McKinsey to repay R902m to Eskom to avoid further legal action
Consultancy McKinsey is to repay the R902m fee Eskom contentiously awarded it for work on a 2016 turnaround programme and will be spared any further legal action in return.
The outcome is a consequence of Eskom’s non-compliance with the relevant procurement laws, not because of any wrongdoing or admission of liability by McKinsey, the consulting firm said in a statement on Friday.
Earlier this year, the National Prosecuting Authority (NPA) told the courts the payments of a total R1.56bn made to McKinsey and sub-contractor Trillian Capital Partners were criminal.
McKinsey came under fire for facilitating state capture when it allowed then Gupta-controlled Trillian to be part of the programme, and earn a generous fee, although it contributed little to the work.
"McKinsey, Eskom and the NPA’s Asset Forfeiture Unit today reached a settlement that enables the management consulting firm to voluntarily return the fee it earned," Friday’s statement said.
The repayment must still be made an order of the court. When paid, the fee, often reported as R1bn but actually R902m, would constitute a "full and final settlement", Bonita Dordel, director of external relations in Africa for McKinsey told Business Day. McKinsey would also assist Eskom in getting a full VAT refund, she said.
McKinsey had previously argued that, while it was willing to pay back the fee, it was concerned it would be forced to do so twice — once to the courts and again to Eskom.
The statement noted that discussions had been held since the beginning of the year to ensure the fee would be repaid "through an appropriate and transparent legal process".
Jabu Mabuza, Eskom board chair, said the settlement was a significant milestone for the board as it seeks to fulfil a "non-negotiable mandate to root out financial mismanagement and malfeasance as a critical foundation to restoring transparent and effective governance". He said Eskom would pursue the remainder of the payments from Trillian, which was not party to the agreement.