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Inquiry hears Transnet paid R42.5bn for new locomotives

Jul 10 2019 13:19
Jan Cronje

Transnet has to date spent R42.5bn on acquiring 1 259 new locomotives meant to upgrade its ageing fleet, some R3.9bn more than it originally budgeted for, the commission of inquiry into state capture has heard.  

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

The commission, chaired by Justice Raymond Zondo, on Wednesday received five files containing detailed invoices for Transnet's multi billion-rand series of tenders for the new engines. The three related tenders, for 95, 100 and 1064 new engines, have been dogged by allegations of kickbacks, irregularities and ballooning prices.

The commission started hearing evidence about the locomotive tenders in early May, 2019. This was put on hold for the commission to focus on corruption and kickbacks in the airline industry, as well as the Waterkloof landing, between June 13 and July 9. 

On Wednesday the commission heard evidence from Helen Walsh, the acting general manager for governance, risk and compliance in the state-run freight rail's company's finance department.

Walsh gave evidence on Transnet's payments to the four original equipment manufacturers for the 1259 locomotives – General Electric, Bombardier Transport, China South Rail and China North Rail. She also provided details on relocation costs, and advisory fees paid to global consultancy McKinsey and Gupta-linked company Regiments.

She said that, to date, Transnet had paid R42 501 186 193.59.

She could not say how much Transnet still has to pay. 

Ballooning costs 

The inquiry has previously heard that the initial estimated cost for the project was R38.6bn. The state-owned freight rail's acting CEO, Mohammed Mahomedy, in late May said cost escalations were not justifiable.

Walsh told the commission that Regiments had been paid a total of R305m (including VAT) in advisory fees between 2014 and 2016. McKinsey, meanwhile, had been paid R11m. 

Jonathan Bloom, of MNS Attorneys, previously told the commission that Transnet's treasury was more than capable of facilitating loans for the payments and that an advisory firm like Regiments was not needed.

"One wonders why this particular situation was allowed to occur," he said.

The inquiry has adjourned for the day and will resume tomorrow.

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