How Gupta company allegedly got R7.5m fraudulently from Transnet

Already reeling from an astronomical R1.8 billion debt due to the R12 billion club loan account that involved Nedbank – part of a consortium of lenders in 2015 – state-owned Transnet made a fraudulent payment of R7.5 million in commission fees to Gupta-linked Regiments Capital, the Commission of Inquiry into State Capture was told yesterday.

Continuing his testimony before Deputy Chief Justice Raymond Zondo into the capture of Transnet by unscrupulous Gupta business associates, Jonathan Bloom from Multipurpose Business Solution revealed how:

• Despite world-acclaimed financial institution JP Morgan having been contracted by Transnet to play a role of transaction adviser on the R12 billion club loan account, Regiments – said to have been part of JP Morgan’s consortium – was allegedly paid R7.5 million in commission by the state-owned enterprise (SOE).
• Transnet executives allegedly exposed the SOE to financial risk when deciding to convert interest rates from floating to fixed.
• Transnet treasury staff, who had considerable expertise on huge transactions, saw their recommendations to Transnet executives on the questionable deal not being implemented.

“In the 2015 Transnet club loan account deal with Nedbank, there was an interest rate swap made from floating to fixed, done within days,” said Bloom.

“These rates were fixed at quite a high level and the sudden change seemed strange because it was not done in line with Transnet’s risk management policy, leading to the company paying lenders substantially.

“The appointment of Regiments Capital was not necessary because the deal was already concluded and Regiments had no role to play in the transaction.

“JP Morgan was employed by Transnet to look into the transaction.

“As to why Regiments was paid by Transnet and not by JP Morgan, which was appointed to oversee the cross-currency swap, is a big question,” said Bloom.

“This payment made to Regiments was unjustified, unwarranted and amounted to fraud because there was no basis to place liability on Transnet to pay.”

On the capabilities of Transnet treasury to handle the transaction, Bloom said the Transnet treasury team “had all the expertise and there was no need for a transaction executing agent”.

“This was an ordinary and normal transaction which they could have easily handled.

“The team had a combined 100 years’ experience and was rated by international consulting firm McKinsey in 2010 as one of the best treasuries in the world.”

Changing interest rates, said Bloom, required doing so in line with the rate debt policy of Transnet, which stipulated that there had to be 90% fixed and 10% floating.

“The Transnet policy is clear on this. It says fix the interest rate at source and not a week later,” said Bloom.

Meanwhile, law firm MNS Attorneys has recommended that Transnet take legal action against Nedbank to reclaim the R1.5 billion loss in an irregular deal related to the type-1064 locomotives tender.

The commission will today hear testimony from former Transnet group treasurer Mathane Makgatho.

– brians@citizen.co.za

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