McKinsey to Pay $122 Million in South Africa Bribery Scandal
Consulting giant McKinsey & Company has agreed to pay $122 million to US and South African authorities to settle a sprawling corruption case involving bribery and securing lucrative consulting contracts with state-owned enterprises during the administration of former President Jacob Zuma.
A Scheme Years in the Making
According to a deferred prosecution agreement announced by the US Justice Department and a statement from South Africa’s National Prosecuting Authority, McKinsey funneled bribes between 2012 and 2016 to officials at Transnet, South Africa’s rail freight monopoly, and Eskom, the state-owned energy company.
“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 $85 million in profits,” said Damian Williams, U.S. Attorney for the Southern District of New York.
The scheme involved allowing local partner firms to funnel money to officials at the two state-owned companies, providing McKinsey with crucial information to help secure contracts.
McKinsey received leniency from US prosecutors for cooperating with the investigation.
Former Partner Pleads Guilty
One of McKinsey’s former senior partners in Johannesburg, Vikas Sagar, pleaded guilty in a New York court in 2022 to participating in a conspiracy to violate the US Foreign Corrupt Practices Act. His plea had been kept under seal while the investigation continued.
“McKinsey 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 in a statement.
Seemingly rebuilding trust is on Plaintiffs’ agenda. “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 $122 million will be split equally between US authorities and South Africa’s criminal assets recovery account, which funds law enforcement efforts.
Uncovering “State Capture”
The settlement echoes years of investigations by South African prosecutors into the systematic pilfering of public contracts during Zuma’s presidency, a phenomenon known locally as “state capture.”
Two years ago, an official commission of inquiry concluded that the Gupta brothers, a powerful business dynasty, had used their influence with Zuma to orchestrate a “racketeering enterprise” at Transnet. They secured contracts that favored their interests or those of their associates. The Guptas and Zuma have denied any wrongdoing.
What are the potential long-term consequences for McKinsey’s reputation and business relationships after this settlement?
## Interview: McKinsey Agrees to Pay Millions in South African Bribery Settlement
**Host:** Joining us now is Alex Reed, an expert on corporate governance and corruption, to discuss the recent news of McKinsey & Company agreeing to pay $122 million to settle a bribery case in South Africa. Alex Reed, can you give us a brief overview of what happened?
**Alex Reed:** Certainly. McKinsey & Company, a global consulting giant, has admitted to engaging in a bribery scheme in South Africa between 2012 and 2016 during the tenure of former President Jacob Zuma. They funneled bribes to officials at Transnet, the state-owned rail company, and Eskom, the state-owned energy company, in order to secure lucrative consulting contracts. According to the US Justice Department, this scheme netted McKinsey and its parent company approximately $85 million in profits. [[1](https://www.reuters.com/world/africa/mckinsey-africa-pay-122-million-south-africa-bribery-scheme-us-justice-dept-says-2024-12-05/)]
**Host:** This is a serious accusation. What does this settlement mean for McKinsey?
**Alex Reed:** This settlement is a significant blow to McKinsey’s reputation. It demonstrates a blatant disregard for ethical conduct and the rule of law. While the $122 million payment addresses the financial aspect of their wrongdoing, the damage to their reputation and the trust placed in them by governments and businesses worldwide will be difficult to repair.
**Host:** What are the broader implications of this case for multinational corporations operating in countries with weak governance structures?
**Alex Reed:** This case serves as a stark reminder that multinational corporations must be held accountable for their actions, regardless of where they operate. It highlights the risks of doing business in environments with weak regulatory oversight and emphasizes the need for robust anti-bribery policies and ethical corporate culture.
**Host:** Thank you for sharing your insights, Alex Reed. This is a developing story and we will continue to follow it.
