KPMG South Africa Expects 400 Job Cuts Amid Gupta Scandals

(Bloomberg) -- KPMG LLP’s South African unit sees 400 people leaving the embattled company as it closes some regional offices and focuses its operations on four cities across the country.

The auditor has been embroiled in a trio of corruption scandals and has lost some of its biggest clients this year, including Barclays Africa Group Ltd. and South Africa’s Auditor-General. It’s being investigated by two auditing bodies in the country over work for entities linked to the Gupta family, who have been accused of using political connections to siphon off state funds.

KPMG will now have about 130 partners and 2,200 employees in South Africa, compared with 3,400 a year ago, the company said in an emailed statement on Monday. Consultations to reduce headcount have already begun and should be wrapped up by the beginning of August, Chief Executive Officer Nhlamu Dlomu said on a conference call. “It’s a difficult day for us,” he added.

The Guptas are friends of former President Jacob Zuma and have been accused of influencing government appointments and the awarding of state contracts. Zuma and the Guptas have denied wrongdoing. Two months ago another scandal erupted when two KPMG partners resigned after they were faced with disciplinary charges related to work done for VBS Mutual Bank, which collapsed in March. Although the auditor responded by saying it would perform background checks on all staff every two years and set up a hotline so that any misconduct could be reported, it continued to lose clients.

KPMG will now operate from four regional hubs in Johannesburg, Cape Town, Durban and Port Elizabeth, the firm said. Offices in Mbombela, Polokwane, East London and Bloemfontein will be closed and the Pretoria and Johannesburg operations will be combined. The job cuts will focus on internal administrative staff and about half of the advisory business, Dlomu said.

Last year, KPMG South Africa appointed nine new executives to restore trust in the auditing firm as clients distanced themselves over its involvement with the Gupta family and what it called an unreliable report on the country’s tax authority.

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