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South African firms are standing against corruption ‘instead of complaining’: Central Bank governor

  • "I think what you're seeing now is South African business, instead of complaining about corruption and maleficence, they're actually taking a stance," he added.
  • The governor didn't want to comment directly on the scandal when asked by CNBC and said there was nothing that the central bank can do as firms drop or review their relationship with KPMG.

Companies in South Africa are increasingly making their own calls on who to do business with, according to the governor of the South African Reserve Bank, following the scandal in the country surrounding the controversial Gupta family.

"This is a free society. It's a free society, and various players in society are absolutely within their rights to take a posture that says that 'I will not be able to do business with you, with that person,' because these are private arrangements," Lesetja Kganyago told CNBC on the sidelines of the International Monetary Fund meetings in Washington on Wednesday.

"I think what you're seeing now is South African business, instead of complaining about corruption and maleficence, they're actually taking a stance," he added.

Global audit firm KPMG has been one firm embroiled in the Gupta scandal in South Africa. The billionaire Guptas have been accused by a public watchdog of improperly influencing government contracts, and an internal investigation at KMPG found that some of its executives ignored red flags regarding the family. KPMG dismissed its South African leadership team after the internal investigation.

"We cannot interfere where individual businesses feel that the reputational risks to that particular business are actually just too high for them to continue in that respect" -Lesetja Kganyago, Governor of the South African Reserve Bank

Embattled South African President Jacob Zuma — whose name also surfaced as part of the scandal — and the Guptas deny any wrongdoing. John Veihmeyer, the outgoing chairman of KPMG International, has apologized "for what went wrong" in the auditor's South African branch.

The governor didn't want to comment directly on the scandal when asked by CNBC and said there was nothing that the central bank can do as firms drop or review their relationship with KPMG.

"They are being investigated by the independent regulatory body in South Africa. They themselves have taken a stance where they commenced with some investigations by KPMG," he said.

"We cannot interfere where individual businesses feel that the reputational risks to that particular business are actually just too high for them to continue in that respect," he added.

The investment management firm Sygnia and Johannesburg's Wits University have dropped their working links with KPMG, and others like Barclays Africa Group are assessing what to do. The Gupta scandal has also badly damaged public relations firm Bell Pottinger. The consultancy international group McKinsey is investigating its own activities too, the Financial Times has reported.