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

It is common when municipal workers go on strike in South Africa to resort to upturning garbage cans and strewing litter around city centres. Their message is clear: we may be at the bottom of the social heap, and you may think we are human trash, but by God, society needs us, and if you don’t listen to us and give us a living wage, we’ll make you pay for it.

Trashing a city is more than a demand for a better wage. Often, it’s also an expression of rage against employer arrogance or unaccountability, and a demand for basic respect. Such tactics are manifestly expressions of class struggle and class power, workers resorting to their most effective weapon. While they are unlikely, in extremis, to be able to confront the armed might of the state, they may well be able to make city managers and the general population wilt in the face of the stink and mess of uncollected garbage.

Yet such actions are indicative of a discordant society, and a culture of littering can tell us a lot about a society’s ethos.

Littering is an act of individual or group disposal of waste at the public expense in terms, not only of the cost of public collection, but also at worst, of public health, and always in terms of public enjoyment of the environment. It prioritises the private interest over the public, and places the burden of collection or consequences of litter on the collective.

Doubtless too, it is expressive of class, income, status and power. It is no accident that in most – if not all countries – better-off residential areas are likely to be freer of litter than worse off localities. They have more public clout and more private resources.

Littering tells us a great deal about community spirit. It is surely no accident that the Scandinavian countries, which regularly top the World Happiness Index, are relatively litter free. Their governments have long prioritised the collective interest and there is less social inequality than in similarly industrialised nations.

Industrialised countries such as Britain and the US are rich, but they’ve embraced austerity and encouraged rampant consumerism, making them sadly notorious for being far more publicly dirty, as captured by Kenneth Galbraith’s (1958) critique of “Private Affluence and Public Squalor”. South Africa has similarly developed a culture of externalising private costs onto the public, a culture of not caring about the environment which has been emblematic of the country’s mining industry for more than a century.

Public interest

South Africa is a country still deeply divided along lines of race, class, and geography in which there may be a public, but a limited sense of “public interest”. It’s a country where the needs of the better off were historically always prioritised over those of the poor.

For example, the expansion of the road system was accompanied by the massive expansion of white suburbia from the 1960s, where tellingly, pedestrians – many of them black domestic workers going to and from work – were denied pavements and left to walk in the road. Because the white inhabitants of suburbia were ratepayers, and because they employed domestic labour to tend to their verges, they enjoyed a generally litter free environment. The scholarship is not available to tell us about the state of litter and waste in the townships at that time, but we may guess it was distressingly different.

Johannesburg Mayor Herman Mashaba, second from left, joins the city’s Are Sebetseng (Let’s work) cleaning campaign. Enoch Lehung

Today, the South African environment is pockmarked by the detritus of mass consumption. The culture of takeaway culture is also the culture of throwaway, and if there is no litter bin available, or if it’s full, too bad. It’s just easier to dump. So, what if it adds to the mess? Does anyone really care about the one more bottle or can lying on the ground?

There are worries, as there should be, that the appalling littering along South Africa’s highways and the litter to be found even in many of South Africa’s beauty spots, is a threat to our tourist industry, and that in turn, means fewer jobs (let alone less general enjoyment). Yet the problems resulting from poor disposal of waste run far deeper.

Yes, the fast food industry and the supermarket chains, which have a fetish for unnecessary packaging, have much to answer for. But the externalisation of production costs onto to the public is hard-wired into South African industry.

South Africa is a country whose industrial origins lie in mining, and mining systematically produces massive waste and pollution which often has hugely detrimental effects on the environment and public health. This culture continues today, sadly encouraged by lax governmental environmental supervision and excessive concern for profits, investment and private gain.

“Littering” by individuals is merely the expression of a far wider selfish – and publicly, costly - culture.

Addressing the issue

There are no great mysteries about how to address the issue of litter. What is needed first is the political will. This in turn requires the recognition of the importance of the problem.

There is more at stake than what many people might consider to be merely a middle class distaste for littering and general physical untidiness. Indeed, any presumption that middle class people have a greater dislike of litter than working class people or the poor needs itself to be questioned. After all, poor people bear the brunt of the problem. Where there is litter, there is filth, and where there is filth, there is disease.

Political will must be backed up by public resources, and all the paraphernalia of waste collection – from collection lorries, appropriate waste sites and disposal mechanisms, and litter bins. So much is obvious. Yet what is also required is far greater effort by government and ordinary citizens to curb the waste encouraged by excess packaging.

South Africa’s recycling industries – providers of thousands of jobs in the informal sector – need to be backed up by greater requirements imposed on retailers to provide collection points for plastic, cans, bottles and so on. The lack of effort by municipalities to encourage recycling by requiring householders to sort their waste into categories is scandalous, especially in middle class, high consumption areas where this would be easy to implement.

Legislation to curb use of plastic is spreading around the world, and South Africa should not want to be left behind.

A cleaner environment, cleaner air, cleaner towns and cities, needs to be placed firmly on the public agenda.

 

Roger Southall, Professor of Sociology, University of the Witwatersrand

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

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