CAPE TOWN - Gupta-linked consultancy firm McKinsey wants to return the R1 billion fee for work done for Eskom, but the company isn't sure where to send the money, the Financial Times reports.
McKinsey CEO Dominic Barton said that since agreeing to return the fee, he has been unable to get a clear indication from government where it should be paid.
The firm initially wanted to return it directly to Eskom, but with the ups and downs of the board and the "political hand" constantly being over the power utility Barton says it caused confusion.
Additionally, Barton adds that these uncertainties made him question whether the money would then just be used to enable ‘something else’ to happen.
In November 2017, Senior partner Dave Fine said the exact same information to Parliament’s inquiry into allegations of state capture at the power utility.
“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.
However, Trillian – which is tied to the Gupta family – has been accused of being a front company for McKinsey to secure contracts worth billions of rands from Eskom and Transnet, as well as receiving the multi-million rand payments for little to no work done on contracts.
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.
However, a report by City Press cited that senior officials of the Hawks had secured warrants to arrest one of the Gupta brothers and his associates and were waiting for the National Prosecuting Authority (NPA) to sign off on the warrants.
The December 14 order, obtained by the NPA in the North Gauteng High Court in Pretoria, implicates Gupta-linked companies.
These companies include Trillion and McKinsey and the order seeks to freeze assets worth an estimated R1.6 billion.
The firm points out that Eskom's counsel informed them in October 2017, that Eskom executives had acted unlawfully by failing to secure the appropriate approvals for the Turnaround Programme contract.
The Pretoria High Court has authorised the freezing of R1.6 billion in assets earned by global consultancy McKinsey and a firm linked to friends of President Jacob Zuma, a source at the state prosecutors’ office told Reuters.
The court made the decision in December after a request by the National Prosecuting Authority (NPA) to freeze the fees earned by McKinsey and local consultancy Trillian for advising South African power utility Eskom.
McKinsey has already lost several clients over the contract.
A spokesman for McKinsey said on it had not received formal communication about the preservation order.
“As we have said before, we will return the fee we earned from the Eskom turnaround programme (R1.028bn) no matter what,” the spokesman said in an email to Reuters.
- BUSINESS REPORT ONLINE