Eskom in bid to recoup interest from McKinsey
Eskom is in talks to recover the interest on money paid to global consultancy McKinsey & Company, the electricity producer has confirmed.
The utility said it was in "protracted talks" with the management consultancy to recover the capital amount, claim back VAT and recover interest accrued on the capital.
Last week McKinsey refunded Eskom the R902m it received from the utility, part of the R1.6bn it shared with Trillian Capital — money that was stolen by executives at the utility.
Trillian was then majority-owned by Salim Essa, a close associate of the Gupta family, which is connected to former president Jacob Zuma.
Without invoice or contract, Eskom’s former chief financial officer, Anoj Singh, paid the Gupta-linked firm R565m on the instruction of McKinsey partner Vikas Sagar.
McKinsey denied having authorised the letter and said it had no relationship with Trillian. Although it had no contract with either Eskom or McKinsey, Trillian denies receiving unearned and undue payments from the utility.
Singh and Eskom initially denied having made any payments to Trillian, but changed their tune under pressure in 2017. They also admitted that Trillian had performed no work to earn the fee, and could not establish the value of McKinsey’s work.
Unpaid compound interest
The unpaid compound interest on the total amounts to R352.6m over the two-year period at the prime interest rate of 10% a year.
Eskom has run out of money to fund its operations and had to rely on a 30-day loan from the Public Investment Corporation to pay salaries for its 47,568 employees earlier in 2018. It is still relying on short-term loans.
In this week’s statements by Eskom, no mention was made about the recovery of the interest accrued on the amount.
McKinsey spokeswoman Bonita Dordel told Business Day on Sunday the consultancy was only paying "just the full fee and not the interest", which she said was the "full and final" obligation McKinsey had on the matter.
However, McKinsey changed its mind on paying the interest the very next day.
Kevin Sneader, the firm’s global managing partner, caved under pressure after giving a public apology for the firm’s role in the theft on Monday.
Pressed by prominent businesspeople at a forum at the Gordon Institute of Business Science to repay the interest, Sneader said the firm "will have a discussion with Eskom about the interest. We have no desire to profit from that R902m. We will engage with Eskom on it."
Asked by Business Day when McKinsey would pay back the interest, Dordel declined to comment on Wednesday.
"Regarding VAT, McKinsey and Eskom have agreed to submit a joint VAT-ruling application to SARS [South African Revenue Service]. McKinsey will pay the VAT amount due if SARS deems the transaction to attract VAT," Eskom said to Business Day’s questions on Thursday.
"Regarding interest, discussions have been entered into and are ongoing. An announcement will be made in due course," the utility said.
This contradicts Eskom’s earlier statement on the matter on Sunday, after McKinsey transferred the R902m.
Asked if the consultancy would also pay interest on the amount, Eskom said the "repayment is of the capital amount and to the extent applicable, the VAT portion will be paid in due course by McKinsey pursuant to a VAT ruling by SARS".
Eskom said it had instituted court action to recover the Trillian portion and the case would be heard in December.
Civil society groups, including Corruption Watch, have asked the US justice department to investigate a case of corruption against McKinsey.
Under the foreign corrupt practices act of 1977, the US can investigate and prosecute any suspected case anywhere in the world.
Representatives of the Federal Bureau of Investigation met with current and former Eskom officials earlier in 2018.