Zondo asks how Transnet’s ‘alarming carelessness’ in train deal was possible
‘How can you miss using the correct currency for something like this?’ Raymond Zondo asked Transnet engineer Francis Callard
State capture commission chair deputy chief justice Raymond Zondo has lashed out at Transnet's “alarming carelessness” over its handling of the controversial multibillion rand acquisition of 100 locomotives
On Monday, Zondo expressed shock that those who edited former Transnet engineer Francis Callard’s initial business case for acquisition of the locomotives failed to adhere to correct foreign-exchange rates.
Callard’s business case recommended Japanese locomotives supplier Mitsui to ensure compatibility with a fleet purchased earlier from the firm, and was signed by former executives Siyabonga Gama, Anoj Singh, Gary Pita and current acting group CEO Mohammed Mahomedy in October 2013.
However, the business case document was later edited to reflect Gupta-linked China South Rail (CSR) as the recommended supplier in the deal worth R3.8bn, which later ballooned to nearly R5bn.
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Those who edited the document, however, failed to update the foreign-exchange rate from Japanese Yen to US dollars, an anomaly questioned by Zondo during Callard’s testimony before the commission on Monday.
Callard said that those who altered his document perhaps did not have time to implement such changes, to which Zondo responded: “That’s an alarming amount of carelessness, [especially when] you are dealing with transactions that cost billions.
“One would have thought that more care would be shown in working with anything to do with prices. This mistake, on the face of it, seems like a very high degree of carelessness. How can you miss using the correct currency for something like this?”
Callard said he could not explain. “It’s not explainable, chair, I fully agree with you. I can’t explain the anomaly, it doesn’t make any logical sense, whatsoever.”
Zondo said he hoped there would be an explanation for the anomaly, which he described as strange.
Regarding pricing for the transaction, Callard said the price per locomotive as per the board submission on January 21 2014, was R34.34m. A further 10% was added for what was described as options, variation orders, special tooling, and initial and capital spares.
The price surged to R44m per locomotive, with R4.47m being the negotiated discount per locomotive. Callard said he was surprised at the markup of the figures and the final price of R4.8bn for the locomotives tender.
“I considered the increase excessive and most difficult to justify.
“I formed that view with reference to the impact of the exchange rate, given the short period of time between asking for a quotation to the time of the award. I believe the impact on exchange rate was excessive, I couldn’t see the immediate justification for that increase.”