The fallout from the ongoing corruption scandal in South Africa continues to expand. In February, now-former President Jacob Zuma resigned from his role.  The highly influential and controversial Gupta family is under investigation for its role in corruption. And now, the negative consequences for some of the more pedestrian players are becoming more serious. 

KPMG’s woes began when it gave a clean bill on audited financial statements of Gupta family companies. KPMG had eight partners leave over these audits and brought in partners from outside the country to try and salvage their work in South Africa. However, it now appears the KPMG imbroglio goes much deeper. It was recently revealed that two partners involved in an audit for VBS—a mutual lender that was placed into receivership (called curatorship in South Africa)—held financial interests with the financial institution. VBS is alleged to broken public financial laws when lending money to former President Zuma. The KPMG audit of VBS gave the financial institution a clean audit report. 

The fallout to KPMG was swift as the firm was banned from auditing public institutions in South Africa. South Africa auditor-general Kimi Makwetu said the ban was based on “significant reputational risk” associated with the auditing firm. One commentator, Pan-African Research chief executive Iraj Abedian, went further in noting, “The company is no longer fit to do audit work at any meaningful scale.”

This final comment brings up the worldwide danger to KPMG. One report noted the following companies were assessing their relationship with KPMG: “Absa, African Oxygen, Bidcorp, DRDGold, Esor, Gaia Infrastructure Capital, Interwaste Holdings, Investec, Lonmin, Randgold & Exploration, Sibanye Stillwater, Vunani, and Wesizwe Platinum”. There are other entities outside of South Africa that are reviewing their relationships with KPMG.

The unraveling of KPMG in South Africa drives home a key point for any company that has done business in South Africa during the Zuma presidency: You need to review all of your business relationships to determine if there are any points in which you have risk of FCPA violations. In addition to the direct financial pain you may well feel, the attendant reputational fallout could cost you quite a bit more.