Transnet locomotive procurement train smash: prosecute Molefe, Singh and Gama, Zondo says

There were three main deals – for 95, 100 and 1 064 locomotives. The 95 and 100 deals were specifically with what was then called China South Rail (CSR). CSR also featured in the 1 064 deal, along with China North Rail (CNR) – with which it later merged – General Electric, and Bombardier Transportation.

The commission’s recommendation was that they be investigated by law enforcement authorities with the aim to prosecute them for fraud, contravening the Public Finance Management Act, racketeering, wilful or gross negligence and a range of other alleged wrongdoings.

With the 95 deal, the commission said that shortly after Molefe was appointed as group CEO and Gama made a return as CEO of Transnet Freight Rail in 2011, that the parastatal saw the “first significant locomotive transaction tainted by corruption”.

The commission said there were reasonable grounds to believe that there were irregularities including a prior decision by Molefe to favour CSR as a bidder, his “inappropriate communication with CSR prior to the closing of the bid”, communication between CSR and the Guptas, the improper changing of the evaluation criteria to favour CSR specifically around its initial lack of B-BBEE accreditation, the failure to obtain the authorisation for a cost overrun, and the non-recovery of late delivery penalties.

The commission found that the alleged wrongdoing in the 100 deal included that management misled Transnet board’s acquisitions and disposals committee and the board itself when it presented a business case motivating that the purchase be confined to CSR. It also said the deal included the payment of excessive advance payments prior to the delivery of any locomotives and the unjustifiable increase in the price of the procurement by R740 million without prior authorisation of the board.

CSR paid a kickback of R925 million on this contract to one of Gupta lieutenant Salim Essa’s companies.

The wrongdoing in relation to the 1 064 locomotive procurement included the misrepresentation to the board of the components of the estimated total cost, the unfair favouring of CSR, the inflation of the price, the inappropriate calculation of escalation costs, forex and contingencies; and the payment of excessive advance payments favouring CSR and CNR – among a raft of other findings.