Eskom bleeds cash to pay consultants

Former employees at the parastatal have realised that they can rake in the big bucks by making a strategic career move to consultancy

Eskom executives have taken note of the huge amount the ailing utility spends on consultants, and realised the big money lies in a strategic career move. And if they can get Eskom as a client, all the better.

Eskom spent close to a massive R3?billion on consultants in the financial year to March and has issued tenders for consultancy services worth billions over the next five years.

Former Eskom CEO Brian Dames, who left in March with a R15.4?million package, has resurfaced as a senior adviser at McKinsey & Company, a management consulting firm that counts the power utility as one of its biggest clients.

Dames was recently interviewed on television network CNBC Africa, where he talked on behalf of the firm about his take on energy issues.

McKinsey has handled a number of assignments for Eskom, including drawing up a procurement strategy for its massive build programme and information technology consulting services.

But Eskom spokesperson Andrew Etzinger denied Dames was back at Eskom in a different capacity.

“Brian Dames is not doing any business with Eskom, and is not registered as a consultant,” he said.

He did not comment after being sent an online link to the CNBC Africa interview, and Dames did not respond to emails sent to his McKinsey address.

But Dames is not the only senior employee to leave for a consulting career, which has proven very lucrative for companies vying for contracts from the skills-strapped parastatal. Others have left, mostly before the latest round of rotational power cuts hit.

Kannan Lakmeeharan, its former acting executive for technology and commercial, quit in April to join an unnamed global consulting firm as a senior external adviser. Izak du Plessis, who acted as finance chief after incumbent Bongani Nqwababa quit in 2008, also left for a consulting firm in September.

City Press has also found senior employees outside the executive committee who have left for consulting firms, including a senior network operations engineer who joined McKinsey in January, and a consultant engineer who left to work as a management consultant at boutique advisory firm Regiments Capital in November.

Regiments executive director Eric Wood said the firm does not provide services to Eskom, but hinted at the jostling that goes on for contracts behind the scenes.

“We have pitched for work, including balance sheet optimisation and cash release, but have not been awarded anything,” he said.

“The last appointment by Eskom was when Regiments was appointed joint lead for the issuance of a €500?million foreign bond – about five years ago.”

Eskom’s consultant bill has ballooned over the past 10 years. In 2005, its spending on “managerial, technical and other fees” – which Eskom confirmed was the line item it used to record payments to consultants – stood at R537?million.

By the year to March 2014, it had spent R2.9?billion, R683?million less than the previous year, when an explosion in 2011 at its Duvha Power Station forced management to bring in German consultancy VGB PowerTech to investigate.

The bill is set to grow larger as the utility issued an open tender in 2012 for a panel of consultants to provide engineering and project management services, with an estimated value of R7?billion over five years.

Another tender was issued in October for the provision of engineering consulting services, including the review of transformer designs and reactors.

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