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Dr. Iraj Abedian. Photo: Elvira Wood
Dr. Iraj Abedian. Photo: Elvira Wood
- Economist Dr. Iraj Abedian has proposed that companies that were caught or helped allow state capture pay “reparations” for economic damage to South Africa.
- Abedian says that the practice of “voluntary” companies to return money without additional supervision is cause for concern, and their contracts should be inspected by an independent panel.
- US consultancy McKinsey announced this week that it would reimburse the R650 million in fees it obtained from Transnet and SAA for working together with the Gupta-linked firm Regiments, and said it had decided to reimburse contracts that may have been “even indirectly” related to state capture. .
Companies that may have allowed the state capture should not only reimburse the fees they earned from the suspicious contracts plus interest, but they should also have to pay “reparations” for the damage they caused to SA’s economy, according to economist Dr. Iraj Abedian, founder and founder. Executive Director of Pan-African Investment and Research Services.
Abedian, a former professor of economics at the University of Cape Town and a former chief economist at the Standard Bank group, says that private sector groups that became entangled in the state capture project get away too easily when they volunteer to pay. The fees.
For Abedian, the knock-on effects of state capture must be taken into account, including credit rating downgrades, bankrupt state entities, a weaker rand and more.
And Abedian has a proposal to better calculate true cumulative damage. An independent panel of experts should evaluate the primary documentation to determine not only what should be reimbursed from shady contracts and tenders, including interest, of course, but also the question of whether more extensive “fixes” are needed.
On Wednesday, the US-based global consulting firm McKinsey announced that it had voluntarily decided to repay “all of the fees” it earned for work it did for Transnet and SAA involving the Gupta-linked company Regiments Capital. According to McKinsey, this will likely reach around R650 million, although Transnet has said the actual amount is higher.
The announcement comes nearly three years after McKinsey said it would return the consulting fees it earned by formulating on the restructuring plan for Eskom, where it worked alongside another Gupta-related company, Trillian. Both companies have ties to Salim Essa, a close business partner of Gupta.
At the time, McKinsey denied wrongdoing, saying an internal investigation had found that it “has never made payments directly or indirectly to secure contracts, nor have we helped others to do so.”
Several other companies have offered to pay or have already paid the fees for suspicious contacts or to work with state companies, including ABB South Africa, KPMG, Bain and Deloitte.
Tainted contracts
McKinsey Chief Risk Officer Jean-Christophe Mieszala said in a statement this week that the group “did not wish to benefit from potentially contaminated contracts” related to work carried out in conjunction with the Regiments for SAA and Transnet.
And while McKinsey defends the “value of our work” at Transnet and SAA, he said he had decided “to return fees for projects that, even indirectly, may have been related to state capture.”
“That is not something our firm is willing to accept,” he said.
The reason for his decision to return the 650 million rand in fees now, which would bring the total that he has voluntarily returned without granting any wrongdoing to 1.65 billion rand, was that the judicial commission had shown him “documents and information about the regiments “. state capture investigation, which was previously “unavailable for our review.”
The commission, led by Supreme Court Vice President Raymond Zondo, has been investigating allegations of state capture, corruption and fraud in state entities since August 2018.
In a statement this week, he praised McKinsey for agreeing to return the money, saying he behaved like a “responsible corporate citizen” and called on other companies to “help fight corruption.”
But for Abedian, the practice of volunteering to pay fees for irregular contracts without further action or supervision is cause for concern.
In 2017, he said, when McKinsey first volunteered to pay his Eskom consulting fees, state agencies should have pushed to find out more fully what happened.
“Where did the billion come from? Who decided? What was the excess of overflow, plunder, extraction, terminology you chose?
“They decided quite literally that it was a billion rand.”
“Since they’ve been playing around with this arrogant term, where ‘we will decide what we will offer to pay.’
‘Rapists, thieves’
“You can’t if you break into my house and steal my laptop … you can’t tell me later what you have stolen, I must tell you what you have stolen,” he said. This, according to Abedian, should be evaluated by an independent panel.
“You cannot tell me what damage you have caused. An advisor, [an] Independent must come and tell to steal laptop that broke the front door, caused trauma, loss of income – someone independently assesses what those who you violently stole owe [pay].
“Repairs are never evaluated and valued by the violators, by the thieves.”
When approached to comment on Abedian’s argument that McKinsey had assumed the roles of both offender and adviser, a McKinsey spokesperson referred to an earlier statement and testimony from McKinsey executives before the judicial commission of inquiry into the capture. of the state.
In the statement, McKinsey notes that its decisions to reimburse Eskom in 2017 and SAA and Transnet this year were voluntary. And in its interactions with the Zondo commission since 2018, the commission has “confirmed that there is no information implicating any current McKinsey personnel in any corruption or dishonor.”
In a separate statement to the commission by Mieszala, the chief risk officer again stresses that the new information the commission showed him shows no evidence of wrongdoing.
“While this information does not demonstrate that McKinsey was involved in corrupt activity, it does corroborate previous allegations that the regiments engaged in a pattern of misconduct.”
