Cape Town warns EY, Nedbank contracts at risk after graft report

Cape Town has threatened to scrap contracts with companies including EY and Nedbank Group Ltd., after the firms were named in a judicial probe on alleged graft relating to business done with the national government.

In a letter to the companies, seen by Bloomberg, the city asked them to explain why the contracts should not be canceled after they were mentioned in reports compiled by the Judicial Commission of Inquiry Into Allegations of State Capture. The investigation probed corruption involving the government during former President Jacob Zuma’s administration that the state estimates cost the country R500 billion ($33 billion).

The City of Cape Town, which is run by the opposition Democratic Alliance “urgently requires your response to those” allegations, the letter said. “On receipt of your response the city will consider whether or not it should” cancel the contract, it said.

The inquiry by a panel overseen by Acting Chief Justice Raymond Zondo is a key plank of South African’s President Cyril Ramaphosa’s plan to implement his pledge to crack down on corruption. Ramaphosa has until the end of June to respond to the panel’s findings and say what action will be taken.

Both EY and Nedbank denied malfeasance. News24, a website that reported on the letter earlier, said that it was also sent to companies including PwC, EOH Holdings Ltd. and a unit of Bidvest Group Ltd.

A spokesman for the municipality wasn’t immediately able to comment.

Company denials

The “letter from the City makes incorrect statements about EY in that the Zondo report makes no findings of any malfeasance and/or corruption on the part of EY,” the company said in a response to questions.

Nedbank said it was engaging with the city and “no adverse findings” had been made against the bank. The inquiry said that some transactions between Nedbank and the state-owned Airports Company South Africa were “disturbing.”

The lender worked on those transactions with Regiments Capital, a company linked to the Gupta family, whose members are alleged to have leveraged their relationship with Zuma to win deals with state companies. The Guptas and Zuma have denied wrongdoing.

PwC said it hadn’t received the letter and was contacting the city. EOH and Bidvest didn’t respond to requests for comment.

KPMG and McKinsey & Co. saw their South African units lose business after they were linked to questionable contracts or practices with state companies and bodies. Both companies apologized and returned money.

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