Business Day

Eskom not charg­ing McKin­sey

- Sikonathi Mantshants­ha Fi­nan­cial Mail Deputy Editor Business · South Africa Politics · South Africa News · Corruption · Crime · White-collar Crime · Fraud · African Politics · Politics · Eskom · U.S. Treasury · Gupta family · KPMG Corporate Finance · SAP · United States of America · U.S. government · Phakamani Hadebe · Philippines Department of Justice

Elec­tric­ity pro­ducer Eskom tied it­self in knots on Mon­day night, back­track­ing on claims it made in a me­dia brief­ing that morn­ing that it had laid crim­i­nal charges of fraud, theft, cor­rup­tion and a con­spir­acy to com­mit fraud against global con­sul­tancy McKin­sey & Co.

This was in re­la­tion to a pay­ment of more than R1.6bn made to the con­sul­tancy and its for­mer em­pow­er­ment part­ner, Tril­lian, in 2016 by Eskom for­mer ex­ec­u­tives, some of whom were fired ear­lier in 2018.

The McKin­sey con­tract was not valid, as it was not ap­proved by Trea­sury. No con­tract was in place be­tween Eskom and the Gupta-linked Tril­lian.

McKin­sey is one of a num­ber of multi­na­tional firms in­clud­ing au­dit firm KPMG and soft­ware giant SAP, whose rep­u­ta­tions have been bat­tered af­ter be­ing em­broiled in state-cap­ture scan­dals in­volv­ing the Gup­tas.

Eskom CEO Phaka­mani Hadebe told the morn­ing brief­ing that since Jan­uary, the power util­ity had laid 11 crim­i­nal charges against stake­hold­ers, in­clud­ing nine se­nior ex­ec­u­tives, im­pli­cated in cor­rup­tion.

How­ever, in the evening Hadebe told this news­pa­per he had made a mis­take in the ear­lier state­ment, which was broad­cast live by var­i­ous me­dia out­lets, in that no charges had been laid against McKin­sey.

Hadebe said Eskom had only en­tered into a civil set­tle­ment for McKin­sey to pay back its por­tion of the R1.6bn. “The mat­ter of crim­i­nal charges is left with the po­lice to act on,” said Hadebe.

The Pre­ven­tion and Com­bat­ing of Cor­rupt Prac­tices Act of 2004 places an obli­ga­tion on peo­ple in a po­si­tion of author­ity to re­port any sus­pi­cions of crim­i­nal wrong­do­ing to the po­lice.

McKin­sey re­paid its R902m ear­lier in July, but de­nied any crim­i­nal wrong­do­ing. Its new global head, Kevin Sneader, apol­o­gised ear­lier in July that McKin­sey had “any­thing to do with any of the is­sues sur­round­ing state cap­ture” and its “hor­ri­ble ef­fect on SA, its econ­omy and its peo­ple”.

Sneader also ad­mit­ted that the firm had over­charged Eskom with fees at a time when the power util­ity “was on a fi­nan­cial cliff edge”.

McKin­sey and Tril­lian orig­i­nally stood to earn R9.4bn from the con­tro­ver­sial three-year ad­vi­sory con­tract.

In Septem­ber 2017, civil so­ci­ety or­gan­i­sa­tion Cor­rup­tion Watch laid cor­rup­tion and fraud charges against McKin­sey with the US Depart­ment of Jus­tice. In terms of the For­eign Cor­rupt Prac­tices Act of 1977, the US gov­ern­ment can pros­e­cute any­one any­where in the world for crimes in­volv­ing state in­sti­tu­tions and in­flu­en­tial politi­cians.

 ?? Freddy Mavunda ?? Power pow-wow: Eskom chair­man Jabu Mabuza, left, and Pub­lic En­ter­prises Min­is­ter Pravin Gord­han at a brief­ing ear­lier in July at Me­gawatt Park in Sun­ninghill, Jo­han­nes­burg. /
Freddy Mavunda Power pow-wow: Eskom chair­man Jabu Mabuza, left, and Pub­lic En­ter­prises Min­is­ter Pravin Gord­han at a brief­ing ear­lier in July at Me­gawatt Park in Sun­ninghill, Jo­han­nes­burg. /

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