McKin­sey and the risk it couldn’t re­sist

The Times (South Africa) - - News -

● 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.”

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