JOHANNESBURG - Global consultancy firm McKinsey was ready to repay the money it earned from a flawed deal with Eskom, but it did not know where to direct the R1billion refund, senior partner Dave Fine told Parliament’s inquiry into allegations of state capture at the power utility yesterday.
“McKinsey does not want tainted money. So if the court decides that payment was valid, McKinsey will still give that money back to South Africa,” said Fine, who is based at the firm’s London office.
Fine hastened to say that McKinsey’s decision did not imply guilt on the part of the company, but was based on discovering that Eskom entered into the deal without proper approval from National Treasury. “We are not paying the money because we did something wrong. I just want to be explicit about that. We went into the relationship with Eskom in good faith, and they told us they had the Treasury approvals for the risk arrangement. The fact that they did not is why we want to give back the money,” he said. “As I state now, I think the contract is valid, because we did real work.”
He conceded that McKinsey allocated staff to work with Eskom before a contract had been put in place, but said this was not done on the cynical assumption that McKinsey would secure the contract regardless of procurement rules. In fact, there was concern within McKinsey that it might not secure the contract. Fine conceded that the R1bn fee was too steep and should have been capped. “We should have been more sensitive to the country’s and Eskom’s economic situation.” Asked by the evidence leader in the inquiry, Ntuthuzelo Vanara, why McKinsey was still waiting to pay back the money, Fine said Parliament should help McKinsey to establish if it should go to Eskom, or the South African taxpayer.
He said there was a risk that McKinsey would “pay twice” if it refunded Treasury and the court later held that the money was owed to Eskom. He insisted the company did honest work for Eskom and also defended its record during its nine-year relationship with Transnet, where it partnered with Regiments, at that point owned by Eric Wood, who later headed Trillian. Eskom’s contract with McKinsey to consult on its turnaround strategy is the subject of a high court review. It saw Trillian earn more than half the amount paid to McKinsey to serve as the consulting firm’s development partner.