New evidence points to criminal action at Eskom
• Documents cast light on new role players in deal • G9 recommended laying criminal charges against Trillian
A bloodbath looms at Eskom as new evidence emerges of possible criminal wrongdoing in the power utility’s R1.6bn deal with McKinsey and Guptalinked Trillian.
The utility is understood to be in the process of charging at least three senior managers and two senior executives with misconduct for their alleged involvement in the scandal.
They include chief financial officer Anoj Singh, former head of procurement Edwin Mabelane, acting head of group capital Prish Govender, senior procurement manager Charles Kalima and former CEO Matshela Koko.
The officials referred all requests for comment to Eskom.
Some new role players have also emerged in the scandal, incriminating virtually the whole top management layer.
This would explain the lack of disciplinary action against those blamed for the losses suffered by Eskom, which posted more than R3bn in irregular and wasteful expenditure this year.
Business Day has seen a mountain of alleged evidence implicating these officials in the suspect deals and payments, including a legal opinion; a report by G9 Forensic Consulting citing sworn statements of senior Eskom officials; details of investigations by US management consultancy Oliver Wyman and law firm Bowmans; minutes of board meetings; and internal correspondence. The G9 report recommends laying criminal charges against Trillian and also implicates McKinsey.
The documents show acting CE 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.
Dladla was also present at a feedback meeting three months later, when the committee agreed to recommend a three-year contract to the board tender committee.
McKinsey and Trillian hoped to make at least R7.8bn from the contract over three years.
Eskom officials recommended paying the consulting firms a risk-based fee, which entitled them to a percentage of savings achieved, allowing them to earn vastly more than charging by the hour. The committee agreed to a down payment of R475m “in lieu of project set-up cost and consulting fees”, before starting any work.
The deal was approved a week later by a board tender committee headed by Eskom chairman Zethembe Khoza.
Khoza also presided over another crucial board tender committee meeting held on February 8, with Singh and Mabelane in attendance, where it was agreed to pay McKinsey a final settlement of R460m, even though Oliver Wyman had warned against paying.
Business Day has seen a legal opinion that Eskom obtained on its draft contract with McKinsey — a month before it was signed — that suggests this remuneration model was illegal.
The opinion drafted by Paul Kennedy SC on December 4 2015 says McKinsey should have been paid hourly rates
rather than a percentage of savings achieved by Eskom.
Similar reservations were raised by Oliver Wyman a year later before the final settlement was disbursed.
Despite Kennedy’s advice, Eskom signed the deal with McKinsey on January 7 2016, which allowed Trillian to pocket R600m without a contract as its black empowerment partner. At the time, Trillian was majorityowned by Gupta lieutenant Salim Essa and was later shown in an audit report by Deloitte to have helped the Guptas pay for Optimum coal mine.
The Gupta leaks show that the conclusion of McKinsey’s suspect contract against Eskom’s own legal advice coincided with the time that Singh was being hosted by the Guptas in Dubai.
Kennedy concluded that McKinsey’s contract was in breach of a Treasury instruction “having the force of law” requiring consultants at Eskom to be paid at hourly rates set in a guide issued by the Department of Public Administration.
Kennedy advised Eskom to renegotiate the contract to pay McKinsey hourly rates.
On Tuesday, the DA lodged a criminal complaint against McKinsey for fraud, racketeering and collusion. Earlier in September, Corruption Watch said that it planned to approach the US Justice Department with a similar complaint.
Trillian and McKinsey both denied any wrongdoing. “We have not paid bribes in exchange for these engagements/projects,” McKinsey spokesman Steve John said on Tuesday.
“We have secured all our work for state-owned companies on the basis of our demonstrable impact for our clients.”
Trillian insists it was only paid for work done and “made no fraudulent representations in regard to McKinsey and Eskom, and both McKinsey and Eskom are fully aware of the relationship between the parties”.
Eskom declined to comment on the legal opinion and said it was “restricted to elaborate further on the specific questions” on disciplinary processes “due to strict confidentiality considerations of the HR processes currently under way”.
Asked if it was appropriate for Dladla to hold meetings with Singh while he was on special leave, as alleged, Eskom said: “As a condition of special leave, Mr Singh is allowed to interface with Mr Dladla on Eskom matters as his immediate superior.”
Asked why Dladla had not been subjected to disciplinary action, Eskom said he was a member of the procurement subcommittee but “played no role in the McKinsey/Trillian operational execution”.