A former senior Eskom executive on Monday 21 June defended making further payments to McKinsey and Trillian despite a decision to terminate a risk-based arrangement with the former, after it became clear that it would not withstand scrutiny from the national treasury.
He said this was firstly because McKinsey and Trillian were demanding payment for work performed on a turnaround plan for the power utility, and secondly because value would be lost if they withdrew abruptly. Hence both work and payments continued.
“We were deciding how best to bring this process to a conclusion, and part of that process was […] key things we had to take care of. One was the fact that there was work ongoing extensively across many parts of the organisation and how best to bring that to a close,” Govender said.
“The post-August agreement was they would remain on the ground so the actual work could be transitioned to another party … you need to transition it to a new delivery vehicle, either in the form of another contract or give it back to the Eskom people to carry on.”
But evidence leader Pule Seleka referred to minutes of a 15 July meeting from the Eskom steering committee that resolved that all activities in relation to the agreement with McKinsey should cease immediately, five months after it began.
In addition, he said, company emails showed that Govender had legal advice that since McKinsey had no contract with Trillian, there was no need for Eskom to pay the Gupta-linked firm.
Eskom paid McKinsey and Trillion R1.6-billion. According to earlier testimony to the commission, payments continued into February the next year, with R176-million paid to Trillian and R348-million to McKinsey.
Govender said the minutes pertained to the next stages of the relationship, not those already underway.
“What we talked about here was that wave two needs to be frozen but the actual activities that were ongoing, could not, you know, just all of a sudden, you know, drop everything,” he said.
“The guys were busy doing something at some mine, they could not just drop it and leave, there had to be a logical transition process undertaken.”
Seleka noted that chief procurement officer Edwin Mabelane signed a termination letter on 16 June 2016 which was approved by the board five days later.
In his affidavit to the commission, Mabelane said when he signed the termination letter, he had the assurance from both Govender and Eskom chief financial officer Anoj Singh that the board had given the green light to terminate the arrangement.
“I don’t understand why Mr Mabelane would say that … he was the chief procurement officer on the board tender committee so why did he say he got the confirmation from myself and Mr Singh?” Govender demurred.
“I actually don’t recall being at the board when this thing was terminated.”
Seleka said beyond this point, payments to Trillian ensued, though the steering committee knew at the end of March that McKinsey did not plan on retaining the company as an empowerment partner.
“The question is why did Eskom make payments directly to Trillian when Trillian did not have a contract with McKinsey?”
Govender confirmed a letter to this effect but said the situation was confusing.
“So what they wrote in that letter didn’t fully explain how McKinsey behaved thereafter because the teams in Trillian and McKinsey still continued to work with each other and they continued in my recollection right up until that August steering committee.”
He said based on this, the steering committee decided that both companies needed to be remunerated.
“But why did you allow that when you knew that there is no contract between the two?” Seleka insisted, adding company emails showed Govender had sight of legal advice that Eskom need not pay Trillion at all.
“You could have gotten rid of Trillian and been liable only to pay McKinsey much earlier on.”
Seleka also asked why the steering committee persisted with an arrangement with Trillian for five months when former Eskom executive Matshela Koko told the commission in February 2016 already that the contract needed prior approval.
“Mr Koko said the writing was on the wall in Feb 2016, that national treasury approval was necessary,” he said.
“So what follows thereafter, it is a purported conclusion of the contract. The parties act as if they are concluding the agreement when the agreement is in fact a nullity because of the lack of prior approval.”
Govender said he was not sure he followed.
“I am cautious to say I understand because I am thinking now what does purported mean.”
Govender resigned from Eskom a day after Singh in 2018.
McKinsey agreed in 2018 to repay Eskom R902-million. It secured a high court order to compel Trillian to refund R600-million but has been forced to apply for the company’s liquidation to secure the money.