Saturday, August 25, 2018

Transnet overpaid R500 million for locomotives – report

Transnet SOC Ltd, South Africa’s state-owned rail and ports
operator, paid R509 million ($38 million) more for 100
locomotives after switching a supply contract to a Chinese rail
company from Mitsui & Co of Japan, according to a report
commissioned by the National Treasury.
The finding is part of an investigation into so-called state
capture, in which private individuals used influence over
government officials to win contracts from state companies.
At the center of these allegations is the Gupta family, who
were friends with former president Jacob Zuma. They deny
wrongdoing.
Transnet’s decision to buy locomotives from China South Rail
also resulted in the vehicles being imported rather than made
in South Africa, according to the draft report compiled by
Fundudzi Forensic Services, seen by Bloomberg.
Regarding the increased cost of the contract, Transnet board
members – then led by Brian Molefe – must give reasons why they
shouldn’t be held accountable, the investigators said.
Transnet’s media office didn’t immediately respond to an email
seeking comment and calls went unanswered.
President Cyril Ramaphosa has pledged to stamp out corruption
since taking over from Zuma in February.
That has included replacing directors at a number of state
companies including utility Eskom Holdings SOC Ltd, which has
also been embroiled in allegations of misuse of funds and
incorrect awarding of contracts.
Proper Procedure
In June, a probe by law firm Mncedisi Ndlovu & Sedumedi
Attorneys found that Transnet didn’t follow proper bidding and
evaluation procedures for contracts, and some executives were
“negligent” or took “unlawful decisions.”
Top officials should be liable for the resulting losses,
according to the report.
Details of the draft document were earlier reported by Business
Day newspaper.
Transnet appointed a group led by US consultancy McKinsey &
Co. to advise on a further contract to acquire 1,064
locomotives, according to the report.
The fee was increased to R267 million from R35.2 million after
various “scope extensions,” though there’s no evidence of
proposals to justify the increase, it said, adding that an
investigation was still in progress.
Mckinsey withdrew from the contract before the fee was paid, a
spokesman said in an emailed response to questions. The
beneficiary was a South African advisory firm called Regiments.
A call to Regiments’ Johannesburg office wasn’t answered.
McKinsey did not help determine the locomotive prices, did not
help select the winning supplier, and did not work on the
transaction advisory service, a spokesman said.
The consultancy last month reached a settlement to repay almost
R1 billion to Eskom and apologised for wrongdoing regarding how
it did business with the utility.
A McKinsey spokeswoman didn’t immediately respond to an email
seeking comment.

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