Excessive costs for 1064 locomotive contract not justifiable, says acting Transnet CEO | Fin24
 
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Excessive costs for 1064 locomotive contract not justifiable, says acting Transnet CEO

May 15 2019 19:10
Lameez Omarjee, Fin24

Former Transnet CFO Anoj Singh played a significant role in developing the business case for a massive contract for 1064 locomotives to be acquired by Transnet, the state capture inquiry heard on Wednesday. 

The contract has been mired in controversy over cost overruns and allegations of corruption. The commission of inquiry has been investigating allegations of state capture, corruption and fraud since August 2018.

The state-owned freight rail's acting CEO, Mohammed Mahomedy, on Wednesday walked the commission through Transnet's new board's review of contracts signed by previous boards and top executives. 

One of the contracts reviewed was for a multi-billion rand tender awarded to China South Rail in 2014 for 359 of the 1064 locomotives. 

At the time when the business case for the locomotives was being established in 2013, Mahomedy was general manager of group capital integration at Transnet. His work included the oversight of mega projects, which the acquisition of the locomotives.

Singh, Transnet's then-CFO, was highly involved in the process of drawing up a business case for the 1064 locomotives, Mahomedy said.

Singh also liaised with the former Transnet Freight Rail CEO, Siyabonga Gama, who had an oversight role of the business case. Singh later left the employ of Transnet for Eskom. He was suspended from the power utility in late 2017 and resigned in early 2018.  

'Immediate red flag' 

The costs for the locomotive contract ultimately escalated from R38.6bn to R54.5bn, as was reported in an 2018 investigation

The massive cost increase should have been an immediate red flag for management, said Mahomedy on Wednesday.

He added that the original amount of R38.6bn already included R2.2bn allocated for contingencies. 

When asked by Justice Raymond Zondo, who is chairing the inquiry, if he was satisfied with Singh's explanations for the cost escalation, Mahomedy said the cost escalations were not justifiable. 

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