Lightning strikes in unexpected places. We hear a lot about what has gone wrong in South Africa and less about the resilience of its relatively new institutions. Perhaps the great corporations which are finding out the hard way should have done a little more research.
Arrogance and greed are powerful motivators and what – they must have reasoned – could provide easier pickings than to be on the right side of President Jacob Zuma and his arch-collaborators, the Guptas? To all who have been saddened by the fading of hope in South Africa, what happened next provides a ray of sunshine.
At the behest of the opposition Democratic Alliance, the vile work of the PR firm, Bell Pottinger, was brought to light. Almost unbelievably in a land where race has been at the root of so much evil, they applied their creative genius to promoting racial division in the interests of Zuma and the Guptas, in return for large amounts of money.
As a direct result, Bell Pottinger has collapsed, to which the world will say a hearty good riddance. Nor does the collateral end there. Two of the world’s most ubiquitous and fee-conscious consultancies are in it up to their necks. KPMG has apologised, as they all do when there is nowhere else to go, for “what went wrong” in South Africa which included “missing red flags in auditing the Gupta family’s companies’.
The management consultants, McKinsey, have undertaken to “co-operate fully with any official inquiries and investigations” into the Democratic Alliance’s allegations of fraud and corruption over the awarding of state contracts. As clients flee to avoid the tarnish of association, the corporate response in more normal circumstances might have been to turn to Bell Pottinger for PR advice.
What might have happened in the UK if comparable events occurred. It is not as if the multinational consultancy firms have been free from scandal here, yet they bounce back into the safe haven of vast public contracts with scarcely a ripple of dissent.
Interest in pursuing wrongdoing often seems in inverse proportion to the scale of “what went wrong” – with no bigger example than the crisis which brought Scotland’s two historic banks to their knees a decade ago.
On the same day these latest developments in South Africa were reported, KPMG had better news in London. The Financial Reporting Council cleared them of misconduct over the collapse of HBOS in 2008, finding that the firm’s audit of the 2007 accounts “did not fall significantly short of the standards to be expected” and that its assessment of the bank’s health in 2008 “was not unreasonable at the time”.
The FRC, which regulates auditors, resisted the investigation and only carried it out on the insistence of the House of Commons Treasury Committee. In response to its finding, the committee’s chairwoman, Sally Morgan MP, said they would “want a full explanation of why the FRC exonerated the auditors”. Perhaps a clue lies in its membership, which scarcely conveys a penchant for boat-rocking.
It remains remarkable that, almost a decade after a banking crash which caused so much human misery and deprivation, the collective view of our legal and regulatory establishment is that not a single individual or company crossed the line between greed-driven, reckless incompetence and criminal negligence or deceit. A shredded knighthood remains the only trophy conceded to public retribution and no prince of banking has suffered the indignity of a one per cent pay cap.
There is nothing new about there being two codes of justice, one for the rich and another for the poor, but the more distribution of wealth diverges, the more corrosive these contrasting standards become. Banking scandals, corporate tax evasion and straightforward kleptocracy have all become much higher profile in the past decade, abetted by leaked information that would once have stayed firmly locked in the vaults.
Oliver Bullough, author of a new book called Moneyland which recounts all of this, wrote in the New York Times this week: “Hundreds of billions of pounds of illicit money pass through British banks every year and the National Crime Agency has called money laundering ‘a strategic threat to the UK’s economy and reputation’.” Bullough argued that “all this dirty money” could present an opportunity: “If Britain cleaned itself up, it would deny tax cheats, criminals, kleptocrats and terrorists access to one of the world’s largest financial centres, and severely restrict their room for manoeuvre.”
The question is whether any such will exists. Before he was derailed by Brexit, David Cameron had placed anti-corruption measures at the top of his global agenda; it was his big idea. “Corruption,” he said, ”adds ten per cent to business costs globally and cutting corruption by just ten per cent could benefit the global economy by $380 million every year.” It remains to be seen if his successor has any appetite for the same cause. Successive governments have been none too fussy about who they welcomed into this country on the basis of wealth alone. This approach, observed Bullough, “is symbolised by the corrupt officials – Nigeria ministers, ex-Soviet insiders, deposed Middle Eastern politicians – who launder their stolen cash and besmirched reputations through British instititutions, spending their dirty money on high-end real estate in London”. Not to mention a few Scottish sporting estates.
It is difficult to reconcile such evidence with the rhetoric. If we are against corruption then why do we facilitate its beneficiaries? If we believe in fairness, then why do we tolerate the ruthless global tax avoiders on our high streets? If we advocate transparency, then why is there such resistance – even now – to investigating the events of a decade ago which have created such a drastic legacy (a reluctance, I might say, which has been as resolute in Edinburgh as in London).
The Azeri money laundering scandal, with its distinctively Scottish connotations, offers a fresh opportunity to show mettle though I don’t sense great political enthusiasm for getting involved. Yet any government or party which assumes that such revelations pass over the heads of the masses should maybe think again. The undercurrent of anger against corporate rottenness will eventually find political expression. Just ask Mr Bell or Mr Pottinger.