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McKinsey will pay back Eskom's money on court order

Oct 10 2017 12:13
Yolandi Groenewald

Johannesburg - Global consultancy firm McKinsey announced on Tuesday that it will pay back in full a R1bn fee to Eskom if a court determines that the power utility had acted unlawfully.

Eskom on Thursday said it was seeking the cooperation of McKinsey and Gupta-linked company Trillian in returning R1bn and R564m respectively “which appears to have been unlawfully paid out in 2016 and 2017”. 

The power utility, which has been a client of McKinsey since 2005, said it had written to both companies “explaining the action it would take” and requested their cooperation in the matter.

McKinsey said in a statement that it stood by the work it did for Eskom.

"We believe our work on the turnaround programme created substantial value, helping improve operating performance by, among other things, increasing plant availability and reducing contractor claims on the new build programme."

It said that Eskom had advised the consultancy that it believed it violated procurement regulations and its internal procedures in the formation of the contract, and that decisions it took with respect to the contract may have been taken without proper authorisation.

"These requirements were solely Eskom’s responsibility. McKinsey entered into the contract and performed its work in good faith."

The consultancy explained that its contract with Eskom for the turnaround programme was approved by Eskom.

"It explicitly required Eskom to obtain the necessary approvals or consents required by the terms of the Public Finance Management Act. We were advised by Eskom on February 5 2016 that it received National Treasury approval and we have reviewed Eskom’s Steering Committee minutes from February 9 2016 that confirm that fact.

"Eskom now contends the contract should be held invalid because Eskom did not, in fact, receive the necessary approvals. We want this issue resolved and we have no interest in benefiting from an allegedly invalid contract."

McKinsey said to provide reassurance to the citizens of South Africa, it would support a review by the High Court of the validity of the turnaround programme contract.

"We invite Eskom and Trillian to submit themselves to this process too," it said. "We plan to set aside the full fee McKinsey earned on the turnaround programme in a ring-fenced account ready to comply with the Court’s decision."

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