Tuesday, January 26, 2021

McKinsey to repay South Africa $44m over link to corruption scandal

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McKinsey & Co. will repay 650 million rand ($44 million) for contracts it had with South African Airways and state logistics company Transnet SOC Ltd., as it seeks to clear its name in the country.

The consultancy firm’s chief risk officer, Jean-Christophe Mieszala, will on Thursday testify at a state graft probe. McKinsey said the contracts were carried out together with Regiments Capital, a company associated with the Gupta family, some of whom have refused to return to South Africa from Dubai to face graft charges.

“The judicial commission has confirmed there is no information that implicates any current personnel of McKinsey in any corruption or impropriety,” the company said in a statement on Wednesday. “The repayment decision was made following the Judicial Commission’s recent introduction of documents and information regarding Regiments previously unavailable to our review.”

McKinsey is one of a number of international companies caught up in South African graft probes mainly targeting firms doing business with state entities. SAP AG and KPMG LLP are two of the companies mentioned.

“The Commission commends McKinsey for taking the step that it has taken,” it said in a separate statement. “The Commission urges other companies to follow its lead and do the same in all cases where evidence shows that they have benefited from contracts tainted by corruption, even if they were not party to that corruption.”

Of the 10 affected contracts, nine were with Transnet and one with SAA. Transnet disputed the amount McKinsey plans to pay, saying the contracts amounted to 688 million rand plus almost 558 million rand in interest.

“The amount owed to Transnet, therefore, is just over 1.2 billion rand, and that is what we continue to insist must be repaid,” the company said in a statement. “In July 2018 McKinsey agreed to return the fees earned at Eskom, plus interest, in similar circumstances.”

McKinsey has previously repaid about 1 billion rand to Eskom Holdings SOC Ltd., the state power utility.

“This situation is a source of great regret to McKinsey,” said Kevin Sneader, McKinsey’s global managing partner, in the statement. “Over the past three years, McKinsey has accepted responsibility for the errors of judgment that were made and continues to work hard to make amends.”

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