Transnet gets R180m back

State-owned freight-rail and ports company Transnet has reached a settlement with Gupta-linked Regiments Capital in relation to the controversial 1064 locomotives contract.

Transnet acting group CEO Mohammed Mahomedy told Moneyweb the settlement agreement effectively means Transnet will get back about R180 million in advisoryand other fees related to the multi-billion-rand contract.

Mahomedy did not go into detail about the agreement.

In 2014, Transnet’s former board approved the deal to buy locomotives from China South Rail, China North Rail, General Electric and Bombadier. At the time, Brian Molefe and Anoj Singh were Group CEO and CFO at Transnet respectively, while Siyabonga Gama was also an executive.

Costs around the contract spiralled from an estimated R38 billion in 2014, to more than R50 billion last year when Gama, who took over from Molefe as Group CEO in 2016, was fired. All three former executives have been implicated in state-capture allegations at Transnet, while several other executives have either resigned or been suspended as investigations continue.

Mahomedy says as part of the state-capture clean-up, Transnet is addressing the issues and several court processes are underway. One of these cases involved the negotiated settlement with Regiments.

Transnet’s new board under Popo Molefe as chair, has been trying to clean up the state capture mess since last year. The entire 1064 locomotives contract has been interrogated and Transnet has been in talks with the manufacturers to bring the costs down and address delays.

During Transnet’s results presentation for the half-year to September, Mahomedy conceded the delays in taking delivery of the locomotives had seen Transnet only spending R7.9 billion of more than R12 billion in planned capital expenditure for the period. However, he says cost savings achieved by interrogating its spending plans benefited the group.

“The locomotive contract was riddled with irregularities,” says Mahomedy.

Transnet reported a slightly stronger first half performance. Group revenue increased by 2.9% to R38.7 billion, while profit for the half -year increased by 3.5% to R2.9 billion.

Operating costs increased by 1.2% to R21.2 billion.