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Eskom welcomes apology and R902m from McKinsey

Jul 09 2018 19:26
Fin24 with Bloomberg

Eskom on Monday welcomed McKinsey's apology to South Africans and confirmed it received R902m from the global consultancy firm.

Eskom Group Chief Executive Phakamani Hadebe said the payment goes a long way towards the utility's quest to address the issues of lost funds and regaining trust.

Hadebe said the apparent lapses in Eskom's own governance processes coupled with improprieties around - and mismanagement of – its procurement process led to a loss of trust in Eskom, its processes and its people.

"We commit ourselves to root out financial mismanagement and malfeasance and we will continue to work with the six regulatory bodies and law enforcement agencies in addressing corruption."

These bodies are the National Treasury, Special Investigative Unit (SIU), South African Police Service (SAPS), Directorate for Priority Crime Investigation (Hawks), National Directorate of Public Prosecutions NDPP and the Zondo Commission.

Eskom's statement comes after McKinsey & Company's global managing partner Kevin Sneader on Monday apologised to South Africa again over how business was handled with Eskom, saying it overcharged the utility and was slow to admit wrongdoing.

Sneader was speaking at a forum at the University of Pretoria’s Gordon Institute of Business Science (GIBS).

He said the trust of their clients and the public in South Africa was now, understandably, very low.

The consulting firm admitted in October to failing to follow its own procedures while doing business with Eskom when it worked alongside Trillian Capital Partners, a business linked to the Gupta family. McKinsey reached a settlement last week to repay almost R1bn in fees to Eskom.

"We did not communicate well enough how seriously we were taking this, or how sorry we were for our involvement.”

Eskom said its board and management are committed to continue to deal decisively with improper and irregular contracts. "To this end, Trillian, which was not party to the settlement, will be pursued for the recovery of the remainder of the payments through the legal review process together with the National Directorate of Public Prosecutions (NDPP)."

While acknowledging that correct procedures weren’t followed, Sneader reiterated that a review of records including millions of emails and dozens of interviews showed there’s “no evidence our firm engaged in corrupt activity”.

In May, South Africa’s National Prosecuting Authority’s Asset Forfeiture Unit filed a lawsuit aimed at recouping R1bn in consultants’ fees it said were unlawfully paid to McKinsey by Eskom, after talks with the US firm about voluntarily repaying the money stalled.

Hadebe said Eskom has vast lessons to learn as it investigates what went wrong and as part of the recovery process.

"While we are still in the process of strengthening our governance control systems, we continue to review our greater internal control environment to ensure that our key controls are not only adequately designed but are also effective."

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