RYK VAN NIEKERK: Magda Wierzycka, the chief executive officer of Sygnia Asset management, has announced that she has fired her auditor, KPMG. This followed some allegations that KPMG did not pick up on serious irregularities during its audits of Gupta-linked companies. The most pertinent of these is that KPMG did not pick up though its audit of Linkway Trading the R30 million earmarked for an agricultural development project in the Free State, which was diverted to pay for the infamous Gupta wedding in Sun City.

Magda, a few weeks ago you publicly warned that you would fire KPMG if they didn’t answer certain questions. May I assume now that they didn’t provide you with decent answers?

MAGDA WIERZYCKA: That’s quite right. Just because of the technicality. Actually the board of directors upset me a little, thus the firing. I merely met with KPMG and I asked the questions I wanted answers to, which they were unable to give me. And then I made the recommendation to our board of directors and our board of directors has now approved my recommendation. We obviously have to notify the JSE and issue a Sens on Monday.

But yes, we had a meeting with KPMG and we questioned them about Linkway, where a very clear case of money laundering happened, R30 million worth of taxpayers’ money being laundered to the company and spent on this lavish Gupta wedding.

But there were other issues. There was also the Oakbay listing, where an artificially-inflated valuation of the company at listing was being used to replace a loan from IDC – again taxpayers’ money – for shares with the company.

RYK VAN NIEKERK: Magda, what was your interpretation of KPMG’s position? Do you think they are taking this seriously enough? I phoned them and asked them for comment, and they basically said they are waiting for the ERBER investigation before they will make a decision whether they will comment or not. What exactly did you expect of them, and why did you then actually just pull the plug, or the board pulled the plug?

MAGDA WIERZYCKA: First of all, there are a few things. Yes, I got exactly the same answer, so I think they are taking it seriously because obviously it’s reputationally damaging to them. I also had to mention the fact that obviously the audit team that I dealt with in Cape Town is a team of the utmost integrity and they are not the people involved in the Gupta companies. But their answers were exactly that – that they are conducting an investigation and that they don’t have any answers as to those investigations…

My point on all of this was that until there were some explanations because, having delved into that, I also delved into the R23 million investigation at Sars, where they produced this report on the wrong procurement, a report which was covered in this claim that’s about if it’s not …why not see the light of day, which implicated someone I’ve got the utmost respect for, and that’s Pravin Gordhan. Again, I got some good answers of that.

The reality of it is that one fact remains indisputable, and that is that the money that was used to pay their fees was stolen from South African taxpayers. There is no debate about that. There’s clearly a debate about whether they, as auditors, have followed the rules of the game in terms of the audits that they have performed, and they have said perhaps they didn’t. They certainly didn’t follow the spirit. But the fees that they earned come from stolen taxpayers’ money – that’s a fact.

As a consequence, I would have expected a moral company to say: “We will take these fees, knowing that’s blood money, and we are going to donate that money to charity. We are going to donate this money to civil rights organisations fighting corruption.” But this blatant “we are investigating, we can’t comment” thing I can’t find as an acceptable answer, given the turbulent times we are living through, given how corruption has grabbed corporate South Africa and the public sector. That’s just completely inconsistent with the ethos of Sygnia.

RYK VAN NIEKERK: Did you ever engage the senior management of KPMG internationally?

MAGDA WIERZYCKA: Well, not internationally. My meeting was with the CEO of KPMG in South Africa.

RYK VAN NIEKERK: Do you think other companies should follow suit? Are you just quick on the draw or do you think there is a bit of complacency?

MAGDA WIERZYCKA: Look, I do know that obviously they are meeting with a lot of clients and a lot of clients have a lot of questions. I guess the actions of companies depend on their own feelings about what is happening in South Africa, and their own kind of moral compass. But I strongly believe that this issue transcends individuals. So, as much as I truly like the team that serviced Sygnia – I don’t have a single bad word to say about that team – the issues in South Africa at the moment are such that examples must be made of companies which were in any way complicit in this kind of wholesale looting of South Africa that is happening in front of our eyes, and is playing in technicolour in Gupta Leaks.

We need to make those examples. We need for those examples to be visible, so that other people are given the courage to stand up and do the right thing. So I do hope there are other companies that punish not only KPMG, because KPMG was guilty, at best, of omission.

But there are other companies like SAP, which seem to have paid bribes, and huge bribes. Those companies need to punished. And unfortunately we live in times where our prosecuting authorities are non-existent and are hiding, and it’s really up to civil society. Civil society is you and me. So it’s really up to people like us to take a stand and do what prosecuting authorities should be doing. That’s all I’m trying to do.

RYK VAN NIEKERK: But that could be a dangerous approach. I know everybody in South Africa is very upset with what seems to have happened, all the things that came out of the Gupta e-mails, but should we not give the authorities and maybe the international authorities an opportunity to actually do a thorough investigation, and then act only once we’ve seen the findings of the investigations?

MAGDA WIERZYCKA: The problem is that there are no investigations on the go in South Africa. The NPA and the Hawks should be investigating and prosecuting. There are so many cases that have emerged out of the Gupta Leaks. I actually had a consultation with one of the best legal brains in South Africa, one of the most senior counsels in South Africa, and she said to me that those e-mails constitute evidence that can be given in a court of law. So how much investigation is being made into whether money laundering happened?

There are so many instances that could be prosecuted today, and they are not even being investigated. So it’s very sad that we now have to rely on foreign agencies such the US Department of Justice, or the SEC, to punish South African criminals and South African corporates. That cannot be a satisfactory state of affairs for South Africa.

RYK VAN NIEKERK: Well, what does that mean, in your perspective, for clients of SAP and Software AG and even McKinsey, who have also featured in the Gupta e-mails, as you said earlier. Do you think those clients should also cut the cord?

MAGDA WIERZYCKA: One hundred percent. I think all the companies implicated in paying bribes to rent-seekers in order to secure government contracts are as complicit as the state-owned enterprises which take those bribes. And consequently they should all be punished. You have a choice of whom you do business with. So are you proud to sit around the communal table and play a phantom family that you are using suppliers who happily pay bribes in order to secure contacts? I happen to think they should be criminally prosecuted, and not rewarded with more business from corporate South Africa.

My belief – and it is a personal belief – is that all of those companies should be punished for what has happened, because that’s a deterrent to other companies. The impact on the bottom line and reputational impact are the biggest deterrents for corporates from repeating this in other instances.

RYK VAN NIEKERK: It sounds like a very good position to be in, but some companies are so heavily dependent on software systems. I know SAP plays a big role in many of the banks of South Africa, and many other big companies. So you think it’s feasible or even practically possible for them to do this?

MAGDA WIERZYCKA: No. I think it is impractical, certainly in the instance of SAP. Some things are easier to do than others. Replacing is easier to do than disengaging an entire systems platform. But then one needs to watch what the German parent company does and whether the people who are involved in the bribery and corruption are brought to justice.

And again, what does the company do from a moral perspective to make restitution for what has happened, because apologies are not enough. Contribution to social causes and poverty in South Africa is a goodwill gesture that would go a long way towards not rectifying what has happened, but at least paying attention.

So I do appreciate the fact that it’s a lot more difficult to fire SAP than it is to move auditors. But in the instance where it is difficult, pressure needs to be put on those companies, continuous pressure, by all their clients to get the right answers and to see that punishment is meted out to those who are implicated in the actual payment of those bribes.

RYK VAN NIEKERK: Magda, it also seems as if many local gatekeepers in the local economy have dropped the ball. In the case of KPMG, they didn’t pick up anything from their audit of Linkway, and then the banks also didn’t identify potentially fraudulent transactions quickly enough. Even the Reserve Bank didn’t put a stop to certain big flows of money to international bank accounts. What does that say of the local financial system?

MAGDA WIERZYCKA: I think the local financial system is slow in acting; certainly the banks – it’s a very good point – should have picked up the suspicious transactions. I think, though, they did pick up these suspicious transactions. I think they were very slow to act in terms of suspending the account. That should have happened earlier because there were a lot of money flows that were happening which should have raised suspicion.

I think the financial services industry in South Africa is very complacent. Our compliance has become complacent, and they are not paying as much attention as they should be paying. Hence we are very slow on the draw when it comes to that. I’m quite sure the Guptas are not the only people who are laundering money out of South Africa right now, as we speak. And I think a lot more attention needs to be paid to making sure that Fica is applied properly, that more monitoring takes place, that more money is spent on compliance.

And if you look at what has happened to the investment banks internationally, like Deutsche Bank, for example, Citibank, JP Morgan, Goldman’s – they were all found wanting in the compliance department post the financial crisis, and the only hiring that has happened in those banks has been on the compliance side. So this issue of lax compliance is a global issue which needs to be addressed because that is where most large-scale fraudulent activity happens. It’s not you and me stealing R100 – those are very, very large transactions which have their origins either in cash or in commodities like diamonds, which are then shipped out of the countries of origin – and they are so difficult to trace. To this day not all the money stolen in the Fidentia fraud has been recovered or accounted for. I’m sure there are some diamonds lying in some bank accounts.

RYK VAN NIEKERK: Did you engage any other leading South Africans in the private sector? Did you consult them in your decision or are you engaging with them now, maybe to ask them to follow suit?

MAGDA WIERZYCKA: I haven’t to date. I think that these are very individual decisions for each board of directors to make. I’m not sure that it’s appropriate for me. Of course, I have had informal chats, but informal chats are informal chats. So certainly what I have tried to do is bring to their attention that many CEOs of large companies, particularly, don’t pay that much attention necessarily to who their auditors are, and don’t read the Daily Maverick.

So certainly on an informal basis I have. But at the end of the day each audit committee and each large company has an audit committee and a chair of an audit committee, and that’s really the person. It’s not the CEO necessarily. It’s the chair of the audit committee that should be asking the right questions and then making recommendations to the board and making recommendations to the CEO.

I’m hoping that there are many chairs of audit committees who are looking at this and asking the questions.

RYK VAN NIEKERK: You know, we’ve had many senior private-sector individuals, CEOs, engage directly with government, yet it seems like you are the first CEO or the first board of a company to actually take action. You did say earlier you expect those boards to make the right decision, but do you think it will happen?

MAGDA WIERZYCKA: No. But I can always hope. Look, I think that the sad reality is that in South Africa in particular there are a lot of companies that are dependent on government contracts – be it in the financial services industry, or be it in any other service industry, and hence they are afraid to benefit from external shareholders, and they are afraid to make the noise because they potentially will lose lucrative government business. So I’m not implying that those are being bribed, but they are providing services to government, to municipalities, and consequently there is much less noise from the corporate sector than I would have expected.

But what I do expect of my fellow business leaders is to make some gestures. So, for instance, I cannot tell you how ashamed I am of companies which, when public marches take place, ask their staff to take leave as opposed to just allowing them to march. That’s just inexcusable to me.

And I have seen some comments from CEOs of large companies circulating which really kind of brings tears to your eyes; tears of shame. So I think that people need to stop being so complacent about what’s happening in South Africa. The business sector needs to realise that if we flatline in an economic recession, there is no job creation, there is no consumer spending, there is no demand for goods and services. There are only higher taxes, higher interest on that, fewer provision of basic services, and no dealing with what are electricity crises. And that’s going to impact each and every South African, including them.

And I think it’s only when you jolt people into that reality that potentially everyone will start taking kind of moral bankruptcy of our government a little more seriously and become a more vocal voice than business has been to date, because I am astounded by the deafening silence from the business sector.

RYK VAN NIEKERK: Thank you, Magda.