NPA closes in on Molefe and Singh
Former Transnet and Eskom bosses Brian Molefe and Anoj Singh should be having sleepless nights right now. That is mainly because papers filed as part of the National Prosecuting Authority’s application to freeze the assets of Regiments Capital and its directors strongly implicate the pair, who both have close ties to the Gupta family, in multibillion-rand fraud.
Former Transnet and Eskom bosses Brian Molefe and Anoj Singh should be having sleepless nights right now.
That is mainly because papers filed as part of the National Prosecuting Authority’s (NPA) application to freeze the assets of Regiments Capital and its directors strongly implicate the pair, who both have close ties to the Gupta family, in multibillion-rand fraud.
That fraud, the state contends, led to the cost of Transnet’s purchase of 1,064 locomotives ballooning from R38.6bn to R54.6bn.
Forensic evidence and analyses presented by the NPA in the application suggests both Molefe and Singh lied to Transnet’s bid adjudication committee about the reasons for the escalation in the total estimated cost of the locomotive deal. They contend in a memo that this was due to “to foreign exchange, escalations and contingencies”.
Investigations later revealed that the original R38.6bn cost of the deal included the items that Singh and Molefe had told the committee justified the increase.
“The version of the original business case submitted to the board, however, falsely claimed that such items were excluded,” the NPA’s Hermione Cronje states in court papers launched in the Pretoria high court.
Molefe and Singh were also pivotal players in ensuring huge increases in the fees paid to Regiments Capital by Transnet, allegedly without any lawful or justifiable basis.
It is important to note that the NPA views Regiments Capital as a “primary vehicle” used by the Gupta family and its associates to extract money from the state. That is because Regiments Capital paid 30% of the money it earned through “advisory services” to Transnet to key Gupta associate Salim Essa on the basis that he had facilitated the company securing the advisory role.
The locomotive deal itself has been mired in multiple allegations of state capture corruption and lucrative kickbacks for Gupta associates.
Essa got Regiments Capital a foot in the door of the deal by arranging for it to partner with McKinsey in providing advisory services to Transnet. Court documents filed by the NPA reveal that McKinsey’s 2012 appointment was itself questionable, as
McKinsey had failed to submit “a mandatory and material returnable document as part of its bid, namely its audited financial statements for the previous three years”.
Nonetheless, McKinsey was appointed in July 2012.
Less than a month later, Molefe approved a memo that recommended McKinsey drop its then partner in the deal and replace it with another service provider for the “procurement elements” of the locomotive deal. Enter Regiments Capital, which was appointed despite, apparently, not having been subjected to Transnet’s mandatory procurement process.
Within a matter of three years, Regiments Capital became Transnet’s primary adviser on the 1,064 locomotives deal, itself the subject of multiple allegations of major state capture corruption. Its appointment as the lead consultant was confirmed in a memo written by Singh in May 2015.
“Taken at face value, in its memo Transnet confirmed the appointment of Regiments Capital as lead consultant for the locomotives project without it ever having been subjected to evaluation, verification and adjudication by Transnet as the most suitable bidder for the project,” Cronje states in court papers.
She also reveals how Singh and Molefe pushed the fees paid by Transnet to Regiments Capital to be increased in April 2014, on the basis that the company “had secured savings of R20bn in respect of future inflation-related escalation costs and foreign exchange hedging costs, as well as an overall reduction of the overall transaction cost from R68bn to R50bn”.
“The amount thus to be paid to Regiments Capital would be R78.4m,” she says.
Despite fierce opposition from Transnet officials, who strongly denied that Regiments had provided any such costsaving services, the money was paid.
According to Cronje, a forensic investigation conducted by MNS Attorneys would later conclude “that not only was Transnet improperly advised to significantly over-pay for the locomotives, Regiments Capital also undertook no services that would have justified being paid a risk-sharing fee — this is because it was the bank JPMorgan that ultimately hedged the financial risk, and the structuring of the transaction was due to ideas put forward by Transnet”.