I’m not pronouncing on anyone’s guilt or innocence here, but it was gratifying watching Brian Molefe and Anoj Singh looking lost in the dock at the Palm Ridge magistrate’s court on Monday.
No, scrap that; I’m sad to see Brian Molefe an accused in a fraud and corruption case.
The man could walk on water when he was at the Public Investment Corporation. His move to Transnet was exciting, we applauded the progress of the torchbearer of black excellence in the public sector. No-one expected it to end with him mortgaging his soul to the dark forces of greed. Is the Saxonwold shebeen open? I need a stiff one.
Molefe and Singh must still answer for their role in the capture of Eskom, but let me unpack for you the tragic consequences of the elaborate scheme they are accused of cooking up at Transnet and why you and I are paying the price up to this day.
On April 25 2012, the board of Transnet met to consider and subsequently approve the purchase of 1,064 locomotives for its general freight business. Two requests for proposals were issued for 465 diesel locomotives and 599 electric locomotives. Molefe was tasked by the board with approving the requests for proposals in line with the Public Finance Management Act (PFMA). The cost for the locomotives was initially estimated at R38.1bn.
Because of the sheer volume of the transaction, the PFMA requires shareholder approval first be obtained. However, the Transnet board received shareholder approval a year after the contract was advertised, a breach of the PFMA.
At the time, the National Treasury also reminded Transnet through written correspondence that in terms of the preferential procurement policy framework, the deal had to meet local content requirements of 50% for diesel locomotives and 60% for electric locomotives. In essence, Transnet had to source more than half the components of the locomotives locally and was not permitted to deviate from that. It was also required to design the bid in terms of the 80/20 procurement criteria, where 80% is awarded on price and 20% on BEE compliance.
The parastatal and then-minister of public enterprises Malusi Gigaba sought exemption from the Treasury both on local procurement and the 80/20 requirements but failed.
Molefe could literally walk on water when he was at the Public Investment Corporation. His move to Transnet was exciting, we applauded the progress of the torchbearer of black excellence in the public sector. No one expected it to end this way; with him mortgaging his soul to the dark forces of greed.
But Transnet bosses were determined to push the deal through at all costs — obviously external push factors were at play.
They further recommended that the business case for the locomotive acquisition be validated by external consultants. Enter global management consulting firm McKinsey.
The list of transaction advisers continued to grow with the inclusion of Gupta-aligned Trillian Capital Partners and Regiments Capital Management. Ultimately, the cost of the locomotives ballooned from an initial R38.1bn to R54.5bn — a R16bn deviation that initially could not be explained. That is until excellent investigative journalism and thorough forensic work were able to piece together how these billions were siphoned off to Gupta shelf companies at home and abroad, and to their network of cronies.
Contracts for supply of the 1,064 locomotives were awarded in 2014 to Bombardier Transportation SA (BT); China South Rail, now called CRRC E-Loco Supply; China North Rail, now called CNR Rolling Stock SA; and General Electric SA Technologies (GE).
An investigation by the Special Investigating Unit concluded that the procurement process was based on flawed market demand strategy and that government laws, regulations and instructions were deliberately ignored. It recommended that the deal be set aside, and Transnet is now in court looking to do just that.
As a result of the deadlock, only 583 of the locomotives were delivered. Transnet is unable to fix those that have broken down because one of the suppliers refuses to release spare parts and components. Another court action is under way to force China Railway Rolling Stock Corporation to release the said spare parts and components needed to return 120 freight trains back to service.
The operations of Transnet Freight Rail have been severely crippled by these shenanigans. Its inability to provide a reliable freight train service has been flagged by the country’s miners, who are not able to fully exploit the commodity boom because they can’t ship all their minerals to ports for export. They are losing billions of rands in revenue, and we are missing out on the tax they would have paid on extra profits made. Our roads are also taking a strain. The lack of an efficient freight rail service is forcing more suppliers to truck goods by road instead of rail.
So when I see Brian Molefe finally in the dock to answer for his role in the pilfering of Transnet, I weep not just for black excellence lost to selfishness and greed, but also for the high toll reckless capture has exerted on public infrastructure and the economy as a whole.
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