EDITORIAL: Transnet cleans out the gravy train
Mohammed Mahomedy and Mark Gregg-Macdonald are trying to unravel years of gross mismanagement
Transnet, SA’s state-owned rail and port utility, is one of the important cogs in the infrastructure needed for President Cyril Ramaphosa’s $100bn investment drive.
Any major investment needs functional rail and harbours to export and import materials, and it needs these services to be scrupulously honest and corruption free.
As it stands, two key positions are filled on an acting basis — by Mohammed Mahomedy as temporary CEO,and Mark Gregg-Macdonald as a stand-in CFO.
To put Transnet back onto a sound footing where it can effectively serve the economy, these two men, with their fellow board members and managers, are trying to unravel years of gross mismanagement, irregular and unlawful contracts that benefited a few, and poor decisions.
To underpin a turnaround in Transnet, which monopolises SA’s rail and port infrastructure, minister of public enterprises Pravin Gordhan would be well served by making permanent appointments in the upper echelons of the company as it weeds out corruption, bad deals and dishonest officials.
One of the major frustrations for Transnet was the inability of Bombardier and China North Rail to fulfil their deliveries from the plants they were encouraged to set up in Durban
Transnet allocated R41bn towards the procurement of 1,064 new locomotives. Mahomedy reiterated at the company’s interim results presentation that a review of the contracts signed with four locomotive makers had turned up instances of irregular and unlawful transactions, which the new board had revisited with those suppliers.
While understandably guarded in what he could say about the process, he indicated on Monday that Transnet had done what it had set out to do in those talks and is now preparing to go to court to review the contracts.
One of the big frustrations for Transnet was the inability of Bombardier and China North Rail to fulfil their deliveries from the plants they were encouraged to set up in Durban. The two companies were paid R1.3bn to facilitate the move from facilities near Pretoria to Durban about five years ago. The Zondo commission has heard there was no justification for the size of the payment to move these two operations to Durban.
So far, Transnet has taken delivery of 75 of the 472 locomotives it was supposed to receive from these two companies. The frustration within the company is clear and it’s not hard to imagine the talks with these two companies are robust.
Transnet has featured at the Zondo commission of inquiry into state capture, corruption and fraud in the public sector, at which the move to Durban was interrogated.
It’s clear that there were irregular dealings within Transnet. Investors based in the US or with exposure to the US cannot be associated with corruption at any level.
An important development has been a signed settlement that has been agreed with the company Regiments Capital, which was linked to the politically powerful Gupta family, one of the architects behind the capture of state-owned enterprises, irregular flows of billions of rand and dubious appointments.
Transnet will be repaid R180m, or 60%, of the fees it paid Regiments for its involvement in the deals to buy new locomotives. Regiments cannot pay the R180m immediately — it has other legal challenges on its hands, not least related to the Transnet Second Defined Benefit Fund, with which it has signed a R500m settlement agreement, according to media reports.
The R180m settlement agreement is just one of the avenues of irregular expenditure the board is chasing. When Mahomedy describes the involvement of Regiments in Transnet as “vast” it is probably a safe bet that there will be further settlements or pursuits of money through the courts.
There are various processes involving former Transnet officials and contractors, Mahomedy says, but again declines to be more specific.
The message from Transnet is entirely right: it is chasing down miscreants to recoup as much lost money as it can.
Transnet could be one of the leading state-owned companies to take these matters to court. It would send the right message to investors that Ramaphosa’s government and its organs are serious about cracking down on corruption.
If in using SA’s policing and prosecutorial services Transnet fails to bring those in the wrong to account, it must aggressively pursue civil claims.
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