Consultants and audit firms – led by global giants like Boston Consulting Group (BCG), Deloitte and PwC – have pocketed more than R300m of the grants provided to South Africa for its just energy transition (JET), and are set to pocket millions more.
This emerges from a 104-page report released last week by Open Secrets, exposing how management consultants are profiting from the climate crisis, and an analysis of the grants register maintained by South Africa’s government of how this money is being spent.
While much of the work involves helping municipalities in Mpumalanga’s coal belt reduce their reliance on the fossil fuel, the secrecy around these projects, and the consultants’ conflicts of interest, shines a light on whether this money is being spent properly.
Zen Mathe, the lead author of the Open Secrets report, says the magnitude of the consulting fees paid is alarming.
“Insiders from these consulting companies who spoke to us confidentially even admitted they found these fees to be high,” she tells Currency. “This was surprising, since we weren’t necessarily looking for wrongdoing with consultants when we started out; we simply wanted to see where the money for the just energy transition was really going, since so little analysis had been done.”
One consultant who worked on a number of energy transition projects told Open Secrets that government departments “regularly pay consultants to work on projects that do little to advance a just transition, wasting public funds and resources in the process”.
Which is not to say that employing consultants is inherently wasteful. One expert tells Currency that while this research is important for accountability, it is not an automatic governance failure to involve consultants in processes requiring deft management skill. “Consultancies doing their jobs can’t really be described as cash-grabbing. There is very weak evidence that the influence they fear has played out,” he says.
The problem is that there is already too little money to go around. While developed nations, led by the UK and Europe, pledged $12.8bn to South Africa’s transition, experts say the country needs multiples of that – $100bn – to make it happen.
But if the early signs are that consultants are pocketing a large proportion of grants in fat fees, rather than this money being used for retraining and transition projects on the ground, this is a red flag when it comes to the allocation of resources.
Two of the largest beneficiaries of South Africa’s JET grants are the consulting arms of Deloitte and PwC – two of the big four audit firms, alongside EY and KPMG.
Deloitte – which services 90% of the Fortune 500 companies and made $67bn in revenue last year – has already banked R145m as an “implementing agent” for South Africa’s transition, according to the grant register. This includes R29m for “capability and capacity” work linked to municipalities, R27m for “capacity development and training”, and R11.2m for projects linked to Eskom. All of this came from US government grants.
Open Secrets says the details of what Deloitte is actually doing are vague, which makes it impossible to verify if these fees are justified. Its work is described as “technical assistance”, “industry knowledge building” and, for one particularly opaque project, it earned R4.8m for what it described as a “variety” of services.
Deloitte declined to provide specifics when asked by Open Secrets, saying it was “contractually bound by strict confidentiality obligations”. But, confusingly, it then said it was “unable to make a direct link between the grant payments listed in the registry and Deloitte Africa’s records”.
This suggests Deloitte subsidiaries from other countries did this work – not the unit based in Joburg.
PwC has done almost as well. The grants register shows that it is the “implementing entity” for four projects worth more than R130m, either acting alone or with other partners.
This includes a R20m project to build a “climate finance accelerator”, and a R22m project to implement “local economic development strategies” in two Mpumalanga municipalities. In some of these projects, PwC is working with a London-based firm called Adam Smith International, and this work is being paid for by UK grants.
“While the UK government will count all of its grant funding as a contribution to South Africa, much of it ends up paying the salaries of consultants for large firms based in South Africa and elsewhere,” Open Secrets says. “Indeed, it is possible that money earmarked as grant funding to assist Mpumalanga’s just transition is contributing to the rent for Adam Smith International’s swanky offices in central London.”
The thin green line
While audit firms have made a mint, the management consultancies haven’t been left out.
Foremost is BCG, a company founded in 1963. It has won a lot of South African business in recent years largely because, unlike rivals McKinsey and Bain, it is untainted by work for state-owned companies during the state-capture era.
BCG’s South African arm, based in Rosebank, has done plenty of work for companies with a patchy environmental record such as Sasol – one of 57 companies that produce more than 80% of global CO2 emissions, according to the Carbon Majors database.
Nonetheless, the grants register shows that BCG has secured a number of just energy transition projects in South Africa worth more than R30m.
The first was as the implementing agent for Eskom’s JET office strategy to decommission coal plants, a contract worth R11.6m. Then BCG secured a two-year R18.6m contract for “early-stage pipeline scoping” in Mpumalanga for small and medium enterprises.
Mpumalanga, at the heart of the coal belt, is set to receive 23% of all the grant funding, and BCG’s mandate is to mobilise private sector investment for the province’s small and medium enterprises to “support the economic diversification priorities”.
BCG, like many other consultancies, is walking the thin green line between advising countries on how to transition, and working for the oil majors that caused the problem in the first place. At one point, BCG advised 19 of the world’s top 25 biggest oil companies, and in 2021 alone, it made $1.1bn from “climate consulting”.
“It is not clear why a body representing South Africa’s largest corporations and polluters should benefit from a project paid for out of scarce and already insufficient grant funds meant to assist a just energy transition,” says Open Secrets.
In response to questions, BCG said it is “proud of our contribution in South Africa’s just energy transition”, adding that it “involved many contributors from many different organisations as part of transparent consultation processes”.
But it is not the only consultancy navigating this conflict of interest. McKinsey and Bain, both battling to restore their reputation in South Africa, have also worked to position themselves as climate consultants, while working for the oil majors.
“Many of the largest private consultants simultaneously work with clients that are accelerating and exacerbating climate change, all while selling their credentials to address the climate crisis,” says Open Secrets. “These private consultants also receive a disproportionate portion of climate finance.”
Mathe says a surprisingly small percentage of the JET grant money ultimately remains in South Africa. “There are grants coming into the country that are meant to be facilitating the transition. But not only is that not happening, what you see is money coming into the country which then flows out again to pay consulting fees in other countries.”
In part, this is by design: some grants stipulate they be spent with entities from the country providing the grant. This shows, as Open Secrets put it, “that much of the grant funds are caught in a circular process that sees little money arriving on the ground in South Africa” but rather passing through on its way back to international firms.
To remedy the secrecy around the energy funding, Open Secrets says all partnership agreements should be made available. And to ensure real accountability, South Africa’s government ought to provide a “publicly accessible database of the full expenditure of just energy transition partnership money – including those which have been paid into the fiscus and those which have been routed outside of the state”.
Top image: Rawpixel / Currency collage.
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