Johannesburg - A week after the Auditor General announced the termination of public auditing contracts with KMPG and Nkonki Inc, the latter announced it has taken the “very painful and difficult” decision to undergo voluntary liquidation.
Law firm Nicqui Galaktiou Incorporated, in a statement issued on Monday evening on Nkonki Inc (Sunninghill's) behalf, said the auditing firm had no option but to voluntary wind-up after 25 years in business.
“The 180 employees including the executives, management, divisional heads and the minority shareholder … are victims who had no involvement nor knowledge in the shareholding and loan transactions, the funding thereof nor the due diligence processes that were conducted”.
Auditor General Kimi Makwetu’s decision last week followed the resignation of Nkonki Inc’s CEO Mitesh Patel earlier in April. Patel resigned after investigative journalism centre amaBhungane revealed that his R107m "management buyout" of the auditing firm was funded by Gupta associate Salim Essa through Trillian Capital.
Fin24 published a report by amaBhungane showing the intention was for Patel to hold most of the shares he bought – 65% of Nkonki – as a front for his funders. After the transaction Nkonki Inc was awarded a new deal with state power utility Eskom.
The auditing firm said in Monday's statement it was “regrettable” that the AG’s office had ended its public sector contract while work was underway by acting CEO Thuto Masasa and other executives to repurchase Patel's shareholding.
“The sale of the shares could not be finalised as a result of the cancellation of Nkonki’s public sector contracts”, it said. The auditor also said it was unable to wrap up the forensic investigation into the sale of the shareholding before the AG’s office acted.
Nkonki Inc employs about 180 people including interns and students with bursaries. Operations will not cease immediately under voluntary liquidation, as the winding-up process may take several months. Liquidators will be appointed by the Master of the High Court.
According to the company’s website, it has won a number of awards for its auditing services. Fin24 contacted the company for comment last week after the AG’s termination of its contract and was sent a press statement, which was later recalled.
The AG’s office relies on contracting 40 accounting firms - including the ‘Big Four’ and Nkonki Inc - as the state’s financial year ends in March and much of the work is seasonal, reducing the need for internal capacity. The auditing firms share in public sector contracts to the value of R450m annually.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER