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Team Talk: Disasters aplenty – Springboks in NZ, KPMG, McKinsey

LONDON — Bob Skinstad and I are having a lot of fun with TeamTalk – a regular podcast where we chat about the major sport and business news of the past week. This time around it’s disasters aplenty – the record Springbok defeat in New Zealand and the corruption scandals that threaten multinationals KPMG and McKinsey. But there’s also a glass half full cameo from FW de Klerk and chartered accountant David Shapiro offering some caustic comments on his old profession. And as you’ll hear from the audio, I’ve finally managed to get the studio equipment working properly. If only I’d listened more closely when the inimitable Sunshine Mothlabane was trying to teach me what all those buttons were for….. – Alec Hogg 

Here we are with Team Talk, episode 3. Hey, Bob, we’re getting better at this.

Alec, we’re moving along nicely. I’m very impressed with your technical skills bringing an ex-sportsman to the table but thanks for that. Lots of fun and lots to talk about, as long as we can leave the rugby behind, if you don’t mind.

Well, let’s start with the worst first.

Well, we’ve got to talk a little bit about that match because I think it blindsided a lot of people and I’ve reflected deeply about it. I genuinely believed that the first 10 or 12 minutes or so, the Springboks played quite well. There was a lot of positives, they couldn’t convert those, and then we came up against an All Blacks side, which just hit sublime form. Everything they did was going to hand, and everything they did was right, and when that happens, (let’s call that the middle third of the match) – when that happens you’ve just got so much to come back from.

We had possession twice. From our possession, they got the ball and scored a try so, 14 points which, in essence, broke the back of the Springboks because they turned around, they’d done very little wrong except perhaps give an intercept pass but they’d been in All Black territory, etc and suddenly they were 14 points behind and they had missed a penalty.. I think then they thought, ‘oh, sherbet, we’ve got to get into this.’ They started doing a little bit more with the ball. The All Blacks turned another ball over and scored another try. Suddenly, it was 31 – 0 at halftime and they hadn’t even blinked their eyes so, that’s why I say, there were a couple of factors that’s got in the way.

But what do you do? You’ve been in that situation, presumably, before. What do you do when that’s happened? You were all out attack. The other side was just waiting for your mistakes, it happens in all sports, particularly in football (soccer), they go away and score a goal and suddenly you can’t understand why you’re one down. The Springboks were 31 – 0 down, you go into the changing room. What happens at halftime?

It must have been such a difficult changing room to govern. In fact, I looked at the screenshots and the All Blacks… In fact, Sean Fitzpatrick, I was sitting next to him in the Sky studio and he said, ‘look at the difference in the changing rooms?’ The Springboks were absolutely devastated.

Shell-shocked?

They were shell-shocked. They were sitting, hanging their heads. They weren’t talking to each other. All of the negative things. We, as humans and I love to study it and try and see it happen but we govern what happens. It all happens in your head first, and you could literally see the difference in the changing rooms. The All Blacks were close together, connected, talking, debating about what they were going to do in the second half. The Springboks were like, ‘oh my God, please don’t let that happen again.’ They say that in psychology, the head can’t tell between positive and negative. All it will hear from that is, ‘let that happen again.’ It won’t hear the ‘please, no.’ And literally from the kick-off, what did we do? We went and made a mistake, a very similar mistake and they were in there.

MTN is the new headline sponsor for the Springboks.
MTN is the new headline sponsor for the Springboks.

Why didn’t they bring a psychologist in or somebody to deal with their heads at half-time?

Well you can’t…

It’s too short?

Exactly, you’d be bringing a paper towel to try and stop a dam flooding. Certainly, any psychologist worth his salt would say, ‘I cannot fix in 10 minutes what is going on here.’ I’ve got it on good authority that the problems are deeper than just the way they played, which maybe is what led to us hoping for a new dawn, which was potentially a false dawn. We spoke about different leaders. We spoke about all the positives. We spoke about coming from behind against Australia and doing well, but maybe what happened 6 months when the Springboks were so poor and seemed apathetic almost, in their matches over here at the end of the year. Maybe that was the state that they found themselves in. Maybe their opposition wasn’t so good. Maybe they’ve had a few good, personal individual performances, which have kept them out of the gutter, if you want.

I hope not. I think we’re incredibly talented but you have to think to yourself that the difference that New Zealand and the void that we’ve got, in terms of where we are compared to where they are – the gap between us and them. It comes from some form of sustainable, manageable search for excellence type thinking from them, which doesn’t occur with us.

Have you ever been in a situation like this? I’ll tell you my story. In standard 6, (grade 7), I played for under 15B at Newcastle High, and as it happens the one week I was sick or something and I couldn’t play, and the team got bowled out for 2 runs, not even a samosa, and you can imagine what happened at the assembly and you can imagine what happened to our poor team thereafter. How we got ripped by everybody in the school for a long time. That’s schoolboy’s sport. It was one of those things that happened and you get over it but when you take it up many, many levels this is like the equivalent of getting bowled out for 2 runs, 57 – 0, in the proud history of the Springboks. They didn’t score a single point. Have you been in that situation yourself and what does one do from here?

I haven’t personally been in that situation, certainly not with the Springboks and certainly not beaten by that much in any match, luckily.

What’s the worst you’ve lost?

I think I lost by 64 – 0 to Maritzburg College, at school but they had… Well, we were relatively pragmatic about it. Two years later we came back and I think we lost 11 – 8, they had a couple of players but you play against the same age group but they had triple/quadruple the number of boys in a standard, than we did so, it wasn’t a mismatch of might against might and then suddenly no one is there. It’s interesting and difficult to think about how these guys are going to react to it. That’s what’s important for me. I wasn’t very anamid with the team at the time, on Saturday and I said a couple of the guys are going to look, and I don’t like pointing fingers at players. I may have my own, personal feelings but I’m never going to say, ‘that guy doesn’t deserve it.’

Everybody goes through their own journey, makes their own way to a Springbok jersey and you flipping deserve it. When you pull it over your head, you deserve it but I think there were a couple of guys who’d go away and say, ‘well, maybe that time I didn’t give it everything I could have.’ And the 79th minute to see Kolisi sprinting across and making another cover tackle of his 22 tackles or something in a match – that’s not a guy not trying and, at the same time, the All Blacks were sublime.

Sometimes, I don’t know, the perfect storm hits the completely unprepared island, type of thing, to use the weather analogy that we’ve seen recently. I think the one thing you’ve got to do in SA sport and I plead with people is that you have to understand the macro picture. Who’s spending money in sport? Where are they spending it? How are they spending it? Eben Etzebeth has probably beaten 99% of the teams he’s ever played against so, at an international level the peak where he’s going to be influencing everybody else – this is an area that he doesn’t know what to do here. He’s never come across this. He’s always been bigger, stronger, faster than anyone and who is taking those learnings, spreading them around and creating an excellent environment? I don’t think we have enough of it. That’s what I worry about. I worry that these Springboks will be castigated and thrown upon the heap as if they weren’t out there trying. They tried, they try every week.

Were their tactics wrong perhaps?

Yes, I think it’s a combination of poor preparation, of a very bruised and battered domestic scene, at the moment. I don’t think Currie Cup looks good, I don’t think Super Rugby looks good. I thought there was pathetic support for the Pro 14. The Kings lost to Leinster at home in front of about 300 people in a 35 thousand-seater stadium, it wasn’t great. It begs me to mention and I do write a little bit and talk a little bit about these kinds of things and sometimes you think like, ‘for a sportsman like that what is there to be proud of?’ We’ve got so many who could be there playing these games but we’re currently, and not necessarily filling that void – it doesn’t make me feel great.

Yes, 300 people, Bob, at school you used to play for more than 300 people, I’m sure.

Yes, absolutely. I mean, our school derbies in SA are a delight. I think the Paarl Gym – Paarl Boys is 15 to 20 thousand people who go along to those kinds of games.

Well, it’s not just in the sports world that there’s been a lot of news. We have had plenty of news going on in the business world and we’re going to be talking about that in some detail, (KPMG and McKinsey). Last week I had one of my highlights. I was hosting FW de Klerk at the Institute of Directors and, as you know, it’s on the Pall Mall in London so, you can’t really get more prestigious than that. We had a full-house, we had to stop selling tickets, and he was charming, humble, quite different to what I expected. But then again, if you look at the history books here’s a guy who, 6 months after he had come into power, had unbanned the ANC, unbanned the SACP, released Mandela from jail, and put SA onto the path that we have it in today, warts and all. We might not be perfect but we’re a hell of a lot better than we would have been, had that route not been taken. It’s a lovely interview, we taped the whole discussion, which went on for over an hour, and one of the parts that we spoke about was many people leaving SA.

He says that he thinks we’re making a mistake. He says that he believes that there is a real demand and a real underlying substantiveness that is going to see the country come right. It was lovely to hear that, it was lovely to hear the positive thinking, particularly in such a gloomy week, well we saw what came over the weekend. Let’s just listen to what he said about this topic.

‘But there’s a relatively silent majority, who are deeply concerned about what is happening in SA. Who are dedicated to ensure that we don’t go down the road of Zimbabwe. Who want to ensure that we fulfil our rich potential and they organise themselves into what has become an extremely strong civil society. Three pillars of democracy still stands in SA, four actually. The Constitution is standing firm, although it’s under threat and under pressure, it stands. Civil society is well organised and extremely strong. We have a free press and freedom of speech, and we have an independent judiciary.’

Former South African president F.W. de Klerk in conversation with participants, Horasis Annual Meeting 2013

It’s good stuff and you couldn’t leave there without feeling two things. How much did he smoke in his life, you can hear the wheezing coming through there? Secondly, that the pillars of society, the things that he put in place, to make sure that there was a stable young democracy, were actually going to work. It was interesting Bob. I met with him before, in the afternoon and then obviously for the event, and he was chewing gum all the time. I said to him, ‘that’s unusual, that’s an American habit.’ He said, ‘no, these are Nicorette’s.’ So, he was a chain smoker but he stopped smoking some years ago but just getting back to that, those four pillars of democracy.

It’s very interesting. We are South Africans and we are doing what we can to help our country to get through the difficult period that it’s going through, and as he says, ‘many people are doing that too.’ But you’ve got to draw heart when you see those four pillars, particularly in the last couple of weeks, the way that they’ve started kicking in. It’s almost like the antibodies in the system are now starting to eject this industrial scale plunder that the country has been subject to.

I think it’s fantastic. I had the great privilege of spending 5 minutes with him at the SA Golf Day on Friday, before obviously, the worries of the weekend that put me into a bad mood but it was wonderful to see and the effort that he puts in. The interaction with the people, the chat, the curiosity, and the interest from him in what’s going on in everybody else’s life as well. But I’ve got to say that just listening to that it is such an indication of how much there is and how important it is that there is a silent majority of people who start to find their voice.

If you’re sitting there on your couch thinking about, and doing it, and these events – some instigated by you, some instigated independently by people all over the world with a concern, and we think of the early whistle blowers, the proud people who are happy to say something are the ones. Margaret Mead said, ‘never doubt that a small committed group of people can change the world because it’s the only thing that ever has,’ which is a lovely way of thinking about it.

Zimbabwe banks
Flag map of Zimbabwe

I think for me, he’s reaching out there in a way and saying, ‘don’t forget that the more people that are clinging onto those pillars and the more people that are not willing to put down the events in SA just to chance, and a few bad people,’ etc and then go on their way and let it happen. The more people that don’t let that happen and do it in a wilful, peaceful protest – the less it will be able to happen to us. You talk about the inexorable slide, ‘are we going to go the way of a Zimbabwe?’ And Zimbabwe has had a lot of people standing up but the court failed them.

The electoral system failed them.

The electoral system failed them and we don’t know how badly the government failed them, we can only guess at this stage. I think of the David Coltart’s of the world and those kinds of people, who 38 years later are still beating the same drum and in SA, I think we’ve got more of them. I think we’ve got more and I’ve been very proud to be a South African, where a lot of business has stood up and said, ‘this is not a privileged few – this is the future of our country.’

And this past week has seen that happening. Here you have the mighty, KPMG, a huge, global organisation. If it were to be listed on any stock exchange (it isn’t – it’s a partnership), it would probably be the top 50 in America, it’s that big. And you have McKinsey, which is about to get the same kind of treatment but let’s just see the scale of what happened at KPMG. Remember, they’ve been involved in quite a few smelly audits but the big one was when they put together a report on SA Revenue Services, which clearly had been doctored and was used for political purposes – ‘to get rid of Pravin Gordhan.’

Just give me context so it was for Moyane?

Essentially what happened was there was a, actually it’s a lovely story, an ugly story but the story is that there was an investigation unit at SARS, that Pravin Gordhan setup. Johann van Loggerenberg was looking after that unit, and they started looking into the illicit cigarette trade. In Pietermaritzburg is a factory that’s owned by Yusuf Kajee and his partner, Edward Zuma, son of Jacob Zuma, and what they were doing was switching off the counting machines. When you have a cigarette factory SARS wants to make sure it can get every cent of the customs that comes out of each cigarette because the cigarette is roughly 50% of what is paid for in the shops, it goes to the taxman, (sin tax) so, SARS has a huge, vested interest in this.

Yes, and if they can manage the exact number of cigarettes they should then be able to workout from your turnover and corroborate what it should be.

Absolutely, 10’s of millions…

Okay so, caught onto it where they would then measure the counting machines, is that right?

So, they have problems with these counting machines at Kajee and Zuma’s factory. They start investigating what’s going on there. The next thing Pravin Gordhan is fired and the investigative unit appears in the Sunday Times as a ‘rogue unit’ supposedly spying on politicians and running brothels, and doing all kinds of outrageously crazy things. The Sunday Times runs these stories over a period of 2 years and eventually it transpires that many of the stories have been corroborated by them because of this KPMG report.

So, if you see, KPMG is right in the middle of it. This is a global brand. As a journalist if you get a report from KPMG you would say, ‘sure, it must be right.’

Well, you would have.

You would have, no more. That report was doctored. That report had all kinds of funny things put into it and for that report KPMG was paid R23m. The impact that that’s had, Pravin Gordhan got fired, the country gets junk status, it is almost incalculable. I asked Iraj Abedian, now Iraj is an Iranian by birth, he is very outspoken. He has excellent struggle credentials, very well known as an independent thinker so, I asked him why McKinsey, who have taken billions, literally, in shady deals are not the ones that everyone is going for and why they’re going for KPMG, and this is what he had to say.

Iraj Abedian

‘The money that KPMG has pocketed (so to speak), through their advisory and audit is a nanofriction of the damage that they’ve caused the SA brand and its investment integrity, and the damage that they’ve caused to the profession of audit in the country, if not globally so, I won’t so quickly brush off KPMG’s damage to say, ‘okay, it was only R60m, as opposed to McKinsey, which is billions of Rands.’ The case of McKinsey is straightforward. They had stolen money. They engaged in bribery. They’ve been highly primitive and crude about it and they’ve pocketed roughly R6bn.’

Okay so McKinsey are in for the high jump because it’s an open and shut case but what Iraj is saying is that KPMG did more damage by lending their brand to this kind of nefarious activities. Interestingly enough, he’s meeting with the McKinsey guys on Thursday and later in this interview he says that the McKinsey guys have now just got to say, ‘what their reparations are.’ They need to pay back all the money. They need to put interest on it. They’ve really just taken money from the state, that they’ve stolen, etc. There’s a way out for McKinsey so, if they pay billions of Rands back they can maybe walk away. They won’t do business in SA ever again, that’s for sure, and probably in many other parts of the world but they could survive it. But KPMG and what they’ve done is they’ve put the brand at risk.

It’s extraordinary now that this happened 18 months ago, this was all coming into the public domain. This book on the supposed ‘rogue unit’ which has got all the details, was published 18 months ago. Now, if there hadn’t been the GuptaLeaks, where all of this information is coming through, KPMG probably would never have addressed it. Well, they haven’t for 18 months and what happened as well was that last week, Friday, KPMG sent over a chap called Andrew Cranston, who is their global senior partner, to do the investigation and what he came up with has been rejected as not enough and far too late. It has also been said by Pravin Gordhan, ‘your apology is not accepted.’ Here’s one of the parts that Cranston was talking about with that SARS report that we’ve just discussed a moment ago.

‘So, the result is that we have a report, which has some issues and the SARS report that we issued, let me explain the issues that we have in the report. The report refers to legal opinions and legal conclusions as if they are opinions. However, that was outside of both the scope of our mandate but it was also outside the expertise of the people who were working on that project.’

And it goes on and on like that, Bob, but let me just dwell a little bit on what he said about the legal report. They were given information from a law firm, who presumably are close to SARS and Moyane, to just inject into the report. So, he’s admitted here, ‘it wasn’t our work – it was somebody else’s work that they put in there.’ It came in as though it was our work. Now, as an auditor, you cannot make a bigger crime or sin than that but the thing that gets South Africans is the way he said, ‘they are issues.’ Mr Cranston, these are not issues. These are very much deeper than that and that’s why you see the Financial Times of London this morning saying, ‘Despotism has taken over in SA.’ The world needs to react to it and that’s why KPMG, as a brand, is teetering on the brink and that is why SA companies are firing KPMG at a rapid rate.

Well, it’s an incredible endorsement of the fact that it’s right that it’s coming out for it to be a leading opinion in the FT. Remember, international opinion and international pressure is what led to apartheid with the SA Government acting on it.

SARS Commissioner Tom Moyane

The ending of it, yes.

Well, the ending of apartheid as a movement was because of eventually the voices coming together and saying, ‘this cannot go on.’ There were people saying, ‘well, it’s none of your business,’ kind of thing but SA is now benefitting again because it is everybody’s business, its global business.

What about you? You meet many different people here, in the UK. Is anyone even talking about SA to you?

They haven’t been, it’s funny. I think over the years SA have had a mountain of problems and it’s just been a thing that South Africans are relatively, happy-go-lucky, hardworking when you need them, in management positions around the world, competent and all diverse types of South Africans. I’m talking expat South Africans. Everybody knows that the local biltong manufacturer, whether it’s Bali, or Bermuda, or Brisbane, it doesn’t matter. Everyone has a laugh about someone having a braai or an accent or an affinity for sport, etc.

Suddenly, and I’ve been feeling this over the last couple of weeks actually. Suddenly now, because the issues that are happening in SA and have been depressing the Rand and making SA and South Africans feel so desperate, are now getting voice in papers – the hook of the FT in the UK. Someone said to me the other day, ‘wow, this Indian family, would they be involved in sport?’ or ‘would they have had an involvement in sport,’ and we think of our friend Graeme Joffe, who’s left the country because he’s been so anti-corruption in sport and in government in SA. He’s almost been rowing a one-paddled boat on his own and it’s not an easy life to be someone who’s taken that opinion. But now suddenly people are starting to understand. They’re connecting dots and saying, ‘jeepers this is actually deeper than we all thought.’ It’s not just the South Africans of old, now whining a little bit because things aren’t going well. There’s actually a real, deep societal problem here and it’s been exacerbated by monies paid, corruptions, etc.

CNN International anchor and reporter Richard Quest

I don’t know but it’s a long way of saying, ‘people are starting to have an informed opinion because global press has turned around.’ I watch Richard Quest, as I do almost every night.

That’s on CNN.

Yes, I’ve always loved his business programs and he talks about entrepreneurship and he’s got a ‘one-minute’ on profitability. He talks about profit, in the business term, but he talks about how companies, countries, people profits and anchor for it. I’ll find the name as we’re speaking, and he talks about SA and he literally has a real go at the people who’ve been involved. He finishes off by saying, ‘may the start to sink the wrong parts of the country and right the right parts of the country.’ That’s global opinions suddenly turning.

Yes, Richard Quest has got millions of viewers. The Financial Times to have their main, leader page focusing on despotism in SA so, the tide is definitely turning, and getting back to what FW de Klerk said, ‘the institutions in SA are still holding firm.’ Imagine if you didn’t have freedom of the press? You’d have no GuptaLeaks. You’d have none of this exposure and KPMG would be continuing to do what they have been doing all along and now, we might have something that will excise the toxicity that’s in the system.

David Shapiro and I have a chat as you know, every week, Bob, and he’s a chartered accountant. So, he’s more angry I think than most people because it’s his industry that’s now been put at, well that it’s been brought into disrepute, and this is what he had to say about the whole thing and I think he kind of sums it up really well.

‘Alec, how many times did we discuss…? You know, you talk about how you can fiddle provisions and how you can fiddle the books. I still maintain that accountancy is a bit of a fraud because it allows public companies or most companies really to manipulate the numbers and that’s the duty of the auditors to say, ‘no, you can’t. No, you’re not allowed to.’ I think there’s a huge outcry even over my favourite company, which is Naspers, where the new CEO is paid a bonus out of a write up in one of their investments, which is Tencent.’

David Shapiro, Sasfin

Well, we won’t go into that because he and I had quite a spirited conversation about that. I’m very on the side of the CEO. It isn’t just Tencent where his bonus was paid on but David puts it very well. He said, ‘the auditors are the guys who are actually supposed to keep you honest,’ the policeman. Who’s policing the policemen? Well, clearly no one is policing the policemen in SA and certainly, no one is policing KPMG. They were like a dirty cop in many ways.

Absolutely, Dementia said, ‘who will watch the watchers and who will guard against the guards themselves?’ I think it’s a great example of, and I’m more interested in, and I’m not necessarily an innovator or a change agent but I’m more interested in ‘next.’ But you’re so right, you’ve got to go back to getting that toxicity out. Get people accountable, and responsible, and all those kinds of things. You can build the ‘next’ – we’ve got people, we’ve got elbow grease, we’ve got opportunists, we’ve got enthusiastic people in SA, and we can build from nothing. We’ve proved that in every other country that we go to so, why can’t we do it at home? For me, this is actually, starting to swing, which is fantastic and I think there is a lot of big companies in a lot of big trouble.

Well, we’re going to be following this very closely over the next week, and what’s on the sporting calendar though? What big things are there? ‘The Springboks are licking their wounds?’

Yes, the Springboks are licking their wounds. The Proteas have got a brand-new coach, Ottis Gibson, who’s spent a lot of time playing in SA.

And AB is back.

Exactly, and as we announced it in a very modern way, which is wonderful but I was reading an article about Ottis Gibson, who played in SA for 6 or 7 years, I think, professionally. Obviously, West Indies origin and has been in the English coaching ranks for a number of years. He’s been bowling coach to Stuart Broad, who can’t speak highly enough of him and Broad has been a thorn in the side of SA. A really, well prepared, and dangerous bowler, so I think it’s good for the Proteas. I would really like to see how he embraces what I always say, ‘a difficult proposition.’ There aren’t many coaches from outside who’ve come into SA and even understood what was going on in Provincial teams, let alone the National team. The extra pressures, the calls for diversity, all those kinds of things but he comes with a tremendous pedigree. A wonderful attitude, a nice, positive guy who’s been an overachiever in the sport himself, and I think it’s tremendous for SA cricket. His first assignment will be Bangladesh, who’ve proven themselves on the international stage, by turning over both India and Australia. They’ve been very dangerous, and that’s going to be the first outing. I think it’s great for the Proteas, and that’s exciting.

We’ve got the T20 Global League starting. I’m not sure, and I made a comment to some friends of mine on a ‘school leavers chat group,’ I’m not sure that the Benoni Zalmi is a brand name that will be ringing around the world in the first 3 weeks but potentially, Quinton de Kock and his team might make everybody know who the Benoni Zalmi’s are quite shortly. I’m actually looking forward to that. I think it’s a good fore for SA into T20. I’m excited about that and we’ve obviously got the return fixtures of the Rugby Championship coming up as well. I’ve been gallivanting a little bit. I coached some rugby in Sweden as a favour to a friend that I’ve got a small interest in a business over there. I saw where rugby can start when people are keen on it. Literally, in the dead fields next to an airport with a disused shipping container as the changing room and 23 smiling happy, enthusiastic young kids who just love the game so, there’s no excuse for anyone getting involved and loving rugby. I think the Springboks have got to be part of what inspires those youngster’s, so hopefully at home we can do something exciting. I did get a terrible, and you get these jokes, and it usually takes about 30 seconds now for the jokes to come firing through after a Springbok loss and the one was that a guy was extremely disappointed because he’d been fined for speeding in the Mowbray area and the cop had given him 2 tickets, both to the Springbok game at Newlands on the 7th October.

And those tickets were sold out long before the All Blacks…

Yes, exactly. That was the joke. They’ll bounce back but yes, there’s quite a bit of sport coming up. I look forward to talking through it.

Just different tactics next time. Play Springbok rugby and who knows. Bob Skindstad, as always, it’s a lot of fun having our Team Talk and we’ll be back with episode 4 very soon.

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