McKinsey & Co, one of the world’s biggest consultancy houses, which was caught up in state capture allegations, will pay back R870m in fees and interest earned on shady contracts at Transnet within the coming five days, it said on Tuesday.
In a media statement issued by Transnet and McKinsey on Tuesday, the two announced a finalised settlement agreement on the fees to be returned to the parastatal. The R870m now includes the fees paid to McKinsey in respect of projects undertaken with Regiments Capital “plus interest”, the joint statement said.
The funds will be paid over on May 31, McKinsey confirmed to Business Day.
McKinsey was implicated in the state capture project in SA when working alongside Gupta-linked firms that were awarded contracts at state-owned entities. In December 2020, it committed to the judicial commission of inquiry on state capture that it would repay R650m in fees it received for work done for Transnet and SAA.
At the time, McKinsey said it had voluntarily agreed to repay the money after the commission shared evidence that its work for the two companies was marred by “irregularities regarding Regiments’ role in several projects between 2012 and 2016".
Deputy chief justice Raymond Zondo commended McKinsey for refusing to retain the proceeds of contracts tainted by corruption. But Transnet denied there had been a settlement and contended that the firm, in fact, owed it R1.2bn for the fees plus interest.
McKinsey’s repayment of fees follows a July 2018 agreement to return more than R900m to power utility Eskom over a contract it was awarded and on which it worked alongside Trillian Capital Partners, another Gupta-linked company.
The firm’s Eskom settlement initially also did not include the interest the firm would have earned on the amount over time. This was subsequently included.
Separately, Regiments directors have been accused of procuring unlawful advisory service deals with Transnet, primarily regarding its purchase of 1,064 locomotives, for which the National Prosecuting Authority has indicated they will face charges.
McKinsey has also committed to returning money earned on a single contract carried out with Regiments at SAA.
McKinsey has previously acknowledged it found a series of gaps in its procedures that indicated a need for more robust safeguards, which led to wide-ranging reforms to the firm’s global risk policies and compliance procedures. It also said the situation was “a source of great regret” for the company.
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