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Brown instructs Eskom to start legal action against McKinsey, Trillian, Koko and Singh

Sep 22 2017 05:00
Paul Vecchiatto (Bloomberg), with Fin24

Cape Town - Public Enterprises Minister Lynne Brown has instructed Eskom to begin legal action against companies including McKinsey over their involvement in disputed contracts at the country’s state-owned electricity company.

Brown ordered Eskom to start taking legal steps against consultancy firms McKinsey and Trillian, as well as suspended acting CEO Matshela Koko and chief financial officer Anoj Singh, who is on special leave, her spokesperson, Colin Cruywagen, said by phone.

Others who will face misconduct charges include former head of procurement Edwin Mabelane, acting head of group capital Prish Govender and senior procurement manager Charles Kalima, according to a report in Business Day on Friday.

McKinsey in July said it’s reviewing documents related to work done for Eskom. An interim report by Eskom and G9 Forensic found McKinsey and Trillian, a company linked to the Guptas, made R1.6bn in fees and expected to make another R7.8bn, according to amaBhungane and Scorpio, two investigative journalism groups. The US firm hasn’t engaged in corruption or paid bribes, it said in an emailed response to questions.

Singh was placed on leave in July after he was linked to a series of questionable deals involving the Gupta family, who are friends with President Jacob Zuma. Koko was suspended pending an investigation into contracts awarded to a company where his stepdaughter was a director. He had denied wrongdoing.

Eskom is spending tens of billions of dollars on new power plants that are years behind schedule and is at the center of allegations that the Guptas, who are in business with Zuma’s son, used their relationship with the president to win state business. The company disclosed 3 billion rand of irregular expenditure in its financial results on July 20, a figure which its auditors said they couldn’t independently confirm. Zuma and the Guptas have denied wrongdoing.

South Africa’s biggest opposition party has already filed charges of fraud, racketeering and collusion against McKinsey and said it plans to approach the US Department of Justice about the work the consultancy did for Eskom.

Documents in the possession of Business Day also reveal that "acting chief executive Johnny Dladla and several other senior officials were present at a procurement subcommittee meeting in June 2015, when Eskom decided to negotiate an exclusive agreement with McKinsey and Trillian to run its Top Engineers programme, which eventually cost Eskom R1.6bn for six months’ work".

Eskom told the paper that Dladla was a member of the procurement subcommittee but "played no role in the McKinsey/Trillian operational execution".

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