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Wits is in their blood

- Wits University

Hilary Joffe shares her family's remarkable connection to the University.

Graduation address by Hilary Joffe

It is an honour and for me, it is a special privilege, because of the long association my family has had with Wits University.

My late grandmother Ethel graduated from this University in 1924, with a degree in botany. That would make her one of the very earliest Wits graduates because Wits only granted degrees for the first time in 1922.

That was when it became a fully-fledged university: before that it was a college of mining, medicine and the sciences and granny Ethel used to talk about the Tin Temple – this was a corrugated iron building in Plein Street where Wits lectures were held in the early days, before the university started to build this campus.

I studied at this campus and am a proud Wits graduate. So was my late mother – and so are my two children.

When my son graduated here last year he felt really humbled by the fact that he is one of those rare people – a fourth generation Wits graduate. But he, and we, his parents, were even more humbled – indeed in awe – at how many of the students who studied and graduated with him were first generation Wits graduates.

Some of you here today is the first person in your family to come to a university, and maybe even the first person in your village or your town. That is a most incredible and impressive achievement.

I salute you, and your families.

But I salute you too if you are a second or third, or maybe even fourth generation university graduate.

For many of you, and for your families, the milestone you have reached today has involved a lot of hardship. For all of you here today, I am sure, winning your degree has involved sacrifices, with lots of late nights and hard work.

Congratulations to all of you.

You are graduating into an interesting world, at an interesting and important time. It is a time of political change, a time of optimism and hope in our country.

We have a new leadership that has promised to root out the corruption and state capture that has done so much damage to our economy and to the fabric of our democracy over the past few years. We have a new leadership that has promised to revive our economy after years of slow growth and rising unemployment.

It is early days yet. And it won’t be easy. But under the presidency of Cyril Ramaphosa, we have seen some positive early signals that the rot will be rooted out, and that South Africa will be put on the road to recovery.

It is such a good time to be to be graduating.

You have the opportunity to make the most of your potential, and of your Wits education, in a way that will be rewarding for you, and your families - but will also contribute to the recovery in our economy and our society.

It is a time when each of you can make a difference.

A real difference.

But it is also a challenging time. You are heading into the world of work, after a year which has not been a good one at all for corporate South Africa and particularly for the reputation of professional services firms.

Many of you, I expect, will be heading into careers in professions such as accounting or law, or in the corporate world (in the private or public sector). But you do so after a string of corporate scandals and corporate calamities that have seen big-name firms such as KPMG, McKinsey, SAP, Hogan Lovells – and of course Steinhoff – hit the headlines for all the wrong reasons.

I wonder how you feel about that.

And I wonder what lessons you will take from those scandals.

I ask this especially if you are going to end up as the auditor or the director of a company, and responsible for overseeing it and making sure that it understands and manages the risks, whether to its finances or to its reputation.

Because the one big question that all these corporate scandals have raised is: Where were the guardians? Where were those who were supposed to exercise oversight? Did they turn a blind eye to the risks? Or did they just fail to spot them?

Where was their independence? And why didn’t they exercise the judgment and the duty of care that shareholders and members of the public expect of them?

If they were advisers or auditors, why did they take on clients they should have known were high risk, or accept mandates which put their own reputations at risk?

If they were directors on the board, why didn’t they ask more questions of management and find out what was really going on?

And what needs to be done to make sure it doesn’t happen again?

It is tempting to lump all these cases of scandal in one big pot and claim it’s all just private sector corruption, just like there is corruption in the public sector. But it is really not that simple. And we need to dig deeper if we are to learn the lessons.

There is clearly criminality involved in some of these corporate calamities - most notably Steinhoff. I will come back to that.

There is alleged corruption in others: information technology consultancy SAP has admitted its people paid kickbacks to Gupta-linked firms to get Transnet and Eskom business; Corruption Watch has asked the US authorities to investigate management consultancy McKinsey under the foreign corrupt practices act for the 1.6 billion Rand contract the consultancy, and Gupta-linked Trillian, had with Eskom.

These are big name global firms, and it is one of the tragedies of the last few years that South Africa has become such a graveyard of reputations for good firms that allowed themselves to be caught up in the cronyism and corrupt tendering.

Equally, it has been one of the achievements of the past year that the evidence of wrongdoing has emerged and that some of the firms and the individuals have had to account for their actions.

And if I can take a brief commercial break here, I want to give credit to my own profession, the media, for digging up the dirt and keeping up the pressure.

Now, hopefully, there will be even more of that transparency and accountability, not just on the private sector side but on the side of the public sector perpetrators, in government and state-owned entities. Those who have broken the law must be charged.

But when we come to the accounting firms and the lawyers who let themselves be embroiled is, the problem is, in a way, a more profound one for the professions.

I am not sure anyone is accusing firms such as KPMG of breaking the law. But they do stand accused of being thoughtless or incompetent. At best, they showed very poor judgment and not nearly enough independence in the face of demands from their clients.  

But that is what they are there for: it is exactly their judgment, their independence, and their integrity, that the public, the shareholders, and the companies rely on.

One lesson to learn from these firms’ failure is about the need to be alert to the world around you - to make sure you have a real understanding of the environment in which you operate, and of the risks and the consequences of whatever business you do – not just for your company but for your country and community.

It is not enough for a firm to look at the numbers and tick all the boxes on the ‘know your client’ tests. When a firm takes on and retains clients, it needs to think about the political or other risks out there.

It can’t be just about getting market share and driving profits

As we have seen over the past year, if a company fails to understand and manage the risks, to its own reputation and to society at large, it might just end up losing its clients and its profits.

And actually, that applies just as much to a firm that makes polony as it does to an audit firm.

KPMG audited the Gupta companies for years without raising red flags. Well, you might say, we didn’t know then what we know now about the Saxonwold family and its machinations. But go back 10 years and there was already at least one dodgy deal in the news.

Equally, when KPMG agreed to do an investigation for its client, the SA Revenue Service, into the ‘so-called’ rogue unit, it cannot have been unaware of now-suspended SARS commissioner Tom Moyane’s efforts to capture the revenue agency and drive out anyone trying to push back against corruption. The report was used to justify attacks by the Hawks and Moyane on Pravin Gordhan and others, attacks that did inordinate damage to SA’s economy and its credit rating, as well as to individuals.

Of course, SARS is an important client for any accounting firm. But did KPMG allow greed to get the contract, or please the client cloud its judgment on what was right?

It has paid the price. So too has law firm Hogan Lovells. It’s come under attack in Britain’s House of Lords for the flawed report it did for SARS – a report which was used (or abused) to exonerate a man who was caught on camera stuffing 1.2 million Rand in cash into ATM machines.

Again, maybe the firm didn’t do anything wrong, strictly speaking: but it accepted a very narrowly defined mandate and didn’t stand up for what was right. Whether it intended it or not, its report damaged SARS and South Africa.

That touches on a second lesson, which is about independence, and integrity.

Professional firms – and I think we can include economists? - depend on the trust the public and their clients have in them: their reputation is their most important asset. And if they don’t stand up to their clients when they need to, they risk losing that.

That is particularly the case for auditors. Their clients pay them, but they serve a broader community of directors, shareholders, government and the public. We need them, and we look to them for the assurance they provide on the quality, transparency and fairness of the numbers.

Indeed, high ranking South Africa still enjoys on global competitiveness indices is thanks in part to the high quality of its auditing standards.

When audit firms’ reputations are compromised, it hits the profession as a whole and impacts on South Africa and its ability to attract investment.

That’s why of all the professions, auditors most need to speak truth to power. They need to ask the right questions – and make sure they don’t miss the red flags – or allow them to be swept under the carpet.

Yet, that’s exactly what some of our audit firms seem to have failed to do. Nor should we single out KPMG. Questions have been asked about what PWC was doing signing off South African Airways’ financials each year as the state-owned airline descended into insolvency; one might ask too why Sizwe Ntsaluba Gobodo took so long to issue Eskom with a qualified audit report, as it did last year confronted with evidence of irregular spending.

And then there are the question marks about Deloitte, which audited Steinhoff in SA and globally.

I have talked about professional services firms but I haven’t yet talked about those who ultimately hire them: the company’s board of directors.

Steinhoff’s auditors might have failed in their role of oversight. But the failure of the directors – who are supposed to oversee the overseers, as it were, is even greater.

Steinhoff’s December announcement that its high flying CEO Markus Jooste had resigned and that it was investigating “accounting irregularities”, wiped more than a hundred billion Rand off the wealth of its shareholders – including the big pension funds that hold the life savings of many South Africans.

It also did huge damage to South Africa’s reputation for good corporate governance – a reputation which, like our high score on auditing, has put us high on the global competitiveness rankings.

The board of Steinhoff read like a who’s who of South African corporate luminaries, led by billionaire Christo Wiese.

So where were they all? when the company’s management was going on a debt-fuelled spending spree, creating all sorts of fancy structures to inflate assets and profits?

Were they knaves, or were they just fools?

If the directors knowingly went along with dodgy accounting so they could keep driving up the share price that’s criminal. They should go to jail, along with the management.

But if they did not know what was going on, that is a profound failure on their part. They missed the signs. They didn’t ask the right questions, or raise the red flag, or call management to account.

In the wake of all these corporate scandals, there is much soul-searching going on in South Africa about the role of auditors and the role of the board of directors, and about how to bolster both. And not just in South Africa: in the UK, for example, the collapse of Carillion has raised similar questions.

Regulators and politicians tend to want more rules, more boxes to tick.

But all the box-ticking in the world won’t help if the people in those firms aren’t alert to what’s going on, inside and outside the company, if they don’t sound the alarm when something doesn’t look right, if they don’t stand up to being rail-roaded by powerful executives or powerful shareholders.

Ticking the boxes won’t help if the guardians let their greed for profits trump good sense, if they let their moral values take second place to their desire for fame and fortune.

The founder and outgoing chairman of FirstRand Laurie Dippenaar put it very simply: “It’s not about rules. It’s about values.”

As you go into the world of work, I would like to think you will take with you your own moral code, of honesty and integrity and standing up for what’s right. Only on that foundation can you make a difference, whether you go into the private sector or the public sector.

I would like to think too that you will take from your education at Wits an ability to be alert to the world inside and outside your workplace and to ask the right questions.

But just as this past year has been one of corporate scandals, it’s also been a time in which business has at last found its voice, standing up, sometimes stridently, to challenge corruption and state capture, and to reinforce the values of integrity, decency, accountability and human rights embodied in our constitution.

We have seen bankers and fund managers using the power of their investments and loans to try to hold failing state-owned enterprises such as Eskom and SA Airways to account and to insist that credible, competent boards of directors be put in to turn these enterprises around.

We have seen business leaders protesting alongside civil society and labour organisations. The representatives of organised business have called for a halt to corrupt and destructive government actions that have undermined the economy’s ability to grow and create jobs. But they have, at the same time, committed their members to root out corruption in their own ranks and ensure accountability and ethical values in their own businesses.

All of that has helped to make a difference.

But SA has a very long way to go to transform its economy and tackle the deep problems of unemployment and inequality that plague us, and hold us back as a country. You as economics and commerce graduates would know that better than I do.

And you can make a difference too. You will know that only a small proportion of South Africans make it to university and of those, only about half actually graduate.

That makes the achievement you are celebrating today all the more impressive. But it also means you, and I, have a responsibility to use our skills to contribute in whatever (small) way we can to make this a more prosperous economy and a better country for all South Africans – one based on those values of honesty, integrity and decency.

In his first State of the Nation address just four weeks ago, President Cyril Ramaphosa said: “We are at a moment in the history of our nation when the people, through their determination, have started to turn the country around.

“Now is the time to lend a hand,” he said. “Now is the time to say ‘send me’”.

So as your teachers and your families send you out into the world outside Wits, I wish you all the very best of good luck – and good judgment.

About Hilary Joffe

Hilary Joffe is the Deputy Editor and Editor-at-Large of Business Day, a leading national newspaper in South Africa. She has over 20 years of extensive experience as a reporter and commentator on the economy and economic policy, financial markets and the corporate sector in the print and broadcast sector.

Aside from managing a multi-disciplinary team, she is also an award-winning columnist and writer. In 2005 and 2008, she won the Sanlam award for Excellence in Economic Journalism. In 2007, she received the US Embassy award for best reporting. In 2008, she was awarded a Ruth First Fellowship.

Joffe left her journalism career from 2010 - 2013 to join Eskom, where she worked as a general manager responsible for reputation management, stakeholder relations and corporate communications. As Eskom’s spokesperson, she gained extensive exposure in the media on issues of national importance. She was a finalist in the South African National Energy Association awards in 2009 and received the Eskom Chairman’s Special Award for the “Keep the Lights On” project in 2012.

Joffe has also worked as a consultant, as a senior economist for Standard Bank, as an Investment Editor for Finance Week, as the Business and Economics Editor of the Weekly Mail, as an economics reporter for the Financial Mail and even as a lecturer in sociology in the 1980s. 

A Wits alumna, Joffe obtained her BA Economics degree and her BA Honours in Industrial Sociology from this University. She then obtained her Master's degree in Sociology from Oxford University in the United Kingdom.