Eskom hasn't given reasons for validity of R1bn payment - McKinsey

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Cape Town - Eskom hasn’t given McKinsey reasons for its turnaround decision that the R1bn payment it made to the global consultancy was legal.

Responding to Fin24’s questions by email, a McKinsey spokesperson gave an update on the matter following reports by the Business Day last week that Eskom’s previous board found the contract to be valid, even though it was originally found to be invalid. 

Eskom’s previous board on January 16 2018 said that an investigation found that the contract was in order and that there was no wrongdoing by Eskom executives. This is opposite to a finding by Eskom’s counsel Bowmans in October 2017, which concluded the executives acted unlawfully as they failed to secure approval from National Treasury for the Turnaround Programme contract, the McKinsey spokesperson said.

“But it went on to suggest McKinsey, nevertheless, pay the money into Eskom’s bank account. Eskom has not shared the basis for this new conclusion."

Meanwhile, Eskom’s spokesperson Khulu Phasiwe told Fin24 that one of the first tasks of the new board will be to investigate why the old board had changed their finding on the legality of the contract. He said that the new board is expected to give an update by mid-February.

Further, the National Prosecuting Authority (NPA) on January 17 had determined that the payments to McKinsey and Trillian were criminal, Fin24 previously reported.

The NPA’s Asset Forfeiture Unit (AFU) served McKinsey a preservation order for the assets, McKinsey confirmed. “McKinsey was served with the order on the afternoon of January 24 and we are reviewing it. We are discussing with the AFU how to give effect to our pledge to return the fees we earned on the Eskom turnaround programme,” said the spokesperson.

“We welcome these discussions because they help to provide an appropriate legal process for the repayment of these fees to South Africa.”

“McKinsey remains committed to South Africa. We are redoubling our efforts to be an active, positive, and responsible member of the community,” added the spokesperson.

Previously McKinsey told Fin24 that it is willing to pay back Eskom’s money, even if the contract is legal.

McKinsey said that it had written to the power utility five times since October, requesting that it set up court proceedings to have the monies paid. “Eskom has not responded to these requests,” the spokesperson said.

Testifying at the Eskom inquiry last week, Eskom head of generation Matshela Koko washed his hands of the McKinsey-Trillian contract, saying that suspended head of legal Suzanne Daniels was the one who arranged the payments.

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