GRAND THEFT LOCO
Transnet employees and partners in crime net R50m in kickbacks
● On December 21 last year, four freight trains belonging to Transnet were dispatched from rail yards to Mpumalanga coal mines belonging to Exxaro and Glencore to collect coal destined for the port of Richards Bay, en route to an export destination.
Only two of those trains made it to the mines. The other two, bound for Exxaro, were diverted by a criminal ring running a sophisticated “ghost train” operation right under Transnet’s nose. The syndicate has netted corrupt employees of the rail and ports company and their accomplices up to R50m in illicit kickbacks.
Now the Special Investigating Unit (SIU) has been roped in to crack the syndicate.
The ghost train operation, concentrated on the lucrative Transnet Freight Rail (TFR) north corridor between Mpumalanga and Richards Bay, is run by a network of corrupt employees in conjunction with freight logistics middlemen who take advantage of the huge shortage of locomotives and the spike in the price of coal to cash in by diverting empty freight trains to customers not billed by Transnet.
Using legitimate orders paid for by mining companies for TFR to collect their coal bound for the Richards Bay Coal Terminal, the syndicate then adds more trains to those orders and diverts them to middlemen who offer these to other customers at reduced rates. The trains are dispatched from various depots in Mpumalanga and Limpopo.
Twenty-five ghost trains were run on the coal corridor between December last year and January. Two people with intimate knowledge of the operation said those who facilitated the movement of ghost trains could score between R1.5m and R2m a train.
Earlier this year, Transnet said it had launched a probe into corruption in the form of “ghost trains” that implicated some of its employees and third parties. This week it reconfirmed knowledge of the operation and said the investigation was now in the hands of the SIU.
A spokesperson said it was assumed a ghost train was in operation when a Transnet train was run on the corridor, but no customer was billed for it.
“It does not imply that trains ran undetected. Instead, it implies that there was no revenue earned by Transnet from such a train operated.”
SIU spokesperson Kaizer Kganyago confirmed the investigation. “We are unable to disclose anything further at this stage,” he said.
It is not clear if the matter was also reported to the police. A spokesperson for the Hawks crime-fighting unit did not respond to questions sent during the week.
Exxaro confirmed to the Sunday Times that two trains it ordered were cancelled during the period under investigation. A report from Transnet said the cancellation was due to a maintenance issue.
Exxaro spokesperson Ling-Ling Mothapo said on Friday that they were co-operating in an investigation led by Transnet. She said Exxaro could have generated more revenue if cancellations had been avoided.
“The cancellation of the trains presents an opportunity cost, as we missed an opportunity to export tonnes in an already constrained logistics environment. This opportunity cost can simply be calculated by taking the current coal price and multiplying it by a train payload of 8,300t. Exxaro is collaborating with the authorities, and we are participants in the ongoing investigation.”
Thungela, Seriti and Glencore all referred queries to Transnet.
At the height of the illicit operation, the coal price was hovering around $277 a tonne, but has since fallen to $130.
A coal miner with intimate knowledge of the illicit operation, who asked not to be named for safety reasons, said the scheme was hatched when coal prices spiked at the start of Russia’s war in Ukraine. He said middlemen in logistics, or freight forwarders, were in cahoots with various Transnet employees responsible for negotiating with customers and those who dispatch freight trains.
“Because of the shortage of locomotives and the war in Ukraine, the coal price went crazy, and that’s when people became greedy and started stealing trains.”
A single freight train can carry a payload of 8,000t. At $200 a tonne, it equates to $1.6m of export coal per train. The insider said Transnet employees involved in stealing trains were being paid $10 a tonne, meaning they were fetching up to $80,000 (R1.5m) per train, but bribes could go as high as R2m, depending on the dollar/rand exchange rate and the price of coal at the time.
“The trains are stolen by people in Transnet. They get paid for every train they shift to another company,” said the coal miner.
TFR runs up to 25 coal trains a month, and at full payload a customer pays Transnet up to R5m a trip, depending on the size of the train. Theft of this magnitude requires the complicity of rail workers at dispatch, portside and control.
Atenkosi Plaatjie, a spokesperson for the United National Transport Union, said they understood that the ghost trains were not booked on the Integrated Train Plan (ITP) —a system used for scheduling trains to move product such as coal, iron ore and manganese. Instead of three trains scheduled on
the ITP running according to schedule, a fourth train was added, but its load and potential revenue were not accounted for.
She said their members were mainly on the operational side and not involved in the planning or scheduling of trains between TFR and its customers.
“We can use the example of a delivery driver. You are not responsible for the scheduling of goods transported and the business deals between the company and suppliers. Your job is to drive the vehicle and transport the goods according to a schedule you have been given by the company. In this case, Transnet schedules the trains that will run according to agreements made with commodity export companies, these trains are allocated/planned on the ITP system, and train drivers then deliver the goods according to the schedule provided,” said Plaatjie.
Brendon Hubbard, a senior fund manager at ClucasGray investment management, said Transnet had to invest in technology that could track the movement of trains in real time.
“The solution is blindingly obvious — it’s installing trackers. It doesn’t cost a lot of money to install trackers on trains. Most countries in the Southern African Development Community, including Zambia, have installed trackers on their trains. At the root of the ghost trains is management dysfunction at Transnet below Portia Derby, the CEO.”
Transnet has been battling a crippling shortage of locomotives, theft and vandalism on its rail network. Business groups whose members are losing money have called for the dismissal of both Derby and TFR boss Siza Mzimela.
The Durban Chamber of Commerce, the Pietermaritzburg & Midlands Chamber of Business, and the South African Chamber of Commerce & Industry are the latest to call for public enterprises minister Pravin Gordhan and the Transnet board to consider firing the two.
Gordhan has directed the board to present a turnaround performance plan to him. This is after the entity reported a loss of R5.7bn, down from a profit of R5bn the previous year, stemming from the decline in rail volumes, which slumped 13.6% to 149-million tonnes in the year to end-March.
Transnet dysfunction is also already affecting employment at coal mines. Business Times reported last week that Seriti’s Klipspruit colliery in Mpumalanga had issued a section 189 retrenchment notice affecting 605 workers as export mines are hampered by their inability to transport more coal by rail. The Minerals Council estimates that R151bn extra revenue could be generated if TFR was operating at full capacity.