First published in the Daily Maverick 168 weekly newspaper.

South Africans are a talkative, argumentative, critical lot. That is good in an emerging and let’s face it, struggling, democracy. We need to have the difficult conversations, we need to point out the frailties in our systems, in our institutions, and in our leaders.

To lead in this country means that you put yourself on a pedestal and invite scrutiny of your efficacy in the position — because, God knows, we need good leaders. So scrutiny comes with the territory and requires that you have thick skin.

On the business front, skins are thinner, possibly because business leaders are less used to criticism. However, when the criticism is justified one has little sympathy for the recipient whether they have thick skins or not. I’m thinking of the VBS villains and the likes of Markus Jooste here. But what about when we get it wrong? What about when the individual has been unjustly castigated, judged, found wanting and discarded? With the skills deficit in this country can we afford to throw out the good with the bad?

I’m talking specifically about Jenitha John, the former head of the audit committee at Tongaat Hulett and former CEO of the Independent Regulatory Board for Auditors (Irba), the audit profession’s highly dysfunctional regulator. In fact, the regulator is so dysfunctional that Finance Minister Tito Mboweni found himself compelled to fire the entire board recently. John resigned a week later. Which makes her complicit in the failures, right? I mean, how can you sit on a company board for five years and not know that the books were being cooked? 

Actually, as it turns out, it is possible when everyone from the auditor to management is providing entirely plausible explanations to your questions. At the same time, the banks (who did due diligence prior to providing funding) and the JSE (which probed Tongaat in 2013 and again in 2018) were also satisfied with the answers.

I shouldn’t need to say this, but I will: I don’t know John from Adam. I fly no particular flag for her. But this is a woman who is highly regarded within the audit profession, who is both a CA and a chartered director (yes, there is such a qualification) and has served on almost 30 boards in a 27-year career.

I found myself thinking about all of this recently because I see the finance minister has advertised for applications to the Irba board. The specifications look robust and one hopes that he will appoint individuals who are suitably qualified, who are independent of the CEO and have a deep desire to rebuild the regulator. At best, Irba can be described as toothless and at worst, laughable. This process will take until at least next March, only after which the search for a CEO will begin. Meanwhile, the backlog of cases at Irba will build — at the time it investigated Tongaat, it had 276 cases on its books — some going back to 2011. 

How the audit failures at Tongaat, Steinhoff, EOH and a litany of others can be prevented in future is a complex question that requires an overhaul of the entire accounting ecosystem.

The systems, platforms and methodologies used by Irba are relics of the dinosaur era and will stay that way for now. The 40-odd CAs and 40-odd admin staff will keep doing what they do in the same tick-box fashion. Expect the VBS investigation to be completed by 2030.

In the few months that she was there, and wasn’t fighting internal and external fires fanned by hidden agendas, she infused the organisation with hope. A strategy to digitise the entire operation was developed. It aimed to leverage the insane amounts of data that Irba has access to.

For instance, external auditors must report all “reportable irregularities” to Irba (they don’t, and that’s part of the bigger story). These reportable irregularities are the questionable and possibly unlawful dealings or omissions auditors encounter and which are recorded in a company’s annual financial statements. Imagine if this data was collected and mined using artificial intelligence? Imagine how it could be used proactively to prevent accounting failures that are all too common? 

John was headhunted by the previous board of Irba, whose term came to an end in May 2020, and asked to apply for the job. Roughly 250 people applied for the CEO position and the selection process was thorough. 

Her past experience at Tongaat was interrogated. And yes, it is true that she chaired the audit committee on whose watch accounting irregularities and possible fraud transpired, requiring the restating of the financial results. Does this mean she is incompetent or reneged on her duties? By all accounts, the committee did challenge both management and Deloitte on a variety of subjects ranging from the valuation of biological assets to the capitalisation of costs and the management of debt covenants and always received satisfactory answers. 

Remember, the job of an audit committee is not to uncover fraud, but to make sure the systems and processes allow the auditors to do their jobs free of interference and that the auditor’s concerns are heard and acted upon.

Tongaat’s troubles surfaced in May 2018 when Anthony Geard, an Investec analyst, said Peter Staude should resign because of the “appalling” financial results of the company. It was John who forced the board to act, challenging the executives in the process.

Staude, CEO at the time, was highly resistant to any outside investigation of — for instance — historical cash flows. Simultaneously CFO Murray Munro collapsed with burnout and was replaced by a temporary CFO, Rob Aitken. John was instrumental in ensuring he was provided with the necessary support and tools to investigate the company’s financials. Much of this happened against the express wishes of the CEO, judging from internal correspondence shared with DM168.

How the audit failures at Tongaat, Steinhoff, EOH and a litany of others can be prevented in future is a complex question that requires an overhaul of the entire accounting ecosystem.

It’s worth noting that both the Institute of Directors SA and the Global Institute of Internal Auditors interrogated how John conducted her duties and were satisfied with the answers received.

Perhaps John is well placed to be part of the solution rather than the problem. Let’s be careful not to throw scarce skills down the drain. DM168