From clandestine meetings in coffee shops and restaurants in Johannesburg to wining and dining in New York, the admission of bribery of Eskom and Transnet by McKinsey lifts the veil on how brazen state capture players were in looting the coffers of the state.
McKinsey, the godfather of management consulting, in its deferred prosecution agreement with US authorities, which will see it pay $122m in restitution, laid bare how its erstwhile executive Vikas Sagar bribed the company’s way into landing lucrative contracts with the two entities at the height of state capture.
The agreement shows how corruption was exported from Transnet to Eskom — just as executives moved from the latter to the former.
The consulting major pocketed $85m in profits from its ill-gotten gains from Transnet and Eskom.
Sagar and his co-conspirators at Transnet and Eskom relied on usage of private emails, messaging apps, among other things, to co-ordinate their illegal activities, the agreement shows.
The corrupt relationship between McKinsey SA and Transnet began in 2011, when Sagar, by his own admission, met a board member of Transnet who had the “ability and authority to influence the award of consulting contracts”.
The scheming would later see McKinsey awarded nearly 10 contracts with Transnet and also subcontract Gupta-linked Regiments and Trillian.
The agreement between McKinsey SA and US and SA authorities marks the final resolution between the consulting agency and the National Prosecuting Authority (NPA) and the US department of justice.
Transfer of corrupt activities
The admission by McKinsey mirrors the Zondo commission of inquiry that looked into state capture, particularly into how the transfer of Transnet executives to Eskom literally amounted to the transfer of corrupt activities between the entities.
“In or around 2015, multiple Transnet executives who had worked with McKinsey Africa transitioned to leadership positions with Eskom ... at Eskom, McKinsey’s bribery scheme proceeded in a similar manner as it had at Transnet”.
Former Transnet executives Brian Molefe and Anoj Singh were the last arrested, alongside Siyabonga Gama, Garry Pita, and Phetolo Ramosebudi on charges including fraud, corruption and, money laundering relating to the parastatal’s locomotives tender concluded in 2015.
At the centre is a R93m payment to Gupta-linked Trillian Capital as part of the 1,064 locomotives procurement process that cost Transnet close to R54bn in total. Evidence heard before the state capture commission was that Trillian — a breakaway company from Regiments Capital — was awarded contracts irregularly at different phases during the procurement process, while having never participated in open bids.
The state capture commission heard that Regiments’ own appointment in the course of the procurement process was irregular, as it too did not participate in the bidding process for the transaction advisory panel that was later appointed.
Molefe, who is now MK party legislator, was Transnet CEO from February 2011 to April 2015, before he and Singh were seconded to Eskom in similar roles.
Zondo found Eskom bent backwards to accommodate McKinsey. “All eight contracts were awarded by way of confinement and approved mainly by Mr Molefe as the group CEO, on the basis of memoranda submitted to him by Mr Singh and Mr Pita. The evidence establishes that McKinsey and Regiments were in possession of Mr Singh’s confinement memoranda to Mr Molefe prior to their making bids,” Zondo found.
Molefe is challenging the Zondo report.
“McKinsey welcomes the resolution of these matters and the closure of this regretful situation. McKinsey is a very different firm today than when these matters first took place.
“We fired Mr Sagar soon after learning of these issues, returned our fees with interest, co-operated with the authorities, and made significant upgrades to our risk, legal and compliance controls to ensure McKinsey sets the standard across our profession. As McKinsey SA begins to look towards the future, we want to reiterate our commitment to the people of SA and to regaining their trust,” the consulting firm said in a statement.
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