McKinsey to repay South Africa $40 million

McKinsey will pay back over $40 million to South Africa after a judicial inquiry into alleged corruption in Africa’s most industrialized country revealed irregularities in contracts that the global consulting firm had with a local partner at government-owned companies.

McKinsey had already paid $65.7 million to South Africa in 2018 after it worked with the state power utility Eskom, alongside a company linked to the Guptas, a family accused of using its powerful influence with the former president Jacob Zuma to loot major public contracts.

The firm apologized for its involvement in the Eskom scandal, which cost it major clients in Africa, even as its own investigation found no evidence of corruption by its partners.

However, in recent weeks South Africa’s inquiry into the claims of so-called “state capture” involving the Guptas presented McKinsey with evidence querying further contracts it had from 2012 to 2016 with another Gupta-linked company, Regiments, as well as with the state-owned logistics group Transnet and South African Airways.

“This evidence suggested irregularities in the contracts of McKinsey alongside Regiments at Transnet and SAA but did not implicate any current employees or partners of McKinsey in any corruption or impropriety in relation to these contracts,” the inquiry said on Wednesday.

The inquiry “suggested to McKinsey that it should repay the fees that it had earned on the Transnet and SAA contracts as an act of responsible corporate citizenship,” it said.

McKinsey broke off ties with Regiments in early 2016 as allegations about the group’s political ties mounted. Three senior McKinsey partners will appear before the inquiry on Thursday, including Jean-Christophe Mieszala, the firm’s global chief risk officer.

In a statement, McKinsey said “in line with our determination to do what is right and be guided by our firm’s earlier commitments to Eskom, we will return fees for projects that — even indirectly — may have been related to State Capture. That is not something our firm is willing to accept.”

The inquiry’s near-daily hearings — led by Raymond Zondo, South Africa’s deputy chief justice — have been the most high-profile symbol of a clean-up promised by Cyril Ramaphosa, who replaced Mr Zuma as president in 2018. The Guptas, who fled South Africa as Mr Ramaphosa took the presidency and leadership of the ruling African National Congress, have denied wrongdoing.

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