global parent company would fund a legal claim against it.
 
"KPMG South Africa has appropriate professional indemnity insurance to support the firm in the event a claim is made," said spokesperson Nqubeko Sibiya.
 
Asked if that insurance covers fraud by a partner, Sibiya simply referred to the same answer again.
 
If all the partners at a firm are involved in fraud, professional indemnity (PI) insurance will not cover a claim, Russell Kayton, of specialist professional indemnity insurance broker Picara, told Business Insider.
 
"The insured should always try and ensure that their PI insurance policy provides cover for fraudulent and dishonest acts by a partner / director of the practice which ensures that the innocent partners / directors are protected. Some policies, however, do not provide this cover while others may only provide cover for an employee, not a partner or director."
 
By law, auditors are protected from liability claims up to the point where they are proven negligent. After that, say if a firm was involved in brazen and large-scale fraud by way of its senior partner, various legal and auditing experts concur, a claim against an audit firm becomes a normal civil matter – and the size of the claim is unlimited.
 
There have been various attempts to set limits to that liability, including by KPMG itself. In 2005, in comments on what was then the Auditing Profession Bill, KPMG South Africa warned that it was "becoming increasingly difficult for auditors of major corporations to fully insure against their exposures".
 
"Unlimited liability results in auditors being the easy target to sue even when corporate failures are unrelated to any audit failure.," it said.
 
KPMG argued that an audit company's liability should be limited to "an agreed multiple of fees" or by way of "ring fencing of liability to a corporate entity as appropriate" – which would protect individual partners.
 
KPMG's future:
The VBS report findings, and the recommendation that National Treasury, the curator of VBS and the Prudential Authority should claim damages from KPMG, may be the “death knell” of KPMG South Africa as we currently know it, one senior audit professional predicted.
 
The person said that it may make sense for KPMG to completely dissolve the partnership of KPMG South Africa, and constitute it anew, with new partners and new staff.
 
Sibiya confirmed to Business Insider that KPMG International will nominate a number of senior KPMG partners from across the international network to serve on the KPMG South Africa board and in executive positions, as well as in senior client service roles.
 
Asked if KPMG was contemplating exiting South Africa, or closing down its current partnership to create a new one, spokesperson Sibiya said: "KPMG is firmly committed to South Africa and still has much to offer the country and the business community."
 
 
Source: Business Insider
The South African economy is in the midst of its longest business cycle downturn in more than 73 years, according to the Reserve Bank, and things aren't looking particularly favourable right now either.
 
The adverse business climate has impacted the stock market too this year, seeing listed companies declining year-to-date on the whole. 
 
According to analysis done by Corion Capital, a boutique hedge fund manager, 60% of listed counters had depreciated by the end of September, with more than a third slumping in excess of 15%. Only 16% of the stocks in the All Share Index gained more than 15% this year to end-September.
 
Topping the list of poor performers are Tiger Brands, off more than 40%, two healthcare companies, Aspen and Mediclinic, MTN, and Woolworths.
 
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
And the sharp sell-off has continued into October, with only the Resource Index managing to gain ground last week and the Banks Index hardest hit, losing 7%.
 
Garreth Montano, a director of Corion Capital, puts the bout of negativity swamping investor sentiment this year down to:
 
- Low GDP growth. South Africa has unfortunately missed out on a resurgence in the world economy and has been left well behind in terms of GDP growth. The reasons behind the sluggish performance of the domestic economy can be debated at length, but many view the Zuma era as a large contributor to the underperformance of SOEs, heightened corruption, lack of job creation and lack of investor confidence in attracting foreign direct investment.
 
- The land debate and mining charter have further dented prospects of new investment, which would aid growth as well as assist in creating new jobs. All of which are dearly needed.
 
- Many commentators believe that president Ramaphosa’s hands are tied until general elections, and the righting of the ship and benefits to the economy will start gaining momentum once there is more clarity around the land issue and elections are behind us.
 
To add to these internal challenges, emerging markets, as a whole, have had a difficult 2018, being largely led down by the crises in Turkey and Argentina. Trade wars have also had a negative effect, creating concerns about a drag on emerging markets exports due to potential for tariff impositions by the US, Montano says.
 
Locally the negative sentiment towards broader emerging markets has played out in large outflows fromn our bond market, as well as foreigners selling off equities, says Montano. Last week almost R6bn alone was taken out of South Africa by foreign investors.
 
These disinvestments have also played out in currency markets, driving the rand dramatically lower to more than R15 to the dollar at stages compared with its peak of almost R11.50 in February this year.
 
 
Source: Business Insider
After 18 years, Australia's Monash University will be pulling out of South Africa, selling out to JSE-listed education group Advtech in a R340 million deal.
 
Monash South Africa was registered in 2000, and markets itself as a local provider of degrees with international brand recognition. Its Johannesburg campus has a capacity of 6,500 students and features a number of student residences, popular among students from other African countries.
 
But the Monash name will disappear from that campus, its soon-to-be new owners say.
 
Advtech on Tuesday said it would pay R343 million for Monash South Africa, plus whatever cash on hand and working capital adjustments on the effective date of the acquisition.
 
That is very close to the R330 million net asset value Monash SA reported at the end of 2017.
 
Monash had been looking for a partner to take over the South African institution for some time, Coughlan says, and Advtech's track record gave Monash comfort that existing students would be well catered for.
 
Monash is Australia's biggest university. It also has a campus in Malaysia, and centres in India, China, and Italy.
 
Advtech is keen to roll out some of the registered Monash qualifications at its other tertiary institutions, which include Vega, Rosebank College, and Varsity College. Monash this year launched the first Bachelor of Engineering programme at a private institution reviewed by the Engineering Council of South Africa, and its MBA and public health qualifications are a good fit for the company, says Coughlan.
 
Advtech recently bought Oxbridge Academy and The Private Hotel School. Its fellow listed tertiary education group Stadio plans to create a "multiversity" for some 100,000 students in South Africa, and is looking to set up medical and engineering schools in the next three years.
The South African economy is in the midst of its longest business cycle downturn in more than 73 years, according to the Reserve Bank, and things aren't looking particularly favourable right now either.
 
The adverse business climate has impacted the stock market too this year, seeing listed companies declining year-to-date on the whole. 
 
According to analysis done by Corion Capital, a boutique hedge fund manager, 60% of listed counters had depreciated by the end of September, with more than a third slumping in excess of 15%. Only 16% of the stocks in the All Share Index gained more than 15% this year to end-September.
 
Topping the list of poor performers are Tiger Brands, off more than 40%, two healthcare companies, Aspen and Mediclinic, MTN, and Woolworths.
 
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
 
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
 
And the sharp sell-off has continued into October, with only the Resource Index managing to gain ground last week and the Banks Index hardest hit, losing 7%.
 
Garreth Montano, a director of Corion Capital, puts the bout of negativity swamping investor sentiment this year down to:
 
- Low GDP growth. South Africa has unfortunately missed out on a resurgence in the world economy and has been left well behind in terms of GDP growth. The reasons behind the sluggish performance of the domestic economy can be debated at length, but many view the Zuma era as a large contributor to the underperformance of SOEs, heightened corruption, lack of job creation and lack of investor confidence in attracting foreign direct investment.
 
- The land debate and mining charter have further dented prospects of new investment, which would aid growth as well as assist in creating new jobs. All of which are dearly needed.
 
- Many commentators believe that president Ramaphosa’s hands are tied until general elections, and the righting of the ship and benefits to the economy will start gaining momentum once there is more clarity around the land issue and elections are behind us.
 
To add to these internal challenges, emerging markets, as a whole, have had a difficult 2018, being largely led down by the crises in Turkey and Argentina. Trade wars have also had a negative effect, creating concerns about a drag on emerging markets exports due to potential for tariff impositions by the US, Montano says.
 
Locally the negative sentiment towards broader emerging markets has played out in large outflows fromn our bond market, as well as foreigners selling off equities, says Montano. Last week almost R6bn alone was taken out of South Africa by foreign investors.
 
These disinvestments have also played out in currency markets, driving the rand dramatically lower to more than R15 to the dollar at stages compared with its peak of almost R11.50 in February this year.
 
 
Source: Business Insider
The world’s tenth largest roof solar system debuted at the Mall of Africa in Gauteng on Thursday morning.
 
It is also the world’s largest mixed-use integrated solar power-diesel hybrid solution, Attacq, the mall’s owner, said in a statement. 
 
The 4,755kWp installation covers most of the centre’s roof space, an area of approximately 45,000m² or 4.5ha.
 
The 7,800MWh energy generated annually will be used to power the Mall’s daily operations.
 
Attacq said the solar power will alleviate pressure on the national power grid.
 
Michael Clampett, Head of Retail Asset Management at Attacq, said the solar/diesel system will save 8,034 tonnes of CO2 annually. The average household produced 80 tonnes CO2 annually.
 
The solar system also created 50 temporary jobs, and two permanent jobs.
 
 
Source: Business Insider

Johannesburg has emerged as the most popular destination city in Africa in 2016, followed by Cape Town, according to the annual Mastercard Global Destination Cities Index.

Johannesburg welcomed 4.57 million international overnight visitors in 2016 – an impressive 24 percent increase on the previous year’s 3.69 million visitors. Cape Town rose from third place in 2015 to become the second most popular African destination city in 2016 with 1.52 million visitors. Lagos (1.04 million), Casablanca (961 694), and Cairo (820 959) rounded out the top five African cities, while Durban remained in sixth place, attracting 758 057 international overnight visitors.

Johannesburg also topped the rankings in Africa in terms of international visitor expenditure, with travellers spending US$2.56 billion in 2016. Shopping accounted for the largest percentage of visitor spend, followed by accommodation and dining out.

“The City of Gold has shown the highest year-on-year growth in visitor numbers of all the African cities ranked in the 2016 index, illustrating that its mix of shopping, iconic attractions and tourism offerings is clearly hitting the mark with international travellers,” says Anton van der Merwe, Head of Market Development at Mastercard, South Africa. “Significantly, Jo’burg also reported a four percent increase in international expenditure from 2015 – much greater than South Africa’s GDP growth of 0.3 percent in 2016. This indicates that Johannesburg is well positioned to be an engine of broad economic growth for the country.”

The Mastercard Index of Global Destination Cities ranks the world’s top 132 destination cities in terms of visitor volume and spend for the 2016 calendar year. It also provides insight on the fastest growing destination cities, and a deeper understanding of why people travel and how they spend around the world. The 13 African cities ranked in the Index are Johannesburg, Cape Town, Lagos, Casablanca, Cairo, Durban, Accra, Dakar, Entebbe, Tunis, Nairobi, Maputo and Beira.

Some 78 percent of Johannesburg’s international overnight visitors in 2016 travelled from the Middle East Africa region. Mozambique was the number one country that sends visitors to Johannesburg, accounting for 1.02 million visitors or 22 percent of the total. The rest of the top five origin countries were Zimbabwe (841 000), Lesotho (493 000), Botswana (315 000) and Swaziland (215 000).

According to the City of Johannesburg, the Index rating affirms Johannesburg’s position as the major economic and cultural hub in Africa.

“Travel and tourism are increasingly important pillars of Johannesburg’s economy, with growth in this sector creating jobs and prosperity for our residents,” says City of Johannesburg Executive Mayor Councillor Herman Mashaba. “Johannesburg’s malls, restaurants, trade conferences and expos, and sporting and cultural events add up to a compelling tourism package that continues to attract international visitors – both from neighbouring African countries and abroad.”

Cape Town rises up the ranks

Cape Town and Durban are ranked number two and eighth in terms of expenditure in Africa, with international visitors spending US$1.2 billion and US$314 million respectively.

The Mother City attracted a larger proportion of long-haul visitors than Jo’burg, with travellers coming from the United Kingdom (335 000), United States (218 000), Germany (217 000) and the Netherlands (96 000). Cape Town’s highest number of African visitors came from Namibia (144 000). Durban’s top three countries of origin were Swaziland (295 000), Lesotho (52 000) and Zimbabwe (49 000).

The world’s top destination cities

Bangkok remained the top-ranked destination city by international overnight visitor arrivals with 19.4 million visitors in 2016, followed by London (19.06 million), Paris (15.45 million), Dubai (14.87 million) and Singapore (13.11 million).

From a spending perspective, Dubai tops the ranks with the highest international overnight visitor spend, amounting to US$28.50 billion in 2016. New York (US$17.02 billion), London (US$16.09 billion), Singapore (US$15.69 billion) and Bangkok (US$14.8 billion) round out the top five.

“We are seeing more people than ever visiting cities for business or leisure. At the same time, we know that people expect their experiences when traveling to be both seamless and personal,” says van der Merwe. “The call to action is clear. Cities that apply technology to simplify services and connect people with their passion points can become true destination cities and realize the benefits of increased visitors and greater spending.”

 

Like it or not, we measure the success (or failure) of cities according to broad principles of urban culture inherited largely from the west. This includes quantitative data: infrastructure, transportation, access to health care, education, amenities and so on. Harder to measure, but no less important, are “other” factors like a sense of belonging, community, identity and history.

What makes a good city? Or what makes a city “good”, as opposed to “bad”? In the past 30 years or so, measuring urban success has become an industry in its own right. There are a host of companies willing to answer that question. They use a mixture of factors that include political stability, economic performance, environmental issues, safety and security, transportation and public services. Add to it more nuanced indices like inclusion, diversity, multiculturalism and choice.

Perhaps unsurprisingly, in 2017, European cities dominated the top 20, with Singapore, Tokyo, Melbourne and Auckland also in the mix. African cities are always in the bottom quartile of every survey, from Mercer’s Quality of Life Index (QoL) to the UN’s World Cities Report. Johannesburg, Cape Town, Port Louis and Durban are the continent’s highest-ranked cities. In Mercer’s 2016 QoL Index, Accra, the capital city of Ghana, Africa’s first independent nation, is at # 166, one slot ahead of Riyadh and one behind Cairo.

Partly because Accra and Johannesburg are the only two African cities I can claim to know in detail, and partly because they represent two very different versions of a contemporary African city, this article looks at their slow climb up the urban food chain.

Cities of the same generation

Accra and Johannesburg are roughly the same age. Gold was discovered just outside present day Johannesburg in 1884, triggering the rush that founded the city. The British declared Accra the colonial administrative capital of the Gold Coast in 1877, both events occurring within a decade of each other.

Today, metropolitan Johannesburg’s population is around 5 million, whilst Accra’s is just over 2.5 million. Johannesburg’s brand identity, prominently displayed in its media image, is of a “world class African city”. Accra makes fewer claims to “world class” status, but in 2016, was awarded the title of Africa’s “most expensive city”.

Companies like Mercer Consulting, Moody’s, Fitch, Standard & Poor’s, CNNMoney.com and PricewaterhouseCoopers cover almost every conceivable inch and index of global urbanity. It’s mostly according to the indices covered above. Yet the lived, daily life experience of millions of city-dwellers, particularly in sub-Saharan Africa, is hardly, if ever, captured by this data. So who is this data actually for? There’s an important clue on Mercer Consulting’s website:

These rankings indicate differences in quality of living factors affecting expatriates in popular assignment destinations. These rankings shouldn’t be used as the basis for determining hardship premiums, as many complex and dynamic factors must be taken into account.

Among the indicators used in determining the “value” of a given global city, the price of groceries, transport, utility bills, restaurants and rent are seen as benchmarks. But this says next-to-nothing about wages, recreation (other than restaurants), local class structures, social patterns, language and even “local” culture, most commonly described by expatriates as “traditions”.

Multinational expatriates may not be the site’s only users, but they’re certainly its target market. Presumably, then, the true purpose of the index is to work out how much to pay the average Briton, European or American in far-flung exotic or dangerous locations.

Booming economies

Ghana is classified by the World Bank as a lower middle-income economy with a per capita GDP of $1,100.

In principle, citizens of Accra, Kumasi and Takoradi (Ghana’s three largest cities) should be entitled to expect at least a reasonable quality of urban existence in line with their own aspirations and ambitions. One of the least talked-about issues in African city-making discourses, however, is precisely what these aspirations and ambitions are, should be … or even could be.

Expatriate expectations (and their salary scales) hardly ever take local realities into account. For your average Ghanaian, going to a funeral or visiting extended family relatives at the weekend may be infinitely more socially rewarding than sitting in an air-conditioned restaurant a deux, listening to piped musak.

Shopping for food in an open-air market where prices can be negotiated may be more convenient than going to an impersonal mall. Yet funerals and roadside markets don’t feature anywhere on any urban index. Given Accra’s current position (# 166), alongside the vast majority of other African cities, whatever local aspirations and expectations may be, they are neither being articulated nor met.

At the “other” end of the scale is Johannesburg, an African city unlike any other. Narrowly within the world’s top 100, it’s a city undergoing enormous changes, although, like Accra, the pace of transformation is often perceived by its citizens to be too slow.

A man selling coconuts on the streets of Accra. Legnan Koula/EPA

By and large, South African cities are closer in form, behaviour and appearance to their “world-class” counterparts – or at least those portions of the city that conform to the stereotype of ordered, well-organised and consensual urbanity. Informal settlements, squatter camps, inner cities, townships and rural landscapes are markedly different for complex historical, political and economic reasons.

Largely due to its demographic make-up, there’s no real expatriate culture in South Africa (with the possible exception of Cape Town, which holds large numbers of non-resident Europeans and Americans). In marked contrast to Accra, expressed as a percentage of the total urban population, middle-class Jo'burgers enjoy relatively easy access to a comfortably bourgeois lifestyle without the input or demands of expatriates.

The gentrification of inner city Johannesburg has prompted much debate, including outcry. But the truth of the matter is that in a context where race and class have historically meant the same thing (you’re poor because you’re black and black because you’re poor), it’s neither possible nor productive to talk about gentrification in the same way as it’s in London, New York or Paris.

Some of the up-and-coming inner city neighbourhoods on which architects and urbanists pour such scorn are the few – if not only – places where young South Africans of all races freely mix. Yes, they do so on the basis of bourgeois values and common class interests, but what’s the alternative? Segregated cities? South Africans have had nearly two centuries of those: forgive a foreigner’s assumption, but I’m guessing the answer is “no”.

Up the urban food chain

Both Accra and Johannesburg have some way to go before they make it onto anyone’s top 20. Both cities have considerable challenges to overcome, not least the dramatic and desperate gap between rich and poor, haves and have-nots (which, certainly in most African cities, includes the gap between locals and expatriates).

But inequality is not a uniquely African problem, neither is intolerance, immigration and displacement. As we’ve seen only too dramatically in the past year, these are issues that continue to confound and confront cities across the globe. Developing more nuanced tools and yardsticks to measure the health and wealth of African cities may be more useful to the rest of the world than we currently acknowledge.

Lesley Lokko, Associate Professor of Architecture, University of Johannesburg

This article was originally published on The Conversation. Read the original article.

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