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Transnet execs changed locomotive business case to favour Guptas'

17 May 2019 - 13:58 By Amil Umraw
Former Transnet strategy manager Francis Callard at the Zondo Commission in Johannesburg.
Former Transnet strategy manager Francis Callard at the Zondo Commission in Johannesburg.

A business case for the purchase of 100 locomotives was extensively changed by Transnet's executives to favour a Gupta-linked Chinese company, China South Rail.

This is according to former Transnet engineer Francis Callard who told the state capture inquiry on Friday that the state-owned company's executives had misled its board acquisitions and disposals committee when it presented a business case motivating that the purchase of 100 electric trains be confined to China South Rail (CSR).

Callard developed the original business case which argued that the contract be confined to a Japanese consortium, Mitsui, which had previously supplied identical trains to Transnet.

However, the case which was eventually presented to the board for approval was significantly different.

"I developed a business case for the 100 locomotives for the coal export line. It was unilaterally changed by Transnet group executives to favour CSR. The changes and implications were material and I submit that the representation made to the [acquisitions committee] was misleading in certain respects," Callard told the commission.

He said the confinement to CSR was "flawed in execution".

Callard's business case, signed off by Transnet executives in October 2013, made provision for the purchase of 100 "19e-type" electric locomotives and 60 diesel locomotives to add to the capacity at Transnet's coal lines. The business case was signed off by executives like Siyabonga Gama, Garry Pita, Mahommed Mahomedy and Anoj Singh.

That business case recommended a confinement to Mitsui. This was predicated on the compatibility with the existing 110 locomotives Transnet had already purchased from the company to service its coal lines.

"It addressed the urgency, the limited numbers of suppliers, and that the goods and services are highly specialised and largely identical to the previous locomotives purchased from Mitsui. The confinement meant the quickest delivery, making use of existing facilities," Callard said.

However, Transnet's CEO at the time and state capture-implicated Brian Molefe withdrew Callard's business case in October that year.

Callard said he heard nothing about the deal until January 2014 when Gama asked him to revise his business case, this time increasing the amount of diesel locomotives to 80. Callard amended his business case but still argued for Mitsui's confinement on the purchase.

He e-mailed the copy to Transnet's executives days after Gama made the request.

But he later discovered that his business case "had been changed significantly"; now arguing for the confinement to CSR. This was after he received an e-mail from Transnet's Lindiwe Mdletshe, asking him to attach slides to his business case. Upon opening the document, he found it had been changed.

Callard said these were the main differences:

• References to the 19e-type electric locomotive equivalent had been removed throughout the document.

• The motivation to confine to Mitsui had been removed and replaced with motivation to confine to CSR.

• Removal of the benefit of the standardisation of the locomotives. The whole section on standardisation had been deleted.

CSR eventually secured the deal and it is alleged that the Gupta family, through their various business interests, scored billions in kickbacks from the deal.

He alleged that Garry Pita was the author of the revised business case.