McKinsey pays $122mn to resolve probes into South Africa bribes

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McKinsey has agreed to pay $122mn to authorities in the US and South Africa over its role in a sprawling corruption scandal during the administration of former South African president Jacob Zuma.

The consulting group paid bribes to win millions of dollars of consulting work with South African state-owned companies between 2012 and 2016, according to a deferred prosecution agreement announced by the US justice department on Thursday and a statement by South Africa’s National Prosecuting Authority.

One of McKinsey’s former senior partners in Johannesburg, Vikas Sagar, has also pleaded guilty to participating in a conspiracy to violate the US Foreign Corrupt Practices Act, US prosecutors said on Thursday. The plea was entered in a New York court in 2022 but had been kept under seal while the investigation continued.

“McKinsey Africa participated in a yearslong scheme to bribe government officials in South Africa and unlawfully obtained a series of highly lucrative consulting engagements that netted McKinsey Africa and its parent entity McKinsey & Company approximately $85mn in profits,” said Damian Williams, the US attorney for the Southern District of New York.

McKinsey and Sagar bribed officials at Transnet, South Africa’s rail freight monopoly, and the energy company Eskom for information that helped win consulting work, US prosecutors said, by knowingly allowing local partner firms to funnel money to officials at the two state-owned companies.

The firm received leniency from US prosecutors in part because it had co-operated with the investigation, the justice department said.

In a statement, McKinsey said it conducted an extensive probe of its own into “the corrupt conduct of a former partner, Vikas Sagar, who concealed his unlawful conduct from the company and his colleagues and then sought to cover up his conduct. McKinsey terminated his employment more than seven years ago.”

The firm said it was pleased to resolve the investigations and that it was committed to “regaining the trust” of the people of South Africa. The $122mn will be split 50-50 between the US authorities and South Africa’s criminal assets recovery account, which funds law enforcement efforts.

South African prosecutors have spent years investigating the systematic pilfering of public contracts, known locally as “state capture”, during the Zuma presidency, which ended in 2018.

Two years ago, an official commission of inquiry concluded that the business dynasty of the Gupta brothers had used influence with Zuma to operate a “racketeering enterprise” at Transnet by receiving contracts that favoured their interests or those of associates. The Guptas and Zuma denied any wrongdoing.

Additional reporting by Rob Rose in Johannesburg