Transnet Freight Rail. Picture: ANDRE KRITZINGER.
Transnet Freight Rail. Picture: ANDRE KRITZINGER.

Transnet’s annual results presentation on Monday couldn’t have come at a worse time for its CEO, Siyabonga Gama.

Though marred by irregular expenditure of R8.1bn since 2005, Transnet delivered what it called "a sterling set of financial results". Steady growth in vehicle, coal and container volumes increased profits 75% to R4.9bn and revenue was up 11.3% to R73bn.

Just days earlier, however, Gama was handed a suspension notice based on three damning draft reports of investigations into allegations of corruption and mismanagement at the state-owned rail and ports operator.

The reports, seen by the FM, detail evidence implicating Gama and other executives in irregularities in three locomotive deals worth more than R60bn that led to billions of rands in alleged kickbacks flowing to Gupta-linked firms in Hong Kong and Dubai.

Unlike former Transnet CEO Brian Molefe and then CFO Anoj Singh, so far the investigations do not implicate Gama directly in corruption. But the draft reports, including one ordered by the Treasury, do cite evidence to support allegations of serious misconduct against Gama when he was head of Transnet’s freight rail division.

The draft report said Gama should be disciplined for being party to the decision to split the tender between four bidders

The reports say Gama must account for his role in the cost of 1,064 locomotives escalating from R38.6bn to R54.4bn, the inexplicable relocation of two manufacturing facilities from Gauteng to Durban at an "excessive and unjustifiable" cost of R1.2bn, and changed specs on a 2012 tender for 95 locomotives that allowed China South Rail (CSR) to sneak in by the back door after it was disqualified for failing to meet black empowerment criteria.

The allegation that McKinsey helped Gama draft his MBA assignments, at about the time it was awarded consulting contracts at Transnet together with Gupta-linked advisory firm Regiments, is also being probed. Gama told Fin24 he’d only received help with the language and flow. But a McKinsey investigation found evidence that one of its partners, Vikas Sagar, had "co-ordinated research support" and helped write Gama’s coursework. McKinsey has reported the matter to the Hawks.

Adding to the cloud of suspicion is that Gama accepted an invitation in 2016 from Gupta lieutenant Salim Essa to stay at the Oberoi hotel in Dubai for a stopover meeting shortly before his appointment as permanent group CEO, though he has said he paid the bill himself.

The size of the suspected kickbacks paid to Gupta entities from deals marred by the alleged irregularities cited in the draft reports is staggering. Documents in the Gupta leaks, including a spreadsheet and a consultancy agreement with Essa, show that R5.3bn of a total of R25.2bn that Transnet paid CSR for three locomotive deals was meant for various Gupta front companies.

The leaked documents show that by January 2015, R1.4bn had already been paid to Gupta-linked entities in the UAE, with another R3bn destined for Tequesta, a company Essa registered in Hong Kong. The Organised Crime & Corruption Reporting Project later reported it had obtained banking records showing that by the end of 2015, CSR had paid another R570m to Tequesta and R750m to another company Essa had set up in Hong Kong, Regiments Asia.

One of the investigation reports, by Mncedisi Ndlovu & Sedumedi Attorneys, recommended that corruption cases be opened against Molefe and Singh for allegedly misleading the board about the reasons for inflating the cost of 1,064 locomotives by almost R16bn.

What it means

The reports detail evidence implicating Gama and others in irregularities in three locomotive deals worth more than R60bn

The draft report said Gama should be disciplined for being party to the decision to split the tender between four bidders, which cost Transnet at least R2.7bn more, and for signing off on the memo as a member "of the team that misrepresented the true reasons and extent of the [R16bn] increase".

A report by Fundudzi Forensic Services, commissioned by the Treasury, also flagged suspicious payments made to Singh. Neither Singh nor Molefe had responded to investigators’ questions by the time the draft report was issued in July.

However, Molefe told the FM he would have been able to "explain what actually happened" had he been given enough time. He described the probe as "procedurally unfair".

Gama is also crying foul. Sunday newspapers quoted letters he sent to Transnet chair Popo Molefe last week claiming it was unlawful to suspend him based on untested preliminary findings leaked selectively to the media. But Popo Molefe said this week the disciplinary process afforded Gama the proper forum to respond. The board would "apply their minds" to the reasons Gama has provided as to why he should not be suspended and "will not discuss the content of the response with the media", he said.

Gama has declined to comment on the allegations. "Can we allow the internal processes to determine on their own whether I should be suspended or not please," he said in a text message. "I don’t intend to engage the media on the matter."