McKinsey charged over function in South Africa’s ‘state seize’ scandal

McKinsey has been criminally charged in South Africa over its function within the nation’s largest post-apartheid corruption scandal, because the fallout continues for international consultancies that had been embroiled within the saga.

McKinsey mentioned South Africa’s nationwide prosecuting authority had on Friday indicted the agency on unspecified expenses, in a case referring to the alleged looting of state freight rail monopoly Transnet in the course of the presidency of Jacob Zuma.

Prosecutors added the agency and Vikas Sagar, a former McKinsey companion in South Africa, to one of many highest-profile instances to have been introduced over the alleged systematic pilfering of public contracts, recognized regionally as “state seize,” earlier than Zuma’s exit from energy in 2018.

Former Transnet executives have been charged with fraud and breaking a public finance regulation referring to a $3bn tender to obtain freight locomotives in 2012.

This yr, an official fee of inquiry concluded that the Gupta enterprise dynasty had used affect with Zuma to function a “racketeering enterprise” at Transnet by receiving contracts that favoured their pursuits or these of associates. The Guptas and Zuma deny any wrongdoing.

The inquiry mentioned McKinsey had been wrongly employed by Transnet to work on the practice procurement alongside a Gupta affiliate, and that Transnet “irregularly made” funds to the agency. McKinsey co-operated with the fee.

The prosecuting authority didn’t reply to a request for touch upon the costs towards McKinsey. Sagar couldn’t be reached for remark. The previous Transnet executives have denied wrongdoing.

The costs have blindsided McKinsey, which repaid thousands and thousands of {dollars} in charges on the Transnet contract and different work tainted by allegations of state seize at Eskom, the state energy monopoly, as a part of amends to South Africa.

“We stay deeply remorseful that our agency has in any means been related to the darkish period of state seize. We publicly apologised and selected to take accountable motion the place we made errors,” mentioned McKinsey.

“Given no new data has been introduced for the reason that fee, we imagine pursuing McKinsey doesn’t have advantage and we’ll defend ourselves towards any claims,” it added.

It added that the place it had discovered problems with concern concerning a person’s conduct it had reported them to the suitable regulation enforcement authorities.

South Africa this week barred Bain for 10 years from public sector contracts in Africa’s most industrial financial system, for what the nation’s Nationwide Treasury alleged was “corrupt and fraudulent” behaviour involving the nation’s income service.

This yr’s state seize inquiry mentioned Bain had helped undermine the income service via advisory work that aided Zuma’s allies in taking on the company after which orchestrating a purge of expert personnel.

“We disagree with the ban and are contemplating our choices in response,” mentioned Bain. The agency has denied involvement in state seize.

Bain is in the meantime launching authorized motion to overturn a three-year ban on tendering for UK authorities contracts that was imposed over “grave skilled misconduct” within the South African scandal.

Further reporting by Kate Beioley