'I am human too': Brian Molefe admits R15bn price hike for 1,064 trains is his cross to bear
Transnet had originally set R39bn for the purchase of more than 1,000 locomotives, but this increased to R54bn
Former Transnet CEO Brian Molefe on Wednesday conceded that he should take responsibility for the state-owned company allowing the price for 1,064 locomotives to go from R39bn to R54bn.
His concession came only after a long grilling by evidence leader advocate Anton Myburgh on how Transnet allowed the price escalation under Molefe's watch.
Molefe defended the cost escalation, saying it was in fact not a price hike and that the R39bn was only a “desktop estimate”. As far as Molefe is concerned, Transnet used the initial amount as a base to lure bidders to a lower price.
However, when the bids were submitted on the basis of a request for proposal (RFP) benchmarked at R39bn, said Molefe, it emerged that service providers were willing to accept R44bn.
“For the first time we saw what the market was willing to accept, and it was not R38.6bn. After bids were evaluated, there was further negotiations to fix the price so that there was no escalation. The final price the bidders were prepared to accept was R49bn,” he said.
Molefe added that the bidders had also insisted that the final price arrived at must be fixed for seven years.
On top of that, he went on, when the Transnet management went to the board with R49bn as a final price, it argued for an additional 10% for “contingency”, taking it to R54bn, which the board ultimately approved.
The increases were, however, done without the approval of the minister of public enterprises - in contravention of the law for transactions of that magnitude.
For that failure on the part of Transnet management, asked Myburgh, who must carry the cross?
“I will carry the can. However, I submit it was not done intentionally and out of malice,” Molefe conceded.
Myburgh pushed him into a corner, saying an increase of R15bn was no small matter that could just be forgotten, especially for Molefe who had painted himself as a diligent CEO throughout his testimony at the commission.
Molefe's excuse was that “I am human too, chairperson.”
But Myburgh was not going to accept this excuse, and pressed him on whether he would “accept if chairperson [Raymond Zondo] finds that batch pricing was contrary to RFP and should not have been allowed, you carry the can?”
Molefe agreed, yet again with a justification: “Ultimately I am the CEO, chairperson, so I should take responsibility. However, none of these things were happening because it was a deliberate and intentional outcome that batch pricing was done and we did not have ministerial approval.
“There was a failure in our systems, these things should have been pointed out during the assurance process. In a procurement like this, there are gates. There was supposed to be a gate not opened if the batch pricing was not correct.”
Molefe's testimony continues.