The report by Fundudzi Forensic Services was compiled for National Treasury and released on Friday morning. It investigated irregularities around the appointment of the companies and the management of the contracts by Transnet.

It implicates McKinsey, Regiments Capital, Trillian Capital Partners along with former Transnet executives including Anoj Singh, Brian Molefe, Siyabonga Gama, Gary Pita and Edward Thomas and others for their respective roles.

McKinsey, like Regiments and Trillian, has repeatedly insisted that its work at South Africa’s state-owned companies were above board.

But, having dissected a total of eight contracts through limited internal records, emails, payments and other correspondence show how Transnet unlawfully coughed up hundreds of millions of rands to the companies through either irregular collusion or the reckless negligence of those involved.

Recommendations include that that the report be furnished to the Hawks for further investigation in terms of the Prevention and Combating of Corrupt Activities Act and that efforts be made to recover irregular payments.

The companies, at different stages dating back to 2012, cashed in on exorbitant fees for the deals that the investigators have billed irregular, unlawful and in some cases, unconstitutional.

Having paid back close to R1-billion following a tainted deal at Eskom, McKinsey faces further claims emanating from its extended tenure as a supplier of choice at Transnet where it made a staggering R1.9-billion over the years.

Not all McKinsey’s deals were examined in this round of the investigation. The focus of this investigation covered several deals between McKinsey and Transnet and their partners at times, Regiments and Trillian.

“We determined that Transnet paid a total of about R3.26-billion to McKinsey, Trillian and Regiments.

“The said payments were made from the time McKinsey was appointed at Transnet in 2005 to 2017,” the Fundudzi report said.

Trillian, a fledgling financial advisory firm set up in 2016, received R115-million out of Transnet while Regiments scored just more than R1-billion since it first ventured into Transnet, according to the report.

The findings and recommendations show that McKinsey was either cherry picked for the deals highlighted in the report when the company was contracted on “confinement” — essentially appointed without tender.

Transnet presented the same reasons over and over for confining these big deals to McKinsey — and in some cases, McKinsey and Regiments started work before procurement processes were concluded.

Wrongdoing highlighted in the report includes the controversial 1064 locomotive that saw Gupta front companies like Homix and Albatime rake in a cut via Regiments and later, Trillian, as well as an R18-billion club loan facilitated for Transnet.

Since the State Capture scandal erupted, McKinsey maintains it was unaware of the Gupta links to Regiments or Trillian.

In 2017 the company told Parliament that it had declined to work with Trillian when the company failed its due diligence.

But, for several years before then, it had worked with Regiments Capital at Transnet and in at least one instance it appears that McKinsey was aware of the identities of Regiment’s own supplier development partners – Albatime and the letterbox company, Homix, exposed in various amaBhungane investigations as a beneficiary of kickbacks from deals involving state-owned companies.

In its response, McKinsey told the Fundudzi investigators:

“Specifically, the proposals indicate (in language drafted by Regiments) that Regiments ‘will sub-contract consultants and services from Homix and Albatime, and provide them with skills development opportunities’.”

It only realised later on, the purported ownership of Homix and Alabatime from press reports and of their alleged ties to State Capture so there would have been no red flags back in 2014 when it first encountered the two companies.

“The fact that Regiments would subcontract some of its consulting work under these contracts would not have been cause for suspicion or concern,” states the report.

“McKinsey and Regiments were paid separately by Transnet on these projects. McKinsey had limited visibility into how Regiments used funds — it was paid directly by Transnet to pay its subcontractors and other entities.”

And, McKinsey told investigators that the two companies were not a part of an initial due diligence performed on Regiments in 2012, because they were not listed as as subcontractors then.

McKinsey is also exposed in the report for seemingly having prepared pointers for then Transnet CFO Anoj Singh in order for him to convince former CEO Brian Molefe to approve the company’s appointment.

As a result, the report states, McKinsey and Singh compromised the integrity of the procurement process by sharing pointers of a procurement to be initiated.

The forensic reports states that McKinsey and Regiments both scored millions of rands in out-of-pocket expenses claims from Transnet, in most of those cases, submitted without supporting documents. The forensic report recommends recovery thereof. In one case the two firms submitted invoices with one of them looking like a “cut and paste” job.

In the locomotive deal, the report states, McKinsey didn’t bother to question why its original B-BBEE partner, Letsema, was replaced by Regiments as a member of its consortium in the deal.

“The removal of Letsema from the McKinsey-led consortium compromised the integrity of the procurement process, resulting in the contravention of section 217 of the Constitution of the Republic of South Africa,” says the report.

And, McKinsey, the report states, signed a letter of intent without questioning the changes to the consortium, raising suspicion that Singh and McKinsey had discussed the matter beforehand. DM