Monday, August 21, 2017

KPMG’s questionable behaviour goes beyond Gupta companies

Yet another scandal means it’s time for some changes in the auditing industry

By GroundUp Editors
22 August 2017

Image of KPMG logo
KPMG has not lived up to a promise on its website: “Above all, we act with integrity”. KPMG logo copied for fair use
Once again, auditing firm KPMG is at the centre of a controversy.

First there was its role in the SARS “rogue unit” claims published by the Sunday Times. In an unpublished but leaked report KPMG recommended that Pravin Gordhan, finance minister at the time, be investigated for starting the unit. But as we now know, there was no rogue unit. The story was a concoction to get rid of Gordhan and further the aims of the state capturers.

Now the Independent Regulatory Board for Auditors is investigating KPMG for the “2014 audit of Linkway Trading, the company alleged to be involved in the Gupta wedding scandal.”

Readers may remember that it was also KPMG which wrote a report for the company at the centre of the social grant payments crisis, Net1. The report essentially cleared Net1 of wrongdoing. But as an analysis published on GroundUp shows, the report failed to ask the right questions.

KPMG is one of the “Big Four” audit companies in the world. In the 1990s there were eight. Through mergers this became five. Then Arthur Andersen went down in flames because of its bogus auditing of oil company Enron. So now there are four. These firms have a virtual monopoly on big audits. And there’s no reason to believe that Arthur Andersen’s corruption was unique, given the inherent conflict of interest in the relationship between the auditing and the audited. The audit companies bid for business from, and are paid by, the very companies they’re auditing.

Instead of listed companies directly hiring audit firms, would it not be better if they paid audit fees to the stock exchange where they are listed? The stock exchange could randomly select an auditor from a list of high quality audit firms and pay the auditor directly. Audit firms could regularly tender to be on the list, which would include many besides the Big Four. The audit firm could be assigned to a company for a few years because rotating auditors too frequently is burdensome, but they must rotate regularly.

This is not a guarantee against corruption but it might go some way to making sure that KPMG (and the others) live up to the promise on the KPMG website: “We seek the facts and provide insight”. “Above all, we act with integrity”.

GroundUp will be publishing occasional editorials on topics we report on. This is the first one. 

Published originally on GroundUp .

Clashes in Khayelitsha following land occupation

“I have no source of income because I’m jobless but I have to pay R500 to my landlord monthly”

By Vincent Lali, Mary-Anne Gontsana and Thembela Ntongana
21 August 2017
Photo of ward councillor
The office of ward councilor Anele Gabuza was set alight, and his house was vandalised. Photo: Vincent Lali
Disputes over housing in Khayelitsha spilled over on Sunday when people set alight and vandalised a community centre that contains the local ward councillor’s office. They also vandalised the councillor’s house. These acts were in response to the Anti-Land Invasion Unit attempting to stop a land occupation near Monwabisi Beach in Endlovini by several dozen people.

The occupiers are fighting to be part of an upcoming housing development.

The ward councillor, Anele Gabuza, told GroundUp that he held a meeting with the occupiers a week ago about the allocation of the houses that will be built: “They said they want to be part of the development because they are backyarders and also deserve houses. I told them that I cannot give them houses because the houses have already been assigned to beneficiaries by the City of Cape Town. I also told them to give me a list with their complaints and their names that I would take to the City and hopefully we would come up with a solution.”

After the occupation on Sunday the Anti-Land Invasion Unit began demolishing the shacks that were being erected. Gabuza said the demolitions began before he had a chance to talk to the City. He said that out of anger, the occupiers burned and vandalised his office and house.

The housing development will apparently accommodate 6,000 beneficiaries from Endlovini, and it would be divided into two phases. Phase 1 will be next to the False Bay College and Phase 2 would be in Endlovini.

Occupiers who GroundUp spoke to said they could not afford to carry on living where they were. Khauta Tsiboli, 32, said he had been living in a shack that belongs to his friends who are living in the Eastern Cape. “The owners of the shack say I must now move out because they are planning on coming back,” he said.

Tsiboli, who lives with three teenage children, was shot with a rubber bullet while the Anti-land Invasion Unit clashed with the occupiers. “A young policeman confronted and ordered me to leave with my shack. I refused point blank and he shot me here,” said Tsiboli, pointing to a wound on his back.

Tsiboli continued to rebuild his demolished shack while police watched from their vehicles some distance away. “I must get my own place to stay now,” he said.

Amanda Kobo, 40, said she built a shack on municipal land because she was fed-up with staying in a shack with her young brother who has a wife and children. “I want to have my own place and fend for myself,” she said. Kobo said she relied on jobs such as cleaning houses and looking after children for a living. “I have sacrificed money to buy bread and instead bought building materials, so the Anti-Land Invasion Unit broke my heart when they tore down my shack,” she said. Hammer in hand, Kobo said: “I have no choice but to rebuild the shack so I can have my own place to stay.”

Another occupier, who has three young children was attempting to rebuild her demolished shack. “I have no source of income because I’m jobless, but I have to pay R500 to my landlord monthly. Sometimes I char in Wynberg, but work is scarce and the money I earn can’t pay rent,” she said. “I have nowhere else to go, so I’m forced to rebuild the shack so that I can have a roof over my head.”

Other residents said they built shacks on the land for their “mature children” so they could have privacy at home. “My kid has turned 18 and he now needs to have his own place where he can have fun with his girlfriends far away from me,” said a 37-year-old woman. She said: “We both need privacy as I can’t sleep with a man in one room while he is also sleeping with his girlfriend in another room in the same shack.”

“I don’t want him to see me date one boyfriend today and another tomorrow because he will have a low opinion of me,” she added.

Simphiwe Mzalwane, 38, who built a shack for his brother on the municipal land, blamed Gabhuza for mishandling the occupation. “The ward councillor should have left the Anti-land Invasion Unit behind and addressed the residents,” he said. “He angered the residents by bringing the Anti-Land Invasion Unit.”

The occupiers damaged chairs, windows and doors and dirtied the community hall. Gabuza said they destroyed windows and frightened his family at his house. He said: “Two police vans were already here when the mob came and torched the hall.” But the police ran away, he said.

Gabuza said he was willing to talk with the residents together with the City to come up with a plan about how they can be accommodated.

The area is bushy and it will be difficult for the Anti-Land Invasion Unit to stop the occupation. As of Sunday evening, it was ongoing.

Western Cape police spokesperson Noloyiso Rwexana said two suspects aged 31 and 36 were arrested for public violence. They are expected to appear at the Khayelitsha Magistrates’ Court on Tuesday.

Published originally on GroundUp .

Grace Mugabe: why diplomatic immunity isn't always an 'out of jail' ticket

File 20170821 27163 jy38xl

Zimbabwean first lady Grace Mugabe with her husband, President of Zimbabwe Robert Mugabe.
EPA/Khaled el-Fiqi

Grace Mugabe, the wife of President Robert Mugabe of Zimbabwe, is accused of assaulting a young woman while on a visit to South Africa. A week after the incident in a hotel in Sandton, Johannesburg’s upmarket central business district, a South African government minister announced that she had been granted diplomatic immunity. She has subsequently returned to Zimbabwe without any attempt by the South African Police Service to arrest her.

The incident has sparked a furious debate about whether she should have been granted immunity, and what this means for the victim of the alleged assault.

At the time of the alleged assault Grace Mugabe was on a private, not official, visit to South Africa. She wasn’t granted immunity before her visit and it’s not clear on what basis she’s now been granted it. Normally diplomatic immunity is granted to an individual envoy by prior agreement, or by the Minister of International Relations if it is in the interests of a country.

Since it is conceivable that Grace Mugabe might visit South Africa again in future it’s worth reviewing the rules, considerations and implications of diplomatic immunity.

Rules governing diplomatic immunity

Grace Mugabe was neither a visiting head of state or government, nor a diplomat representing her country – both of which would have qualified her for diplomatic immunity.

There is no basis in customary, conventional international law or domestic law for the spouse of a head of state to claim – as a right or entitlement – some form of immunity when visiting a foreign state.

A foreign state – in this case South Africa – can, of course, grant immunity. But there’s a legal framework that governs this. In her case, as the spouse of a foreign head of state, she could be granted immunity from the criminal and civil jurisdiction of the courts in South Africa if, for instance, she was on a visit as an envoy of her country to attend an international conference, or if she was accompanying her husband on an official visit. The fact that she happens to be an important person isn’t a good enough criterium.

In other words, it’s not status that serves as a basis for granting immunity. Rather, it’s the nature of the person’s visit.

South Africa’s Diplomatic Immunities and Privileges Act gives the minister of International Relations and Cooperation the power to grant immunity to foreign visitors who represent their countries on official business. The act sets out how this must be done. If there’s no prior agreement that already covers the visit, a notice must be published in the Government Gazette.

What’s clear is that the spouses of foreign heads of states, members of foreign royal families, international celebrities and the like, can’t be granted immunity on a whim. There are laws, protocols, and procedures to be followed.

Formalities aside, it’s also important to keep in mind the underlying rationale of diplomatic immunity in international law and international relations. Diplomatic immunity is a principle with ancient roots and forms an integral part of international relations. At the heart of it is the idea that diplomats – or others representing their countries or international organisations – must be able to pursue their official duties free from interference by the host state.

Foreign envoys who are granted immunity therefore enjoy immunity from the criminal and civil jurisdiction of the courts of the host country.

What about justice for the victim?

Diplomatic immunity can indeed be seen as a shield against accountability for criminal conduct or civil obligations. The abuse of diplomatic immunity can therefore lead to impunity.

If a person who enjoys diplomatic immunity is accused of a crime, and their immunity isn’t waived, it’s normal practice for the host country to declare the person to be persona non grata. They are then expected to leave the country. But that also means there is no justice for the victim of the crime.

Nevertheless it’s important to remember that the immunity initially granted to the diplomat or envoy does not attach to that person in his or her personal capacity. It would have to have been granted in one or other other official capacity.

The right to institute a prosecution for most crimes (including assault) lapses only after 20 years. There are exceptions. This right never lapses in the case of serious offences such as murder, rape, robbery with aggravated circumstances, and the atrocity crimes of genocide, war crimes and crimes against humanity.

It’s conceivable that a person who once enjoyed diplomatic immunity, but who no longer benefits from it, will face justice at some future date. This assumes that they find themselves back in the country in which the alleged crime took place.

It would be hard to justify continued immunity for someone accused of a crime given that criminal conduct, including assault, is not normally associated with official business between two sovereign states.

That’s not to say that the victim can easily get justice. Diplomatic immunity conferred on visiting envoys and representatives means immunity from prosecution and civil action. This means that a victim will be frustrated in their quest for justice in the courts.

The ConversationHowever, that doesn’t mean it’s impossible. Taking into account the rules around the prescription of the right to institute prosecution of crime, and the underlying rationale of diplomatic immunity as a tool to facilitate official political and commercial relations between sovereign states, it can be argued that diplomatic immunity isn’t the impenetrable shield of impunity imagined by some.

Gerhard Kemp, Professor of Criminal Law and International Criminal Law, Stellenbosch University

This article was originally published on The Conversation.

Sunday, August 20, 2017

Cold War kids: This time it's youth, not ideology, igniting unrest

File 20170816 32614 1ogsdzg

High school children sit in front of a billboard featuring Ché Guevera in Cienfuegos, Cuba.

Just when you thought the Cold War could be consigned to museums and thrillers like The Hunt for Red October, along came Donald Trump’s threats of “fire and fury” in North Korea and military intervention in socialist Venezuela.

And then there’s the even more bizarre case of Cuba.

In a twist worthy of a John Le Carré novel, diplomats from the United States and Canada stationed on the island nation fell ill in the past year due to some sort of “sonic attack.” The diplomats suffered hearing loss, nausea and other symptoms similar to a concussion.

After they returned home, an investigation only deepened the mystery. Was Russia involved? And what about the turn toward dictatorship in Venezuela: Was Cuba pulling the strings? The Cold War was back and hotter than any time since Ronald Reagan joked about bombing the Soviet Union.

While the Cold War was a war of ideas between revolutionary movements and economic theories, this latest dust-up between Venezuela’s President Nicolás Maduro, and Trump obscures the fact that across the Americas, the new battle does not break along traditional ideological lines of right versus left. While it may look like the Cold War Redux, a closer look reveals a generational divide as opposed to a political one.

Ideology everywhere

As a doctoral student specializing in the cultural Cold War in Latin America, I saw how ideological polemics permeated everything: from folk music to the poetry of Pablo Neruda, so much depended on one’s position on controversies like the Cuban Revolution, the civil wars in Central America and the status of Puerto Rico.

Then I went to Cuba. I studied Afro-Cuban percussion with a religious man whose only framed portrait in his living room was a photo of him hugging Fidel Castro, even though the Revolution often marginalized and denigrated manifestations of his Afro-Cuban religion.

The same people who loved to sing the popular ode to Ché Guevara, Hasta siempre, Comandante, were budding capitalists, running small restaurants or ferrying tourists around in their 1950s Oldsmobiles as a side hustle to their “real jobs.” The people most adept at the side hustle or startup weren’t necessarily more right-wing than their status quo compatriots. But they were definitely younger.

Guevara, who spelled out the ethos of the “authentic” revolutionary in an essay called “Socialism and the New Man in Cuba”, would have been outraged. The ultimate goal of the revolution was to replace monetary incentives — capitalism in any form —with the moral incentive of building a just, fair and equitable society under socialism.

Side jobs needed to survive

While Guevara died fighting for this cause in the jungles of Bolivia, his ideas endure: Tu ejemplo vive – “your example lives on” – is a popular billboard throughout the country.

A building in Cienfuegos, Cuba.

As president of the National Bank, Guevara was happy to preside over the demise of the Cuban tourist industry. Tourism, for the revolutionaries, replicated structures of neocolonialism and exploitation. (He urged everyone to get out and cut sugarcane to help build the nation).

Today, visitors can now go on pricey tours of the small organic farms run by a new generation of cuentapropistas (small-scale entrepreneurs) that have popped up in the last decade.

“You always need another job on the side,” a driver on the road from Santiago to Holguin told me. He was a cellist in Santiago’s symphony orchestra, a prestigious position. But with a salary of around $30 a month, he could not take care of his most basic needs. “Maybe some people can do it,” he said, “but I don’t see how.”

In Venezuela, meanwhile, some of the most vocal opposition on the streets is not from the disenfranchised middle class with ties to the oil industry, but from former Hugo Chávez supporters.

Some of the protesters are poor people who have simply tired of queuing up for toothpaste and toilet paper. But others are bona fide leftists themselves, arguing that the ongoing Bolivarian Revolution in Venezuela has deteriorated into an old-fashioned kleptocracy.

Venezuelans fled to Spain, U.S.

Even the Communist Party of Venezuela —a seemingly natural ally of Maduro —has fractured in its response to the government’s crackdown on dissent.

Waves of Venezuelan dissidents arrived in Spain and the United States after Chávez began redistributing wealth and clamping down on private media in the early 2000s. These political refugees have given way to a far more numerous and diverse group: the “wave of desperation.”

Again, the common denominator for these dissidents isn’t so much ideology, but youth. They are university students of all political persuasions who are on the front lines of the street battles against government forces.

A young anti-government demonstrator holds a Venezuelan flag during clashes against Venezuelan Bolivarian National guards officers at a protest against Venezuela’s President Nicolas Maduro in Caracas, Venezuela, in August 2017.
(AP Photo/Ariana Cubillos)

State-run media in Cuba and Venezuela and mass media in North America have different explanations for the tumultuous times in the Americas, but they seem to agree on one thing: It’s a Cold War revival of Right versus Left.

In Alberta, conservative media draws false parallels between Rachel Notley’s pragmatic New Democratic administration and Maduro’s Socialist Party. In Venezuela, TeleSur often depicts the struggle as one between the working class pueblo and the right-wing oligarchy backed by Donald Trump’s administration. (Of course, Trump’s statement that the United States had a “military option” for the Venezuela crisis only played right into Maduro’s hand).

When the Cold War ended, it seemed like ideological orthodoxy might also give way to pragmatics and new political formations. Neoliberal philosophies took hold of traditional left-of-centre parties. Cuba opened up small-scale capitalism. Venezuela promised a “21st Century Socialism.”

The ConversationSo while it might look like we’re headed back into an age of right-wing vs. left-wing binaries, a new generation of activists across the hemisphere suggests otherwise. Those of us who remember the last Cold War would do well to think outside our orthodoxies as we process a new era of hemispheric tumult.

Russell Cobb, Associate Professor of Latin Amerincan Studies , University of Alberta

This article was originally published on The Conversation.

How eclipses were regarded as omens in the ancient world

File 20170807 25556 1lixvch

A solar eclipse observed over Grand Canyon National Park in May 2012.
Grand Canyon National Park

On Monday, August 21, people living in the continental United States will be able to see a total solar eclipse.

Humans have been alternatively amused, puzzled, bewildered and sometimes even terrified at the sight of this celestial phenomenon. A range of social and cultural reactions accompanies the observation of an eclipse. In ancient Mesopotamia (roughly modern Iraq), eclipses were in fact regarded as omens, as signs of things to come.

Solar and lunar eclipses

For an eclipse to take place, three celestial bodies must find themselves in a straight line within their elliptic orbits. This is called a syzygy, from the Greek word “súzugos,” meaning yoked or paired.

Solar lunar eclipse diagram.
Tomruen (Own work) via Wikimedia Commons, CC BY-SA

From our viewpoint on Earth, there are two kinds of eclipses: solar and lunar. In a solar eclipse, the moon passes in between the sun and Earth, which results in blocking our view of the sun. In a lunar eclipse, it is the moon that crosses through the shadow of the Earth. A solar eclipse can completely block our view of the sun, but it is usually a brief event and can be observed only in certain areas of the Earth’s surface; what can be viewed as a total eclipse in one’s hometown may just be a partial eclipse a few hundred miles away.

By contrast, a lunar eclipse can be viewed throughout an entire hemisphere of the Earth: the half of the surface of the planet that happens to be on the night side at the time.

Eclipses as omens

More than two thousand years ago, the Babylonians were able to calculate that there were 38 possible eclipses or syzygys within a period of 223 months: that is, about 18 years. This period of 223 months is called a Saros cycle by modern astronomers, and a sequence of eclipses separated by a Saros cycle constitutes a Saros series.

Although scientists now know that the number of lunar and solar eclipses is not exactly the same in every Saros series, one cannot underplay the achievement of Babylonian scholars in understanding this astronomical phenomenon. Their realization of this cycle eventually allowed them to predict the occurrence of an eclipse.

The level of astronomical knowledge achieved in ancient Babylonia (southern Mesopotamia) cannot be separated from the astrological tradition that regarded eclipses as omens: Astronomy and astrology were then two sides of the same coin.

Rituals to preempt royal fate

According to Babylonian scholars, eclipses could foretell the death of the king. The conditions for an omen to be considered as such were not simple. For instance, according to a famous astronomical work known by its initial words, “Enūma Anu Enlil” – “When (the gods) Anu and Enlil” – if Jupiter was visible during the eclipse, the king was safe. Lunar eclipses seem to have been of particular concern for the well-being and survival of the king.

In order to preempt the monarch’s fate, a mechanism was devised: the “substitute king ritual,” or “šar pūhi.” There are over 30 mentions of this ritual in various letters from Assyria (northern Mesopotamia), dating to the first millennium B.C. Earlier references to a similar ritual have also been found in texts in Hittite, the Indo-European language for which we have the earliest written records, dating to second-millennium Anatolia – modern-day Turkey.

Saving the king

In this ritual, a person would be chosen to replace the king. He would be dressed like the king and placed on the throne. To avoid confusion with a real coronation, all this would occur alongside the recitation of the negative omen triggered by the observation of the eclipse.

The real king would keep a low profile and avoid being seen. If no additional negative portents were observed, the substitute king was put to death, therefore fulfilling the prophetic reading of the celestial omen while saving the life of the real king. This ritual would take place when an eclipse was observed or even predicted, something that became possible to do in later periods.

The presence of this ritual among the corpus of Hittite texts in second-millennium Anatolia has led to the assumption that it must have existed already in Mesopotamia during the first half of the second millennium B.C.

A legend

Although omens predicting the death of the king are already known for this earlier
period, the truth is that the main basis for such an assumption is an interesting story preserved only in a much later, first-millennium composition known by modern scholars as the “Chronicle of Early Kings.”

According to this late chronicle, a king of the city of Isin (modern Išān Bahrīyāt, about 125 miles to the southeast of Baghdad), Erra-imitti, was replaced by a gardener called Enlil-bani as part of a substitute king ritual. Luckily for this gardener, the real king died while eating hot soup, so the gardener remained on the throne and became king for good.

The fact is that these two kings, Erra-imitti and Enlil-bani, did exist and reigned successively in Isin during the 19th century B.C. The story, however, as told in the late “Chronicle of Early Kings,” bears all the trademarks of a legend. The story was probably devised to explain a dynastic switch, in which the royal office passed from one family or lineage to another, instead of following the usual father-son line of succession.

Looking for meaning in the skies

A lunar eclipse.
Neil Saunders, CC BY-NC-ND

Mesopotamia was not unique in this regard. For instance, a chronicle of early China known as the “Bamboo Annals” (竹書紀年 Zhúshū Jìnián) refers to a total lunar eclipse that took place in 1059 B.C., during the reign of the last king of the Shang dynasty. This eclipse was regarded as a sign by a vassal king, Wen of the Zhou dynasty, to challenge his Shang overlord.

In the later account contained in the “Bamboo Annals,” an eclipse would have triggered the political and military events that marked the transition from the Shang to the Zhou dynasty in ancient China. As in the case of the Babylonian “Chronicle of Early Kings,” the “Bamboo Annals” are a history of earlier periods compiled at a later time. The “Bamboo Annals” were allegedly found in a tomb about A.D. 280, but they purport to date to the reign of the King Xiang of Wei, who died in 296 B.C.

The complexity of human events is rarely constrained and determined by one single factor. Nevertheless, whether in ancient Mesopotamia or in early China, eclipses and other omens provided contemporary justifications, or after-the-fact explanations, for an entangled set of variables that decided a specific course of history.

The ConversationEven if they mix astronomy and astrology, or history with legend, humans have been preoccupied with the inescapable anomaly embodied by an eclipse for as long as they have looked at the sky.

Gonzalo Rubio, Associate Professor of Classics & Ancient Mediterranean Studies, History, and Asian Studies, Pennsylvania State University

This article was originally published on The Conversation.