Singh denies contractual wrongdoing between Eskom, McKinsey

Contractual agreements between international consulting company McKinsey and Eskom yesterday dominated proceedings at the Commission of Inquiry into State Capture, with the power utility’s former chief financial officer, Anoj Singh, describing McKinsey’s termination as legal.

The McKinsey contract, which began in December 2015 and was cancelled in June 2016, saw McKinsey, Gupta-linked Regiments Capital and Trillian Capital Partners, pocketing R1.7 billion for what was envisaged to be a turnaround strategy to boost the financially ailing Eskom.

McKinsey, which offered to pay back R600 million in consulting fees to Eskom, found itself entangled with a company with state capture project credentials, having failed McKinsey’s due diligence – including adherence to black economic empowerment (BEE).

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In his testimony before Deputy Chief Justice Raymond Zondo, Dr Alexander Weiss, a senior energy consultant for McKinsey, told the commission how the company raised red flags when Trillian – a division of Regiments Capital, with Eric Wood at the helm – was introduced to McKinsey by Eskom executives under the guise that a BEE partner would be established.

Eskom said Trillian, which turned out to be BEE non-compliant, would be partners based on its capabilities of risk management and working closely with state-owned enterprises.

Singh said there was “a legally-binding document on the agreement between Eskom and McKinsey”.

“On 6 December, 2015 a letter was signed between Eskom and McKinsey, based on the 1034 document – offer and acceptance.” Dr Weiss did concede that the letter was binding.

The contract was terminated but McKinsey was paid in line with the agreement on work done,” said Singh.

Singh refuted as “untrue” claims by McKinsey on how Trillian became its subcontractor, saying the consulting company played politics.

He said the master service agreement with McKinsey was terminated by the Eskom board tender committee resolution of 2016.