Global consulting giant McKinsey & Company has agreed to pay $122 million to U.S. and South African authorities to resolve its role in a high-profile corruption scandal during the presidency of former South African leader Jacob Zuma. The settlement underscores ongoing efforts to address corporate complicity in public sector corruption in Africa’s most industrialised economy.
Key Details of the Scandal
McKinsey Africa, the company’s subsidiary, was implicated in a bribery scheme that spanned from 2012 to 2016. The firm collaborated with local partners to funnel illicit payments to officials at Transnet, South Africa’s rail freight monopoly, and Eskom, the state-owned power utility. These bribes secured McKinsey lucrative consulting contracts, generating approximately $85 million in profits.
The U.S. Department of Justice (DOJ) stated that McKinsey Africa’s actions violated the Foreign Corrupt Practices Act (FCPA), a U.S. law prohibiting bribery of foreign officials. The case also highlighted systemic governance failures within South Africa’s state-owned enterprises during the Zuma era.
Deferred Prosecution Agreement
Under a three-year deferred prosecution agreement with the DOJ, McKinsey Africa accepted responsibility for the allegations. The agreement includes extensive cooperation with ongoing investigations and enhancements to the company’s compliance and risk management systems.
Guilty Plea by Former Partner
Vikas Sagar, a former senior partner at McKinsey Africa, pleaded guilty in 2022 to conspiring to violate the FCPA. The plea was unsealed this week, with prosecutors confirming that Sagar actively concealed his illicit activities from the firm and later attempted to cover up his actions. McKinsey terminated Sagar’s employment in 2016 following internal investigations.
Impact on South Africa
The corruption at Eskom and Transnet exacerbated inefficiencies that have constrained South Africa’s economic growth for over a decade. Eskom, in particular, suffered financial instability and operational setbacks during the period, as it struggled to implement a “turnaround plan” that McKinsey had been hired to assist.
South African prosecutors have aggressively pursued cases of “state capture,” a term describing the extensive looting of public resources during Zuma’s presidency. The McKinsey settlement follows earlier investigations into the Gupta family, alleged architects of state capture, and their ties to Zuma. Both parties deny wrongdoing.
Statements from Stakeholders
- U.S. DOJ: Nicole M. Argentieri, head of the DOJ’s Criminal Division, described McKinsey Africa’s actions as a “serious and long-running bribery scheme” that violated public trust.
- McKinsey Africa: In a statement, the firm emphasised its commitment to ethical conduct. “We fired Mr. Sagar soon after learning of these issues, returned our fees with interest, and implemented extensive compliance upgrades,” the statement read.
- South Africa’s National Prosecuting Authority: The agency praised the settlement as a step forward in recovering funds lost to corruption and holding global firms accountable.
Split Settlement
The $122 million will be equally divided between U.S. authorities and South Africa’s Criminal Assets Recovery Account, which funds law enforcement initiatives.
A Broader Reckoning
McKinsey is also in discussions to resolve another investigation into its work with opioid manufacturers accused of contributing to the U.S. addiction epidemic. Reports suggest the settlement in that case could exceed $600 million.
What’s Next for South Africa?
The settlement highlights the importance of robust governance and corporate accountability in Africa’s public and private sectors. As South Africa seeks to rebuild public trust, authorities continue to pursue restitution for the systemic corruption that plagued its state institutions during the Zuma administration.
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