PARLIAMENT, November 15 – Global consultancy firm McKinsey stood ready to repay the money it earned from a flawed Eskom deal but did not know where to direct the R1 billion refund, senior partner Dave Fine told the parliamentary 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,” Fine said.
“The amount that we are talking about is the billion rand that McKinsey was paid by Eskom.”
He hastened to point out that this decision did not imply guilt on the part of the company, but was based on the fact that it has emerged 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 at 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 on the deal struck with Eskom before a contract was in place, but said this was not done on a cynical assumption that it would secure the contract, regardless of procurement rules. In fact, there was concern within McKinsey that it may not secure the contract.
Fine said Parliament should help McKinsey resolve the uncertainty as to who should get the refund, Eskom or the South African taxpayer.
He was adamant that McKinsey did honest work for Eskom, regardless of whether the parastatal had authority to sign off for the work.
“I am not aware that this money was in any way involved in corruption. I have a high bar for what I mean by tainted. I have not heard anything at this point in time that makes me aware that an illegality was committed.”
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.
Eskom chief financial officer Anoj Singh was caught out after claiming that the payments to Trillian and McKinsey were found by another international consulting firm Oliver Wyman to have been entirely above board. He was subsequently contradicted by Oliver Wyman.
He has since been suspended.
In September, Eskom said it had sought the cooperation of McKinsey and Trillian in the form of repaying R1bn and R564m respectively as it seemed to have been “unlawfully paid out in 2016 and 2017”.
Fine told the committee McKinsey had no idea they were working with a partner linked intricately to the Gupta family and extensive internet searches had yielded nothing untoward about Salim Essa and Eric Wood, key players in the family’s business empire, at the time.
MPs said they found this hard to believe but Fine insisted that in 2015, contrary to today, there was little to be found on Google on the two men.
He conceded that he was invited to a Gupta family wedding at Sun City in 2013.
“The only rationale I may have is that at the time I lead the South African practice of McKinsey. I have no idea why I was invited to the wedding and I did not go.”
Former finance minister Pravin Gordhan asked why McKinsey has elected not to deal with the controversy at a high level and in a more public manner, sardonically asking whether its international directors were “very shy or very arrogant”.
The inference was that South Africa accounted for too small a percentage of the company’s global earnings for it to take the matter seriously, he said.
Fine responded that McKinsey was a media shy company but senior staff had been in South Africa to discuss the matter in depth.
“We are not a firm that is comfortable in the press. It is a very difficult situation, internally the scope of the discussion is very wide and very deep.”
Gordhan shot back: “That is in the best traditions of the underground that we used to have in South Africa.”