28/11/2017 13:45 SAST | Updated 29/11/2017 10:09 SAST

Why Won't Eskom Fight For Its McKinsey, Trillian Money?

The power utility seems in no rush to be paid back R1.6 billion in unlawful consultancy fees.

Siphiwe Sibeko/Reuters

Eskom isn't threatening any court action and has set no deadlines for consultants McKinsey and Trillian to pay back the almost R1.6-billion in fees they received illegally from the embattled parastatal.

Eskom spokesperson Khulu Phasiwe told HuffPost SA that McKinsey had already indicated its willingness to repay around R1 billion, while Trillian, which received almost R600 million, "has not yet said no".

An internal inquiry found in July that the state power utility's decisions to make the payments were unlawful, with no valid contracts in place.

BusinessLive last week reported that Eskom had shelved plans to go to court to get the money back. Phasiwe denied this, however, and said Eskom and the companies' lawyers were in talks.

Eskom, in the grips of a cash crunch and the subject of a parliamentary inquiry, doesn't seem to be in a rush to get the money back.

McKinsey has said it wants to pay back the money -- not because it has done anything wrong -- but because Eskom failed to get the necessary approval from National Treasury. The company told HuffPost SA it will return the fees "no matter what".

We will pay back the fees, if not to Eskom then to South Africa.

"We entered into the Eskom turnaround programme contract, performed our work in good faith, and delivered real impact. We are paying back the money not because we have done something wrong but because Eskom did not get the necessary approvals from the National Treasury. Eskom informed us they had secured the necessary approval from the Treasury. Documents provided by Eskom's lawyers confirm this," a McKinsey spokesperson said.

The company has on four occasions asked Eskom to expedite proceedings at the high court, but the embattled state-owned company has failed to do so. "Regardless of the outcome of any court process, or if Eskom chooses not to pursue the matter, we will pay back the fees, if not to Eskom then to South Africa – meanwhile the funds are in a ring-fenced account."

Phasiwe said Eskom trusted McKinsey and Trillian would return the money but couldn't provide details of the process it is following to ensure that happens. "The court issue is McKinsey's... there's no need to go to court if everyone has the expectation that the money will be repaid. Trillian is dealing directly with our lawyers."

There was no desire to go to court, Phasiwe said. "We have the expectation [that the money will be repaid], and we trust they will do the right thing. There is no deadline for them, and it's no use going to court when one has said yes and the other hasn't said no. There is no dispute."

Insiders, however, said that Eskom's own law firm, Bowmans, told McKinsey in a letter that Eskom itself will have to go to court to set aside the agreements with the two consulting companies. Eskom has said it will not oppose this.

According to BusinessLive, there are fears in the higher echelons of Eskom that if the repayment matter goes to court, certain senior executives may come under a harsh spotlight. McKinsey, however, is reportedly insisting on the issue being aired in court and believes that only Eskom can explain what went wrong when the contracts were illegally doled out.

There are fears in the higher echelons of Eskom that if the repayment matter goes to court, certain senior executives may come under a harsh spotlight.

In a statement, Trillian said: "Trillian has responded to Eskom's letter of demand, which was, as stated by their lawyers, based on an incomplete investigation. To date Trillian has had no reply from Eskom nor its legal representatives on the matter."

Energy expert Chris Yelland said he was "baffled" as to why Eskom isn't pursuing the return of the money with more urgency. "I have no idea why not. Eskom's half-hearted attempts at recovery are absurd. Let's see if the minister [Lynne Brown] appoints a new Eskom board before the end of the month as promised and what they do about this."

McKinsey needs to get the Eskom-Trillian scandal behind it as the company is facing legal action in terms of the American Foreign Corrupt Practices Act (FCPA).

Corruption Watch and its correspondent attorneys in the US are bringing a case against the global professional services company alleging that the Eskom-Trillian deal breached the FCPA, which is regarded as the strongest piece of anti-corruption legislation in the world.

McKinsey senior partner in South Africa Vikas Sagar left the company in the light of the revelations of the shenanigans in the Eskom-Trillian deal which breached several of the company's covenants. The company is taking the issue very seriously, with senior people from New York heavily involved in events in South Africa, which they regard as a crisis.