Eskom has reached a settlement with PricewaterhouseCoopers (PwC) in a High Court case concerning a collapsed cost-cutting consultancy deal that cost the power utility at least R95 million. The settlement follows a lengthy legal battle over a contract known as a “capital scrubbing engagement” that was intended to slash R65 billion from Eskom’s capital expenditure budget.
Eskom has reached a settlement with PricewaterhouseCoopers (PwC) in a High Court case concerning a collapsed cost-cutting consultancy deal that cost the power utility at least R95 million. The case aimed to set aside a cost reduction contract known as a “ capital scrubbing engagement” and recover payments made to PwC and a subcontractor Nkonki, with links to the Gupta family.
Eskom said the disputed contract has been set aside and PwC will pay the power utility a sum of R43 million in a full and final settlement. Eskom described the settlement as a significant milestone in its action plans to enhance governance and accountability. “Management’s commitment in dealing with cases arising from the findings of Zondo Commission has been instrumental in achieving this outcome, and it underscores our dedication to restoring integrity within Eskom,” said Eskom CEO Dan Marokane.The dispute between Eskom and PwC over the capital scrubbing deal came to light in 2020, following an exposé by Daily Maverick. The publication learned that Eskom’s legal department appointed G9 Consulting and Advisory Services to investigate the capital scrubbing contract after whistleblowers and a senior Eskom official raised red flags over the project. The project, which kicked off in early 2017, was touted as a cost-cutting exercise to slash R65 billion from Eskom’s capital expenditure budget in the five years after 2017. Similar to the controversial McKinsey-Trillian contract, the fees PwC’s consultants would earn were reportedly performance-based or “at-risk” and dependent on how much cost-cutting PwC and its subcontractors Aurecon and Nkonki could achieve. Daily Maverick reported that one of the PwC partners involved said the project was really important as they stood to make a “s***load ” of money from it. However, the project collapsed after 18 months and a settlement of R95 million was paid to PwC and its subcontractors. That was after PwC had initially invoiced Eskom R270 million for completing a portion of the project. G9’s report found that PwC tried to claim credit and fees for work that Eskom’s staff had already done. Daily Maverick’s calculations showed that PwC would have earned fees between R1.9 billion and R4.2 billion with an assumed discount rate of 5% to 20% on the targeted R65-billion cost reduction. Eskom labelled the fee structure as “patently unlawful and stupendously egregious” and demanded that PwC pay back the R95 million plus interest before taking the matter to court in 2021
ESKOM Pricewaterhousecoopers Pwc Capital Scrubbing Cost-Cutting High Court Settlement Corruption
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