NEWS

EFF: Transnet Spent R17.4B In Corrupt Overpayments

Its dossier alleges that Malusi Gigaba, Jacob Zuma and Brian Molefe were among those involved in the process.

09/06/2017 05:52 SAST | Updated 09/06/2017 05:53 SAST
Bloomberg via Getty Images
South African President Jacob Zuma at the launch of a new Trans Africa locomotive at Transnet's engineering site in Pretoria, South Africa, on April 4, 2017.

The Economic Freedom Fighters (EFF) has released internal Transnet documents that it alleges show R17.4 billion of taxpayers' money was lost in inflated prices on the purchase of 1 064 locomotives.

The money was lost to corruption during the procurement of the locomotives, the EFF said at a press briefing on Thursday.

The dossier points fingers at then public enterprises minister Malusi Gigaba, now finance minister, President Jacob Zuma, then Transnet boss Brian Molefe, former Transnet CFO Anoj Singh and former Transnet tender committee chairperson Iqbal Sharma as being involved in the process.

EFF leader Julius Malema said the tender was split between four companies, two of which would supply 465 diesel locomotives and the other two, 599 electric locomotives.

According to Malema, these were the company's initial best and final offers to Transnet, after negotiations had taken place, per locomotive:

  • China North Rail: R27,360,000
  • General Electric: R24,312,000
  • Bombadier: R28,788,150
  • China South Rail: R28,900,000

"That was a good thing because government was now saving money at Transnet," Malema said.

However, a month after the negotiations had concluded, Malema said Gupta companies who served as advisers to Transnet proposed an accelerated delivery schedule and rocketed the prices from the four suppliers.

"Then entered the Guptas, through a company called Regiments Capital and Trillian, [who were] transaction advisers for Transnet. When they start with their work, the locomotive prices shot up ... they did not reduce the prices but increased it and pocketed billions in the process through corruption," Malema alleged.

A R17.4 billion price hike
In its dossier, the party included what appears to be extracts of a financial and risk analysis drawn up for Transnet by Regiments Capital.

The analysis compares the costs of the original delivery schedule of the locomotives, which was set between 2020 and 2021, and an accelerated delivery schedule that allowed for the delivery of product between 2017 and 2018.

It takes into escalation drivers and forex costs before arriving at a conclusion that an accelerated delivery schedule would be cheaper for Transnet.

The EFF then made reference to a set of spreadsheets that appear to be from within Transnet. They reflect the final breakdown of costs for approval from the board of acquisition and disposal committee.

Malema noted the difference in the costs between the original offers and the final price that was allegedly paid per locomotive. He said the difference amounted to R17.4 billion.

"How can a supplier charge the client more if they are awarded contracts to be concluded over a shorter period? They should instead give a bigger discount," Malema said.

"Prices were inflated from the original final best price given by the suppliers all inclusive. Fraud is committed against the Public Finance Management Act as the Gupta-linked criminals inflated the suppliers' price after the supplier gave their best price."

Attempts were made to get a response on the allegations from Transnet, but it did not respond before publishing deadline.

However, in a report late on Wednesday afternoon, Jacaranda FM quoted Transnet saying it is confident that their procurement processes have sufficient checks and balances to guarantee integrity.

Transnet was quoted as saying that all contracts above a certain threshold are checked by an independent auditing firm and one of the key considerations is value in terms of the competitiveness of the bid.