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Transnet to get R180m back from Gupta-linked Regiments Capital

Watch CEO Mohammed Mahomedy share interim results highlights.

State-owned freight-rail and ports company Transnet, which itself has been caught up in the crosshairs of state capture, has reached a settlement with Gupta-linked Regiments Capital in relation to the controversial ‘1064 locomotives contract’.

Transnet acting group CEO Mohammed Mahomedy told Moneyweb during its interim results briefing on Monday that the settlement agreement effectively means Transnet will get back around R180 million in advisory- and other fees related to the multi-billion-rand locomotives contract.

While Mahomedy did not go into further detail about the agreement with Regiments, he conceded that the contract – which involved four major global rail locomotive companies – had been racked by irregularities and delays.

Resignations and suspensions

It was in 2014 that Transnet’s former board approved the deal to buy locomotives from China South Rail, China North Rail, General Electric and Bombadier. At the time Brian Molefe and Anoj Singh were Group CEO and CFO at Transnet respectively, while Siyabonga Gama was also an executive.

Costs around the contract spiralled from an estimated R38 billion in 2014 to more than R50 billion last year when Gama, who took over from Molefe as Group CEO in 2016, was fired. All three former executives have been implicated in state-capture allegations at Transnet, while several other executives have either resigned or been suspended as investigations continue.

Read: Transnet dismisses CEO amid procurement probe

Mahomedy says that as part of the state-capture clean-up process, Transnet is addressing the issues and several court processes are now underway. However, he stresses that the legal processes need to take their course.

“Transnet has commenced various legal proceedings with both entities, as well as employees and executives who were implicated at the State Capture Commission. Transnet is in the process of pursuing these conversations with the individuals and entities, but largely we have commenced civil- and, in some cases, criminal proceedings.

“We will pursue these matters to the full extent of the law,” he adds.

“These matters are now in the hands of the courts and we will look to expedite these matters as quickly as possible.”

Mahomedy notes that one of these cases involved the negotiated settlement with Regiments to pay R180 million back to Transnet. “We look forward to this amount being paid back to Transnet in the very near future.”

Transnet’s new board under Popo Molefe as chair, has been trying to clean up the state capture mess at the company since last year. The entire 1064 locomotives contract has been interrogated and Transnet has been in talks with the locomotive manufacturers to bring the costs down and address delays related to delivery schedules.

Watch: Transnet’s interim results highlights 

During Transnet’s results presentation for the half-year to September, Mahomedy conceded that the delays in taking delivery of the locomotives had seen Transnet only spending around R7.9 billion of its more-than R12 billion in planned capital expenditure for the period. However, he says cost savings achieved by interrogating its spending plans benefited the group, considering the tougher economic environment.

Read: Transnet eyes Richards Bay port for new liquefied gas hub

“The locomotive contract was riddled with irregularities and unlawful agreements,” notes Mahomedy. “Our talks with the locomotive manufacturers have progressed. Transnet has, from its side, concluded what it set out to achieve in the talks. We will now approach the courts to hopefully come up with just and equitable agreements,” he adds.

Transnet reported a slightly stronger first half performance for its 2019/2020 financial year compared with the previous full year. Group revenue increased by 2.9% to R38.7 billion, while profit for the half -year increased by 3.5% to R2.9 billion. Operating costs increased by 1.2% to R21.2 billion, with staff and energy costs accounting for almost 75% of this. Cash generated from operations increased by 5.3% to R16.2 billion, while its gearing came in at 43.2% and its cash interest cover ratio was at three times.

Mahomedy says Transnet delivered a “credible performance” for the first six months of its current financial year, despite tough trading conditions. He concedes that on an operational side, the general freight part of the business is facing challenges with lower throughput.

He also notes that irregular expenditure recorded in last year’s financial results had seen Moody’s Investors Service changing its ratings outlook for Transnet from stable to negative. “We continue to engage with the rating agencies and are confident this rating will return to stable soon.”

Read: Transnet disputes qualified audit findings

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It would also help if we stop burning out trains. And we must stop stealing copper wire as well.

In the meantime “Madam” at the NPA is still building capacity.

Drop in the ocean.

yes, speaking under correction, but as far as i can remember back when the 1000 locomotives were bought from china with the assistance of the guptas with their so called “expert knowledge” about locomotives, it was calculated at that stage that they received commission of +/- R10 million per locomotive – R180 million (only 18%)is then actually just a drop in the ocean out of a R1 000 million possibly paid as commission.

I agree, that amount compared to the amount they pay monthly to wages makes it of little consequence. The need billions, getting millions back means they are barking up the wrong trees. They should be chasing billions.

Only R180m? It would be interesting to know how the parties got to this figure!And to see how the money is appropriated/utilised – on incentives/bonusses for recovery the money?!

This on top of the negotiated settlement between Transnet Pension Fund and Regiments, for 50%-60% of the reported losses.

Every little helps.

just more money to loot by ANC and friends. So first they steal billions and then they “settle” for paltry amount. What the hell-not their funds .Only tax money.Thank you corrupt greedy ANC.

So, Mr. Mahomedy; “These matters are now in the hands of the courts and we will look to expedite these matters as quickly as possible.”

And seeing as you acknowledge that: “The locomotive contract was riddled with irregularities and unlawful agreements,” we look forward to the speedy prosecution and jailing of the directors and others involved.

The taxpayer does not want “the courts to hopefully come up with just and equitable agreements” but rather actual jail terms.

There is no other way of stopping the corruption which is bleeding the economy dry.

I have just heard that Adam Catzavelos has been swiftly and efficiently dealt with by the courts. Please ensure that you operate with same swiftness and efficiency.

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