McKinsey reaches settlement to repay Eskom R1bn

● McKinsey has reached a settlement with power utility Eskom over the R1-billion consulting fees which were unlawfully paid to it in 2016 and 2017, the global consultancy firm said on Friday. Last year Eskom said it wanted its R1-billion and R600-million back from McKinsey and Trillian respectively.

McKinsey said in a statement it and Eskom had been in discussions with authorities since the beginning of the year and the repayment was not because of any wrongdoing or admission of liability by McKinsey.

In a statement, Eskom said Trillian, the BEE arm of McKinsey, which was paid R600million in consulting fees, was not part of the settlement and it would pursue the remainder of the money owed to it.

Eskom CEO Phakamani Hadebe said he would pursue Trillian, and if it meant going to court in order to get the money back, Eskom was going to do so.

Hadebe said Eskom had a list of people which had contributed to the irregular expenditure at Eskom and the power utility was going to pursue them as well.

He said the challenge with trying to get the money back was that it was not a speedy process and the McKinsey settlement was the exception because there was willingness on McKinsey’s side to pay back the money.

Asked whether Trillian had the money to pay back Eskom, Hadebe said, “It’s not about money, it’s about the fact that if you had that money, surely you must have assets somewhere. At the end of the day, we are doing what we committed to when we started, where there is irregular expenditures we will follow through,” he said.

The cash-strapped power utility is in continuing wage negotiations with unions. The latest offer that the power utility put on the table was a 7% increase in 2018 and 6% for 2019 and 2020. The negotiations have been ongoing for weeks.

Eskom has undergone a lot of executive changes in the last few months in order to clean up the state capture corruption which had been embedded in the business for the past few years.

Eskom had a debt of R387-billion and is working on a restructuring strategy in order to cut some overhead costs.

Hadebe said any cent that the power utility received would add value to the business. The repayment by McKinsey would be settled within five calendar days of the court’s order.

“The settlement agreement, once made an order of court, will resolve in full McKinsey’s repayment obligations in the proceedings,” the McKinsey statement said.

The National Prosecuting Authority’s Asset Forfeiture Unit earlier this year filed a lawsuit aimed at putting pressure on McKinsey to repay the R1-billion after McKinsey had stalled on talks.

Repayment not because of wrongdoing or admission of liability, says McKinsey