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Documents 'deliberately' altered to award locomotive contract to China South Rail, Zondo inquiry hears

May 17 2019 13:37
Lameez Omarjee, Fin24

Former Transnet executives amended a business case to procure 100 locomotives so that it would favour China South Rail in tender processes, the commission of inquiry into state capture heard on Friday. 

Francis Callard, a former electrical engineer at the state-run freight rail agency, told the commission he was "uncomfortable" with the way procurement process guidelines set out by the Department of Trade and Industry and National Treasury were disregarded at Transnet.

The commission, chaired by Deputy Chief Justice Raymond Zondo, has been investigating allegations of state capture, corruption, and fraud since August 2018. The commission has already heard from board chairperson Popo Molefe and acting CEO Mohammed Mahomedy, who both shared how procurement processes were flouted in the awarding of tenders.

Callard presented evidence on how a particular contract for 100 locomotives was irregularly awarded to China South Rail (CSR) in 2014. The contract reportedly cost Transnet R509m more.

"I prepared a business case for 100 locomotives which was unilaterally changed by Transnet group executives and or the freight rail supply chain services to favour CSR (China South Rail)," he said.

According to Callard's testimony, a memo of the business case he originally drew up for Transnet to procure the locomotives was amended without his knowledge or any consultation with him or any of his technical colleagues. He said there was "deliberate misrepresentation" in the revised memo which he believes was authored by former Group Chief Procurement Officer Garry Pita.

"I cannot say who made the decision (to amend the memo) but there is a trace of emails between myself and various parties including Garry Pita that indicate strongly and suggest overwhelmingly Garry Pita was the author of the revised document," he told the commission. Callard said he had received the revised version from former supply manager Lindiwe Mdletshe.

Callard said it made more business sense to award the contract to Mitsui & Co of Japan. Mitsui had already been a provider of the required locomotives in the past and would be best suited to provide the locomotives urgently.

Callard then unpacked the material changes that were made – such that the memo excluded the need for urgency. If urgency was included in the business case CSR would have fell out of the running in the procurement process because it would not meet this need, Callard explained. Further, the memo changed the need for a locomotive with specifications and included more general requirements instead.

"I was taken aback by these unilateral changes… I did not know what to make of these changes. I deliberated on it long and hard. I slept on it," he told the commission.

Callard said he emailed Siyabonga Gama, the Transnet Freight Rail CEO at the time, and Thamsanqa Jiyane, the former chief procurement officer of Transnet Freight rail to express his concern.

In response Jiyane called Callard by phone to ask him why he sent the email. To this Callard responded, "Because these locomotives won't work."

Commenting on what he learnt of the process, Callard said, "I am personally uncomfortable. Of everything I have read and seen of this, I am uncomfortable."

The inquiry will resume at 14:00.

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