The movement of billions of rand from state-owned enterprise (SOE) Transnet to China entities, local companies owned by Gupta business associates and international consultancy firm McKinsey – in irregularly sanctioned transactions by the executives and its board – was today laid bare as acting group CEO Mohammed Mahomedy took the stand on his first day of giving testimony before the Commission of Inquiry into State Capture.
In defiance of Transnet supply chain prescripts and advice by its treasury department managers, former group CEO Brian Molefe and chief finance officer (CFO) Anoj Singh pushed through questionable deals, bypassing management structures, at huge cost to the company.
This was in blatant disregard to fiduciary duty, the Public Finance Management Act (PFMA) and National Treasury regulations governing procurement, Mahommedy told the commission.
In his testimony before Deputy Chief Justice Raymond Zondo, he gave details of:
- A 2014 questionable amount of R166 million paid to Gupta-linked Regiments Capital and Trillian in “success fees” for having “negotiated” for billions of rand in a China Development Bank loan for the purchase of the 1,064 locomotives from China South Rail (CSR).
- A payment amount of R93.5 million made to Trillian for negotiating the ZAR Club Loan from Absa, Nedbank, Future Growth and Bank of China.
- How a total capital outlay cost of R38.6 billion for the locomotives soon ballooned to an estimated total cost of completion amount of R54 billion.
- The R2.2 billion contingencies created as a buffer went up to R4 billion.
- Transnet Freight Rail (TFR) former CEO Siyabonga Gama and former chief procurement officer Thamsanqa Jiyane waived the mandatory broad-based black economic empowerment (BBBE) Trade and Industry compliance requirement to accommodate CSR in the locomotive transaction.
- Late payment penalties paid to CSR which cost Transnet R700 million.
- CSR executive Wang Pan’s e-mail to former chief supply chain officer Garry Pita, who later became CFO during Gama’s tenure as group CEO, expressing appreciation to have met Molefe, assuring him that money would be paid “into your account for facilitating support”.
Mahomedy continues his testimony tomorrow (Thurs).