Transnet pushes for solution in ‘illegal’ R54bn deal
Transnet is in talks with the suppliers of locomotives to agree to the start of a joint legal process to resolve an “irregular and illegal” R54bn purchase of locomotives, said acting chief executive Tau Morwe.
Transnet’s agreement with General Electric, Bombardier, China North Rail and China South Rail in 2014 to buy 1,064 locomotives as part of a strategy to renew its rolling-stock fleet was allegedly fraught with corruption, linked to the way the contracts were structured, resulting in billions of rand in kickbacks.
Debt levels at Transnet, much like other parastatals, have spiralled under chronic mismanagement, rising to R122bn from R25bn over the past few years.
As part of the clean-up of the rail and port logistics parastatal, the new board wants to terminate the four contracts and set in place an order for fewer locomotives (perhaps 953), Morwe said in an interview on the sidelines of the Investing in African Mining Indaba.
“We’ve engaged the original equipment manufacturers (OEMs) and will, in mid-February, enter negotiations to go to court together to cancel the contracts and look at negotiating the contracts for the locomotives the business needs but that are not on the production line,” Morwe said.
Asked if the court process was likely to be antagonistic or a joint approach, he said: “The idea is to go to court together because what we want is for the court to come up with a just and equitable solution for the parties.
“What we are doing with the OEMs as we negotiate with them is to attempt to find out how much money they were paid that they were not supposed to receive and how much they paid to third parties,” he said, referring to transactional advisers such as Trillian and Regiments Capital.
Transnet dismissed group chief executive Siyabonga Gama and has taken steps to suspend other senior executives. It issued summonses to recover money lost in contracts to buy the 1,064 locomotives from the four companies after costs escalated from the original estimate of R38bn.
Summonses to recover money were issued to Gama, former CEO Brian Molefe and former CFO Anoj Singh.
Transnet was willing to look at private operators buying slots, or time allocations, on its general freight business lines if studies by independent third parties showed the parastatal would be unable to do so efficiently and cost-effectively, Morwe said.
This could include the line between Durban and Johannesburg, linking SA’s busiest port with the economic hub.
As an indication of its difficulties in its business, which includes the two heavy-haul lines for iron ore and coal as well as its general freight business, volumes in the financial year to March were going to miss the 247-million tons target, coming in at about 216-million tons.
Transnet has spent R42bn on its rail infrastructure over the past decade, but the condition of the network was “worse now than it was 10 years ago”, Morwe said, adding this was the subject of an investigation. Transnet plans to spend about R73bn over the next 15 years on upgrading its network. This expenditure still had to be approved by the board or the state, he said.