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 was based on investigations which are continuing.

“Major litigation” was anticipated, he said.

Molefe said Transnet would be ready by February next year to give a substantive report on action to be taken and what would be a “just and equitable remedy” which would address the de-facto situation as well as the imperatives of Transnet’s business. The company did 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.

Transnet signed four contracts worth 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 for the locomotive acquisition 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 said the Transnet board had instructed 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 numbers of locomotives to be acquired and the possible renegotiation of the delivery schedule.

He told MPs that only 497 of the 1,064 locomotives had 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 numbers 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 had not materialised.

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