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15 Nov 2017 15:36
In January last year, Eskom finalised a project with Trillian and McKinsey where a 100 of their consultants would join Eskom in a three-year partnership to help the energy parastatal cut costs. (Reuters)
Global Consulting firm McKinsey is willing to return the R1-billion it received from Eskom contract that, in October this year, the energy parastatal acknowledged was unlawful.
David Fine, a senior partner at McKinsey, represented the multinational at Parliament’s inquiry into Eskom on Wednesday.
The inquiry focussed on McKinsey’s business dealings with Gupta-linked Trillian Capital and the infamous Gupta wedding held at Sun City.
Eskom released a statement calling for the repayment of R1-billion paid to McKinsey and R564-million paid to Trillian because the decision had been made without consulting appropriate government authorities.
In January last year, Eskom finalised a project with Trillian and McKinsey where a 100 of their consultants would join Eskom in a three-year partnership to help the energy parastatal cut costs. The consultants were expected to make a 10% commission for any savings that they helped the utility make.
The project was stopped in its first six months and the consultants expected Eskom to pay them for the work they had done, which amounted to R1.8-billion for both McKinsey and Trillian.
The board was advised against paying the companies, but Eskom’s chief executive, Anoj Singh, went ahead with the payment.
Fine said the R1-billion Eskom paid McKinsey was a “large” amount, but not unusual.
The issue for Fine was whether Eskom had used the consultants appropriately, especially as Eskom’s liquidity was volatile.
Fine admitted that perhaps the consulting fees they charged the energy parastatal should have been capped, but did not respond to questions about whether the R1-billion consulting fee was the only amount Eskom had paid the company.
“We should have had better governance in place, to give the South African citizens peace of mind,” said Fine in response to a question about whether the work McKinsey did for Eskom was worth what was paid for it.
Fine said McKinsey wanted “to give back the money, not because we are guilty, but because McKinsey thought that Eskom had approval from the national treasury”.
In questions about McKinsey’s relationship with Trillian, Fine said he was not aware that McKinsey had done “anything illegal”.
“McKinsey has never worked for a Gupta company,” Fine told the portfolio committee on public enterprises, adding that McKinsey was unaware of a link between Trillian and the Guptas.
Fine said he became aware of the issues only when the media uncovered the scandals and Thuli Madonsela released her State of Capture report in 2016. McKinsey then stopped working with Eskom, he said. McKinsey’s last project for Transnet was in April 2016.
The committee questioned how Fine did not see the link between Gupta associates, Trillian, Eskom and Transnet. Fine responded by saying the committee would think he was “rather dim” for not seeing the connections.
He told the committee that McKinsey wanted to resolve the impasse between itself and Eskom, but that the company was “awaiting confirmation” on whether McKinsey should “pay the money to Eskom or South African citizens”.
Correction — the original introduction of this story read “Global Consulting firm McKinsey is willing to return more than the R1.5-billion it received from Eskom”. This amount accounted for the R1-billion and over R500-million that McKinsey and Trillian received from Eskom respectfully. It must be noted that Trillian will only be paying Eskom R1-billion.
A paragraph was removed where it the author mistakenly attributed a Transnet deal to McKinsey. The issue came up as a side question during the parliamentary inquiry and the author would like to confirm that McKinsey was not involved in the purchase of 300 locomotives from a China South Rail, rather, it was Tesqueta, which is another story completely.
Read more from Gemma Ritchie
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