McKinsey pulls out of state entities

CAPTURE: CONSULTANCY FIRM REJECTS ALLEGATIONS

McKinsey & Co will review its practices in SA and suspend work for state companies.

Risk officer says things will be done differently in future.

McKinsey & Co will review its practices in South Africa and suspend work for state companies after an internal investigation found it failed to follow its own procedures while working with the country’s power company.

The US consultancy never worked with any business linked to the Gupta family and didn’t make payments to directly or indirectly win contracts, the company said in a statement on the findings of its probe into allegations of wrongdoing regarding work with Eskom and Trillian. McKinsey said it will suspend all work for South African state companies until after a review by its newly formed risk committee.

“There are things we wish we had done differently and will do differently in the future,” Tom Barkin, McKinsey’s global chief risk officer, said in yesterday’s statement. “We reject the notion that our firm was involved in any acts of bribery or corruption.”

McKinsey has become embroiled in claims that the Gupta family used their friendship with President Jacob Zuma to win lucrative contracts from state companies, particularly through Eskom, which provides more than 90% of the country’s electricity. The Guptas and Zuma have denied any wrongdoing.

McKinsey offered to repay about R1 billion in fees it received from Eskom if a court finds its contract was unlawful. Eskom has said its officials didn’t get approvals from the National Treasury. McKinsey said it operated in good faith.

McKinsey won’t restart work for state companies in SA until it has been reviewed and approved by its risk committee, it said.

The investigation showed that McKinsey didn’t make payments to Trillian, nor have a contract with the firm, and it didn’t authorise any payments by Eskom to Trillian. But McKinsey said it didn’t follow its procedures when it “worked alongside” Trillian at the utility.

In a letter to McKinsey and Trillian, Eskom describes the financial-services company as the US firm’s “black economic empowerment partner/supplier.”

“We have concluded that we made several errors of judgment,” McKinsey said.