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R1.25bn relocation costs for Transnet train tender 'unjustifiable', inquiry hears

May 31 2019 12:32
Jan Cronje, Fin24

Two transportation companies contracted to build billions of rands' worth of locomotives for Transnet had "no justification" for hiking costs by R1.25bn as a relocation fee, the state capture commission heard on Friday. 

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

On Friday, the commission continued to hear testimony from MNS Attorneys, which in 2018 was hired to probe allegations of fraud, price inflation and other irregularities by Transnet's former board.

The firm eventually produced six investigative reports after they were given to access to internal mails and documents, and allowed to interview Transnet staff. 

Thobani Mnyandu, an expert in construction law and tenders, told the commission that based on the MNS probe, the relocation costs from Johannesburg to Durban for the two groups were unjustified. 

The two companies are Bombardier Transportation and China North Rail. They have not yet appeared before the commission.

'Relocation costs' 

In early 2015 the two companies entered into negotiations with Transnet after the assembly point for locomotives was changed from Pretoria to Durban. The leader of the negotiating team from Transnet was the group's then-Chief Financial Officer Anoj Singh.

As the commission heard earlier in the week, Bombardier quoted an extra R618m for relocating, and China North Rail R647m. These figures were accepted by Transnet's then-CEO Siyabonga Gama. 

Mnyandu told the commission that, by the time Transnet halted the payments for the relocation, Bombardier had been paid R248m and China South Rail had been paid R368m.

He said that, in the view of MNS, Gama had breached the Public Finance Management Act by incurring fruitless and wasteful expenditure and not interrogating the reasons for the costs.

Gama was fired in late 2018. Singh later joined Eskom. He resigned in January 2018. 

'Unjustifiable' 

The locomotives were part of a controversial contract for 1 064 new engines meant to upgrade and modernise Transnet's fleet. But the tender has been dogged by allegations of kickbacks, fraud and irregularities after prices increased from R38.9bn to R56bn.

Mnyandu on Friday quoted from a report by Liliwe Rail Solutions, a consultant which MNS contracted as independent expert to probe whether the costs were warranted. The report's findings, which he read out on Friday, were that no relocation had taken place, the costs billed to Transnet were unjustifiable, and the cost increases were approved without documentation by Transnet. 

In early 2015, neither group had yet set up shop in Johannesburg, the inquiry has heard. According to some initial email correspondence, the move to Durban was expected to actually produce savings on certain items, as the assembly points for the locomotives would now be nearer to Durban port, where the locomotive parts would be shipped from abroad. 

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