Transnet was the cash cow for corrupt executives, state capture commission hears
'he relocation costs were unjustifiable and excessive. There was the incurrence by Transnet of fruitless and wasteful expenditure.'
A Transnet locomotive. Picture: Facebook
Whether someone dealt with the relocation of original equipment manufacturers (OEMs) or loans to fund multibillion-rand capital expenditure projects, Transnet was the cash cow for service providers and corrupt executives, if damning evidence presented this week before the Commission of Inquiry into State Capture is anything to go by.
In their evidence on the capture of Transnet – South Africa’s largest state-owned entity (SOE) – MNS Attorneys director Thobani Mnyandu and Jonathan Bloom of Multi-Purpose Solution yesterday lifted the lid on how:
- Transnet senior executives did not act in the best interests of the SOE;
- The agreement concluded between Gupta-linked BEX and China North Rail (CNR – a sister company of China South Rail) was fraudulent and corrupt;
- Strategic sourcing senior manager Lindiwe Mdletshe and former chief financial officer Anoj Singh – the leader of Transnet’s negotiating team for the OEMs relocation from Pretoria to Durban – breached the SOE’s procurement manual policies;
- Gupta-linked Regiments Capital overcharged Transnet by R90 million in fees for the attainment of the ZAR club loan; and
- Former Transnet Freight Rail and later Transnet Group chief executive Siyabonga Gama breached the Companies Act in authorising the R1.2 billion expenditure for the relocation of the OEMs to Durban.
Mnyandu, whose law firm led an investigation into the malfeasance and corruption at Transnet, told Deputy Chief Justice Raymond Zondo that due to the nature of an agreement between CNR and BEX raising “a sharp interest on fraud and corruption”, his firm recommended that Transnet consult law enforcement agencies to arrest and charge employees involved in the graft.
He said MNS advised Transnet to stop making payments on the relocation, recommending that Bombadier and CNR provide statements and debasements on finances to date.
“In our legal analysis of the variation orders, we found that if the contract itself was unlawful, then everything that followed from it was unlawful,” Mnyandu said.
“In relation to the CNR and BEX agreement, we’ve recommended to Transnet that they consult law enforcement agencies. We found that the advice provided by PwC [PricewaterhouseCoopers] was not taken into consideration.”
PricewaterhouseCoopers advised Transnet that if costs incurred were to be prohibitive, it should have sought alternatives.
Mnyandu added: “The relocation costs were unjustifiable and excessive. There was the incurrence by Transnet of fruitless and wasteful expenditure.”
In his testimony on Transnet’s 2015 R12-billion syndicated ZAR Club loan transaction, Bloom said: “Regiments should not have been paid any fee for this work. There was sufficient capacity, knowledge and skill within Transnet to raise the loan. There was actually no need for Transnet to outsource this function.”
Regiments, said Bloom, used a higher amount and a percentage beyond the market norms – based on the yield to maturity fee, amounting to what would have been 0.85% of the notional fee. The notional value of the loan to Transnet was R18 billion, with the yield to maturity value being R102 billion.
While an initial Transnet contract for advisory services fee was capped at R35.2 million, when Regiments came into the picture, it scored up to R265.5 million – a 754% increase.
Hearings into Transnet continue.
– brians@citizen.co.za
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