Eskom paid R1.6bn to 'clueless' consultants to help it weather its financial storm
Consultants from Regiments Capital and McKinsey knew nothing about most of the work that Eskom paid R1.6bn for and had to be schooled on elementary concepts by the power utility employees.
This was the testimony given by Mosilo Mothepu, a former Trillian Capital and Regiments Capital employee, before the Zondo commission into state capture on Thursday. Mothepu led the team of consultants that were assigned to help Eskom weather its financial storm in 2016.
Mothepu told the commission she had left Regiments Capital for greener pastures but was approached by the company’s then CEO Eric Wood in 2015 to return because of a lucrative contract that was on the cards. A tempting offer of a better pay and bonus lured her back.
Regiments Capital was a financial service company providing consultancy services in property, fund management, advisory and securities.
When she returned to the Regiments Capital the company had increased its workforce from 50 to 250.
Mothepu said McKinsey, another consultancy firm, was the main contractor and Regiments Capital was a subcontractor and their shared fees and benefits between them.
She said her team started having meetings with former Eskom CFO Anoj Singh in July 2015 before he officially started his work at the power utility.
Tagged “Project Panjora”, the consultants had to come up with solutions for cost savings initiatives on procurement, generation, establishing the engineers top programme and initiatives that would optimise the company’s balance sheet. They also had to deal with insurance issues on boilers, something none of them had an idea about.
Eskom provided the consultants with a team of junior technocrats who were equally clueless.
“Eskom was capable of all of these initiatives on their own… I told Eric that I don’t know anything about a boiler and insurance but we were shoved down the throat of the Eskom officials. Of course there was a lot of resistance. In my observation, part of state capture is just appointing consultancies unnecessarily and siphoning off very large fees. While the internal team has the capacity to perform them," Mothepu told the commission.
“Eskom had an insurance division. It was headed by somebody who was an expert on insurance. My team and I knew nothing about insurance…We came in as Regiments and McKinsey and eventually Trillian [Capital] in the middle of the implementation of these transactions… A total of R1.6bn was paid, which was completely unnecessary because Eskom had and still have the capacity,” Mothepu said.
She added that the only expertise that the consultants had was negotiating short and long-term loan facilities.
“Our heads were under the water… We were asking very elementary questions because we were completely clueless,” she said.
Mothepu told the commission that Singh brought the consultants ahead of his official announcement.
“He wanted those low-hanging fruits so that when he was finally appointed he shines in the first 100 days and say this is what I have accomplished in a short period of time.”
Mothepu said the consulting companies were working while Singh was still expected to take the actual contract to the Eskom board and National Treasury for approval. Work, however, began before these approvals, she said.
She said some of the consultants were given access cards to Eskom offices and a boardroom was availed for them to use.
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