Multinational Companies Return Money to South Africa after Corruption Probes

What is happening in South Africa lately is so interesting. The results of the so-called “State Capture” investigation have produced some striking findings. South African authorities have investigated how several multinationals contracted with State-owned entities via the Gupta brothers (now exiled in Dubai), who in turn, used their friendships with former President Jacob Zuma to manipulate and control state-owned enterprises for personal gain. 

Multinational companies were, as a result, ordered to repay the State after being found to have entered into contracts with these State-owned entities tainted by graft & corruption. 

Is this a case of repeat corruption offenders?

Let’s take a look at the companies in question.

ABB Ltd.

ABB Ltd. (a Swiss-based power and automation technology company), will repay 1.56 billion rand ($103 million) to South Africa’s power utility company Eskom Holdings SOC Ltd, after the reimbursement was agreed with South Africa’ Special Investigating Unit.

ABB is no stranger to corruption scandals. In 2004, ABB resolved a Foreign Corrupt Practices Act (FCPA) enforcement action with U.S. Authorities concerning conduct in Nigeria, Angola, and Kazakhstan. It paid a $5.9M penalty to the SEC and $10.6M to the DOJ.

In 2004, ABB also disclosed to the Italian authorities that an internal investigation uncovered improper payments to an Italian power generation company employee. It is unclear what became of the Italian investigation.

It then resolved another FCPA enforcement action in 2010 related to misconduct with Mexican government officials and in connection with the Iraq U.N. Oil for Food program. $39.3M was paid to the SEC  and $19M to the DOJ.

In 2017 ABB came again under U.S. & U.K. Authorities’ scrutiny in connection with its past dealings with Unaoil. ABB self-reported allegations of improper payments to third parties between ABB’s subsidiaries and Unaoil. Last May, the UK Serious Fraud Office closed its bribery investigation into ABB after concluding the case “did not meet the relevant test for prosecution.”

But ABB is not the only multinational to return money to the South African State. ABB joins McKinsey & Co. and KPMG LLP, among other international companies that have made money in South Africa from corrupt contracts.


McKinsey issued a Mea Culpa last week and said it would repay 650 million rands to the state logistics company (Transnet) and national airline (SAA) after handing back 1 billion rand to Eskom two years ago.

As a result of its corruption entanglements in South Africa, companies like Coca-Cola, Sasol, and 3 of South Africa’s largest banks cut their ties with McKinsey over its work with Eskom.

With its global influence and impeccable record of advising companies and governments on best practices, how did McKinsey become entangled in such reputational damage?

McKinsey admits errors in judgment while denying any illegality. Its changing corporate culture opened the way for an aggressive push into more government consulting, as well as new methods of compensation. While the changes helped McKinsey nearly double in size over the last decade, they introduced more reputational risk.

McKinsey seemed to be facing a parallel reputational headache in the U.S. last week. The firm issued a rare Mea Culpa acknowledging that its work with Purdue Pharma fell short of its standards and vowed a full internal review of its actions, including the possible destruction of documents. The firm faced criticism after a report revealed that consultants had discussed destroying documents related to the opioid business and proposed that the drugmaker pay its distributors rebates for overdoses. 


KPMG South African unit is another example of firms who lost several major clients and had to overhaul its leadership over work done for the Gupta family.

KPMG South Africa faced additional criticism after a report was released looking into its activities with lender VBS Mutual Bank. There was reportedly “no prospect of saving VBS” and yet KPMG had given it a clean bill of health in 2017, just months before it collapsed in 2018. Upon the bank’s collapse it was discovered that almost R2bn ($137m) had been siphoned out of the bank through corrupt activities at the lender.

In January this year, the SEC suspended a former KPMG leader from appearing or practicing before the SEC after he was convicted of a felony last year, for having illicitly acquired confidential information about when and how KPMG, would be inspected in order improve results. 

A US$50 million fine was also issued to KPMG by the SEC for altering past audit work. The firm was also ordered to hire an independent consultant “to review and assess the firm’s ethics and integrity controls and its compliance with various undertakings,” a press release by the agency stated. 

Alstom S.A.

Also named in the widened probe into contracts with Eskom is French engineering company Alstom S.A. Now here is a company with a long record.

In 2011, a subsidiary of Alstom S.A. was ordered to pay 39 million Swiss francs ($42.7 million) in fines to end investigations by Swiss Authorities.

The investigation centered on payments made by Alstom Network Schweiz AG to middlemen — termed “commercial agents” by the company — in return for securing government contracts to build power stations in 15 countries since the 1990s. The Swiss Authorities concluded that Alstom had failed to take necessary measures to prevent foreign officials’ bribery in three of those countries: Latvia, Tunisia, and Malaysia.

In 2012, the World Bank slapped a hefty $9.5-million fine on Alstom and blacklisted two of its subsidiaries after it admitted to bribing a senior Zambian government official.

In 2015 Alstom was sentenced to a $772m fine in the U.S. for violating the FCPA after investigators found it had paid at least $75m of bribes to secure contracts worth billions of dollars in Egypt, Indonesia, Saudi Arabia, and Taiwan.

In 2019, Alstom Network U.K., a British subsidiary, was ordered to pay a total of £16.4 million (U.S. $20.8 million) for bribes it paid to win a contract to supply trams in Tunisia.

You get the idea…

Other multinational companies being investigated by the South African authorities for their tainted contracts with Eskom include WSP Global Inc.Black & Veatch Corp., and Tenova SpA. The deals were all repeatedly altered, with the value increasing to a multiple of their initial approved cost.

We have yet to observe which other multinationals emerge unscathed from South Africa’s “State Capture” inquiry. But one thing is for sure; President Cyril Ramaphosa came to power with a pledge to crack down on the endemic state corruption that became rampant under former President Jacob Zuma’s 9-year rule, and he is not backing down.

It is estimated that over 500 billion rand were looted from the state, much of it from government firms while Zuma was in power.

Disclaimer: the views expressed on this page are personal. The information provided here does not, and is not intended to, constitute legal advice; instead, all examples, media, content, and materials available on this page are for general informational, and compliance guidance illustrative purposes only. Readers are advised to contact an attorney in the relevant jurisdiction to obtain advice with respect to any particular legal matter or legal development shared here.

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