Point of interest: McKinsey can't say if it will also pay interest on R650m repayment to Transnet, SAA

A senior partner at management consulting company McKinsey could not guarantee that the company would also pay interest on the fees it will repay for contracts it earned from state-owned entities Transnet and SAA.

On Wednesday, McKinsey announced it had voluntarily committed to return all of the fees it had earned on all nine contracts where Gupta-linked company Regiments worked with McKinsey at Transnet and on one contract where Regiments worked with McKinsey at SAA.

The amount to be repaid is estimated to be R650m, without interest.

State capture commission evidence leader Matthew Chaskalson SC asked McKinsey's chief risk officer, Jean-Christophe Mieszala, on Thursday whether the company would also repay the interest on the fees it will return, as it did with Eskom in 2018.

In that instance, McKinsey repaid all the fees it had earned at Eskom with interest, when it found procedural irregularities in the 2016 turnaround programme at Eskom.  

“We made a decision on principle to return our fees. We have to work out with the state-owned entities but also the authorities on what this would be and how this will be done,” Mieszala said.

Chaskalson said that though McKinsey had decided to repay the fees it earned from the Transnet and SAA contracts, it did not seem to acknowledge the full nature of McKinsey's SA partner Vikar Sagar's impropriety.

Mieszala said McKinsey's own inquiry did not find any evidence that corrupt payments were made by McKinsey to Transnet or Eskom officials. However, its investigations identified areas of concern relating to professional standards or violations of its own internal policies by Sagar.

These related to the fact that Sagar had assisted Siyabonga Gama, CEO of Transnet, with his MBA in late 2015 and early 2016.

A second area of concern was a letter Sagar wrote which inaccurately referred to Trillian as a subcontractor of McKinsey.

“This letter was confusing.”

This led to McKinsey taking disciplinary action against Sagar and terminating his employment with the company in October 2017.

Chaskalson said that, six weeks ago, the commission had provided McKinsey with information, including two e-mails, which showed that Sagar was aware that Gupta associate Salim Essa was related to Trillian.

In an e-mail dated November 16 2016, a letter written to Sagar and copied to Trillian owner Eric Wood and Essa was sent to Sagar's private e-mail address.

In that e-mail, executive director of Integrated Capital Management Clive Angel informed Sagar that “we are still waiting for the financial spreadsheet re the proposed aggregate 50-50 fee split and timelines as mentioned last week. Salim needs this in advance of setting up a meeting for you and Alex with Brian”.

Chaskalson said it was clear that Alex was McKinsey partner Dr Alex Weiss and Brian was Brian Molefe.

“What this e-mail makes absolutely clear is that contrary to what he told the McKinsey investigators, Sagar knew that Salim Essa was behind Trillian,” Chaskalson said.

Chaskalson said the second point was that Sagar was dealing directly with Essa in relation to the proposed appointment of McKinsey and Trillian at Eskom.

Mieszala said this e-mail was concerning on multiple accounts. One of the concerns was why Essa was copied into the e-mail discussion.

“Clearly would we have known or seen such an e-mail we would have raised questions. The fact that ... Mr Sagar had hidden from us that he knew there was this connection between Trillian and Mr Essa is definitely a source of concern,” Mieszala said.

Mieszala said it was also a concern to McKinsey that Sagar had used his personal e-mail for professional business as a way of trying to hide things from McKinsey.

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