Eskom: We'll pay back the money if... - McKinsey

Firm says it will put fee it earned in a ring-fenced account pending High Court review of matter


McKinsey will pay back the fee in full if the Court determines Eskom acted unlawfully.

Eskom has been a client of McKinsey & Company since 2005, and we stand by our work at the company. We believe our work on the turnaround programme created substantial value, helping improve operating performance by, amongst other things, increasing plant availability and reducing contractor claims on the new build programme.

Eskom has now advised us that it believes it violated procurement regulations and its internal procedures in the formation of the contract, and that decisions it took with respect to the contract may have been taken without proper authorisation. These requirements were solely Eskom's responsibility. McKinsey entered into the contract and performed its work in good faith.

Our contract with Eskom for the turnaround programme was approved by Eskom. It explicitly required Eskom to obtain the necessary approvals or consents required by the terms of the Public Finance Management Act. We were advised by Eskom on 5 February 2016 that it received National Treasury approval and we have reviewed Eskom's Steering Committee minutes from 9 February 2016 that confirm that fact.

Eskom now contends the contract should be held invalid because Eskom did not, in fact, receive the necessary approvals.

We want this issue resolved and we have no interest in benefiting from an allegedly invalid contract.

To provide reassurance to the citizens of South Africa, we will support a review by the High Court of the validity of the turnaround programme contract. We invite Eskom and Trillian to submit themselves to this process too.

We plan to set aside the full fee McKinsey earned on the turnaround programme in a ring-fenced account ready to comply with the Court's decision.

Statement issued by McKinsey, 10 October 2017