McKinsey pays back interest to Eskom

McKinsey & Co, the global management consultancy that has been accused of playing a prominent role in state capture, has paid back the interest owed to power utility Eskom.

Consultancy McKinsey & Co, which was awarded a lucrative contract by Eskom alongside a Gupta-linked firm, has paid back nearly R100m in interest owed to the utility.

Eskom confirmed on Wednesday it received R99.5m in interest from McKinsey on July 23. It has already paid back the R902m it earned for the contract, which was never approved by the Treasury.

McKinsey joined a string of companies including audit firm KPMG, software giant SAP and public relations firm Bell Pottinger, whose reputations were battered after being embroiled in state-capture scandals involving the Gupta family.

The interest payment covers the two years since McKinsey was paid almost R1bn in 2016. It was calculated on the “prevailing call account rate of Standard Bank at the time, of 6.3%, factored to the two respective payments made by Eskom to McKinsey”, said Eskom spokesman Khulu Phasiwe.

Eskom also paid R565m to Trillian, McKinsey’s empowerment partner. Under pressure from negative media publicity, Eskom later admitted that it had no legal basis to pay Trillian, as it did not have a contract with the firm. Trillian had also performed no work to earn the money, Eskom said in July 2017.

Trillian denies it received any undue payments from Eskom, saying it earned the fee through its work alongside McKinsey.

Eskom is pursuing Trillian to recoup the money. In March 2018 the utility approached the high court in Pretoria to review and set aside the payment.

The case will be heard from December 5 2018.

The contract came about in 2016, when former Eskom executives, with McKinsey and Trillian, concocted a scheme that resulted in both consultancies working on a project to develop internal project management and engineering capacity inside Eskom. This was part of a grand project to drain more than R9bn in fees from Eskom, according to whistle-blowers who used to work for Trillian, some of whom are due to testify before the Zondo commission of inquiry into state capture.

Business Day understands the US justice department, through the Federal Bureau of Investigations, has already interviewed some of the witnesses.