Locomotive deal dodgy, says report

Officials at state logistics company Transnet went out of their way to assist China South Rail (CSR) in its bid to be appointed for the supply of 95 locomotives, a report published by the National Treasury yesterday shows.

The report by Fundudzi Forensic Services, which was contracted by the National Treasury to probe irregularities at Transnet and state power utility Eskom, looks into the procurement process followed in the procurement of three batches of 95, 100 and 1 064 locomotives.

It says former Cabinet minister Malusi Gigaba, who was then public enterprises minister, compromised the procurement process by signing the locomotive supply agreement between Transnet and CSR as a witness.

Gigaba resigned as home affairs minister and member of parliament this week, less than two weeks after the public protector found he had violated the constitution and executive ethics code by lying under oath.

The Fundudzi report says CSR also compromised the integrity of the procurement processes by communicating with Transnet’s then group CEO, Brian Molefe, during the bidding process.

Molefe’s communication with CSR official Wang Pan was sent to individuals with links to the wealthy Gupta family, friends of former president Jacob Zuma accused of trying to influence the government and state companies for financial gain.

“CSR was irregularly appointed in that it should have been disqualified for receiving bid documents unlawfully, communicating with Molefe, failing [broadbased black economic empowerment] requirements and not submitting all returnable documents,” the Fundudzi report says.

Transnet and CSR entered into an agreement in 2012 relating to the design, manufacture, testing and supply of up to 95 new locomotives.

Transnet would have saved R1.2 billion had it procured another 100 locomotives from Japan’s Mitsui at R3.188 billion instead of procuring from CSR at R4.4 billion, according to the report.

The Transnet board failed to notify the shareholder, being the government, of acquisitions and disposal above R2 billion before the conclusion of the contract with CSR as required by the 2013-2014 shareholders compact agreement.

Transnet board members failed to act in the best interest of Transnet when they ratified the increase in estimated total cost for the acquisition of 1 064 locomotives from R38.6 billion to R54.5 billion.

Molefe and other Transnet officials contravened the Public Finance Management Act by failing to take effective and appropriate steps to prevent irregular, fruitless and wasteful expenditure, the report says.