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Transnet became 'captive client' after selling off comms network, inquiry hears

May 27 2019 18:00
Jan Cronje

Transnet should never have sold off its vital fibre communications network to an external service provider in 2007, the state capture commission has heard.

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

Former Transnet employee Gerhard van der Westhuizen, a chartered accountant, was testifying on Monday. Van der Westhuizen first worked in the oversight of outsourced audits, and later oversaw the state-owned entity's ICT procurement and vendor management. He resigned in late 2014. 

Van der Merwe told the commission that, in 2007, the decision was taken to sell off "non-core" assets, including Transnet's fibre communications network Transtel and the group's data storage subsidiary. 

Transtel's assets were sold to Neotel, while global IT services company T-Systems bought the hardware and software on which Transnet data was kept. 

'Significant risk'

Agreements were signed with the companies so that they would keep providing services to the state-owned freight rail and port operator.

But Van der Merwe said the initial decision to sell off the assets made no sense.

It later placed the Transnet at a major disadvantage when negotiating extensions for the contracts.

"It exposed Transnet to significant risk," he said.

He said Transnet became a "captive client" with a weak negotiating hand when the contracts were set to be renewed in 2013 and 2014. This is because its fibre communications network was owned by an outside service provider. 

transnet  |  state capture inquiry
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