Multibillion-rand deals to replenish Transnet’s aged locomotives were tainted with corruption, according to the second part of the state-capture report, which outlined a tableau of graft in the dealings the state-owned enterprise (SOE) had with multiple private companies.
From 2010 to 2018 Transnet was involved in the major procurement of locomotives, network services and infrastructure expansion that the commission maintains was “tainted by corruption” and not in the best interests of Transnet.
“Evidence reveals extensive wrongdoing by some members of the board of directors and senior executives at Transnet during the relevant period,” the commission said in its report.
“The evidence shows that the contracts were procured in 2011-2014 by corrupt payments to the corrupt Gupta enterprise.”
The state capture report highlighted many irregularities with the purchase of 1,064 locomotives for R54.5bn, where US consulting giant McKinsey was contracted. It points out that the contracts were signed in 2014, yet McKinsey had already begun work in 2012.
The Zondo report further outlines how Regiments capital came to be a part of the consortium without having tendered. While the negotiation team, led by former Transnet CFO Anoj Singh, and Regiments in the post-tender process “imprudently agreed to excessive advance payments particularly to favour the China South Rail Corporation (CSR)".
“The contract should have never been awarded to McKinsey as its bid was non-responsive on account of it refusing to furnish its financial statements,” the report by the commission read.
Adding that Regiments played a key role in finalising and agreeing to escalation costs during the tender process. In 2014/2015, McKinsey and Regiments were awarded contracts valued at R2.2bn without tender. Half of Regiments revenue was directed to a Gupta-owned company, Homix.
The commission, chaired by deputy chief justice Raymond Zondo, said the manipulation of supplier companies pointed to money laundering and racketeering on the part of former CEO Brian Molefe and Singh, who misrepresented the profitability of the procurement.
The damning report highlighted the procurement of 95 electric locomotives from CSR, shortly after the appointment of Molefe as group CEO and the reinstatement of Siyabonga Gama as CEO of Transnet Freight Rail (TFR), as the “first significant locomotive transaction to be tainted by corruption”.
The commission said it found irregularities in the bidding process for the 95 locomotives, which cost R2.7bn, including that Molefe had previously favoured CSR as a bidder, while Transnet failed to disqualify CSR as a bidder on the grounds that it had not submitted the necessary documents, and the SOE did not get approval to exceed R700m in its purchase, as required by law.
“All these irregularities favoured CSR and were against the best interests of Transnet,” said the report.
Zondo recommended law enforcement agencies probe, with the intention to prosecute, CSR, Regiments Capital, Salim Essa and his associate companies over numerous contracts that led to at least R7.34bn in kickbacks being paid to firms controlled by Essa and the “Gupta enterprise” from 2012 to 2016.
The judicial audit urged authorities to look into the unlawful activities and agreements where it was agreed that Regiments would be appointed as a supply partner on Transnet contracts in exchange for Regiments paying 30%-50% of its fees to Essa and his associated companies, including Regiments Asia.
Update: February 1 2022
This story has been updated with new information.
Read the report here:
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