Bain & Co barred from UK government contracts over ‘grave misconduct’ in South Africa | Corporate governance

The global management consultancy Bain & Company has been barred from tendering for UK government contracts for three years after its “grave professional misconduct” in state corruption in South Africa, the Cabinet Office said.

Britain became the first western country to take this step, after pressure from the former Labour minister and anti-apartheid campaigner Peter Hain.

In January, the Guardian revealed that Lord Hain had called on Boris Johnson’s government to penalise Bain & Co, which is headquartered in Boston, Massachusetts, over its “despicable” role in South Africa’s biggest post-apartheid corruption scandal. The UK’s move puts pressure on the US to follow suit.

A Cabinet Office spokesperson said: “After reviewing Bain’s role in alleged state capture and corruption by the former government of South Africa, taking account of the evidence and conclusions of the South African Government Commission, the minister for government efficiency considered Bain to be guilty of grave professional misconduct. We have consequently excluded them from competing for Cabinet Office contracts for a period of three years.

“This decision has been taken in light of Bain’s responsibility as a global brand for its South Africa division and the company’s failure to clarify the facts and circumstances of its involvement.”

A South African judicial commission investigating state capture and corruption concluded in January there had been “collusion” between the Boston-based global consultancy and the former South African president Jacob Zuma to reshape entire sectors of the economy.

The commission found that between 2012 and 2015, Bain helped draw up plans to “seize and restructure” the South African Revenue Service (Sars) and centralise procurement procedures – changes that the report said would facilitate corruption.

Jacob Rees-Mogg, the Cabinet Office minister, told Bain that the scandal had rendered the company’s integrity “questionable” and that he was not convinced it had taken its role in the scandal “sufficiently seriously”.

In a letter seen by the Financial Times, Rees-Mogg told James Hadley, Bain’s UK managing partner, that the three-year ban would apply retrospectively from 4 January 2022. “I trust that after three years have elapsed Bain & Co will have restored its reputation,” he wrote.

The Cabinet Office will advise all government departments that Bain and its affiliates should be excluded from tendering for contracts for the three-year period. It said that the UK strongly supports the South African authorities’ efforts to tackle corruption and promote accountability. The Cabinet Office also noted that Bain is not a strategic supplier to the government.

Lord Hain said: “I’m pleased the UK government has agreed to suspend Bain from public contracts at my urging.”

He added that global corporations such as Bain needed to “feel the pain” of the consequences of their role in South Africa’s state capture and corruption scandal.

“Otherwise other corporates will be tempted to do the same,” he said.

Hain proposed legislation in July to enable ministers to bar companies that have acted unlawfully or unethically from tendering for public contracts. He has also called on the US government to immediately suspend all public sector contracts with Bain and bar the company from entering any new contracts.

Bain said it was “disappointed and surprised by the minister’s decision”.

It added: “We will be responding to express our concern about the process and its outcome, where recommendations from the Cabinet Office were apparently overruled, and to address inaccuracies in the minister’s 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.

“Bain have apologised for the mistakes our South African office made in its work with the South African Revenue Service (Sars) and we repaid all fees from the work, with interest, in 2018. Bain South Africa did not act illegally at Sars or elsewhere, and no evidence to the contrary has been put forward. Neither commission of inquiry in South Africa has recommended any charges to be filed. We have offered our full cooperation to the relevant authorities and will continue to do so.”