On Sunday — two days after the National Prosecuting Authority (NPA) charged the SA office of McKinsey & Co — senior partners of the global management consultancy informed leaders of Business for SA (B4SA) that McKinsey proposes to pause its engagement with the special purpose business outfit that helped the government roll out Covid-19 vaccines last year.
The NPA’s charges against the consulting firm are related to its work at Transnet, the state-owned freight logistics company described as a primary site of state capture.
McKinsey was contracted to B4SA to assist business in implementing interventions to tackle bottlenecks affecting economic growth, including energy logistics, crime and corruption, water and infrastructure.
The NPA had already charged one former senior executive at the firm, Vigas Sagar. Adding McKinsey to the charge sheet has come as a surprise given the remedial steps the company had implemented after being found to have unduly benefited from state capture at Transnet and Eskom, the beleaguered power utility. These steps have included voluntarily paying back the ill-gotten fees; sacking the employees responsible for plundering these entities; and openly co-operating with the Zondo commission of inquiry into allegations of state capture and corruption.
These are known actions by the firm. More behind-the-scenes ones have not been publicised.
Significantly, Raymond Zondo, the chief justice who chaired the inquiry, recommended no further action. Instead, he found McKinsey’s posture to be exemplary of a good corporate citizen.
For its part, B4SA has accepted the recommendation for McKinsey to withdraw its services. Some of B4SA’s stakeholders — such as the government, community and labour organisations — might reasonably have been apprehensive to deal with a criminal suspect.
For McKinsey, while its work for B4SA was small and less lucrative than the tens of millions of dollars and rand it charges its private sector blue-chip clients, this is not the end of the road. It marks the beginning of a long, arduous and uncertain road to recovery.
It has already excluded itself from public sector work in SA but has not left the country. In fact, it is still serving private sector clients — just like the auditing and law firms that advised the Guptas and their associates during state capture.
McKinsey’s co-operation with Zondo, including a public apology to South Africans and the SA authorities, contrasts sharply with that of Bain & Co, another consultancy, which helped the architects of state capture to weaken public institutions such as the SA Revenue Service.
Bain may have issued a public apology, but it did not send its global leaders to the Zondo inquiry to account for its devastating role in hobbling what was once an esteemed tax collection agency. Quite correctly, the SA authorities have adopted a hard-line approach, banning Bain from doing work in the public sector for a decade. This was after the British government did the same.
However, there are many troubling questions flowing from the NPA prosecution. McKinsey has said it will defend itself against the charges once the indictment is clarified.
Among the questions arising from this development is whether the NPA has acquired the capacity to prosecute a company as sophisticated as McKinsey, and whether it did explore an alternative dispute resolution — such as a fine — compared to a costly protracted prosecution. If an alternative route was explored with McKinsey before Friday’s announcement, what was the outcome of these interactions?
What should the private sector clients of McKinsey do? Dump it and force it to shut down the SA office? Is it not enough to return the dirty fees and fire the bad apples? What more — except for a fine to the SA authorities — should McKinsey do to fully atone? Does the NPA know anything we don’t know about McKinsey’s work at Transnet (the reason for Friday’s action)?
While Zondo made adverse findings against some banks, he gave lawyers and auditors a free pass. They have continued trading after explanations and closures of the accounts of those linked to state capture. Customers have not withdrawn their deposits en masse.
After Friday’s announcement, should banks, auditors and lawyers be shivering in their boots?
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