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Brian Molefe failed to get go-ahead for massive Transnet locomotive price hike, inquiry hears

May 29 2019 12:22
Jan Cronje, Fin24

Former Eskom CEO Brian Molefe during a meeting with Parliament’s Standing Committee on Public Accounts on May 30, 2017. (Gallo Images / Sowetan / Esa Alexander)

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Transnet's former CEO Brian Molefe did not seek required approval from the minister of public enterprises when the price for the acquisition of 1 064 locomotives was hiked by billions of rands, the state capture inquiry heard on Wednesday.

The commission of inquiry has been investigating allegations of state capture, corruption and fraud since August 2018.

Tshiamo Sedumedi of MNS Attorneys was continuing to testify on Tuesday about the findings of six investigative reports into Transnet. The group had been asked to probe allegations of irregularities related to tenders by the state-owned entity's previous board.

The 1 064 locomotives were meant to upgrade and modernise Transnet's fleet, but the contract has been dogged by allegations of kickbacks, fraud and irregularities after the price increased from R38.9bn to R56bn.

Sedumedi told the commission that, according to MNS's probe, the price increase was unlawful because Transnet had not sought approval from the minister of public enterprises. Only the initial cost of 38.9bn was approved by the minister. 

Transnet falls under the department of public enterprises, together with state entities such as Eskom and Denel.

Sedumedi said that, according to the Public Finance Management Act , Transnet had to obtain approval from the department of public enterprises for the contract price hike.

"We don’t have any record of an application being made for such an increase," he said.

Sedumedi said that then-CEO of Transnet, Brian Molefe, wrote a memorandum to the group's board motivating for the increase, but only after the increases had already been concluded. The board approved the proposal.  

"It is our view that an ex-post facto ratification by the board does not cure that violation [of the law]."

Molefe left left Transnet in 2015 to join Eskom. He resigned from Eskom in 2016 after being implicated in Public Protector Thuli Madonsela's State of Capture report. He was controversially reappointed as the power utility's group CEO in May 2017, only to have the offer rescinded after a backlash.

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