Gupta-linked firm scored R227m in loan swaps for Transnet, says acting CEO
Regiments Capital allegedly performed the task for the SOE, despite company's treasury team being more than capable of doing it
Gupta-linked company Regiments Capital allegedly scored R227m for carrying out loan swaps on behalf of Transnet — a task the state-owned company’s treasury team was more than capable of doing itself.
This is according to Transnet acting CEO Mohammed Mahomedy, who testified at the state capture inquiry on Thursday.
Mahomedy said that by 2015, Transnet had entered into a number of loan transactions with various foreign financial institutions. The loans obtained from Germany, Canada and the Chinese Development Bank, amassed to more than R30bn. This excluded another loan, a “club loan”, for R12bn sought from five institutions. All the loan transactions were granted at floating rates.
According to Mahomedy, in December 2015, then Transnet treasurer and state capture-implicated Phetolo Ramosebudi recommended that the floating interest rates on the club loan be converted to a fixed interest rate. This was despite members of his team warning against the move as it would incur a greater financial obligation for Transnet.
“Regiments were paid by the Transnet Second Defined Pension Fund an amount just over R227m for the execution of these swaps. The Transnet treasury team had the capability to do this work,” Mahomedy said. “Executives should have identified this as an immediate red flag.”
Mahomedy told the inquiry on Wednesday that key roleplayers at the state-owned enterprise and certain companies acted to the detriment of Transnet’s best interests.
Mahomedy made the statement in his affidavit to the commission, parts of which were read by advocate Phillip Mokoena, who was leading evidence. Mahomedy was the group’s acting CFO when he penned the affidavit.
“I understand that there was a system where a set of key roleplayers and Transnet executives, board members and certain companies acted in consult to the detriment of Transnet’s best interests,” Mahomedy said.
He then described various transactions which flouted the company’s normal procurement processes. These transactions are now under the spotlight at Transnet.
“Certain transactions were approved through normal processes and some of the transactions did not go through the governance processes prescribed within Transnet. If we look at the Neotel transaction, there was an approved memorandum to appoint Neotel in October 2013,” he said.
“In November, a memorandum was signed by [then CEO Brian Molefe] nullifying the decision of the people who approved the [previous] contract and replacing Neotel with P-Systems. Then, in December, another memorandum approved the appointment of Neotel.”
Neotel scored a R4.9bn contract from Transnet to upgrade CCTV systems at the country’s ports without a competitive bidding process being finalised.
“If we look at the maintenance agreement with China South Rail … As far as we have reviewed, we have not seen any evidence of it surfacing at any management committee meeting. It was presented directly to the board of directors and then subsequently delivered to the minister’s office for approval,” Mahomedy said.
The Chinese company allegedly paid about R5bn in kickbacks to companies linked to the Gupta family and in return scored about R25bn in locomotive contracts irregularly signed off by Transnet.
Mahomedy’s testimony continues.