Eskom finds how it paid out billions to advisers

The review has been requested by the Hawks Khulu Phasiwe Eskom spokesman

● A damning internal review by Eskom has revealed that global advisory giant McKinsey & Co made nearly R2-billion from the utility in the past 12 years.

It details how the firm benefited from a lack of controls in Eskom’s processes.

McKinsey has been attempting to distance itself from executives who formed relations with its BEE partner, the Gupta-associated Trillian, to siphon more than R1.6billion from Eskom in a single transaction.

The review, which covers R1.9-billion in contracts between 2005 and 2017, reveals interventions by Eskom officials to land McKinsey lucrative contracts.

It found that another advisory firm, Oliver Wyman, awarded a contract to review payments to McKinsey, was also hired despite not being on Eskom’s vendor list. However, its holding company is on the vendor list.

The internal report, compiled by Eskom’s assurance and forensic unit and seen by the Sunday Times, also reveals how:

McKinsey was paid R1.9-billion for 22 contracts awarded since 2005;

Of that, R1.05-billion was a single transaction in 2016 in which payments were also made to Trillian;

Eight of the 13 contracts reviewed were done through sole-sourcing;

Payments in seven contracts were modified, some with increases of up to 503%;

Twelve of the payments, totalling R116million, were made outside of Eskom’s normal procurement method;

Payments for five contracts, totalling R159-million, were made to McKinsey using contracts that were not in its name;

Documents for a two-year, R35-million contract awarded in 2013 listed the supplier development and localisation partner as two Eskom employees;

McKinsey used an expired tax clearance certificate to get a R2.8-million contract;

In an R8.3-million contract McKinsey was not in the top three bidders; and

Eskom could not prove it had done a market review to verify that McKinsey was the only supplier of services despite this being the reason for Eskom not putting the R97-million contract out to tender.

Eskom’s chief audit executive, Molefi Nkhabu, compiled the report. It shows lax controls at the power utility.

But Nkhabu did not make any findings in the report in respect of McKinsey.

Eskom spokesman Khulu Phasiwe said the review had been referred to the National Treasury and was requested by the Hawks and the Special Investigating Unit.

Eskom has instituted action to recoup R1.6-billion paid to McKinsey and Trillian.