With the scalp of Bell Pottinger already under their belt, the same forces which brought down the international PR company are now after bigger game.
KPMG, which is now being referred to as a “four-letter word” in South Africa, is first up, followed by McKinsey and maybe SAP after that – any company used by the toxic Gupta brothers, close friends of the president Jacob Zuma, to add respectability to aid their plunder of state funds.
They don’t come any bigger - and the damage won’t be contained at the South African borders.
This is world-wide stuff, with KPMG potentially facing the same kind of melt-down as Arthur Andersen did in 2002. Back then, Andersen fired the partner in charge of auditing the Enron Corporation, admitting it had ordered the destruction of thousands of email messages and documents after it learned the US securities and exchange commission was investigating the Enron accounts.
But it was too late. Within months Andersen, which traced its originals all the way back to 1913, had gone, a huge international business brought down by one rogue client and one greedy partner (who later became the star witness for a criminal prosecution of the firm) in its Houston office.
KPMG’s reaction in South Africa has been along similar lines – and also too late. Last week, admitting that its work for the Guptas “fell considerably short of KPMG’s standards”, it fired eight partners, including its local chief executive and chairman.
That, however, is not going to do it and its many critics, including the opposition leader Mmusi Maimane, are demanding a lot more. Headlines in the South African press in recent days have turned vicious: “Now Gupta Bell tolls for KPMG”, and “How to deal with KPMG: throw them out”.
On Friday the firm went a stage further by confessing it had ignored “red flags” and had been “aware of, but ignored, information which put the Guptas’ integrity into question".
It was also, it added, withdrawing its hugely controversial report into a so-called “rogue unit” of the South African Revenue Service (SARS), which resulted in untold damage, including the resignation of senior SARS officials and huge anguish to its former head, and later finance minister, Pravin Gordhan.
Mr Gordhan, a man of rock-ribbed integrity (rare in today’s ANC leadership), has demanded that KPMG admits its complicity in “state capture” and has accused the Guptas of “stealing” 100 billion rand (Dh27.57bn) of government funds which they could not have managed without its accounts being signed off by KPMG. He is now considering legal action against the firm and two regulatory bodies are also carrying out investigations that could have very serious consequences for its future.
SARs, which now claims it was duped by KPMG’s report on the “rogue unit”, is formally taking its complaints to the statutory bodies, both local and international, and has demanded that KPMG is blacklisted for further government work – something which has never happened before.
In the meantime the company is leaking clients and will lose a lot more before this scandal has run its course. Companies across the country have this week called emergency meetings of their audit committees to consider what to do next.
The audit committee of Investec meets on Wednesday to discuss whether it should sever a 20-year relationship, but I think we already know the answer.
Investec was one of the first clients to turn on Bell Pottinger and its chief executive, Stephen Koseff, has been critical of KMPG's failure "to conduct themselves in an ethical manner". One of his own senior staff was more explicit when he told the Financial Times: "I expect [Investec] to sever ties with KPMG. KPMG is compromised and cannot expect to carry on business as usual as an auditor."
Other major South African banks are adopting a wait-and-see attitude but basically KPMG is finished in South Africa. Its big task now is to stem the damage there.
Arthur Andersen was, for decades, one of the most respected names in the accounting world, boring but utterly reputable. But in the 1990s, an analysis of the Enron failure concluded, “the firm embarked on a path that valued hefty fees ahead of bluntly honest bookkeeping, eroding Andersen's good name”.
Its collapse, in the way no other scandal did, galvanised a discussion in the accounting profession, among regulators and within Congress over the future of the industry. After Enron it became the subject of a US justice department investigation, numerous congressional inquiries and lawsuits from shareholders - who lost everything - over its stamp of approval on Enron's books.
Is it too far-fetched to draw the same analogy with KPMG’s current plight? I don’t think so. Bell Pottinger was basically brought down when it was thrown out of the UK PR body which regulates the industry. Formal complaints about KPMG, already under scrutiny from the local regulatory bodies, are also winging their way towards the international agencies which regulate these matters. Its South African activities have attracted world-wide attention.
The Financial Times has run stories on KPMG's South African woes three days in a row, and The Wall Street Journal has not been far behind. Rival accounting firms are already pitching for their international clients.
I wonder will the name KPMG still be around a year from now? Arthur Andersen – and Bell Pottinger – have illustrated just how fast a reputation can disappear. KPMG is on a slippery slope.