Standard Bank and Barclays Africa drop McKinsey following scandal

01 November 2017 3 min. read

In the latest chapter of the ongoing Gupta family saga in South Africa, both Barclays Africa (Absa) and Standard Bank have declared that they will no longer associate with McKinsey & Company, terminating their current contracts and refusing future renewals.

In recent months, the US-based management consulting firm McKinsey & Company has become mired in a scandal regarding its practice in South Africa. Earlier in 2017, the firm was accused of working in collaboration with local consultancy Trillian, a politically connected firm controlled by the Gupta family, to extract a fee of up to R1.6 billion from local electricity supply firm Eskom. The Gupta brothers – who are associated closely with South African President Jacob Zuma, previously employing his son, Duduzane – have continuously faced allegations from members of the ruling African National Congress (ANC) of being “tenderpreneurs” (businessmen who have close ties with government and ANC to win contracts), and their firm is now being investigated over allegations of corruption. They, and Zuma, have denied any wrongdoing.

The deal for Eskom allegedly violated a number of laws, regulations and codes of conduct. Having become involved in the controversy, McKinsey has since admitted that, despite the absence of intention, it was in violation of professional standards, while continuing to deny charges of corruption and bribery. Since the incident, not only has the firm been publicly condemned by civil society organisations such as Save South Africa and Future SA, but has also begun to lose its clientele in the region.

The latest blow to the firm comes in the form of a refusal on the part of two major South African banks, Absa and Standard Bank, to renew their contracts with McKinsey. The banks confirmed the termination of the association in an email communication with the media.

Standard Bank and Barclays Africa drop McKinsey following scandal

While the exact nature of those relationships has been kept private, the firm has held close links to both banks over the years. Standard bank relies on McKinsey, among others, for consulting services, including advice on the digital transformation to agile technology that the bank has undergone over the last year. Barclays’ South Africa arm, Absa, also relies on the firm for consulting services, primarily in the financial advisory field.

Comments on the severance of ties were short and opaque. Ross Linstrom, the spokesperson for Standard Bank said that the group had, “elected to terminate McKinsey and Company’s services and has notified it accordingly.” Meanwhile Absa’s email stated, “Barclays Africa Group has taken a decision to not contract any new work with McKinsey and is going through a process of winding down existing work.”

McKinsey & Company, on the other hand, refused a comment on the matter altogether, stating, "It is our longstanding policy not to comment on individual companies or discuss our clients.”

Speaking of the scandal in recent months, the firm’s Global Managing Partner, Dominic Barton, had previously said, “We are sorry for the distress this matter has caused the people of South Africa. We are taking a hard look at all of our practices in the country.”

Alongside McKinsey, Big Four professional services firm KPMG has also been linked with the scandal, and is currently under investigation. Both Absa and Standard Bank also have partnerships with KPMG, and are presently reviewing their alliance with the firm.

Related: Sanlam acquires employee benefits consultancy arm of Absa.