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Eskom To McKinsey and Trillian: #PayBackTheMoney

Eskom has told the consultancy firms that the fees they earned appear to have been unlawful.

06/10/2017 06:37 SAST | Updated 06/10/2017 06:37 SAST
GULSHAN KHAN/AFP/Getty Images
Members of South African political party Congress of the People (Cope) demonstrate outside state entity Eskom Offices at Megawatt Park.

Eskom has asked consultancy firm McKinsey to #PayBackTheMoney: the power utility issued a statement on Thursday night saying it would seek "cooperation" from McKinsey and Gupta-linked firm Trillian for R1.6-billion in fees they were paid for a turnaround project.

McKinsey was paid R1-billion, while Trillian was paid R564-million, which Eskom said "appears to have been unlawfully paid out".

"The interim findings from Eskom investigations, into the circumstances surrounding payments made to both the companies, point to certain decisions by Eskom, and resultant payments, as being unlawful," read the statement, according to Fin24.

Eskom reportedly said: "Eskom is obliged, pursuant to its statutory and common law duties, including the PFMA (Public Finance Management Act) and the Companies Act, to seek to set aside these unlawful decisions and to have all the money unlawfully paid out returned."

According to Daily Maverick, McKinsey previously defended the work it did for Eskom.

"We are proud of our work at Eskom and stand fully behind the impact and value we delivered and do not believe there is an appropriate basis to reclaim all or any part of the monies," the firm previously said.

But on Thursday, the company reportedly said:

"We were happy Eskom met with us yesterday, at our request, to share some of the findings from its investigations. McKinsey takes its commitment to Eskom, South Africa and BBBEE seriously. We are encouraged that Eskom is willing to cooperate with us in an independent process to ensure the Turnaround Programme arrangements were lawful."

Business Day previously reported that Eskom had received legal advice that the payments to McKinsey and Trillian were illegal, which it ignored. Eskom reportedly then lied to the media about this.

It received this advice both from its own legal team, and from constultancy firm Oliver Wyman, which it hired to investigate the contracts.

Daily Maverick reported that the legal opinion received by Oliver Wyman also warned that, in many cases, the projects McKinsey and Trillian were working on were just proposals that had not been signed off, and that it might take years for Eskom to benefit from them, although McKinsey and Trillian would be paid.

The firms are facing pressure on a number of fronts.

Fin24 reported that civil society groups protested outside McKinsey's offices on Thursday morning. The South African Federation of Trade Unions also laid charges against Trillian.