{"id":7633,"date":"2019-01-17T13:45:13","date_gmt":"2019-01-17T13:45:13","guid":{"rendered":"https:\/\/amabhungane.org\/amabhungane\/?post_type=stories&p=7633"},"modified":"2024-09-21T10:27:43","modified_gmt":"2024-09-21T10:27:43","slug":"update-chinese-rail-supplier-returns-r618m-to-transnet","status":"publish","type":"post","link":"https:\/\/further.co.za\/amabwp\/update-chinese-rail-supplier-returns-r618m-to-transnet\/","title":{"rendered":"Update: Chinese rail supplier returns R618m to Transnet"},"content":{"rendered":"

The slow and painful process of returning looted funds to Transnet has begun.<\/p>\n

Chairman Popo Molefe confirmed at a media briefing on Thursday that a Chinese rail company has repaid R618-million to the state-owned rail company.<\/p>\n

The R618-million represents a 10% advance payment that Transnet made in terms of a R6.18-billion maintenance contract that it handed to CRRC E-Loco Supply in 2016.<\/p>\n

The 12-year contract required CRRC E-Loco to provide maintenance on the various locomotives, including the contentious 1064 locomotive package, that Transnet contracted between 2012 and 2014 to buy from China South Rail (CSR) and China North Rail (CNR). CRRC E-Loco is a division of the amalgamated Chinese rail company that was formed when CSR and CNR merged.<\/p>\n

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One source familiar with the deal said the R618-million advance payment was made to CRRC E-Loco before the contract was even been signed. Transnet confirmed that the payment was made after the award letter was signed, but is yet to confirm whether the actual contract had been signed when the R618-million was transferred to the Chinese supplier.<\/p>\n

The R6.18-billion maintenance contract was in addition to the R28-billion in contracts awarded to CSR and CNR to supply locomotives.<\/p>\n

Transnet confirmed that CRRC E-Loco agreed to return the advance payment without Transnet needing to serve court papers, but that negotiations were continuing to reclaim the VAT portion of the advance payments and to determine whether the R6.18-billion contract should be cancelled entirely.<\/p>\n

\u201cWe have recovered the deposit, the advance payment\u2026 In terms of the contract itself, that\u2019s under review at this time for us to actually see what our options are on that maintenance contract. We\u2019re also evaluating whether there\u2019s a need for it,\u201d interim chief financial officer Mohammed Mahomedy said at the media briefing in Sandton.<\/p>\n

Molefe confirmed that Transnet would also start its first round of negotiations with the suppliers of the locomotives themselves \u2013 CRRC, Bombardier and General Electric \u2013 regarding potential overpayments to them.<\/p>\n

\u201c[W]e would not necessarily pay the full amount of the contract, we would pay the amount minus the undue enrichment\u2026 They will have to convince us that they were entitled to that money,\u201d Molefe explained.<\/p>\n

But Transnet is not only focusing on the locomotive manufacturers.<\/p>\n

Between 2013 and 2017, global consulting giant McKinsey and its partner Regiments Capital received an estimated R1.94-billion in consulting fees for work on Transnet\u2019s massive capital expansion project.<\/p>\n

AmaBhungane\u2019s investigation showed how roughly a quarter of those fees were promised to the Guptas and their business partner Salim Essa, who acted as fixers or \u201cbusiness development partners\u201d to help the consultants secure the contracts. (Read amaBhungane\u2019s Trojan Horse investigation\u00a0here<\/a>.)<\/p>\n

Initially Regiments director Niven Pillay denied knowing about the millions in \u201cbusiness development fees\u201d flowing into anonymous letterbox companies controlled by Essa and the Guptas.<\/p>\n

In a 2017 interview he told us that neither he nor Regiments chairman Litha Nyhonyha \u201cwere party to any of the payments to Homix\u201d \u2013 one of the most notorious letterbox companies used to receive the payments. \u201cWe found out after the fact and stopped it.\u201d<\/p>\n

But in an affidavit filed in court in October last year, Pillay admitted that he had known about the payments since 2012:<\/p>\n

\u201cThe fee agreed at the time was 35% of all revenue earned, 5% to [business development partner Kuben Moodley] and 30% to Mr Essa, or their nominees\u2026 We were informed by [Regiments director] Dr [Eric] Wood that this fee was later increased to 55%\u2026\u201d<\/p>\n

Transnet has already served papers on Regiments, demanding that it return roughly R150-million it received for facilitating a loan between Transnet and China Development Bank. (Read amaBhungane\u2019s article on the China Development Bank loan\u00a0here<\/a>.)<\/p>\n

But that still leaves more than R400-million of the R1.94-billion paid to McKinsey and Regiments by Transnet which was not used to provide services but instead channeled to Essa and the Guptas, seemingly for helping the consultants to secure contracts from Transnet.<\/p>\n

\u201cWe are in discussions with [Regiments]. We are talking to them and trying to establish exactly what was paid to letterbox companies but also accountability for possible repayment to Transnet,\u201d Mahomedy confirmed on Thursday.<\/p>\n

With regard to McKinsey, Mahomedy said: \u201cWe are looking at the services rendered as well as what opportunity may exist for us to have any recourse with them.\u201d<\/p>\n

Transnet paid McKinsey and Regiments separately. All known payments to the letterboxes were made by Regiments, not McKinsey\u00a0\u2014 which has consistently denied knowing about the payments. Molefe said that Transnet is receiving \u201cco-operation\u201d from the embattled consulting firm.<\/p>\n

Molefe was stinging in his criticism of what he found when he and the current board arrived at Transnet in May 2018.<\/p>\n

\u201cWhat we found in the organization was nothing short of a horror show, a horror movie. Things you thought would not happen in this country and in a state-owned entity. Some of the key architects of state capture had effectively turned Transnet into a piggy bank.<\/p>\n

\u201cIn our view, many of these executives who were responsible for running Transnet went to the office every day primarily to loot\u2026 But I must hasten to say there were many more who knew nothing about what was happening because they were not part of the whatsapp group\u2026<\/p>\n

\u201cTransnet in the phenomenon of state capture was the first target of the champions of state capture, the Guptas. But I\u2019m sure as we go on into the year you\u2019re going to find that there are many others who emerged and whose modus operandi is similar to \u2026 the Guptas,\u201d he said.<\/p>\n