McKinsey to pay back R1bn to Eskom, Trillian not part of deal

Africa’s largest electricity supplier, Eskom has finalised a settlement agreement with the world’s largest management consultancy, McKinsey for R1 billion ($74 million).

As Trillian, was not party to the settlement, Eskom said it will continue to pursue the recovery of the remainder of the payments made to Trillian through a legal review process launched earlier this year.

Eskom asked the consultancy firms McKinsey and Trillian to pay it back 1.6 billion rand ($117 million), last year after an internal inquiry found that the state power utility’s decisions to make the payments were unlawful.

Last year South Africa’s political opposition party, the Democratic Alliance alleged McKinsey steered funds to Trillian, a company which at that time was connected to the Guptas, a trio of Indian businessmen who South Africa’s anti-graft watchdog has alleged used their links with than President Jacob Zuma to win government contracts.

The Guptas denied any wrongdoing, saying they were pawns in a plot against Zuma, who  also denied any wrongdoing.

McKinsey ended up earning around 1 billion rand and Trillian 564 million rand for a “Turnaround Plan” carried out at Eskom between January and July 2016.

McKinsey says it stopped working with Trillian after the company failed due diligence in March 2016.

The size of the contract – $120 million for six months of advice – was heavily-criticized.

U.S. business advisory Oliver Wyman found in a December 2016 report commissioned by Eskom that McKinsey’s contract with the utility was “very unusual” and charged fees at more than double market rates.

In a media statement, on Friday Eskom said “the process has taken longer than what would have been ideal however it was of importance that we ensure that an appropriate and transparent legal process is followed”.

“This is a significant milestone for the Board as we seek to fulfil what we see as our non-negotiable mandate to root out financial mismanagement and malfeasance as a critical foundation to restoring transparent and effective governance” said Jabu Mabuza, Eskom Board Chairman.

“We are thankful that this hard and difficult journey has yielded positive results. We are equally appreciative of the support and cooperation we have received from McKinsey and the AFU. This for us further demonstrates that we are serious about consequence management and achieving a renewed culture of accountability and good governance which is key to our sustained success,” said Eskom Group Chief Executive Phakamani Hadebe.

  • With additional reporting by Reuters

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