How world sees SA: McKinsey reputation shatters in graft crisis. #GuptaCurse

EDINBURGH — McKinsey bosses have poured cold water on allegations their South African employees have played a key role in state capture and corruption. But they had better sit up and take note that public sentiment has swung against them in the global media. In the UK, the media is like a pack of hungry wolves when it gets its teeth into a big story that is gathering momentum. The Financial Times has picked up on Gutpa-linked McKinsey on its front page; others could easily follow. It took a while for UK media outlets to pick up on the Bell Pottinger scandal. In a nutshell, Bell Pottinger worked with the Gupta-Zuma families to incite racial violence and work in the interest of a corrupt clique. Ultimately public pressure forced Bell Pottinger out of business. The global public relations giant with not far off 300 employees around the world was put into administration this week. Consultancy McKinsey may think it is too big to fail. Ditto KPMG, whose staff have also been caught aiding and abetting state capture. Remember, though: It was only six weeks ago that Bell Pottinger CEO James Henderson thought his company was more powerful than the court of public opinion. At the weekend, Henderson was reported as saying he has lost everything as his company collapses. The #McKinseymustfall hashtag is gaining traction on social media channels. – Jackie Cameron

By Thulisizwe Sithole

South Africa’s main opposition party is taking aim at consultancy McKinsey as the scandal surrounding the country’s controversial Gupta business family that destroyed UK PR firm Bell Pottinger continues to spread to international firms, reports the Financial Times.

The publication, which circulates among the influential in business in London and elsewhere, tells its readers that the Democratic Alliance plans to use a parliamentary inquiry into alleged corruption at state-owned companies to seek answers from the management consultancy over work it did with a company tied to the Gupta family.

Zapiro’s archival cartoon on the controversial Gupta Sun City wedding still rings true. More of his magic available at www.zapiro.com.

“We will most certainly be requesting that McKinsey South Africa representatives as well as their US based Representatives be called before the Public Enterprises inquiry into State Capture,” it quoted Natasha Mazzone, the DA’s spokesperson for public enterprises, as saying.

While the term “state capture’’ has become a familiar term in South Africa, it is not a concept used elsewhere. State capture is, in effect, a corruption and patronage-based strategy to gain access to state funds.

The Financial Times explained how the Guptas have been accused of using a friendship with President Jacob Zuma to influence ministerial appointments and public contracts in what has become South Africa’s biggest post apartheid political scandal.

McKinsey employee Vikas Sagar

“McKinsey was drawn into the scandal in July, when it placed a partner in South Africa on a leave of absence. The firm said then that he had ‘inaccurately characterised’ McKinsey’s ties with Trillian Capital, a company owned until this year by Salim Essa, a business associate of the Gupta family.

“The ties were exposed in a leak of emails from the Gupta’s business empire earlier this year. “

BizNews has reported that the GuptaLeaks are authentic.

The Financial Times highlighted the following points:

  • Trillian has been accused of diverting hundreds of millions of rand in ghost contracts from Eskom on behalf of the Guptas, claims it has denied.
  • McKinsey partner Vikas Sagar, wrote to Eskom, South Africa’s power monopoly, last year that McKinsey had subcontracted certain services to Trillian while advising the utility. That communication was uncovered as part of an lawyer’s investigation into Trillian’s alleged ties to state capture which was commissioned by Trillian’s outgoing chairperson, Tokyo Sexwale.
  • McKinsey said on Wednesday that it had worked alongside Trillian from November 2015 to March 2016. But it denied ever using Trillian as a formal subcontractor or supplier. It also said that Eskom paid the two companies separately.
  • The global consultancy said it considered partnering with Trillian as a local supplier but terminated the discussions in March 2016 when Trillian failed its due diligence process by not disclosing who its shareholders were.

McKinsey, like global consultancy KPMG, has tried to create the impression that it is an innocent in the game of state capture – even though evidence to the contrary has been mounting in the public domain. This week, investigative journalists with amaBhungane and Daily Maverick in South Africa have exposed more details of how McKinsey appears to have “got into bed with a partner whose main role was to help secure stunningly lucrative contracts by dint of its political connectivity”

“For McKinsey, a firm with an $8.4-billion (R109-billion) a year reputation, its flirtation with Trillian could end up costing it dearly,” said the reporters.

Corruption Watch is reportedly preparing a submission asking the US Department of Justice for an investigation into McKinsey’s conduct, which on its reading is “in gross contravention of the US Foreign Corrupt Practices Act’”.

The Financial Times said DA wants to use the parliamentary hearing to explore leaked correspondence that purports to show that “McKinsey instructed Eskom to pay Gupta-owned companies, describing them as McKinsey sub-contractors, for work that was not performed”.

McKinsey said it commissioned the law firm Norton Rose Fulbright this year to investigate its work with Trillian. The Financial Times has reported that this investigation did not uncover any irregularities within McKinsey.

Electricity pylons carry high voltage power lines from the Hendrina power station, operated by Eskom Holdings SOC Ltd., in Middelburg, South Africa on April 13, 2016. Photographer: Waldo Swiegers/Bloomberg

“McKinsey said hundreds of thousands of documents and emails have been reviewed, and that the consultancy has not ‘discovered anything that would require us to notify US authorities’ of wrongdoing.

“We hold ourselves to the highest professional standards wherever we work and stand firmly against corruption. We are committed to ascertaining the facts and swiftly taking any and all appropriate action,” the firm said, adding that it has not been ask to participate in the parliamentary hearings. McKinsey has also come under pressure from activists over its work with Trillian.

The Financial Times has also pointed its readers to the Twitter hashtag #McKinseymustfall has also started circulating on social media in South Africa.

“Similar hashtags were used to target KPMG, the accountancy that has come under heavy criticism for its work for the Guptas, and Bell Pottinger.”

The respected business newspaper also highlighted the role of Save South Africa in pushing global corporates to be accountable for their activities in the country.

It said that Save South Africa helped expose Bell Pottinger’s ethical lapses in the country and urged KPMG clients to drop the accountancy this week”

Save South Africa is “extending our protests to all businesses that have facilitated state capture including McKinsey”.

David Lewis, executive director at Corruption Watch, said what McKinsey has done ‘is only just coming to the surface. [Clients] should seriously look at it.

“McKinsey declined to comment on whether clients had sought feedback on McKinsey’s work in South Africa,” added the Financial Times. 

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