The Cabinet Office has banned Bain & Company from bidding for its contracts for three years – with its Minister recommending the Government bring in a ban of the firm across all its arms. The move comes as the strategy giant encounters an international backlash for its connection to a major political scandal in South Africa.
As reported by the Financial Times, Bain & Company has been informed the Government will not accept tender bids from the firm, due to its “grave professional misconduct” in the infamous South African Revenue Service (SARS) scandal. Cabinet Office Minister Jacob Rees-Mogg informed Bain that the affair had rendered the company’s integrity “questionable”, before adding he was not convinced that the Boston-headquartered company had taken its role in the scandal “sufficiently seriously”.
Bain, which maintains its innocence in the case, is one of the three largest strategy consultancies in the world, alongside McKinsey & Company and Boston Consulting Group. The prestigious trio have long been the go-to firms of governments and major corporations seeking strategic advice – and Bain illustrating that, Bain has been awarded UK public sector contracts worth up to £63 million since 2018, including Brexit consulting work worth £40 million for the Cabinet Office.
The fact such a key client is now shunning it for new contracts shows the reputational damage the company is facing due to the SARS case. Britain is the first western country to impose such penalties on Bain for its role in the “state capture” scandal, though there is understood to be mounting pressure on the US to follow suit.
A comment from Bain read, “We were disappointed and surprised by the minister’s decision . . . We will be responding to express our concern about the process and its outcome and to address inaccuracies in his letter. If necessary, we will then consider other options for review of the decision. In the meantime, we will continue to work with the Cabinet Office to ensure that we do what is required to restore our standing with the UK government.”
The SARS scandal
In 2014, Bain was commissioned to evaluate the operations of SARS, and offer recommendations on improvements. A year later, this led to the restructuring of SARS, then directed by Tom Moyane, which resulted in the destruction of a large part of its capacity.
After multiple allegations of corruption forced Jacob Zuma from office, in 2018, new President Cyril Ramaphosa set up an inquiry to evaluate what had been going on regarding the previous administration’s private-sector dealings. The Nugent Commission was the first place where revelations about Bain’s involvement in the dismantling of SARS emerged. The commission sought to determine whether deviations from established processes had unfairly favored politically connected individuals and/or individuals connected to SARS senior management.
Bain tasked long-time employee Athol Williams with reporting to the Nugent Commission on the reliability of a review conducted by Baker McKenzie into how Bain obtained its contract. However, despite repeated requests, he was not granted access to the results of the law firm’s investigation by Bain, and was unable to give a complete opinion. In late 2019, Williams went on to blow the whistle on Bain, stating that the company had withheld relevant information from the Nugent Commission.
He would go on to offer his services to the subsequent Zondo Commission, volunteering his services to the Commission for six months, during which time he drafter a 700-page affidavit. The drafting of this affidavit, and the analysis of about 500 documents still in his possession from his lengthy time with Bain – a company he joined in 1995 – saw him reach the conclusion not only had Bain hidden a number of serious elements from investigators, but it had masterminded “state capture”, in order to repurpose state institutions to the advantage of the firm, and its allies.
Williams tested for two days before the state capture commission, presenting evidence of an alleged alliance between Bain, Jacob Zuma and Tom Moyane, enabling a private sector capture of SARS’ state assets. The commission’s final report concluded that Bain’s behavior was ‘unlawful’, while praising Williams for rejecting “hush money” and acknowledging his contribution to the investigation.
Later in 2021, Williams fled South Africa due to fears of reprisal, having implicated dozens of individuals. In his time in exile, Williams collaborated with veteran anti-apartheid campaigner Lord Peter Hain, to draw global attention to Bain’s activities in South Africa – one of the outcomes of this being the ban from the Government on Bain taking state contracts.
Initially, Cabinet Office officials advised that no action against the company was necessary. However, Rees-Mogg sought further advice, including from an external QC. Following that, he informed Bain he was particularly concerned at the way Bain’s South African division “colluded” with the regime of former president Jacob Zuma to undermine the country’s revenue service. As such, the Cabinet Office would not accept its tenders for three years, and will advise all government departments to apply the same ban.
Bain is not the only consulting firm to have been embroiled in the SARS case, however. Other international consulting companies’ South African wings are also entangled in the allegations.
Notably, in 2020, Bain’s MBB rival McKinsey agreed in 2020 to repay $39 million to the South African Government, after irregularities were found in contracts it had entered into, with a local partner at government-owned companies. Meanwhile, Big Four firm KPMG has publicly apologised for “mistakes” it made with work it performed for businesses tied to the Gupta family – a family who stands accused of serious corruption via its ties to Jacob Zuma.