Report recommends legal action against Transnet executives over locomotives deal

An investigation into allegations of tender irregularities into the procurement of locomotives by Transnet has revealed that senior executives of the logistics group “went out of their way” to assist China South Rail to secure the lucrative tender and recommended that criminal investigations be instituted against them.

A report by Fundudzi Forensic Services, which was commissioned by the Treasury, reveals a litany of improper misconduct in the tender process and that the company was “irregularly appointed” and that former Transnet CEO Brian Molefe was allegedly in contact with the company during the bidding process. The report was released on Friday.

In 2011, Transnet embarked on a process of buying electric and diesel locomotives to revamp its ageing freight rail fleet.

The procurement of 1 064 locomotives increased from R38.6bn to R54.5bn. The report said Molefe and Anoj Singh, who was chief financial officer "may have received gratification for the role they played in the increase".

It recommended that criminal investigations be instituted against Molefe, Siyabonga Gama, Singh and others for "possible receipt of gratification" and that appropriate disciplinary steps be taken against the officials who are still employed by Transnet.

It further recommended that "the cabinet consider restricting the officials who resigned before being disciplined from employment by an organ of state for a period of five years".

“Transnet would have saved R1.2bn if it procured 100 locomotives from Mitsui at R3.188bn than procuring from CSR at R4.4bn," the report said.

The Transnet Board also failed to notify the shareholder of the acquisition, as required by the law for tenders above R2bn, before concluding the CSR contract, it said.

CSR is said to have compromised the integrity of the procurement processes by communicating with Molefe during the bidding process and that Molefe’s communication with the company was forwarded to "individuals who have links with the Guptas and companies associated with the Gupta family", it said.

"CSR was irregularly appointed in that it should have been disqualified for receiving bid documents unlawfully, communicating with Molefe, failing B-BBEE requirements and not submitting all returnable documents,” said the report.

READ: Transnet wants former executives, Gupta-linked company to pay back the money

The forensic probe also looked into allegations of irregularities in the appointment and management of work done by McKinsey, Regiments and Trillian for Eskom and Transnet.

Transnet paid a total of R3.26bn to the companies.

“Transnet should consider recovering the out of pocket expenses paid to McKinsey (R12 476 640.75) and Regiments (R7 689 975.59).”

Transnet a week ago started court proceedings to recoup R189m from four of its former executives, including Gama and Regiments for inflated payments in the acquisition process of locomotives by the state-owned firm.