Daily Maverick 168

Trainspotter: Stupidity and greed, interrupted?

By Richard Poplak 26 September 2020
Caption
Wiseman Nkuhlu, former chairman of KPMG SA Photo: Sipho Maluka/RCP/Media 24/ Gallo

Former KPMG chairman Wiseman Nkuhlu has offered this country an opportunity. The auditing giant must be pressured into following through on redress payments, which should form a precedent that allows us to focus on economic justice for the looting of the past 70 years.

First published in Daily Maverick 168

It’s always been difficult to determine the worst fashion brand in Australia, a country in which beer sleeves count as formal attire. But then there’s David Jones, a brand so Sydney-on-boxed-wine that it would constitute a fashion crime in Upington. Major credit must go to Ian Moir, the former CEO of Woolworths, who not only managed to discover David Jones but also to buy it. He was cheered on by the South African retailer’s board and shareholders, largely because of the three-letter honorific preceding his name, which conferred on him the status of oracular High Priest. 

Almost every time a South African CEO forays out of the country to make an acquisition, the bottom line is artificially juiced for a quarter or two … and then ensues an embarrassing mess. And so it was with David Jones.

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Shortly following the purchase in 2014, long before the Covid-19 retail meltdown, the Woolworths share price started plummeting. The company has since lost more than 70% of its value, with R12-billion wiped off the books. 

For this gargantuan screw-up, Moir has been punished with a R70-million windfall: he received R13.9-million for his eight-month stint at Woolworths and R7-million for his five months as acting CEO of David Jones. He is currently also due R22.8-million in notice pay and a further R34.8-million in restraint-of-trade payouts. 

Restraint of trade? If I were Woolworths, I’d pay a competitor R34.8-million to take him. 

Neatly contrasting — or rather echoing — this formal economy debacle, there is the saga of a young tenderpreneur named Hamilton Ndlovu, who in May posted on social media images of three Porsches, a Lamborghini SUV and a Jeep Cherokee that he had purchased for his family during the Covid-19 lockdown period. Ndlovu is one of those lucky souls who magically secured a PPE contract from which he splooged money on big-ticket luxury items while his fellow South Africans starved in their homes. And he made sure that everyone knew about it. 

We now suspect that a large portion of the hundreds of billions earmarked by President Cyril Ramaphosa for emergency procurement was either stolen or misspent. In a recent address, the President promised immediate action and implied that the perpetrators would soon be wearing (David Jones-designed?) orange overalls in a jail cell near you. Subsequently we’ve learned that Ramaphosa is insisting that only parts of the Special Investigations Unit’s homework assignment will be made available to the public. 

In other words, if the government can help it, we’ll never really know the scale of procurement corruption.

Ndlovu has been so adept at plastering social media with his new toys that last week SARS was obliged to seize several of his vehicles, a wad of cash and other assets suspected stolen from the South African public.

But into this smoke-darkened dystopia last week shone a ray of light. It came from an unlikely source: Wiseman Nkuhlu, former chairman of KPMG SA. 

But not everyone has proved so unwise. When you add up the plundering at state-owned enterprises, the rapaciousness of the Big Banks (who couldn’t figure out how to dispense the hundreds of billions of Covid-19 relief ZAR that were earmarked for small and medium-sized businesses) and, of course, the cover-up specialists and looters-in-chief of the state capture years, we arrive at a litany of names that are milestones along the highway to an IMF bailout: Steinhoff, Tongaat, Edcon, Eskom, SAA, Denel, SAP, Liebherr, McKinsey, Lonmin, EOH, AngloGold Ashanti, etcetera. Top this off with a big heaping dollop of BBBEE bullshit and the Covid-19 bonanza, and we can start to process the total, complete failure of South African liberalised “development state” capitalism, a hybrid model of state/public corporatism that has massively enriched a handful of men and women while annihilating the nascent post-apartheid middle class and creating oceans of poverty. 

As a result, just as in many parts of the world, this country now finds itself at a major historical inflection point: the hyperwealthy can just about taste victory. There are almost no remaining challenges to their authority. Organised labour was once the alloy out of which economic and racial justice was forged. 

But it was co-opted by — or, rather, sold out to — the ruling party. Average citizens have been reduced to standalone units of labour to be discarded without any recourse. New coinages like “gig economy” and “outsourcing”, along with old tricks like the veneration of the “entrepreneurial spirit”, can’t hide the fact that exploitation now exists on a previously unimaginable scale. It’s hard to pin down the ontological spark of this class war, but it kicked off in earnest in 1970 when a Milton Friedman paper titled The Social Responsibility of Business is to Increase its Profits finally and fully unfettered the capitalist esprit. CEOs became the new gods and the market slowly started to decouple from reality — a process that is now fully complete in the wake of the global pandemic lockdowns.

Across the world, those god-like CEO types kept failing upwards, and now dominate both democratic and authoritarian politics alike. Their shareholders are not their so-called constituents but rather the hyperwealthy benefactors backing their campaigns, who rig the system ever more tightly in their own interests.

But into this smoke-darkened dystopia last week shone a ray of light. It came from an unlikely source: Wiseman Nkuhlu, former chairman of KPMG SA. 

As one of the Big Four auditing and consultancy firms, KPMG helps underpin monster capitalism more than any other, by creating the illusion of a functioning economic system. Weirdly, however, during a virtual book launch for his memoir, the absurdly titled Enabler or Victim? KPMG SA and State Capture, Nkuhlu did two things largely without precedent in South African corporate history.

First, he admitted that his former employer had behaved poorly during the “Rogue Unit” report escapade: a rank piece of consultancy work that all but finalised the destruction of SARS and remains the most important piece of propaganda produced during the state capture era not to be burned in a Nkandla braai pit. 

South Africans have learned the hard way that the only foundation on which a country can be built is justice.

Second, Nkuhlu said that reparations should be paid to the more than 30 actual human beings who were materially and psychologically harmed by the contents of the report (and its subsequent laundering via the Sunday Times). 

These comments may not have been meant for wider consumption, but they very quickly started doing the media rounds. As a towering member of the Mbeki-ist centre-right establishment, anything Nkuhlu says carries weight. And what he said was that corporates must bear responsibility, not only to their shareholders but also to the people they harm in the process of enriching a handful of hedge fund operators.

Even more importantly, Nkuhlu has opened the door to the idea of corporate redress, which could in turn expand out into other forms of compensation. During the reconciliation era, it was enough for black and white South Africans to appear in beer commercials together — the idea was that forgiveness had been granted to whites by the black population through the vicarage of Madiba, and it was now time to hug a new dispensation into being.

That didn’t work out so well, mostly because forgiveness without redress may be possible between individuals but it cannot form the basis of a sustainable national culture. 

South Africans have learned the hard way that the only foundation on which a country can be built is justice. But justice wasn’t served to the fallen regime’s main instigators, and nor were any impositions made on the local or foreign corporations that banked all that sweet apartheid loot. 

The muckraking NGO Open Secrets has written extensively in Daily Maverick about apartheid-era sanctions-busting enrichment, implicating the French “defence group” Thales, Nedbank, BAE Systems and many others in a decades-long project of organised corruption, the bill for which was forced upon the new democracy and paid off by taxpayers. 

Wittingly or no, Wiseman Nkuhlu has offered this country an opportunity. KPMG SA must be pressured into following through on redress payments, which should form a precedent that allows us to focus on economic justice for the looting of the past 70 years. 

The money exists. And we can get it back. 

The stupidity and greed exemplified by the Ian Moirs and Hamilton Ndlovus of the world are the results of a twisted system that reifies profit and demonises humanity. If a company that has caused as much grief and destruction as KPMG SA can carve out a path towards a slightly better future, they should be encouraged to do so. As for their peers in state capture, the sooner we see them in some David Jones-inspired orange overalls the better. 

But, more important still, it’s time for CEOs to get docked and for the South African people to be recompensed. DM168

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All Comments 13

  • Great article! Lessons for investors is to back founder-run or largely founder-influenced companies rather than public companies run by hired help that have never created anything in their lives. Perversely, our fund management industry is by an large run by business science mba types that have never created and grown anything. Hence : mis-allocation of capital. A company like Apple has spent less than a fraction of its market value on acquisitions. It also has virtually zero write downs and write ups. Cash inflow exceeds reported profits. The result is Apple can today if it chooses, complete its real reason to exist : repay all shareholder funds invested, repay all profits not yet distributed, settle all interest bearing debt and still generate over a trillion runt in operating cashflow. The secret : in excess of 30% return on capital invested for 20 years.

  • Great article except for his required anti-opposition jibe “complete failure of South African liberalised “development state” capitalism”. The ANC has been in power for 26 years, these failures have been on their totalitarian left watch. The ANC cannot by any figment of a normal imagination be called “liberal”. It is the opposite.

  • The money paid to Ian Moir is not public (taxpayers’) money. Nor is he guilty of fraud. I’m no fan of big business, but the comparison with Hamilton Ndlovu is facile.

  • Quis custodiet ipsos custodes:
    Richard, you’re barking up the wrong tree; South Africa’s problems do not emanate from “liberalised ‘development state’ capitalism” but rather from a bastardized form of Westminster style government, overseen by a much lauded Constitution that myopically empowers the watched to appoint their own watchers. It didn’t take long for an uneducated cattle herder (among others) to appreciate the opportunities for exploitation that this loophole presented.
    We should heed Archbishop Makgoba’s suggestion that South Africa start all over again with a CODESA lll, but this time primarily populated with concerned ‘think tanks’ and ‘Thomas Paines’ rather than politicians (lest we forget, the principal architect of the current ill-considered form of government is none other than the incumbent President). If no option is treated as off the table, there are several successful countries (Costa Rica, Switzerland et al), and mountains of literature that inspiration can be drawn from. In addition, if flavoured with oodles of common sense (eg. preferential voting, double auditing, transparent tendering etc, etc, etc’) it will lead to a form of government that better addresses oversight on both politicians and big business – at far less cost to taxpayers.
    Dreaming hasn’t been outlawed – yet!.

  • What Johan said below. I want to add” Don’t confuse capitalism with crony capitalism. And I cannot agree more – CEO pay has been out of control for decades now. How dare this “person” get off with 70 bar for making such a hash of it? Morally I wonder if it makes Woolies shareholders fully justified in shop lifting to get some of their cash back eh?

  • Payback time!And in the case of state capture, if a prison sentence is not adequate or viable,then there is the option of recovery of monies looted. Beefed up specialized forensic units could recover large amounts and place them in a designated public private fund administered by ethical persons(eg religious leaders) to be redistributed to needy projects in partnership with the accredited NGO’s. I wish!

  • Redress payments are one thing but the prosecution of those in KPMG involved in the fraud is as important. Although Moir made a bad business decision this in itself is not a crime. The crime is paying him a fortune for doing so. How the board and shareholders allowed the restraint of trade payments to be made boggles the mind.
    It might have been fairer had Richard compared Markus Jooste’s escapades to those of the silly Hamilton Ndhovu.

  • I find it mind blowing that all these State Captured individuals sold they country out for so little. An Oberoi here a flight there, or in the case of SAA procurement manager (how on earth did this individual qualify in the first place) for a couple of million???

  • The real solution to our issues is a proportional vote. 1 vote to every citizen ( those in prison get no vote as they have forfeited their right ). 1 vote extra to property owners. Another vote extra if you pay personal tax. Thus, those that contribute actual money and stability to the country get more votes.

  • Scientists Collective – Covid-19

    Anticipating a ‘Second Wave’ — and when and how South Africa should try to prevent or mitigate it

    By The Scientists Collective