South Africans are, rightly, very concerned by the evidence of serious and widespread corruption in our country.
As a result, South Africans are rediscovering and reinforcing our commitment to ethical and transparent practices in government and business. In doing this, we must be guided by our Constitution and by the rule of law. All of us have duties of transparency and reasonableness and a right to due process under law. We, our suppliers, and our clients, all have the same duties and rights.
Just as the Standard Bank Group relies on due process, we will not rush to judgement. We will not trade off our commitment to the Constitution, to the law and to our values - including upholding the highest level of integrity - for the temporary satisfaction of ‘doing something.’
Our positions on KPMG, McKinsey and SAP are consistent with our approach to all supplier relationships.
As always, whenever we become aware of information from which it can reasonably be inferred that a supplier might be violating Standard Bank’s Values and Ethics or might expose Standard Bank to legal or reputational risks, the Group will request an explanation and – if appropriate – remedial action.
The Group Chief Executive and other senior executives have had several meetings with the senior leadership of KPMG, McKinsey and SAP over the past weeks. In each case, we have explained to the supplier in no uncertain terms the damage that association with them has caused and is causing to the Group. In each case, we have stated our expectations in terms of disclosure and remedial action and each supplier has committed to undertake such action.
The Group Executive Committee and the Group Board continue to monitor and discuss these relationships very closely and will take any necessary governance action.
To be clear: We will not continue these relationships unless we receive satisfactory explanations and are certain that necessary and proportionate remedial action is being taken.
Our specific position on each of these suppliers is as follows:
KPMG is one of the two independent auditors of the Standard Bank Group.
We are concerned by the acknowledgment of misconduct by KPMG South Africa. The conduct of some KPMG partners, and of the firm itself, has been incompatible with the Standard Bank Group’s values and ethics.
As the South African Reserve Bank statement on this matter points out, this misconduct could potentially cast doubt on the quality and reliability of auditing in South Africa, which is essential for economic growth and financial stability.
We do not consider that KPMG has yet taken sufficient action to begin to restore its reputation. We note however that KPMG’s new management team has committed to conduct an independent investigation and to undertake all necessary remedial action.
Guided by the South African Reserve Bank, we are concerned to prevent systemic risks to the stability of the financial system that might arise from replacing a large financial services group’s auditors without a carefully planned transition.
Standard Bank therefore believes that it is both ethically right and commercially appropriate to allow KPMG to complete the independent investigation and to give us the information we need to assess whether or not to continue our relationship with KPMG.
In making this assessment, we will be guided the Group’s Values and Ethics, by the facts presented, and by the extent to which KPMG’s remedial actions are proportional to the wrong-doing and have restored their reputation and our trust in their ability to fulfil the audit function with the necessary professionalism and independence.
McKinsey South Africa
McKinsey South Africa is one of several suppliers of consultancy services to the Standard Bank Group.
The Standard Bank Group is gravely concerned about allegations adverse to McKinsey South Africa arising from its dealings with Trillian, Eskom and Transnet.
We have been in discussion with McKinsey’s senior management regarding these allegations.
In making a decision concerning any relationship with McKinsey, Standard Bank will be guided by the outcomes of an investigation led by an independent law firm and by the remedial action taken following from that investigation. We will weigh those against Standard Bank’s interests and values.
SAP is a major supplier of software and IT services to the Standard Bank Group.
We are aware of allegations that SAP made an improper payment to secure a contract with Transnet.
We note that SAP suspended its top management in South Africa, that the Chairman of SAP has apologised to the people of South Africa, and that SAP has commissioned an independent investigation into these allegations. We note further that SAP has undertaken to provide an update by the end of this month, and has committed in advance to take all necessary remedial action.
We will make a decision on our relationship with SAP based on our assessment of the findings of the investigation and of the adequacy of their remedial action and bearing in mind the imperative to maintain the stability of our IT systems.
Issued by Standard Bank