Transnet could’ve saved on locomotives from Mitsui, Zondo hears

Former Transnet group CEO Brian Molefe has dismissed a forensic report that suggested the freight company would have saved R1.2 billion if it purchased locomotives from a different company rather than China South Rail (CSR).

Appearing before before Commission of Inquiry into Allegations of State Capture chairperson Deputy Chief Justice Raymond Zondo, Molefe argued otherwise, saying that Mitsui locomotives are “failing”.

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This is after the commission’s evidence leader, advocate Anton Myburgh, said on Wednesday morning Transnet would have saved R1.2 billion if it procured 100 locomotives at the price of R3.188 billion from Mitsui, rather than procuring from CSR at the price of R4.4 billion, according to a Fundudzi Forensic Services report.

Adv Myburgh reads from the Fundudzu report: Transnet would have saved R1.2 billion if it procured 100 locomotives from Mitsui at R3.188 billion than procuring from CSR at R4.4 billion. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 10, 2021

On the procurement of 1,064 locomotives, Molefe said Transnet had issued the tender with an estimated budget. However, the bidders ended up with a budget of R49 billion.

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It was alleged that the locomotives were irregularly procured at an initial estimated cost of R38.6 billion, which escalated to R54 billion.

The former Transnet boss told the commission Transnet had decided to add a further 10% for contingencies. He said R54 billion was the negotiated price for the 1,064 locomotives.

“Chair, R38.6 billion was the estimated price and R49 billion was the bidder’s offer. Then R54 billion was the fixed agreed price after negotiations and that for seven years there wouldn’t be any inflation nor foreign exchange cost to be acquired by Transnet.”

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“After the bids were looked at…there were further negotiations and then the final price was agreed upon,” he said.

When asked whether the business case for the procurement of locomotives included escalation and hedging costs when it was presented to the freight company’s board, Molefe conceded he misrepresented the business case to the board.

He further said that it was difficult to estimate forex escalation and hedging costs.

Watch the proceedings below, courtesy of the SABC:

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