Fired Transnet officials must explain disputed locomotives deal, Zondo inquiry hears
Former Transnet engineer Francis Callard says a February 2014 request by Anoj Singh to speed up delivery of the locomotives did not make sense
Axed controversial Transnet executives Anoj Singh, Brian Molefe and Siyabonga Gama need to explain the almost R60bn spent on acquiring 1,064 locomotives, the state capture inquiry heard on Thursday.
Francis Callard, the former Transnet engineer who continued his testimony before the Zondo commission, explained that a number of processes were followed in the acquisition of the 465 diesel and 599 electric locomotives, with the first phase being the selection of bidders, and the second relating to negotiations.
Callard said the Transnet negotiations team included Molefe and Gama and reported directly to Singh, the former CFO and Gupta ally.
Callard’s business case for the acquisition of the locomotives put the estimated total cost (ETC) at R38.6bn, which later ballooned to R54.5bn. The R38.6bn was inclusive of potential effects from forex hedging, forex escalation and other price escalations and excluded borrowing costs.
Callard said the negotiations team reported to Singh on a fairly regular basis, and noted that the end result of the negotiations process was the R54.5bn price tag for the locomotives.
“The negotiations team should answer for the price increase,” charged Callard, when asked a number of questions by Zondo.
On Monday, Callard detailed how Singh called for the state-owned logistics company to embark on an aggressive delivery schedule for the 1,064 locomotives. He had said no reasons were given for accelerating the delivery.
“It was given to us post-event that it would save forex costs in the future … but it was not demonstrated how this would be achieved.”
The delivery of the 465 diesel and 599 electric locomotives was initially planned over a seven-year period ending 2018/2019, but this was reduced to up to four years.
Callard said the February 2014 request by Singh to accelerate delivery of the locomotives did not make operational or commercial sense.
“It was ill-considered, as it was,” Callard said.
Callard explained that commissioning a locomotive required staff with expertise, and that Transnet had had an insufficiently skilled workforce at the time. He said it took two to three years to train a locomotive driver.
“We were not ready to deal with this number of locomotives,” he said, explaining that they sent a report to erstwhile group CEO Gama, among others, to that effect. The report’s tone was “tread very carefully before accelerating [delivery of] these locomotives”.
A report by Fundudzi Forensic Services, commissioned by the Treasury to investigate various allegations at Transnet and Eskom, found that the Transnet board members failed to act in the best interest of the parastatal when they “ratified the increase of ETC” for the locomotives from R38.6bn to R54.5bn.