Transnet suppliers ‘flouted obligations’

THE WERKSMANS report has accused the original equipment manufacturers of Transnet’s 1 064 locomotives to the entity of flouting contractual obligations by failing to implement localisation requirements on the R54.5 billion contract.

The law firm said its investigation established that local content commitments on the transaction were not being met.

It said former public enterprises minister Lynne Brown also raised concerns about the supplier development and localisation plans in a letter to Transnet in 2014.

She expressed her unhappiness that the companies participating were planning to import technologies and components which would have been earmarked to be produced by local suppliers in South Africa.

“This is a very serious matter and the department would like to engage Transnet thereon as a matter of urgency,” Brown said in the letter.

The adherence to the localisation requirements – which were aimed at promoting economic development and employment – have been a bone of contention.

Parliament’s portfolio committee on trade and industry previously expressed dissatisfaction about the implementation of localisation at state-owned companies such as Transnet and the Passenger Rail Agency of SA.

Transnet awarded the contracts to General Electric, Bombardier Transport, China South Rail and China North Rail on March 17, 2014.

Werksmans said some of the manufacturers were behind schedule “while others have not achieved their local content requirements at all”.

It said, according to the Transnet Internal Audit, the non-compliance with the requirements constituted “material reputational risk” for Transnet.

Transnet said earlier this year that its previous board had approved the recommendation by Werksmans that certain matters in the report be referred to the judicial commission of inquiry into state capture, headed by Deputy Chief Justice Raymond Zondo.

Werksmans said management allegedly prevented the Transnet internal audit from conducting a full audit on local content, despite the fact that the responsibility fell within the unit’s scope.

It said the local content element of the locomotives transaction required further investigation and clarification with the assistance of a forensic auditor. “…not only have the (original equipment manufacturers) and Transnet committed to (local content) through transaction agreements, but it is also legislatively required,” the law firm said.