McKinsey & Co, the global consultancy firm that was ensnared in the state capture project in SA after working with Gupta-linked firms, has agreed to repay about R650m it received for work done for Transnet and SAA.
In a settlement announced on the eve of the company’s appearance at the Zondo inquiry on Thursday, McKinsey said it has voluntarily agreed to repay the money after the commission shared evidence that its work for the two state companies was marred by "irregularities regarding Regiments’ role in several projects between 2012 and 2016".
McKinsey worked alongside Regiments Capital at Transnet and SAA.
Regiments and its directors have been separately accused of procuring unlawful advisory services deals with Transnet, primarily regarding its purchase of 1,064 locomotives, for which the National Prosecuting Authority (NPA) has indicated that they will face charges.
The company was linked to the Gupta family, friends of former president Jacob Zuma. They are at the centre of state capture allegations.
McKinsey was one of a number of private sector companies that were alleged to have taken part in dodgy deals during the Zuma presidency.
KPMG’s involvement in wrongdoing, including its notorious report that legitimised the now-discredited narrative about a "rogue unit" at the SA Revenue Service (Sars), was detailed in a book by Wiseman Nkuhlu, who was brought in to clean up the firm.
Bain & Co, which paid back money it received for work at Sars after being subject to scathing findings in retired judge Robert Nugent’s final report, and technology consultancy Gartner and Hogan Lovells, a law firm with US and European roots, were other high-profile companies whose reputations were damaged by their association with Sars when it was run by former commissioner and Zuma ally Tom Moyane.
McKinsey’s repayment of fees follows a July 2018 agreement to return more than R900m to power utility Eskom regarding a contract it was awarded and in which it worked alongside Trillian Capital Partners, another Gupta-linked company. It will also return money earned on a single contract carried out with Regiments at SAA, the bankrupt national airline that was recently granted a R10.5bn state bailout as part of its business rescue process.
The commission commended McKinsey for its commitment and urged other companies to follow its lead and "make clear that they will not retain the proceeds of contracts that are tainted by corruption even if that corruption was the product of processes in which they were not involved".
Under scrutiny
Jean-Christophe Mieszala, global risk officer at McKinsey, said the repayment of the fees is not an admission of guilt but, as was the case with Eskom, "a matter of principle" and "an act of responsibility" for having fallen short and landed in a position in which it could be used by other parties.
Mieszala could not say exactly what the wrongdoing was before his testimony at the commission on Thursday.
McKinsey initially came under scrutiny for its repayment of the Eskom fees that did not include the interest the firm would have earned on the amount over time, something it did later.
Asked if the company has taken the interest into consideration in repaying the Transnet and SAA fees, Mieszala said the details are yet to be worked out for a legal framework that will dictate how repayments will occur.
"We will have to work that out with the commission and the other legal authorities and the SOEs," Mieszala said.
The evidence that prompted McKinsey to repay the fees does not implicate any current employees or partners of the firm in any corruption or impropriety regarding these contracts, he said. As such, no further disciplinary action will be taken beyond that which was taken when violations of the firm’s professional standards and policies were first detected.
McKinsey’s association with state capture has been "painful" for the firm’s 150 employees in SA and others globally, Mieszala said.
The consultancy has decided not to work with state-owned entities (SOEs) in SA for the time being as it strengthens protocols about work for the government and its entities.
The agreed amount only relates to McKinsey’s fees. Regiments was put into liquidation in September.
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