Nedbank Reviewing McKinsey's Services Amid Governance Concerns

(Bloomberg) -- Nedbank Group Ltd., the South African lender controlled by Old Mutual Plc, said it's talking with U.S.-based consultancy McKinsey & Co. about allegations leveled against the firm regarding its involvement in disputed government contracts.

“We have been engaging with McKinsey within our formal governance processes, which need to be followed when accusations are leveled against service providers,” the Johannesburg-based bank said in an emailed response to questions on Wednesday. Nedbank uses McKinsey's services for consulting work and will wait for the results of the U.S. company's investigations before making a decision on whether or not to terminate the firm's services, the bank said.

Steve John, a London-based partner at McKinsey and its global director of communications, declined to comment on Wednesday.

McKinsey was contracted by state-owned power utility Eskom Holdings SOC Ltd. to carry out consulting work. An interim report by Eskom and G9 Forensic this year found McKinsey and Trillian, a company linked to the politically connected Gupta family, made 1.6 billion rand ($118 million) in fees from Eskom, according to the power company. The Guptas are accused of using their friendship with President Jacob Zuma to influence government contracts and cabinet appointments. Zuma and the Guptas deny wrongdoing. 

Companies Ensnared

The U.S. firm has said it didn't engage in corruption or pay bribes and that the fees it made from Eskom were in line with similar projects. McKinsey said in July that it's reviewing thousands of documents related to work done for Eskom. The controversies around the Gupta family have also spread to companies including auditors KPMG LLP and public relations firm Bell Pottinger LLP. 

Bell Pottinger collapsed last month, after it was found to have stoked racial tensions in South Africa on behalf of the Guptas, and so far four companies in South Africa have said they have stopped using KPMG. To start making amends the auditing firm has apologized, eight senior executives have quit and it's undergoing an independent investigation into its work for the Gupta family.

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net.

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, John Bowker