Transnet procurement corrupted by Gupta enterprise and its puppets

Gigaba, Molefe, Gama, Singh and Jiyane exposed.
The Gupta way … extortion, theft, fraud, forgery, bribery, kickbacks, ‘fees’, irregular awards made and irregularly increased, illicit influence, corrupt control. Image: Shutterstock

The Zondo report into the impact of state capture on Transnet between 2009 and 2018 shows the Gupta enterprise engaged in a pattern of racketeering at the state-owned company.

The primary architects and implementers of state capture such as Malusi Gigaba, Brian Molefe, Siyabonga Gama, Anoj Singh and Thamsanqa Jiyane, were placed in key roles at Transnet, where they could exercise “illicit and corrupt influence/control over decision making”.

This had a devastating and costly impact on procurement.

Gigaba, minister of public enterprises from 2009 to 2014, ensured the appointment of Molefe and Singh as directors of Transnet, and Gama as CEO.

They in turn gave free rein to Iqbal Sharma as chair of the influential board acquisitions and disposal committee of the Transnet board.

The racketeering activity included extortion, theft, fraud, forgery and uttering (putting forged money into circulation).

Key employees at Transnet were disempowered or marginalised.

Substantial fees were paid to consulting and advisory services such as McKinsey, Trillian and Regiments for doing work that could have been done internally. Kickbacks were paid to entities within the Gupta enterprise, and money was laundered through various shell companies controlled by Gupta associate Salim Essa and his associate Kuben Moodley.

Cash bribes

Witnesses comprising drivers and close protection officers testified that Molefe, Gama, Singh, Gigaba and Garry Pita (former Transnet CFO) were the recipients of cash bribes from the Gupta enterprise.

In regard to Pita, there is a “reasonable suspicion that he may have received cash bribes” and that further investigation should be undertaken.

The Zondo report recommends that further investigation be carried out to determine if there are reasonable grounds to conclude that Pita should be prosecuted for corruption.

There are “strong and convincing reasonable grounds” that Molefe, Gama, Singh, Gigaba and Jiyane “corruptly received property from and participated in the affairs of the Gupta Enterprise”.

Security contract

The General Nyanda Security (GNS)/Abalozi contract – for the rendering of security services in relation to cable theft and the prevention of criminal activities against Transnet Freight Rail (TFR) – was signed in June 2008, extended in July 2008, and extended again in May 2009.

The total amount paid to GNS for security services over some two years was R95.5 million.

There were significant misrepresentations and irregularities in the award of the contract, and GNS effectively outsourced the tender as it had no track record in the security service industry.

Transnet issued a summons against GNS for the recovery of R95.6 million on October 27, 2010, but Transnet dropped the litigation action in May 2014, and then “made an improper payment” of R20 million to GNS in settlement of its legal fees.

The procurement of the 95 locomotives

In 2011, 95 locomotives were procured for R3.6 billion.

The Zondo report opines that this was significant as it provided “insight into the evolving relationship” between Transnet and CSR Zhuzhou Electric Locomotive (CSR) and the role of the irregularly appointed CSR as a supplier “as part of the corruption and pattern of racketeering activity of the Gupta enterprise”.

CSR paid Century General Trading (CGT) a 20% kickback amounting to $16.7 million. At least 85% of this was paid to companies controlled by the Gupta enterprise.

The procurement of the 100 locomotives

Next up was the procurement of 100 locomotives that were urgently required for use on the coal export line from the Ermelo coalfields to Richards Bay. Francois Callard, a senior manager of TFR, submitted a business case memorandum for procurement from Mitsui at a cost of R3.871 billion.

The enablers and implementers got involved, and CSR was appointed as the supplier. Assurance was given that CSR could produce 100 locomotives in a short amount of time. The estimated cost was R3.8 billion excluding borrowing costs. TFR management failed to disclose that production would take place wholly in China.

Moreover, the locomotives were not suitable for heavy haul, and had to be modified at an additional cost of R347 million.

The cost of the locomotives was increased to R4.37 billion, with local content of only R657 million – and 60% of the payment price had been paid upfront, “unusual and not in line with past practice”.

On March 17, 2014, Transnet agreed to another increase in price to R4.48 billion.

Then Singh got involved, and the price rose to R4.84 billion.

CSR paid a kickback of R925 million to Regiments Asia, which then paid 85% of this amount to the Gupta enterprise.

Zondo is of the view that there are “reasonable grounds to believe that board members” such as Molefe and Singh, and employees such as Gama and Jiyane, “violated the Constitution and other legislation by facilitating the unlawful awarding of tenders by Transnet to benefit the Gupta enterprise …” 

The procurement of the 1 064 locomotives

The acquisition cost of 1 064 locomotives was stated in the business case for procurement in 2011-2012 to be R36.6 billion. The ultimate cost of procurement was ratcheted up to R54.5 billion.

McKinsey was appointed as the transaction advisor.

Kickbacks of 21%, amounting to R1.3 billion, were to be paid to Regiments Asia.

Zondo found that Molefe, Singh, Gama and other members of the board did not act with “fidelity, honesty, integrity and in the best interests of Transnet in managing its financial affairs …” and there are “reasonable grounds to believe that Molefe, Singh, Gama and Essa, as well as others, received corrupt gratifications”.

Transnet is seeking to set aside the 1 064 locomotive contract.

To wrap up

The alleged wrongdoing included the irregular tender awards, the irregular increases in the contract values, the kickbacks paid, the payments made to entities in the Gupta enterprise, and the payment or receipt of bribes.

Value-added and pay-as-you-earn tax may not have been paid over to the South African Revenue Service (Sars).

An inflated amount of legal costs was paid to GNS/Abalozi even though these had already been settled or had prescribed. This expenditure was unjustifiable.

Among the Zondo report recommendations:

  • An independent body must be created with the power to review procurement awards.
  • Law enforcement agencies should conduct further investigations with a view to the possible prosecution of Essa and his various companies.
  • Law enforcement agencies should conduct further investigations with a view to the possible prosecution of Molefe, Singh, Gigaba, Gama, Pita and Jiyane on charges including corruption, receipt of bribes, and racketeering; Singh for his travel costs to Dubai and Gama for the payment of his Oberoi Hotel bill; and Molefe for the unauthorised payment of R20 million to GNS/Abalozi.
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You can also read or download the Zondo report on Transnet here.

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A good article thank you. There are 6 names mentioned for potential prosecution and forced repayment. These Zondo recommendations from the perspective of what they must pay back is disproportionately absurd. Singh for his travel costs to Dubai – assuming he flew first class, surely even staying at plush hotels we are talking ticket and entertainment/ hotel – say generously R150k. Gama for his Oberoi hotel, i have not seen the cost and have not focused on these costs but even if R200k, that is not punishment, it is an insult to the tax payers that have had to endure the Zondo commission.

These men were orchestrating and allocating capital to the tune of R50 billion+. This is just on the locomotives. As an example of the absurdity of the proposed Zondo “punishments” – on the CSR deal you can see the basic mechanics – inflate the price by R1B give or take – which is then kick backed – however the total deal ultimately was 10 times this size, it is reasonable to assume the same greed and methodology would have applied to the whole deal – when they sat around and decided on senior cadre deployment “commissions”.

When you are conducting fraud at this industrial scale on behalf of your masters, you are going to want to ensure that you are set for life to live like a king and have pack up and disappear money (somewhere else) when this comes out – it always does. When someone is already on R4m-R5m a year salary, they don`t just say, yup no worries cover my first class return and i will tie up that R925m kick back you have arranged. The Guptas were very big on cash and not just in ZAR – one might hazard a guess that they were not paid the pittances mentioned above, but i suspect tens of millions per deal. Even if all 6 received R10m each, that is still less than 10% of the R786m (nett amount after 85%). I can only assume that this “commission” would have been similar on each deal.

We are missing a big question here – these are just well paid minions. Silly assumption and guesses on my side – but say R786m less R60m – leaves R726m – the REAL money – where did that go? To the Guptas yes but then split with who else and how. Running riot like this even by these six, needs far higher approval and ultimate approval from the head master not so. Will we ever learn these facts – that remains to be seen. Clearly billions are missing and i do not think anyone of this crooked network would be stupid enough to keep it in SA.

Does anyone recall that little market incident, Nene out and Des van Rooyen in on 9th December 2015, albeit only for 4 days. What people seem to forget is what Des did in his brief 4 days – those with access to treasury and SARB will have the exact details i only have notes. However, in this period he allegedly signed off the transfer of close to R85B to Abu Dhabi in about 11 transactions – something i assume Nene had been refusing to do. This was then allegedly immediately disbursed within UAE and a large chunk sent to India – now you see why these things should be looked at – that is the kind of move you make when you know the writing is on the wall… again this is just speculation on my side – i have no idea what the make up of those transfers were or for who – but someone should take a look – if they are allowed to. But i believe it is from foreign banks accounts – that the real rewards for mandates well executed by cadres will have been paid, to other foreign accounts.

Zondo are recommending payback only on what they can physically trace and they are looking largely ONLY at South African banking activities. The dragnet should be expanded a little further east – Singapore maybe, Kuala Lumpur and Shanghai – i would start with PBOC – but super opaque. Look for proxy accounts family usually or useful idiots. Dubai will be another place that was used by this cartel i suspect – it certainly was a busy hub for all sorts of TRANSNET team members and ministers for years, the Gupta family did settle their when they fled. Again good luck in getting anything from the UAE banking system. I suspect these enquiries are prevented and limited to SA – the real money for all concerned sits offshore – what is being found is what is allowed to be found.

Just my cynical until proven otherwise 2 cents.

Absolutely agree…look futher than the South African scenario to find the “real” mischief. Now that you mention it….Those 4 days were critical to the theft! Surely the Zondo Commission has or is looking into that? Or is this Commission merely a smoke screen to placate the taxpayer into believing all is well so continue paying taxes!
Nothing, it seems, is what it seems in SA any more!

I could not finish reading this article as I was sick to the stomach at the level of corruption and the total disregard for the taxpayer specifically and the people of South Africa generally.
Where does this end? In my opinion,it only ends with the kingpin being taken out and facing the laws of the land that we are all required to abide by. The man under whose watch this was allowed to happen no matter the reason -. Stupidity is not reason enough. Until Zuma and his henchmen are convicted of these crimes against the people of South Africa, we will never get over this.

The engineers and architects of what is likely Africa’s largest ever fraud – are all billionaires and i am not referring only to the Guptas. The minions in this article could have been any one of a number of other cadre deployments. The selection process must have been an interesting affair.

In short – imagine what is going on behind the curtain. The cartel that executed this arguably have more free cash available to them all over the world, than our own government.

I am not holding my breath.

The other side of the racketeering coin – hardly ever discussed.

Gama was the head of Spoornet/ TFR from 2005 apart from a firing/ rehiring farce detailed in Zondo. During his time in the wilderness were any of his activities and interactions investigated or at least queried. Has Zondo gone back far enough in their digging? Follow the money. Clearly, he had a very powerful lobby of vested interests to put him back in power.

https://www.sanews.gov.za/south-africa/suspended-transnet-ceo-found-guilty

https://www.miningmx.com/news/energy/19031-the-return-of-siyabonga-gama/

The other side of this ugly coin were the TFR customers/ would be customers switching everything to road. Rail for sale apparently, those that paid homage to the emperor would get their slot allocations and trains, those that did not – well allegedly they would not get their agreed slots or only some of them. Resulting in downsizing, moving to road and ultimately not being able to operate at anywhere near their full potential, if at all. How many businesses did this affect over the 13 years, what was the lost opportunity cost to the country in terms of job losses and new jobs not being created – rail after all along with ESKOM should form the backbone of the economy.

You have a man in Gama controlling rail and according to Zondo actively working against its development for 13 years! What as a country could we have achieved during this time, if this man had been pro-business development and pro job creation? How many projects were cancelled not just at TFR but at Portnet and for what reasons. What was the incestuous relationship between the head of Transnet freight rail/ Transnet and heads of ESKOM that just canned or worked against ever trying to switch the VAST amounts of road business to rail – this should have been a hand in glove relationship and South Africa`s main job creation driver.

Why are there so many no-go areas in the Zondo reports, or absence of what would appear to be obvious areas to investigate. Were there proxy companies set up during his tenure with blatantly obvious conflicts of interest, was he benefitting from other private companies that sometimes inexplicably boomed and continue to this day, whilst others were sidelined? What is he doing now – so many questions that a simple diagram could unravel in short order by those that know i would think if you asked the right people? Imagine what he knows, hence the reason he was allowed to run riot on the other side of the coin for years – you can reach the stage of being too big to FALL which clearly, he had achieved.

Will we ever find out what happened to dozens of lieutenants? Afterall, they did his bidding. Names which are not mentioned or hardly ever mentioned – what are they doing today, simple google searches seem to have not even been bothered with at Zondo – maybe because investigating the other side of the coin, would open up the parastatal to multibillion rand legal claims from the affected private sector? Why do they not have a junior google search division at Zondo – it is amazing what you can find in just 15 minutes of googling Gama and Transnet. Was Gama running a Mafia style operation – PwC words not mine. What do the key people in this article do today – i have no idea but it is easy enough to find out i am sure? Was anyone disbarred? What did the Transnet board pursue, what, why-not, were the internal minutes ever shared etc etc etc?

The conclusion of this article essentially shows you that PwC at the time, was asking the perpetrators to investigate themselves – what happened – nada obviously and the feeding continued for another few years.

https://www.news24.com/citypress/news/transnets-war-employees-threatened-if-they-queried-dodgy-tenders-20150706

All Zondo does is raise more questions than answers in my opinion – is that the aim?

End of comments.

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