Grace Cramer is a second-year International Development student from London and a senior editor of SAIS Perspectives.

“South Africa is not for sale.” These words, first spoken by ex-finance minister Pravin Gordhan, have since come to adorn placards, op-ed titles and political banners across the country.[1] It was 2010 when the first rumblings of alleged kickbacks and bribes among South African politicians emerged. By 2016, the rumbles became howls of outrage as citizens discovered, through leaked emails and the State Capture report, just how much money had been extracted from the state by corrupt politicians and the infamous Gupta family.[2]

Politicians haven’t been the only ones to be laid bare. If South Africa was for sale, multiple businesses stand accused of facilitating the transaction. This article asks how two such firms - McKinsey and KPMG – were drawn into the state capture scandal, arguing that these firms suffered from corporate isomorphic mimicry. While they implemented best practices de jure, in reality these practices were ignored, sacrificed for financial gain and powerful alliances. Only through improved culture and collaboration, can these firms regain their reputation as guardians, and not merchants, of South Africa’s wealth.

Scandal in South Africa

McKinsey’s involvement in state capture centers on services provided to a state electricity provider, Eskom, in tandem with Trillian Capital Partners. Evidence of the partnership first emerged after an investigation at Trillian.[3] While McKinsey has continually refuted that a formal relationship existed, [4] a letter has emerged in which then-McKinsey director, Vikas Sagar, directed Eskom to pay Trillian directly as McKinsey’s subcontractor.[5] Furthermore the relationship itself appears strange. In testimony made to South Africa’s parliament Trillian’s recently-departed CEO, Bianca Goodson, said; “in hindsight, it is my opinion that the entity [Trillian] was to get 50% for certain revenues without doing much work.”[6] This suggests that Trillian acted as a gatekeeper, not a subcontractor, to South Africa’s state-owned enterprises (SOEs).[7]

This payment for access is then alleged to have reached the Guptas through Salim Essa, who is known colloquially as the “fourth brother”[8] and who until recently owned 60% of Trillian. McKinsey has insisted that Trillian "withheld information" about its "connections to a Gupta family associate”[9], yet Essa attended many Trillian meetings and was a close associate of Sagar. These findings have lead South Africa’s parliamentary committee on public enterprises to “investigate whether McKinsey knowingly let funds from Eskom be diverted to Gupta-controlled firm Trillian as a way of securing the deal”.[10]

KPMG is similarly embroiled. It has lost eight of its senior executives, including its CEO, after leaked emails divulged that KPMG had audit, tax and advisory relationships[11] with no fewer than 36 Gupta-linked firms, allegedly overlooking numerous conflicts of interest in the process.[12] Emails further exposed that KPMG was aware of these firms’ reputational issues.[13] KPMG has also been accused of specific transgressions including allowing the Guptas to write off their daughter’s wedding as a business expense, drafting an inaccurate report for the South African Revenue Services (which led to the firing of Pravin Gordhan)[14], and helping the Guptas acquire the Optimum coal mine.[15]  Taken together these accusations indicate that KPMG, like McKinsey, aided and abetted the capture of state funds for the Gupta family.

Investigating Isomorphic Mimicry

After months of leaked information, investigations, and apologies, the dust is at last beginning to settle and broader questions about the firms’ conduct have emerged: namely, how could two multi-national firms, with litanies of compliance documents and monitoring procedures between them, have failed to notice so much unscrupulous behaviour? The answer might lie in the concept of isomorphic mimicry; the process by which organisations conform to a set of internationally recognised best practices that nevertheless do not serve their actual purpose. In this way the “form” – the policies and regulations – takes precedence over, and is conflated with, the function - the outcomes the organisation would want to reach. By examining how much McKinsey and KPMG’s actions deviated from their espoused best practices, it should be possible to determine if their governance practices were a case of mimetic isomorphism.

A strong ethical culture, for example was supposed to be a McKinsey hallmark, with its famed fifteen values, keeping consultants on the straight and narrow. Yet, for all their reputed importance they appear to have failed to guide the firm’s work with Trillian and Eskom.[16] Arguably the best known of McKinsey’s values is “the obligation to dissent.”[17][18] Yet in the firm’s work in South Africa, it was clearly disregarded. Former employees describe how McKinsey ignored concerns raised about the partnership, based on Trillian’s lack of experience and a previous investigation for fraud. They even describe how one partner who raised concerns was shifted off the project.[19]   

Culture aside, companies like McKinsey are supposed to be able to rely on monitoring procedures to detect wrong-doing and the firm claims that “any potential breach of…ethical standards is subject to comprehensive investigation.”[20] Yet evidence suggests that staff could manipulate these standards. Trillian initially passed vetting by McKinsey’s Global Risk Council, pending an inquiry, because senior management in the Johannesburg office kept information from the committee about its ownership, allege three former partners.[21]

KPMG claims to ensure that member firms comply with regulations. Policies on audit are particularly stringent, as they are based on external standards set by organisations like the International Ethics Standards Board for Accountants (IESBA).[22] Nevertheless, there is clear evidence of irregularities in KPMG’s audit of Gupta-owned firms. For example, it’s difficult to believe that experts in audit could have missed the “intricate web of money transfers and laundering in 2013”[23] that shifted money from the Free State government to a host of Gupta-linked companies, including Oakbay Investments and Linkway Trading. As Iraj Abedian points out, just the fact that R30-million moved from the Dubai-based Accurate Investments to South African Linkway Trading with only an invoice, should have raised concerns even in auditors without KPMG’s expertise.[24]

KPMG also makes much of its rigorous monitoring policies which include three different types of global quality and monitoring programs,[25] proprietary software to check for conflict of interest issues[26], and an externally managed hotline.[27] Despite this, issues raised by staff on Gupta-firm audits were routinely ignored. Emails show junior auditors expressing concern over the Sun City wedding being classified as a business expense, writing; “we are of the opinion that these (wedding-related) costs are most probably not in the production of Linkway’s income.”[28] Taken together, these transgressions suggest that KPMG’s regulatory and procedural efforts amounted to little more than isomorphic mimicry.

Where next?

The story does not end here. Simply because a firm fell prey to isomorphic mimicry doesn’t mean that it can’t change its future narrative. To fix themselves McKinsey and KPMG need to shift away from a best practice form of governance and instead focus on systems that actually deter misconduct. They can do this in two ways;

Creating an ethical culture 

McKinsey and KPMG’s culture, regulations, and monitoring procedures were all aligned with industry best practice. And yet none of these restrained staff. Employees, especially where support from senior leaders was strong, were able to circumvent rules and risk regulations. This was made permissible, and perhaps motivated by, cultures that routinely allowed rules and values to be violated. Thus it is imperative that these firms rebuild their ethical foundations upon which regulations and professional standards can rest. Such a commitment would entail a frank overview of ethical failings, reshaping hiring and promotion practices as well as performance management systems and, above all, ensuring an ethically minded leadership team is in place.

Creating external alliances

McKinsey and KPMG also need to find ways to improve their accountability. As partnerships, the firms struggle more than most companies with oversight. They lack the independent board or shareholders that would typically hold publically listed companies to account. In this way firms are very like the legendary Odysseus who, to avoid the lure of the harpies’ call, had his men tie him to the mast of his ship and vow not to untie him until temptation had passed. There is something that KPMG and McKinsey could learn from the Greek epic; namely that during a moment of weakness it can be helpful to tie your own hands and place faith in external actors.

This could be done through the use of ‘social audits,’ which audits carried out by an external, independent body “relating to the social performance of an organisation.”[29] In the case of KPMG and McKinsey, it might be prudent to work with an organisation, likely an NGO, with a strong reputation in the area of anti-corruption.

However, most firms would be unlikely continue this process, as there is a cost to being more ethical than your rivals.[30] To create external monitoring that can last for the long-term, KPMG and McKinsey should work with others to build an alliance between transparency organisations and firms willing to be scrutinised. They could make use of civil regulation; voluntary arrangements where, instead of legal repercussions for transgressions, violators typically face social or market penalties.[31] However, while this regulation is often credible it is rarely and comprehensive, due to its voluntary nature.[32] Brian Levy therefore suggests the use of ‘hybrid approaches’ which bring together governments and non-government stakeholders. These arrangements have the potential to be both highly comprehensive and credible.[33]

From merchants to guardians

Evidence thus far suggests that both McKinsey and KPMG facilitated the “selling” of the South African state. Even if neither firm is found guilty of corruption, neither can say they lived up to the ethical standards they claim. This is apparent when looking at these firms’ ethical underpinnings. Both KPMG and McKinsey can claim some measure of best practice and still codes, rules and processes were ignored.

Yet there is hope. Refocusing the firm on ethics, through performance management systems and strong leadership, can buttress behavioural change that prevents future wrongdoing. Through alliances with other firms which each agree to third party verification, KPMG and McKinsey can rebuild trust in their brands and help prevent misconduct at other companies. South Africans deserve nothing less. Business does not operate in a vacuum, it is granted a tacit licence to operate by society. To retain this McKinsey and KPMG will need to prove that they can safeguard the South African state.  


[1] African News Agency. “SA not for sale, says Gordhan”. The Citizen, August 26, 2017.

[2] The Economist. “Why McKinsey is under attack in South Africa”, October 12, 2017.

[3] Corcoran, Bill. "Blue-chip firms risk damage as South African corruption scandal spreads." The Irish Times, October 14, 2017.

[4] Cameron, Jackie. “McKinsey turns on its own as explosive SA-Gupta graft scandal erupts”. Biz News, July 10, 2017.

[5] Strydom, TJ and Brock, Joe. “Two banks drop McKinsey in fallout from South Africa scandal”. The Washington Post, October 30, 2017.  

[6] le Cordeur, Matthew. “As it happened - #StateCapture: I was lied to blatantly by Trillian - whistleblower”. Fin 24, November 3, 2017.

[7] The Economist, “Why McKinsey is under attack in South Africa”, October 12, 2017.

[8] amaBhungane, "The McKinsey dossier part 1 – how McKinsey and Trillian ripped R1.6bn from Eskom”, September 14, 2017.

[9] Ibid.

[10] Strydom, TJ and Brock, Joe. “Two banks drop McKinsey in fallout from South Africa scandal”. The Washington Post, October 30, 2017.  

[11] Motsisi, Mooketsi ('Pop'). “Op-Ed: KPMG – rearranging the deckchairs or stage-managing the facts? An insider’s perspective.” Daily Maverick, October 13, 2017.

[12] Gossel, Sean and London, Timothy. “What the South African KPMG saga says about shareholder activism”. The Conversation, September 27, 2017,

[13] Sithole, Thulasizwe. “Exposed! Magda Wierzycka unpacks fresh evidence linking KPMG to dirty Gupta deals”. Biz News, November 10, 2017.  

[14] Corcoran, Bill. "Blue-chip firms risk damage as South African corruption scandal spreads." The Irish Times, October 14, 2017.

[15]Bowker, John. “KPMG Under Fire in S. Africa for Work Done for Gupta Family”. Bloomberg, September 22, 2017.

[16] Raghavan, Anita. “In scandal’s wake, McKinsey seeks cultural shift”. The New York Times, January 11, 2014.

[17] Working with McKinsey. “What Is the "Obligation to Dissent" at McKinsey?” Working with McKinsey, November 23, 2013.

[18] Millerd, Paul. “Decoding High Performance @ McKinsey & Company”. Better Working World Project, March 4, 2017.

[19] Brock, Joe. “McKinsey ignored staff warnings in Gupta scandal, ex-employees say”. The Times, September 13, 2017.

[20] “Responsible Business Practices”. McKinsey. Accessed December 8, 2017.

[21] Brock, Joe and Cropley, Ed. “Exclusive: McKinsey worked with South African firm after learning of Gupta links - sources”. Reuters, November 3, 2017.

[22] Ibid. p.8

[23] Wild, Franz. “Gupta wedding money laundering saga: KPMG responds to audit watchdog probe”. BizNews, July 2, 2017.

[24] Abedian, Iraj. “Op-Ed: The KPMG Failure – Ethical test for SA business and company director”. Daily Maverick, September 11, 2017.

[25] KPMG. “Our relentless focus on quality”. 2016 Transparency Report. December 2016. 

[26] KPMG. “Our relentless focus on quality”. 2016 Transparency Report. December 2016. 

[27] KPMG. Global Code of Conduct 2012.

[28] van Wyk, Pauli. “KPMG: ‘Weak’ apology suggests company saw no evil, heard no evil – therefore did no evil”. The Daily Maverick, September 15, 2017.

[29] Belal, Ataur Rahman. “Corporate Social Responsibility Reporting in Developing Countries: The case of Bangladesh”. London: Routledge, 2008.

[30] Sullivan, John. D., Wilson, Andrew and Nadgrodkiewicz, Anna. “The role of corporate governance in fighting corruption”. Center For International Private Enterprise. October 18, 2013. p. 12

[31] Vogel, David. “Private Global Business Regulation”, The Annual Review of Political Science, 11, (2008). p. 261

[32]Ibid. p. 25

[33] Ibid. p. 24

Photo credit: Creative Commons/South Africa Tourism licensed under CC by 2.0.