McKinsey doesn’t know how to return the R1 billion Eskom fee: report

Global consultancy McKinsey is still prepared to return the R1 billion it was paid for consultation work for Eskom – but is uncertain about where to send it, the Financial Times reports.

Speaking to the publication, McKinsey CEO Dominic Barton said that since agreeing to return the fee, he has been unable to get a clear indication from the South African government where it should be paid.

The firm initially wanted to return it directly to Eskom, but with the switching in and out of the board and the political hand constantly being over the power utility, Barton questioned whether the money would then just be used to enable ‘something else’ to happen.

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 additional contract work.

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.

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.

Many heads have since rolled at Eskom including those of the entire board. Chief among the big exists is former CFO Anoj Singh, who was heavily implicated in the Trillian saga, as well as former acting CEO and head of IT, Sean Maritz, who controversially reversed Eskom’s claim that the contracts were unlawful.

Before he resigned, Maritz was to appear before the new Eskom board to explain the decision. As he is no longer an employee, this is impossible; however, even former employees can still face criminal charges.

McKinsey’s initial response to the contract issue 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, that position changed, as the company didn’t want anything to do with the ‘tainted’ money.

According to Barton, the scandal has hit its business in South Africa hard, with many big companies – including big banks – disassociating themselves from the consultancy. He said that the R1 billion refund has also hit the group’s partners.

Read: McKinsey says it will pay back the R1 billion Eskom contract

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McKinsey doesn’t know how to return the R1 billion Eskom fee: report