Notes &Updates

KPMG in suspended audit animation

On 9 May this year, JCI, the erstwhile listed mother ship of the late Brett Kebble, advised shareholders that audits of its annual financial statements would be completed by the second week of August. There is a twist to what appears to be innocuous: the audits referred to would be for the financial years 2013, 2014, 2015 and 2016.

A number of shareholders have been fretting over the situation, not least because of the JCI’s status as kingpin of the greatest unprosecuted fraud in South Africa’s history. The damages claim – which has yet to make it to court – now totals close on R50 billion.

Since Kebble was booted out of JCI in August 2005, its auditors have been KPMG, famously also the auditors of Investec who, as bankers, had been intimately involved in the affairs of both Kebble and JCI since 1997. For the years 2006 through to 2012, KPMG racked up auditing and forensic fees from JCI to the tune of R93 million.

JCI’s accounts for 2006 to 2008 were published as “unaudited and disclaimed”. The 2009 to 2012 financial statements were published as audited.

So what’s the apparently insurmountable problem, starting with the 2013 financial statements? We know that JLMC, forensic auditors at Randgold & Exploration, Kebble’s key victim, had reported significant details of Kebble’s defalcations by mid-2006.

These reports would have been available to KPMG who were also appointed as auditors to Randgold (by Investec, who took took control of both JCI and Randgold in August 2005, see nose190).

The reports made clear most of the R1.9bn that Kebble raised by selling shares stolen from Randgold were routed via CMMS, a 98% subsidiary of JCI.

Did someone mention “reputational risk”? Yes, of course, KPMG famously resigned as auditors from various Gupta-family companies earlier this year…                                  Barry Sergeant

Health insurance to be chopped

Talk in the corridors of power is that the Treasury has told Health Minister Aaron Motsoaledi, in no uncertain terms, that his white paper proposals for the ambitious National Health Insurance (NHI) scheme are completely unaffordable under current or foreseeable circumstances.

The White Paper, released by Motsoaledi in December, proposes major reforms to the healthcare sector, with a view to narrowing the gap between rich and poor when it comes to the availability of health services.

The paper envisages mandatory NHI membership, while the role of medical schemes is reduced to providing only “complementary services”.

Motsoaledi, who spent much of his Health Budget vote in May punting the NHI, now has a major problem.

The DA has warned for months that, if implemented as is, it could be the country’s next big disaster.  DA shadow health minister Wilmot James said months back that the NHI would require a “monumental amount of money” (to be raised with extra taxes) to run and would be the next-biggest fiscal risk (after nuclear energy) that the nation faces.

The DA is to present its own offering on NHI, within the next few weeks.

Youi OUTed

The commerce commission of New Zealand has filed 15 charges against insurance firm Youi New Zealand Pty Ltd, a member of South Africa’s OUTsurance group, for using deceptive methods to lure customers.

The regulator, which lodged the charges in the Auckland District Court, alleged that between July 2014 and February 2016 Youi employed misleading sales techniques when attempting to sell policies to consumers who were only seeking a quote.

“Youi has co-operated with the commission’s investigation and has indicated that it intends to plead guilty to the charges,” the regulator stated.

Youi is accused of making false or misleading representations regarding consumers’ ability to obtain a quote online and in telephone sales calls, when consumers were told that their bank or credit card details were required to generate a policy quote.

Youi then claimed payment for unsolicited insurance policies by sending letters of demand or charging consumers’ bank or credit card accounts without their permission or knowledge.

Invoices for unsolicited insurance policies did not specify that the consumer was not obliged to pay for the policies.

The insurer has been operating in New Zealand since July 2014, offering home, contents and vehicle insurance products.

Youi is a wholly owned subsidiary of OUTsurance International Holdings, part of the Rand Merchant Insurance Holdings Group, registered in South Africa.

Sweet Willie

Willie Hofmeyr wants to be our next Public Protector because he is under-utilised at the National Prosecuting Authority (NPA), where he works for only about three hours a day. All the juicy political stuff he used to handle has been redirected into Zulu hands. (Hallo Ms Jiba!)

It’s well to remember however that Willie, like equally charming Pravin Gordhan, is/was a Party cadre, deployed to look after the Party’s interests, not the public interest.

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