Here comes the money

Much like prostitution or drug dealing, accounting is an ancient, venerable profession. Much like mainstream religions and superhero comics, it has its own elaborate origin story. In 1494, Luca Pacioli finally completed his civilisation-altering Summa de Arithmetica, a Renaissance-era masterpiece that helped introduce double-ledger accounting to the dark art of financial management. Where merchants had previously consulted wizards, astrologers and sangomas on how best to keep their books, they now had at their disposal a simple, inviolable axiom: “For every credit in a ledger, there must also be a debit.”

As we leave Enlightenment rationality in the rearview mirror and careen into a re-upped age of magick and occultism, it shouldn’t be surprising that the basic tenets of accounting – the credit/debit dichotomy – now resembles a tangle of sweaty serpents rutting their way through an orgy. Enron, Lehman Brothers, Steinhoff, the Guptas: tricky accounting has ripped open the membrane of trust on which the entire financial system is premised.

“Although economics is cloaked in the rhetoric of science, the modern economy runs on faith,” noted the economist and academic Richard Norgaard. “The economy, in other words, really is the world’s greatest faith-based organisation.”

It’s currently a big, fucking, mess.

Leaving aside the rest of the world for the moment, South Africa’s auditing and accountancy professions are at their lowest point since the birth of democracy. The faith has not just temporarily evaporated: rather, the great God of oversight and accountability is dead, perhaps never to be resurrected. This is in no small part because the State Capture phenomenon was facilitated, enabled and underwritten by the blue-chip auditing and consultancy firms that comprise the Big Four: Deloitte, PricewaterhouseCoopers, Ernst & Young, and KPMG. We should also not ignore the staggering variety of bad behaviour perpetrated by smaller players like Nkonki and Grant Thornton, followed by several bottom-feeding rats and mice about which the less said the better.

Before I’m tied to an ergonomic office chair and pelted with solar calculators, I’m willing to acknowledge that there are many individual accountants and auditors in the country who aren’t bent, and there are occasions when even the Big Four refused to sign off on some piece of outrageous financial Kabuki theatre. But those honest men and women exist in a superstructure that is rigged to avoid transparency and disclosure, one that has undermined the foundations of our political economy. Perilously, it has opened up space for industrial-grade crooks like Jacob Zuma to worm his way back into viability.

At the core of this meltdown is an organisation called the South African Institute of Chartered Accountants (Saica), which along with the mind-bogglingly negligee Institute of Internal Auditors South Africa (IIASA) and a range of other oversight bodies, is charged with watching the financial sector’s watchmen. This Tuesday, Saica is scheduled to hold its annual general meeting, which promises to be the most contentious in the association’s history. There is, of course, the issue of Saica’s abject awfulness. But more specifically, there is a firebrand academic, commentator and chartered accountant named Khaya Sithole, who is at the centre of dispute that could flush what’s left of the association completely down the toilet.

In a profession that prefers grey suits and polite corporate doublespeak, Sithole has long been a bomb thrower. He’s a Fallist in good standing, Secretary General of the Advancement of Black Accountants in Southern Africa (Abasa), and a renegade ANC youth leaguer. (He’s 67. Just kidding.) Most of all, he’s proved a perceptive critic of the contradictions that define the South African financial phantasmagoria. Sithole is Saica member #09105040 (no word whether he has a barcode tattooed on his neck), and between 2014 and 2017, in his twin capacity as a senior accountancy lecturer at the University of Witwatersrand, he was programme director of Saica’s Thuthuka Bursary Fund, a venture created to churn black and coloured accountancy students through the Wits sausage grinder.

Earlier in 2018, the association contended that Sithole had unlawfully granted funding to 129 students by fraudulently employing a Thuthuka Bursary Fund letterhead and a colleague’s electronic signature. On 22 June, he faced a disciplinary hearing for breaching Saica’s codes of conduct.

Wait, Saica has codes of conduct?

The only other Saica member currently facing disciplinary measures is former Eskom CEO Anoj Singh. Yup, Anoj Fucking Singh. That’s some serious company. Of all the Saica members, many of whom have been embroiled in catastrophic and legendary acts of malfeasance – stand up, Markus Jooste! – Sithole and Singh are the only two in the dock.

Predictably, the hearings last Friday descended into D-grade South African performance art – chanting by Abasa and ANC Youth Leaguers, alleged death threats against Saica members, heightened security, the usual stuff. But in the lead-up to Saica’s annual general meeting, it’s worth asking: is it Sithole who sits in the dock? Or is it in fact Saica that faces the more substantial, and ultimately more damning, accusations?

There goes the money

Khaya Sithole hates Saica. Saica hates Khaya Sithole. How’s that for a perfectly balanced credit/debit ledger?

Over the course of 2017, Sithole argued that the association should be far more antagonistic towards the Big Four, and later warned that Saica was in no position to properly parse the Gupta/KPMG nightmare, because it was in effect designed not to censure its members, but to defend them.

“Firstly, in spite of what Saica thinks of itself, it is in reality nothing more than a glorified members network whose members pay an annual membership fee based on the idea that there is some value in being associated with the brand,” Sithole wrote. “But more crucially, the very idea that Saica could do anything independent relating to KPMG is simply laughable.”

Why might that be? Well, guess who audits Saica?

KPMG.

And guess which firm they replaced?

The until-recently Gupta-second-hand-ownded collaborators, Nkonki.

Amazingly, Saica continued to insist that it could without conflict of interest engage in an independent investigation into their own auditors. This is so screwed up that it’s like washing down three Clonazepam with a flagon of ayahuasca. But still, Saica insisted that this status quo was as good as things got. Integrity was baked into the system or some such bullshit, and just because it smelled insanely rotted didn’t mean that there was anything particularly amiss.

Like many other commentators, Sithole had for a long time called for market diversification in order to break up the Big Four cartel, and for the skilling up of smaller South African firms in order for them to provide services that are ordinarily the ambit of the world’s biggest shyster monopoly. But unlike, say, the downsizing carnage that occurs in almost every industry (journalism, say), whenever anyone brought up the destruction of KPMG, rivers of tears flowed for the suits who’d be out of work for all of seven minutes and 12 seconds.

“Those who say so seem to operate on the premise that KPMG’s employees are some social invalids who need us to protect their jobs, [this] is rubbish. KPMG primarily employs individuals who are experts (or at least we used to think they were) in their field. These are not low-level blue-collar workers whose ability to migrate across jobs is limited.” – Sithole says.

So what’s the goddamned problemo?

Clearly Saica was more interested covering its members’ asses than a calculated offensive against dodgy accountancy practices. KPMG and PwC’s behaviour in the VBS bank saga – where they somehow failed to properly audit a cheeseball bank with almost no capital – was alone worthy of expelling them from the association. But that, as Sithole pointed out in not so many words, was as likely as Jacob Zuma (perhaps VBS’s most absurd beneficiary) failing to take a seventh wife.

In no small way, Saica has set itself up to fail. Its 20-member board is comprised entirely of Cas – picture that for a second, 20 accountants in a room together, with all of their diversity of experience, sense of humour, and perspective mashed into one formidable oversight body. And get ready to guffaw – its chairman, Lwazi Bam, is the current CEO of Deloitte Africa, a company implicated in both the Steinhoff and Africa Bank debacles. As it heads into its AGM, there are no surgeons on call, and its medical aid fund has been audited into penury. (That’s an extended metaphor, by the way, not an actual parsing of its health regime.)

Fake it ’til they make it

Which brings us back to Khaya Sithole, who stands accused of faking signatures and fraudulently handing out bursaries, which Saica claims has cost the programme over R10-million. And while this isn’t morally or ethically equivalent to scamming billions in order to buy racehorses and a two-bedroom flat in Sea Point, it’s still fraud. And what South Africa probably doesn’t need is another accountant perpetrating another act of fraud, however well-intentioned.

So what gives?

The paperwork Sithole submitted to Saica, all of which was made available to Daily Maverick, is prodigious and comprehensive – the reply statement alone runs to 27 pages in length. But before we get into his defence, it’s worth checking in with the University of Witwatersrand’s Vice Chancellor, Adam Habib (who is currently on sabbatical, the lucky man). He wouldn’t comment specifically on the Sithole case, except to tell Daily Maverick that, “I’ve never interacted with him on the issue.” (Sithole’s affidavit flatly contradicts this, but more on that in a moment.)

What Habib did want to say is that there are strict protocols for recommending (and picking) students for bursaries and other grant programmes.

“This happens at the faculty level, not at the central level,” he said. “For the Saica programme to come into effect, they need a programme manager at the university level, at their cost. They want their own person that tracks their Saica people. Khaya Sithole was one of their guys. You operate within the framework of the rules. The emails always come with a clause to that effect.”

Because this is a story about Saica, it is obviously a story of the shredding of protocols.

Indeed, Part I of the Sithole dispute relates to Saica’s Thuthuka Bursary Fund approval mechanism. According to the institute, Sithole fraudulently created an approvals letter and forged the electronic signature of a Saica employee named Nthato Selebi. According to Sithole, he submitted to Selebi for approval an already extant generic form letter titled “WITS Letter 2014”, along with an annexure which identified individual students, appended with an invoice. Selebi signed off on the invoices, and therefore must have known about (and approved) the disputed bursary handouts.

In subsequent years, no one seems to have requested an updated form letter, and nor was there any streamlining or tightening of the process. So Sithole simply reused the document.

“The fact that this is completely wrong is indisputable,” Sithole wrote in an apologia to former Saica CEO Terence Nombembe. “I screwed up — spectacularly.”

But – and here’s the rub – Sithole contends that the head of school, Associate Professor Nirupa Padia, knew that he was screwing up. (Padia could not be reached for comment.)

So why is he the only dude in the dock?

Part II of the dispute pertains to an amount that Sithole is said to have defrauded – or, more specifically, “over-claimed” – from NSFAS, which splits the fund 50/50 with Saica. The overclaiming adds up to more than R3-million for the 2015 academic year. Sithole contends that the amount that both the bursary and NFSAS were granting students was not enough to cover the academic year, and that he made a request (that was never denied) to over-claim until the issue was resolved. It was, of course, never resolved.

In other words, spend it like you stole it.

Part III brings us to the 129 students who allegedly didn’t meet the approvals criteria, but nonetheless received a bursary. Here, Saica insists that Sithole, who as programme director had discretionary oversight of the shortlist, went into full Santa Claus mode by handing out funding to many more claimants than the bursary could afford. Sithole insists that he was pushed, cajoled and nagged into accepting claims by Wits Vice Chancellor Adam Habib, former Saica CEO Dr Terrence Nombembe, chairman of the bursary fund Sizwe Nxasana, and Executive Director of Saica’s Nation Building department (seriously?) Chantyl Mulder. All of these good people, insists Sithole, had pet students they wanted included on the bursary’s rolls, and the beleaguered programme director had no choice but to comply to their injunctions.

Habib flatly denies this, and in a statement provided to Daily Maverick Saica refused to comment, saying in an email that, “Given that Mr Sithole is the subject of a Saica Disciplinary Hearing, we are not in a position to publicly debate and provide specific responses to his numerous claims regarding Saica, as due disciplinary process needs to be followed to complete his hearing and any further debate may compromise the outcome of the disciplinary proceedings.”

For his part, Sithole took an activist position.

“[W]hat I seek to highlight here is the reality that of all the people to whom I reported, none seemed to have possessed a commitment to following rules and guidelines that I am now accused of violating.”

That’s about as far as I’m willing to go with the details of this case, because from here Sithole’s statement descends into the epically boring backbiting that defines academia everywhere. But the overall point is that Saica, the body that oversees the accountancy profession and that is critical to our financial ligature, couldn’t run a university bursary programme without it melting down into sheer fuckery.

So here’s some financial advice: withdraw your money from the bank, pack a small bag, and run your ass to Zimbabwe.

In the red

“Look,” Sithole said, when I spoke with him by phone. “For me, its matter of, there’s no point in time when I’ve disputed that I screwed up. You must tell the truth to the public, and let the public deliberate. I’m calling Saica out for inconsistency. But they decided to go for the jugular. Unfortunately, they didn’t know that I kept the evidence.”

The evidence suggests that the bursary programme was a collective cock-up. And despite tweets to the contrary, Sithole’s contention is not that he acted like Robin Hood and stole from rich accountants in order to give to a legion of poor black and coloured accountants. It’s that he followed a shitty approvals procedure and no one told him to do otherwise.

So the one institute plugging the dyke between South Africa and a catastrophic financial nuclear winter is … clueless?

“Unfortunately that’s the impression that one gets after all these years,” said Sithole.

So where’s the upside here?

“For me, what might be good is a period of introspection. They stumble from one crisis to another, but now they need to start dealing with their dysfunction. Why wait until now to deal with my case? They said they were busy.”

Yeah, but what about the board members who insist that Sithole is just a shyster in hipster’s clothing?

“People are free to speculate,” he said. “But for me it was the quest for justice. Don’t add agendas. Why is my hearing public, when Anoj Singh’s hearings are private? Why?”

As for the very notion of self-regulation?

“Nah, not for these types of organisations,” said Sithole. “It works when the players in this industry engage honestly. It was always a far-fetched idea, and now someone has to come in and intervene.”

 Is this case genuinely about the fact that Khaya Sithole, the most boring blessed in the world, handed out fraudulent accounting bursaries and brought the profession into disrepute? Probably not.  Two debits don’t make a credit. But the stupidity and dysfunction say something fundamental about the South African financial system: it doesn’t work. There are no watchmen. And in order for it to progress, the status quo needs to take a hammering, and rationality needs to be restored.

Mathematics doesn’t lie. But people do. Time to trust the former, and start jailing the latter. DM