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JOHANNESBURG - Consultancy firm McKinsey & Company yesterday (TUE) defended the work it did for Eskom, saying a high court should review the validity of the turnaround contract with the embattled power utility. 

The company said it was willing to repay in full consulting fees to Eskom work if the court found that the power utility acted illegally when making the payments.

McKinsey insisted that it was not in the wrong. Eskom has told McKinsey that the power utility believed that it had violated procurement regulations and its internal procedures in the formation of the contract, “and that decisions it took with respect to the contract may have been taken without proper authorisation. These requirements were solely Eskom’s responsibility.

McKinsey entered into the contract and performed its work in good faith.”

The company said Eskom had approved its turnaround programme contract and that it was the utility’s responsibility to obtain the necessary approvals or consents required in terms of the Public Finance Management Act. 

“We were advised by Eskom on 5 February 2016 that it received National Treasury approval and we have reviewed Eskom’s Steering Committee minutes from 9 February 2016 that confirm that fact. Eskom now contends the contract should be held invalid because Eskom did not, in fact, receive the necessary approvals. We want this issue resolved and we have no interest in benefiting from an allegedly invalid contract,” said McKinsey. 

Last week Eskom said In a statement that it wanted McKinsey and the Gupta family-linked Trillian Capital Partners to return approximately R1.6 billion it said appeared to have been unlawfully paid out last year and this year.  Eskom reportedly gave the companies until yesterday to make the payments.

However, McKinsey said it supported the high court review of the contract and invited Eskom and Trillian to submit themselves to the scrutiny. McKinsey said it would set aside the full fee McKinsey earned on the turnaround programme in a ring-fenced account ready to comply with the court’s decision.

“We believe our work on the turnaround programme created substantial value, helping improve operating performance by, amongst other things, increasing plant availability and reducing contractor claims on the new build programme,” the company said.

Eskom, which is at the centre of allegations that the Gupta family used its close relationship with President Jacob Zuma to win contracts from state-owned companies, said it would do everything it could to claw back all the fees unlawfully paid, “while expediting the disciplinary processes currently underway.” 

Eskom has suspended Chief Financial Officer, Anoj Singh and former Interim Chief Executive, Matshela Koko. 

Asked if McKinsey and Trilian had made the payments, Eskom spokesman, Khulu Phasiwe said the power utility had received correspondence from the legal representatives of Trillian and McKinsey, “and our legal team is handling this matter. The discussions are ongoing, and therefore we are not at liberty to divulge any further details at this stage.”

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