Publications
Partners
The business case for the acquisition of 1 064 new locomotives to upgrade Transnet's fleet came under the spotlight on the first day of a disciplinary hearing of the company's former chief financial officer Anoj Singh, who is implicated in allegations of misconduct.
Singh was not present at the hearing, which is being by the conducted by the South African Institute of Chartered Accountants. He has pleaded not guilty.
On Wednesday Francis Callard, a former engineer at the state-owned freight rail and ports group, said there were different versions of the business case for the acquisitions of locomotives before it was approved by Transnet's board in 2013.
Some versions of the business model included foreign exchange hedging and cost escalation for the R38.6bn contract, while the other versions excluded these factors. Callard described the exclusions as a "deliberate and calculated misrepresentation".
Forex hedging is used to cushion a company from currency changes during the course of a contract.
Callard, who earlier in the year also gave evidence before the judicial commission of inquiry into state capture, told the hearing it appeared the misrepresentation finally made it to the board for approval.
Transnet has issued summons against some of its former directors, including Singh, to recoup some funds.
Singh chaired the locomotive committee which prepared the formulation of the business case, and one of the misconduct charges he is facing relates to his conduct in the matter.
Presiding Officer Mohammed Chohan asked Callard on Wednesday what the motivation for the exclusion of forex hedging and cost escalations from the plan could be.
"In my opinion this was done to create head room for increased cost," he replied.
The acquisition of locomotives was meant modernise Transnet's fleet, but the contract that has been dogged by allegations of kickbacks, fraud and irregularities after the price increased from R38.9bn to about R56bn.
The hearing also heard from Callard that while consulting company McKinsey was brought in to participate in the development of the business case, its consultants were not experts in freight rail.
READ: Bombardier denies overcharging Transnet in major locomotive deal
The delivery of the 465 diesel and 599 electric locomotives was initially planned to take place over a seven-year term ending 2018/2019, however Singh had directed that the timeline be reduced to about three years. The motivation for the acquisition had been changed from meeting existing demand to shifting freight traffic from road to rail.
Singh was in 2009 appointed acting chief financial officer for Transnet, a position that was made permanent in 2012. He left the company in 2015 to join Eskom. The hearing will also hear misconduct charges relating to his time as chief financial officer at the power utility.
The hearing continues on Thursday.
