South African minister announces McKinsey legal action
South Africa's Public Enterprises Minister Lynne Brown has ordered the state-owned power utility, Eskom, to investigate possible criminal charges against leading global consulting firm McKinsey.
That's after revelations surfaced over contracts at Eskom, which investigators say were characterised by corruption.
Other companies are involved, including the Gupta family-owned Trillian, while Eskom CEO Matshela Koko and chief financial officer Anoj Singh have been suspended.
This comes in the week that the fourth-largest auditing company in the world, KPMG,
sacked its entire senior executive in South Africa for alleged involvement in helping the South African Revenue Service (SARS) distribute a false report that brought down the country's finance minister, Pravin Gordhan.
He's now taking legal action against KPMG for personal losses, and the company faces losing its licence in South Africa over the affair. At the time, Gordhan's shock removal led to an outflow of billions of dollars of investment, which had a direct effect on the country's GDP growth.
Earlier this year in July, McKinsey said it was beginning a process of reviewing documents linked to work done for Eskom.
A report at the state-owned power company said McKinsey and Gupta company Trillian had made R1.6bn in fees and expected to make another R7.8bn. These fees were added without value, according to the report.
The global arm of McKinsey is now exposed as its operations come under scrutiny in South Africa. Charges of fraud, racketeering and collusion have been laid against those involved by the Democratic Alliance, the country's main opposition party.
On Thursday, September 21, Gordhan met with KPMG in Johannesburg and issued a statement saying: “We shared our strong feelings and disapproval of the manner in which KPMG SA has been involved in the validation of state capture and corruption in respect of both SARS and the Gupta companies.”
He and his deputy, Mcebisi Jonas, want the auditing company to deliver a full disclosure of its role in the saga in 2015 that saw both lose their jobs over allegations of a rogue unit operating in SARS under their watch.
The report was bogus and KPMG retracted it. It also announced it would pay the R40m earned by auditing Gupta-owned companies since 2002 to anti-corruption charities.
The auditing firm would also pay back R23m earned from writing the report to SARS concerning the rogue unit.
The Gupta family are constantly in the spotlight in South Africa and have fled to Dubai where they immediately bought property. They've been linked to President Jacob Zuma, who has faced constant pressure over alleged corruption. At the same time, Zuma is trying to ensure that one of his former wives, Nkosazana Dlamini-Zuma, takes over the leadership of the ruling ANC at a special conference in December.
This is opposed by other leaders of the organisation, setting up a possible succession battle as the party loses support, particularly in urban South Africa. In local government elections held in 2017, it lost control of Johannesburg, Pretoria and a city in the original heartland of the party, Port Elizabeth.