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Transnet boss fights R2.5bn T-Systems deal

Nov 12 2017 06:00
Sizwe Sama Yende

CEO launches court bid to set aside Gupta-linked tender, while preferred bidder Gijima calls for a criminal probe into the contract.

Transnet CEO Siyabonga Gama has launched a court application to set aside the board’s decision to award a R2.5 billion tender to the Gupta-linked German information technology (IT) company T-Systems.

Gama’s affidavit, filed in the Pretoria High Court on October 23, exposes how the board’s acquisition and disposal committee (ADC) defied Transnet’s management – as well as National Treasury’s advice – by ceding its IT data services tender to the German company on February 22.

The five-year tender could have been awarded to business mogul Robert Gumede’s Gijima Holdings, which scored the highest points.

Gijima’s chief operating officer, Maphum Nxumalo, said the company thanked National Treasury for its intervention to stop wasteful expenditure.

“We are dismayed and disillusioned that major German-owned companies have been involved in state capture and corruption with impunity, while local companies are cheated of contracts,” Nxumalo said.

“It is astounding that the board of Transnet decided to ignore the evaluation team’s results and management’s recommendation. We are confident that Gijima and Transnet will succeed in rescinding the unlawful awarding of the contract to T-Systems, which, for the past eight years, continues to charge Transnet more than R500 million annually against Gijima’s price, which is less than R300 million per annum.”

Nxumalo called for a criminal and forensic probe into T-Systems’ contract and the unlawful tender award.

T-Systems has been providing IT services to Transnet over the past seven years, at a cost of about R500 million a year. It is among many multinational companies that have been linked to the Gupta family’s state capture of South Africa’s state-owned enterprises.

City Press established T-Systems’ link to the Guptas through a data services contract that the company ceded to Zestilor, after inheriting it through its purchase of Arivia.com in 2009.

The cession contract – approved and signed by erstwhile Transnet CEO Brian Molefe on December 1 2014 – benefited Zestilor. Zestilor was owned by Zeenat Osmany, the wife of Gupta associate Salim Essa.

Gama wants the court to declare the board’s action “invalid and unlawful” and wants the tender to be reviewed and set aside.

Transnet spokesperson Molatwane Likhethe did not answer questions about who had sat on the ADC and given the go-ahead. “Given that the matter has now escalated to a legal process, Transnet would like to reserve its comment on this matter,” Likhethe said.

“Transnet would, however, like to clarify that the application for the declaratory order in the High Court was purely a governance process that has to happen before the company can implement any of the National Treasury’s directives.”

Gama said in court papers that T-Systems and Gijima, as the remaining two bidders, submitted their best and final offers on August 17 2016.

He said Gijima scored the highest points overall for price and preference, but Transnet’s cross-functional evaluation team compiled a risk assessment report on October 5 2016, highlighting a number of risks that were prevalent within Gijima’s final offer.

“The team resolved that the risks identified were too material for the tender to be awarded to Gijima,” Gama said.

However, he added, after deliberations by officials in legal services, supply chain management and the IT chief information officer – and after meeting Gijima representatives about the risks – it was decided that the tender be awarded to Gumede’s company.

“The group chief financial officer then submitted a memorandum recommending that Gijima be awarded the contract, given that the risks assessed had been mitigated,” said Gama.

“ADC, a sub-committee of the Transnet board, differed with the officer and, instead, recommended to the board that the contract be awarded to T-Systems and not Gijima.”

Transnet informed T-Systems on March 2 2017 that it was the successful bidder and issued a letter of intent, while Gijima was told its bid was unsuccessful.

Gijima lodged a complaint with Transnet’s procurement ombudsman, but since the board was implicated, the ombud requested National Treasury to investigate.

Solly Tshitangano, the chief director of governance, monitoring and compliance at National Treasury, warned Gama in a letter dated July 18 that Transnet’s board had an obligation to award the tender to the preferred bidder, Gijima.

On Tuesday, T-Systems filed a notice of intention to oppose Gama’s application. T-Systems spokesperson Thamsanqa Malinga confirmed receiving written questions but did not respond.

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