(Bloomberg) -- South Africa is ready to start a probe into contracts of Eskom Holdings SOC Ltd., which provided false information about dealings with Trillian Capital Partners Ltd. and McKinsey & Co., the minister overseeing the state-owned power utility told lawmakers.
“I view Eskom's lying about its relationship with McKinsey and Trillian as an assault on our democracy,” Public Enterprises Minister Lynne Brown said in Cape Town on Wednesday. “If the truth had been told first, then the investigation into the contracts could have been far advanced at this stage.”
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Eskom is at the center of allegations that the politically connected Gupta family used their relationship with President Jacob Zuma to win lucrative contracts from state companies. The Guptas and Zuma have denied any wrongdoing. Trillian, a financial services firm, is linked to the Gupta family through business associate Salim Essa, who was its principal shareholder until he sold out in July.
While Eskom previously denied having done business with Trillian, the utility said in July it would commission an independent investigation into work done by the company and disclosed 495 million rand ($36 million) of payments made to it. Trillian was the so-called supply development partner of McKinsey in an agreement it had to provide services to Eskom. That relationship ended in March 2016.
Wrong Information
“We do acknowledge that the minister has previously been given wrong information and Eskom is currently in the process of dealing with the individuals who have given wrong information to the minister and the board,” Khulu Phasiwe, Eskom's spokesman, said by phone.
Trillian will cooperate with any investigation related to its work under the supplier development partnership with McKinsey, the company said in an emailed statement Wednesday. It wasn't involved in the commercial negotiations between Eskom and McKinsey and only invoiced for work authorized and completed “to the client's satisfaction,” the company said.
“Trillian was allocated a portion of the work as McKinsey's SD partner for these projects,” it said. “McKinsey had the large portion and Trillian was offered no more work than the percentage earmarked by McKinsey for which Trillian billed accordingly.”
McKinsey, which said in July it was reviewing documents related to work done for Eskom, 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.
Steve John, a London-based partner at McKinsey and its global director of communications, said Wednesday that the consulting firm had nothing to add to its prior statements.
Bloomberg reported this week that letters written in March 2016 by McKinsey to Trillian and Eskom executives show the U.S. consulting firm was concerned about the reputation risk of working with Trillian as a project development partner. Trillian “is not aware of any basis for McKinsey raising concerns with Eskom after the commencement of the joint work for Eskom, or at all,” the company said in response.
The state's Special Investigating Unit is waiting for approval from Zuma to begin its probe of Eskom, said Brown. The minister also plans to arrange a special general meeting in November to appoint a new permanent board for Eskom, she said.
To contact the reporters on this story: Paul Vecchiatto in Cape Town at pvecchiatto@bloomberg.net, Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net.
To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net, Liezel Hill, Andre Janse van Vuuren
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