EXCLUSIVE: Tension as Jenitha John takes charge at Irba

A deepening leadership crisis has led to chaos at the Independent Regulatory Board for Auditors (Irba), according to insiders.

As the oversight body for SA’s auditing profession, Irba should be providing calming leadership for an industry grappling with existential angst after a spate of scandals at firms including Steinhoff, SAA and VBS Mutual Bank.

Yet Irba itself is now under the microscope after its board, whose term expired on May 9, opted to hire a new CEO, Jenitha John, who until a year ago was the chair of the audit committee of Tongaat Hulett. It caused an uproar, considering Tongaat was the scene of one of SA’s worst accounting scandals, where profits were falsified partly due to "undesirable accounting practices", according to a PwC forensic report released last November.

The lobby group Organisation Undoing Tax Abuse (Outa) wrote to finance minister Tito Mboweni last week, warning that "appointing a CEO implicated in irregularities will not only be highly inappropriate, but will also cause significant reputational damage to Irba".

On Friday, Mboweni said he would "hold discussions with Irba’s board to consider the concerns raised [and] if any impropriety is found, the minister will request the board to review the appointment".

The problem is, there is no board. Mboweni will first have to appoint a new one, whose members will arrive on their first day with the unenviable task of reviewing the CEO’s appointment.

In the midst of this, John officially took over as CEO from Monday, even though the incumbent, Bernard Agulhas, only finishes his contract at the end of June. In theory, it should have been a "handover period"; in practice, it’s a mess.

On her first day, John sent an e-mail to all Irba staff, which the FM has seen, saying that "to clarify, effective today, I am currently the CEO and the accounting authority until the new board is appointed".

She wrote: "I know that there is a lot of anxiety in the system brought on by recent media statements which cast aspersions on my credibility. These defamatory comments are very unbecoming of individuals. I have taken the high ground by not responding publicly, however, there may be action in due course."

Quite who this threat applied to, she didn’t say.

John added: "I appreciate hearing some of your concerns already raised on the organisational culture."

One insider, however, says Irba’s senior staff, having read Mboweni’s announcement, don’t know what to think.

"At the moment, it’s chaos. She has written to various individuals asking for information, but people are unsure what to do, given the minister’s announcement."

Asked by the FM about her e-mail and the concerns of staff, John declined to comment. "It’s very early days and I’m gathering information and meeting my colleagues," she says.

Outa CEO Wayne Duvenage says he’s written to Mboweni again, asking when the issue will be resolved, but has heard nothing. "How long will it take to get the board appointed? And once it has been appointed, will it have the courage to act on this?"

At this stage, however, Duvenage doesn’t believe John should be in the office. "You’ve still got Bernard Agulhas as CEO, so there’s no need for her to be there until this is resolved."

But it makes it all the more urgent that Mboweni appoint a new board to review her appointment.

Mboweni’s spokesperson Mashudu Masutha-Rammutle tells the FM: "The process is under way. The minister is keen to appoint a new board as soon as possible, but I don’t have any timelines on this unfortunately."

There’s much at stake. As accounting lecturer Khaya Sithole told the FM last week: "Especially at a regulator, it’s not just the existence of impropriety and compromised independence that’s a problem, it’s the perception of it too."

Still, others have expressed incredulity that Irba’s outgoing board, chaired by Abel Dlamini, hadn’t anticipated that the Tongaat issue would be a problem.

Critically, John wasn’t implicated in any of the Tongaat irregularities, which included overstating the value of sugar cane in the fields and incorrectly accounting for expenses. However, given her position as the chair of the audit committee with oversight of Tongaat’s financials, there are questions to be asked about whether she detected these problems, and what she did as a result.

Last week, in something of a surprising twist to the Tongaat saga, Richard Chambers, CEO of the US-based Institute of Internal Auditors, which John will chair from July, said she actually helped expose Tongaat’s irregularities.

"As early as 2018, she was calling for an independent, third-party review of Tongaat’s financial practices, much to the chagrin of some of [its] senior executives. She persisted with her request … until PwC was ultimately engaged to undertake an independent review in February 2019," he said.

However, there is no indication of this from any of Tongaat’s publicly available records and, to date, there has been no confirmation from within Tongaat that it was John who blew the whistle.

Instead, company insiders say it was only when Gavin Hudson took over as CEO in February 2019 that he lobbied for the PwC probe.

In defending the appointment, however, Irba’s former board said it had picked John from a list of 267 candidates and had "interrogated" the Tongaat issue extensively. "[We] were satisfied, on the basis of information presented and publicly available reports, [including] the PwC report, that there is currently no evidence of guilt or wrongdoing on [John’s] part."