McKinsey, Bain and South Africa’s State Capture

Three institutions, several different stories

The label state capture can make a collection of events sound like a single transaction. That is a poor starting point for understanding the consulting cases. Eskom supplies electricity, Transnet operates transport infrastructure and SARS collects revenue. Their mandates, contracts and governance structures differ. The conduct examined in each matter should remain attached to the institution and proceeding that established it.

The McKinsey Africa US agreement provides a defined account of a bribery scheme involving Eskom and Transnet. The Nugent commission examined SARS administration and governance, including Bain’s work. A reader should not be led to believe that the US agreement resolves every allegation across all three institutions or that its findings are a conviction of every firm mentioned in the documentary.

Keeping the strands separate improves the analysis. It allows a public buyer to see whether the weakness involved partner selection, fee incentives, procurement authority, leadership interference or organisational redesign. Different failure mechanisms require different safeguards. A single instruction to improve ethics would leave much of the practical problem untouched.

A local partner needs more than a place on the proposal

Partnership arrangements can have legitimate purposes, including building local capacity and providing skills the lead firm lacks. A due-diligence review should establish that purpose in concrete terms. What will the partner do? Who owns it? Who supervises its work? How is its compensation related to identifiable services?

Those questions become more important where a partner has close relationships with public officials or access to confidential procurement information. The review should examine the actual facts rather than assuming that local knowledge is either harmless or inherently improper. If the firm cannot explain an ownership chain or a material payment, the uncertainty should reach the approving authority before money moves.

This is a proposed procurement checklist, not a substitute for the legal findings. It also has limits: paperwork can be complete while the underlying conduct is improper. The reviewer needs the authority and information to test what happened in practice.

Test a savings fee against the public institution’s mandate

Performance-related fees can align an adviser with a client’s goals, but only if the baseline and the definition of success are credible. An apparent saving can arise from a revised assumption, a deferred expense or a change unrelated to the consulting work. A public body should know who independently verifies the benefit before agreeing to pay a share of it.

The review should also examine the quality of the outcome. An electricity utility has obligations beyond lowering one cost category. A transport operator has service and safety responsibilities. A tax authority must retain the capability to enforce the law. A model that values a narrow saving while ignoring damage to the mandate is incomplete even if its arithmetic is correct.

For a public-sector business case, define the baseline, the attribution method, mandatory service standards and the audit process on the same decision page. Do not ask the institution to approve an incentive structure whose most important terms will be settled later by the supplier.

Organisational redesign can change the ability to resist

The SARS strand raises a particularly important question for consulting practice: what does a restructure do to institutional challenge? An operating model changes reporting lines, responsibilities and access to information. It may also change whether experienced people can investigate a problem or challenge leadership.

A conventional organisation chart cannot show that effect by itself. The review should map decision rights and control activities before and after the change. Who can open an investigation? Who can stop a payment? Which specialist teams can demand evidence? Who can overrule them, and where is that decision recorded?

This is our analytical reading of the governance problem, not a new finding about a particular individual. It is useful because a redesign can appear efficient while reducing an institution’s capacity to perform its core function. The Enron case examines a parallel problem inside a company: a system can reward performance while making challenge harder.

An illustrative mandate-protection review

Imagine a fictional revenue agency considering consolidation of several specialist teams. The proposed chart reduces managerial layers and presents a lower personnel cost. Before accepting it, the agency should identify which functions require operational independence, which case files must remain accessible and which escalation routes must survive the transition.

The implementation plan should then state how ongoing investigations continue, how staff knowledge is retained and how the agency will detect a loss of enforcement capability. A six-month reduction in spending may look favourable while the organisation loses the expertise needed to collect revenue over several years.

The example is not a reconstruction of the SARS programme. It shows how to review a similar decision without treating the number of boxes on an organisation chart as a measure of institutional effectiveness. A strategy presentation should make the mandate test visible before the implementation roadmap.

Repayment, apology and legal resolution answer different questions

A repayment can address the return of fees. An apology communicates a position about past conduct. A deferred prosecution agreement sets out obligations and an enforcement outcome. None should be treated as an interchangeable label for the others.

For a visual account, show the relevant institution, period, currency and legal basis beside each figure. Do not add a rand repayment to a dollar penalty without a defined purpose and conversion date. Avoid implying that several public announcements concern separate amounts if one agreement credits another payment.

The same discipline applies to company responses. A denial made before an investigation should be dated rather than displayed as though no later outcome exists. A later remediation statement should not erase the historical finding. A reader needs both the sequence and the final status supported by the sources used.

A practical brief for an independent public buyer

The strongest client brief defines a public problem, the capability gap, measurable outcomes and the constraints that cannot be traded away. It identifies the public official accountable for the decision and the independent reviewer who will examine the evidence. The adviser should not become the sole source of both the recommendation and its validation.

Deliverables should leave a usable record: source data, assumptions, contracts, versions, decisions and knowledge-transfer materials. The France consulting-spend case explores why authorship and public accountability matter even when buying expertise is legitimate. The Luanda Leaks case follows a related issue through a more complex payment chain.

For consultants, the practical test is whether the work strengthens the institution’s ability to act within its mandate. If a project delivers an attractive operating model while making scrutiny less effective, the review has missed a material part of the outcome.