A confidential report on Transnet\u2019s R50-billion deal to buy 1064 locomotives implicates a second Chinese supplier in paying what appear to be kickbacks to a Gupta-linked firm.<\/p>\n
The 108-page report by law firm Werksmans shows that China North Rail (CNR) paid a middleman to extract R647-million from Transnet for a project that, by one internal estimate, should have cost just R9-million.<\/p>\n
Other documents obtained by amaBhungane suggest the middleman was a front for Gupta associate Salim Essa.<\/p>\n
Together, these documents provide the first evidence that not one, but two, locomotive manufacturers enlisted Essa\u2019s help to secure benefit in the largest locomotive acquisition in Transnet\u2019s history.<\/p>\n
AmaBhungane previously exposed<\/a> how China South Rail (CSR – CNR\u2019s sister company) agreed to pay 21 percent of its portion of the Transnet locomotive contract to Tequesta \u2013 an Essa-controlled letterbox company in Hong Kong \u2013 in exchange for Essa\u2019s help to secure the contract.<\/p>\n In 2014, CNR was awarded a R9.9-billion slice of the deal and tasked with delivering 232 diesel locomotives, roughly a quarter of 1 064 Transnet would acquire.<\/p>\n The rest were divided between CSR, Bombardier and General Electric.<\/p>\n The understanding was that CNR\u2019s locomotives would be part-built by Transnet at its Koedoespoort facility in Pretoria. But before the deal was finalised, Transnet decided to move CNR and Bombardier to Transnet\u2019s facilities in Durban.<\/p>\n Investigative journalism takes time and money. Help us do more. Be an amaB Supporter.<\/a>\u00a0<\/span><\/p>\n The plan was pitched to Transnet\u2019s board as a way \u201cto stimulate development in other parts of South Africa\u201d, but would ultimately cost R1.2-billion and delay the entire project by months, if not years.<\/p>\n \u201cThe relocation carried with it significant delivery risk for the 1064 project, as it created a ready excuse for non or late delivery\u2026\u201d the Werksmans report noted.<\/p>\n Transnet\u2019s failure to investigate other options is \u201cpeculiar\u201d and \u201cinexplicable\u201d.<\/p>\n The delay undermined the rationale for splitting the contract between four manufacturers in the first place.<\/p>\n CNR\u2019s initial back-of-envelope calculation was that the relocation would cost R9-million.<\/p>\n Curiously, CNR enlisted the help of a dormant shelf company to negotiate the “best possible price” with Transnet on its behalf.<\/p>\n On paper Business Expansion Structured Products, or BEX*, was an odd choice for a lead negotiator. The company\u2019s sole director, 28-year-old Taufique Hasware, previously worked selling cellphones and Persian carpets.<\/p>\n Undeterred CNR signed a contract with BEX in April 2015 to provide \u201cbusiness development\u201d services.<\/p>\n Amongst CNR\u2019s local partners, the BEX contract set off alarm bells.<\/p>\n Roberto Gonsalves, one of three director representing CNR\u2019s local partners, told amaBhungane this week. \u201cWe as [minority] directors dissented.\u201d<\/p>\n But he said CNR used its majority to push the contract through. Gonsalves and the other local directors subsequently refused to sign off on CNR South Africa\u2019s financials.<\/p>\n For both CNR and BEX, the relocation project was potentially a major windfall.<\/p>\n Departing far from the initial estimate of R9-million, CNR gave BEX a new benchmark of R280-million. Whatever Transnet agreed to pay over-and-above R280-million would go to BEX as an \u201cagency commission\u201d.<\/p>\n For example \u2013 and this is the actual example CNR gave its local partners \u2013 if Transnet agreed to pay R650-million for the relocation project, BEX would receive R370-million (R650-million minus R280-million) as payment for negotiating the deal.<\/p>\n Everything over R280-million would go to BEX, Gonsalves confirmed, a deal he describes as hugely excessive for a company that had never traded.<\/p>\n Two months later, BEX came up with a figure: R719-million.<\/p>\n \u201cOn this price CNR are prepared to offer a 10% settlement discount\u2026 This results in a revised project relocation cost of R647 181 494,\u201d BEX wrote in an email.<\/p>\n BEX\u2019s figure was a substantial increase from the R9-million estimate, and more than double CNR\u2019s benchmark of R280-million.<\/p>\n In addition to this, BEX wanted 50 percent \u2013 R323.6-million \u2013 to be paid within 14 days of a deal being signed.<\/p>\n Werksmans found nothing to suggest Transnet investigated the figures it was being fed.<\/p>\n \u201cSuch a vast cost for relocation should have been the subject of detailed investigation and verification and consideration by Transnet. Remarkably, it appears that no independent verification or investigation of the costs was undertaken by Transnet,\u201d the Werksmans report noted.<\/p>\n In a written response to amaBhungane<\/a> Transnet said: \u201cThere were various threats made to Transnet in terms delay penalties based on the forex structures and escalations which were fixed for the duration of the contract. Transnet was informed by these bidders that the delay in signing off the relocation is also impacting other suppliers.\u201d<\/p>\n On 23 July 2015, Transnet acting chief executive Siyabonga Gama approved the payments: CNR would receive R647-million while Bombardier would receive R618-million.<\/p>\n Detailed questions were sent to CRRC, the company formed when CSR and CNR merged, but no response has been forthcoming.<\/p>\n There is no evidence connecting Bombardier to BEX, but it may be tainted by any suggestion the relocation costs were inflated. The company denied \u201cany suggestion of misconduct in connection with the Transnet procurement process\u201d.<\/p>\n Even without the leaked BEX email there were clues that Salim Essa was the hidden hand behind BEX.<\/p>\n The sole director of BEX, Hasware, was a director of three other companies \u2013 Homix, Forsure Consultants and Hastauf \u2013 which appear to operate as \u201cletterboxes\u201d for the Guptas and Essa, passing back large \u201ccommissions\u201d from Transnet contracts.<\/p>\n AmaBhungane tried to reach Hasware, but were told by the man who answered his phone that Hasware had moved to India.<\/p>\n In addition to this, when Werksmans\u2019 forensic auditor, Wits professor Harvey Wainer, saw the BEX \u201cbusiness development\u201d contract he remarked that it looked \u201cidentical\u201d to the now notorious R5.3-billion \u201ckickback\u201d agreement signed between CSR and Tequesta, as part of the same Transnet locomotive deal.<\/p>\nShadowy shelf company<\/h5>\n
R719-million<\/h5>\n
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The Essa connection<\/h5>\n