Prasa chairman Popo Molefe. Picture: PUXLEY MAKGATHO
Prasa chairman Popo Molefe. Picture: PUXLEY MAKGATHO

Transnet’s contracts to acquire 1,064 locomotives were “unlawful and irregular” from the beginning and action has to be taken about this violation of the law, chair of the state-owned freight, rail and logistics group  Popo Molefe insisted in parliament on Tuesday.

He told parliament’s trade and industry committee that this conclusion is based on continuing investigations.

“Major litigation” is expected, he said.

Molefe said Transnet will be ready by February 2019 to give a substantive report on action to be taken and what would be a “just and equitable remedy” that will address the de-facto situation as well as the imperatives of Transnet’s business. The company does need locomotives, though possibly not the number contracted.

The Transnet board has taken action against the malfeasance in the parastatal, dismissing former CEO Siyabonga Gama, suspending senior executives and issuing summons to recover money lost, including from Gama and former CFO and Gupta ally Anoj Singh. In November, Gama lost a court bid to have his dismissal overturned.

Transnet signed four contracts valued at R54.5bn for the acquisition of 1,064 locomotives in March 2014 with South China Rail, North China Rail, General Electric and Bombardier Transportation.

The R54.5bn price tag was an escalation of the original estimated cost of R38.6bn, with allegations of Gupta-linked corruption linked to the way the contracts were awarded. Allegations of multi-billion rand kickbacks have also been made.

Molefe developed a reputation as a no-nonsense corruption buster during his time as the chair of the Passenger Rail Agency of SA (Prasa), where he took the Hawks to court to force them to investigate irregular expenditure of more than R14bn. In March 2017, Molefe went  to court again, this time to fight the dissolution of the Prasa board by then transport minister Dipuo Peters.

Molefe said the Transnet board has instructed the management of Transnet Freight Rail and Transnet Engineering to undertake a detailed review of the company’s business need for locomotives. This might result in a reduction in the number of locomotives to be acquired and the possible renegotiation of the delivery schedule.

He told MPs that only 497 of the 1,064 locomotives have been delivered so far, when in terms of the delivery schedule all of them should have been delivered by now.

“We are far behind,” Molefe said.

He explained that the number of locomotives acquired was based on Transnet’s market demand strategy, which was overly ambitious in terms of projected demand for freight transport. The projections have not materialised.

The originally planned delivery schedule of seven years was compressed to three years on the advice of transaction advisers, ostensibly on the grounds that this would save money. But no money has been saved.

“If anything, it put the company under pressure to pay huge amounts of money on the loans the company was forced to take from the banks in a very short period of time,” Molefe said.

ensorl@businesslive.co.za