Civil society organisations demand action against McKinsey

Protesters gathered outside the company's Sandton office.

Demonstrators hold up a poster during a protest against McKinsey over 'irregular payments' involving Eskom and Trillian on 5 October 2017. Picture: Supplied.

JOHANNESBURG - Future South Africa and a few civil society organisations have demanded that consultancy firm McKinsey be held accountable for irregular payments involving Eskom and Trillian Capital.

Privately-held McKinsey, the world’s largest management consultancy, is under parliamentary investigation in the country for fraud over a R1.8 billion contract to advise energy utility Eskom from late-2015 until July 2016. Public Enterprises Minister Lynne Brown is asking for an official report.

On Thursday, protesters gathered outside the company's Sandton office.

A demonstrator called for officials to be charged.

“We are here today during our first demonstration outside McKinsey’s office. We will be back here again to call for McKinsey to answer for its involvement in state capture and the theft of taxpayers’ money.”

WATCH: Future SA protests outside McKinsey's offices

Last year, a US risk management firm advised South Africa’s state energy utility to withhold tens of millions of dollars in payments for advice from McKinsey, because the global consultancy’s “very unusual” payment model allowed it to charge fees in excess of market rates.

Despite the warning by US management consultancy Oliver Wyman, Eskom continued to make payments to McKinsey, two sources with direct knowledge of the matter told Reuters.

A third of the fees were paid by Eskom to Trillian, controlled at the time by members of the Gupta family, billionaire friends of President Jacob Zuma who were accused by South Africa’s anti-corruption watchdog last year of using control over state agencies to siphon public funds.

Eskom says it paid the fees to Trillian at McKinsey’s request, but McKinsey says it only worked alongside Trillian and they never had a subcontractor relationship.

Trillian, a junior local management consultant, said it supported McKinsey with its work.

McKinsey says a letter written by one of its directors authorising Eskom to pay Trillian as a McKinsey subcontractor “inaccurately characterised” their relationship.

McKinsey says it is cooperating with the authorities and has ordered its own investigation into the operations of its South African office. The Guptas and Zuma deny wrongdoing.

Demonstrators hold up posters during a protest against McKinsey over 'irregular payments' involving Eskom and Trillian on 5 October 2017. Picture: Supplied.

The full payment terms of McKinsey’s contract with Eskom have not previously been made public.

They were examined last year by Oliver Wyman, which was commissioned by Eskom to investigate the deal. Reuters has reviewed the 15 December report containing the findings and recommendations.

Oliver Wyman told Reuters it was not legally permitted to comment on the contents, but it “stands by the findings and recommendations contained in the report”.

McKinsey said it was aware Oliver Wyman had carried out a review of its work at Eskom, but it had not been told there was any dispute over the impact of its work or what it was paid.

“The fees we charged at Eskom are in line with similar projects we, and other firms, undertake in South Africa and elsewhere around the world,” spokesman Steve John said.

Eskom said it would not comment further, pending its own investigation into the affair.

Trillian told Reuters it was not involved in the commercial negotiations between McKinsey and Eskom and had not seen the Oliver Wyman report.

Additional reporting by Reuters.
Pictures: Supplied.

(Edited by Shimoney Regter)