McKinsey to pay back R870 million in Transnet fees

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  • The US consulting firm McKinsey has agreed to pay back R870m it earned in consulting fees at Transnet.
  • This is a substantial hike from its previous estimate of R650m.
  • McKinsey worked alongside Gupta-linked Regiments Capital at Transnet.

The US consulting giant McKinsey & Co has agreed to pay back R870 million for consulting work it did at Transnet alongside the Gupta-controlled Regiments Capital.

The amount announced by McKinsey and Transnet in a joint statement on Tuesday is much larger than the R650 million put forward last year.

In December, the Zondo commission into state capture announced that the US company has agreed to pay back R650 million to Transnet and SAA for work it did on consulting contracts.

Transnet objected, saying it wanted more than R1.2 billion. McKinsey has apparently upped its offer, despite saying last year that the decision to pay back the fees was based on "principle", rather than any "legal obligation".

McKinsey worked alongside Gupta-linked Regiments Capital on nine contracts at Transnet, starting in 2012 Regiments paid a portion of its fees directly to the Gupta-controlled Gateway - which McKinsey says it did not know. 

Apart from its association with Regiments, McKinsey has come under fire for its work to justify Transnet’s acquisition of 1 064 new locomotives, in a contract that has been mired in controversy over cost inflation and allegations of corruption after it ballooned from R38.16 billion to R54.5 billion.

While McKinsey did not find that its current employees or partners were implicated in state capture, it did confirm that some of its staff members violated their professional code of conduct. Among them is Vikas Sagar, who is alleged to have assisted former Transnet CEO Siyabonga Gama with the writing of his academic work for an MBA around 2015.

In a short joint statement on Tuesday, Transnet and McKinsey said they have finalised the settlement on the fees McKinsey committed to return to Transnet at the state capture commission last year. 

“The full and final settlement of R870 million includes the fees paid to McKinsey in respect of the projects undertaken with Regiments Capital, plus interest.”

In 2017, McKinsey agreed to return R1 billion in consulting fees earned at Eskom.

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