McKinsey and the risk it couldn’t resist
● Global business consultancy McKinsey, facing parliamentary hearings over payments to a company controlled by the Guptas, ignored suspicions raised over several years by senior staff in South Africa that companies it worked with were set up to influence the awarding of state contracts, two former employees said.
Since July, when new information emerged about McKinsey’s flagship South African contract, the consultancy has been under increasing scrutiny in a widening corruption scandal centred on the influence of the Guptas.
Parliament’s public enterprises portfolio committee is investigating whether McKinsey knowingly let funds from Eskom be diverted to a Gupta company as a way of securing a $78million contract to advise Eskom. McKinsey denies wrongdoing.
McKinsey says it carried out a due-diligence review on its partner in the Eskom deal, Trillian, beginning in January 2016 and cut all ties with that company two months later.
But the former employees said they had attended meetings in Johannesburg at which problems with Trillian and its precursor, Regiments, employing the same principal staff, had been discussed as far back as 2013.
The former employees said they would
“We turned a blind eye … to the role of the Guptas”
Former McKinsey employee have expected such concerns to have been referred up the chain to managers outside South Africa but did not know if that had happened.
Ultimately, McKinsey accepted the Eskom account in spite of the warnings, the sources said.
“We turned a blind eye,” said one. According to the ex-employees, as an Eskom deal was coming together in 2015 there was strong resistance in McKinsey’s South Africa office to working with Regiments and Trillian on the Eskom bid.
They said a McKinsey partner approached an Eskom board member in September 2015 to say that McKinsey did not want to work with either Regiments or the Gupta-linked Trillian, because of concerns about the ownership of the companies and their capabilities. The partner was then taken off the project.
The Eskom deal was too big to jeopardise by looking too closely at the role of the Guptas, the ex-employees said.
“Losing a contract of that size would have serious implications for the business and staff in South Africa,” said one. “It was considered a risk worth taking.”