Transnet Durban

SATAWU rejected the 6% wage increase proposal from the CCMA. Image: Transnet

Troubled Transnet reports R10b of irregular spending

Transnet has been in the midst of an overhaul over the past year, following revelations of corruption and mismanagement under its previous executives including Brian Molefe, Anoj Singh and Siyabonga Gama, among others.

Transnet Durban

SATAWU rejected the 6% wage increase proposal from the CCMA. Image: Transnet

Transnet said Friday that irregular expenditure in 2020 was lower at R9.97 billion compared to R18.51 billion in the previous year.

The state-owned rail, logistics port and pipeline company, which operates nearly three-quarters of Africa’s rail network, the bulk in South Africa, has been investigating allegations of corruption.

The entity has sought to clean up operations under new Chief Executive Officer Portia Derby, separating its procurement and finance functions and reviewing the overall structure, Bloomberg reported.

Transnet blamed contracts in previous years for the spending that did not comply with prescribed by legislation.

Plans to ring-fence billions of rand of irregular expenditure at Transnet are under discussion by the National Treasury, the auditor-general and the department of public enterprises, minister Pravin Gordhan said.

Speaking at the release of Transnet’s annual results, which showed cumulative irregular expenditure of R114bn, public enterprises minister Gordhan said the talks are geared to secure clean audit findings for the state-owned entity (SOE).

Transnet is the largest and most crucial link of the country’s freight logistics chain, delivering thousands of tons of goods around South Africa every day. Goods are transported from sea to land destinations via rail, pipelines and road.

Dodgy deals

Instances where procurement deals were made without following proper compliance “continue to have a lingering effect on the business,” Transnet said.

One of these ‘dodgy deals’ was unpacked at the Zondo Commission into state capture this week, when Transnet executive Yousuf Laher told the inquiry that “fear of being perceived as insubordinate” led him to not further questioning the decision by the company’s decision to pay R4.4 billion in the acquisition of 100 electric locomotives from China South Rail, instead of obtaining the carriages at a lower price.

Laher, executive manager in Transnet’s Freight Rail’s finance department told the state capture inquiry this week that at the time in 2014, he had done all he could to raise his concerns to his principal former Transnet CFO Anoj Singh because he did not know how the much higher price had come to be.

Laher was part of the negotiation and evaluation teams on Transnet’s controversial acquisition of 1 064 locomotives and the extra 100 electric locomotives.

He told the inquiry that the initial quote was R3.8 million per locomotive, totalling R3.8 billion, and was from suspended chief executive at Transnet Engineering, Thamsanqa Jiyane, but a reasonability calculation done by Laher put the price at R41 million per locomotive.

Two days after the negotiations, Laher said he was told that then CEO Brian Molefe had settled on R44 million, a decision he made in separate meetings and without board approval.

The contract for the 100 locomotives was awarded to China South Rail, which had initially quoted Transnet R49 million per locomotive.

Did you suspect any wrongdoing?

Evidence leader Advocate Anton Myburgh quizzed Laher on whether he had suspected that there was corruption in the award of the tenders for the 100 locomotives.

“At that period of time no, I had no suspicion of anything untoward happening. Maybe it’s because we were so involved in the detail. It was a very pressurised environment. We were dealing with multiple issues at the same time.”

He added that although he didn’t think there was any irregularity, he had questioned Singh, the bidders and other parties to the negotiation like Transnet’s legal team.

But he didn’t push further than that, he said, because he feared being insubordinate.

“I gave him my honest advice and we had a debate, to the extent that the debate became vigorous and if I continued along the line, it could have been insubordination but that was a very small fear in the back of my mind, the explanation he was giving me at that time seemed reasonable.”

The explanation he was given on the increase was that the locomotives were not the same and they came with different specification which pushed the price higher.

He said Singh also didn’t say that the decision on the higher price was determined at by the sub-committee that he, together with Molefe and former Transnet executive Siyabonga Gama, was part of.

Laher said he believed Molefe had made the final decision since he was the most senior member of the committee and he did not think that was strange.

Former senior manager at Transnet Freight, Francis Callard, has previously told the commission that Laher had not been forthcoming with information about the tender process and his role in it. Laher has refuted his claims.

The inquiry also heard that Singh was known to raise his voice and had an erratic temper and that Laher did not want to get on his ‘wrong side.’