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Scandalous SAA consulting contract inflates McKinsey controversy

Published September 21, 2023
9 months ago

In a new revelation underscoring the depth of scandal facing global consulting firm McKinsey, our investigative team has discovered a suspicious 2014 consulting contract with South Africa Airways (SAA). This contract, inked partially with the controversial advisory firm Regiments Capital, saw these players sharing R12.5-million. This rising tide in McKinsey's sea of controversy further shakes the company's reputation.

In July, Kevin Sneader, the global head of McKinsey issued a public apology for extracting close to R1-billion in fees from the electrical supply company Eskom, through an at-risk consulting contract. This omission left the SAA issue hidden until now.

Our investigation revealed that SAA released a tender in 2013 seeking consultation on working capital. Evidence seemed to indicate that Regiments Capital, assisted by SAA’s then treasurer, Phetolo Ramosebudi, had access to a constant supply of confidential information, including details from rival bidders KPMG and Boston Consulting Group. Come January 2014, SAA awarded the contract to McKinsey and Regiments partnering in a bid.

Despite procuring fees side by side at Transnet, the SAA gig was a venture into new frontiers for McKinsey and Regiments. The South African airline needed to address crippling funding shortfalls, and the consulting contract presented a costly solution.

Even though intended projects, meant to elicit savings for SAA, fell through, the contract allowed McKinsey and Regiments to collect 80% of their fees based on hypothetical savings, elevating financial gain above fiscal responsibility. The discrepancy in delivery versus payout ignited a dispute, after which SAA paid a renegotiated fee of R12.5 million.

The extent to which McKinsey and Regiments will go to claim further fees remains unknown. What our investigation makes unequivocally clear, however, is that SAA maintained its refusal to pay any additional fees on the contract, drawing a reluctant curtain over a sordid chapter of potential corruptions.

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