‘Transnet – the gift that keeps on giving’

More information emerged at the Commission of Inquiry into State Capture last week relating to Transnet’s dealings with a well-known telecommunications company in a business relationship that recently led to the downfall of former acting CEO Tau Morwe. With 17 years of experience at the state-owned freight and rail company behind him, Morwe seemed like a shoe-in to have his position made permanent – until the board found he had apparently not been sufficiently forthcoming with information about contracts he had allegedly signed off. Taking the stand in front of Judge Raymond Zondo recently, Transnet board chairman Popo Molefe said they simply had to let Morwe go because of the parastatal’s decision to have nothing to defend once they appeared before the commission. The decision, he reiterated, was also in keeping with certain information that had been unearthed about a closed-circuit television contract involving the telecoms company. It is in the wake of these recent revelations that Morwe’s contract was not renewed. However, in leading evidence

to the commission, senior counsel Mahlape Sello said Transnet’s association with the service provider went back to at least 2007 and had been investigated by at least three forensic business advisory companies – UBAC, Qhubeka and Ligwa. The former two worked together on a report that found Transnet “had paid an excessive price for what was delivered”, Sello told Zondo. It also found that although the company had given Transnet a three-year guarantee for equipment, the original provider had only issued a two-year guarantee. “It begs the question – where did Transnet’s service provider get three years from?” More importantly, the UBAC Qhubeka report indicated that the company in question “is not a registered security service provider as per the Private Security Regulation Authority and Act 56 of 2001”, Sello added. The plot thickens further in respect of what Ligwa found. In its own report, Sello stated that the service provider had been paid an amount of R225 million for a contract that did not exactly clarify what it was for. “Ligwa found there was no elaboration as to the services

that would be required.” Curiously, payment was also required in full prior to any delivery of services. In addition, and Sello drew Zondo’s attention to an invoice proving this, former Transnet chief financial officer, Anoj Singh, had signed off on the invoice days before the contract was concluded. And yet, even though it remained unclear why such an amount had to be paid for undelivered services, despite it being referred to as a “mobilisation fee”, it charged Transnet a further R500 million. Zondo asked how it could be that costs could escalate to this extent. Sello answered that it appeared “Transnet is the gift that keeps on giving”. Even more bizarre is an amount of R200 million Transnet paid to the same service provider in an asset buyback agreement. This specific agreement is the one that links the parastatal and the telecoms company back to 2007, and includes assets Transnet sold to the telecoms company “on the proviso that it would buy it back at a later stage”. Why this should have been deemed an appropriate transaction for a parastatal to

make remains unclear, as is the process of valuation that determined Transnet should buy its old assets back for R200 million. As for the mysterious R500 million that the service provider wants Transnet to pay, Sello stated that it amounted to an increase of 429% on top of the R225 million that had already been paid.

Sello also remarked that at one stage the company had been found to have only completed 38% of the relevant contract which demanded that it be at 43% in order to meet the completion date. But in spite of being behind schedule the service provider asked Transnet for an additional R500 million. The charge was for “services in transition”, it said.