McKinsey says it will pay back the R1 billion Eskom contract

Global consultancy McKinsey & Co. said it will pay back the money it received from work done for Eskom, even if a court finds that everything was above board and legal.

Speaking to the Parliamentary portfolio committee on public enterprises, McKinsey senior partner David Fine informed the public of the position.

McKinsey was contracted by Eskom to consult on the power utility’s turnaround strategy, with Eskom noting that it had paid the group R1 billion for the contract. A further R564 million was paid to capital group, Trillian, for other contract work.

However, Trillian – which is tied to the controversial 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.

The project was stopped in its first six months, and despite being advised against paying the companies, Eskom’s CFO, Anoj Singh, went ahead with the payment.

Following the wider state capture scandal hitting the public, Eskom said it was obliged by the Public Finance Management Act (PMFA) and Companies Act to seek to set aside the unlawful decisions and have the money returned.

McKinsey’s initial response was that it would pay the money back only if the South African courts ordered it to do so, after finding that the contracts were invalid.

However, this position has now changed, as it appears the company doesn’t want anything to do with the ‘tainted’ money.

“It doesn’t matter whether or not the contract was valid or not, we will give that money back to South Africa,” Fine said.

The group maintains that it has done nothing illegal in its contract work for Eskom, and that it entered into agreements with the power utility in good faith.

Fine admitted that the R1 billion contract was large, but not unusual – though said it should have probably been capped, given the state of Eskom’s liquidity.

“We want to give back the money, not because we are guilty, but because McKinsey thought that Eskom had approval from the national treasury,” Fine said.

However, at this stage, the company was still seeking clarity on how to go about paying back the money – whether it be to Eskom, or to the South African government – saying it would like to avoid “paying twice”.

Read: Standard Bank and Absa ditch McKinsey – report

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McKinsey says it will pay back the R1 billion Eskom contract