A Japanese supplier was available to combine the locomotives already in use by Transnet, but the CEO's cab had other plans as they plunged the plan, eventually transferring the deal to China South Rail, a company now accused , that she paid Guptas bribes.
In fact, a steady business case has been buried to buy 100 locomotives to use the Transnet coalline from a Japanese supplier.
A later version, updated over the weekend as a special request, was unilaterally changed, this time motivating a Chinese competitor.
After all, the initial proposal to limit the auction to the Japanese Mitsui for extremely good reasons did not even go to the Board, which later approved the deal of 3.8 billion euros for China South Rail (CSR).
Since then, costs have jumped to nearly 5 billion.
On Friday, the State Commission on Capture heard details of a series of dubious activities that led to a deal with CSR to provide Transnet with a locomotive that the company never produced together with payments totaling R2.6 billion over six months after signing the transaction. – cash paid before the delivery of one.
A lot of information on this deal and one for 1 064 locomotives is in the public domain, claiming stunning twists and turns of Gupta-related unions.
Former Transnet manager and engineer Francis Calard, who had assembled the initial business case for the acquisition of 100 locomotives in 2013, reveals the genesis of the transaction during testimony.
Once again, the same characters appear – Brian Molefe, Anno Singh, Siyabonga Gama, Gary Pita, and Tammy Jiane – whose fingerprints are above all other dirty deals in Transnet
The state freight and logistics company is in the market for double-voltage locomotives that would be compatible with the fleet previously purchased by the Japanese company Mitsui.
Calard worked out the business case and was signed on October 15, 2013 by Gama, Pita, Singh, and the executive director of the acting group, Mohamed Magomedy, who testified to the Commission earlier this week.
He recommended Mitsui for the transaction to ensure compatibility with existing locomotives, noted the availability of immediate production facilities and the fact that a locomotive already used by Transnet is known.
As this was an urgent requirement, it was also important that Mitsui already have a production base in South Africa and deliver the locomotives more quickly.
Besides, there was no need to develop specifications, design or some kind of prototype testing – it would save time and money.
This document had to go to the board of the Board, known as the Board for Acquisition and Release (BADC) for approval, before being submitted to the Council for final approval.
But the document will not go to BADC. Calard, whom he had taken to be ready for the meeting if needed, instead received a Gama SMS, which says a lot: "Please leave the meeting room. Thami (Jiyane) comes to talk about 1064. 160 (the deal involving 100 locomotives) is withdrawn, so I'm not sure why you are there. "
Calardt said he was told that Molef had withdrawn the note for 100 locomotives.
Around January 2014, he received another SMS from Gama, this time for updating the business case to acquire 100 locomotives and now wagons.
It was urgent because it had to be presented to BADK until next week and Gama had asked him to do a "miracle" to do so.
Calardt said he had worked with a colleague this weekend and had prepared an up-to-date business case. There were slight changes, but the overall logic of the deal with Mitsui remained the same.
One or two days after submitting this updated business case, on January 22, 2014, he received an email from Lindley Madletche in the supply chain, asking for help formatting his last note.
He then discovered that his document had been significantly altered. In principle, Mitsui has been abolished as a preferred supplier because the document now recommends that a CSR be detained.
Other changes included:
- The requirement that it be a 19E equivalent locomotive has been removed throughout the document, now almost any locomotive may seem;
- The need to inform the Board of the final negotiated price has already disappeared, and the authority over the process and approval was intended to remain with the executive director of the Brian Molefe Group;
- The whole section on the use of standardization to synchronize the new batch with the existing fleet has been replaced by a wording according to which CSR has been declared the best participant in a different freight locomotive deal (a bit useless since the coal line required a different product).
Calard said his proposal has provided evidence of spare parts and maintenance already available through Mitsui, as there was no CSR locomotive in Transnet.
In addition, the urgency factor has also completely disappeared.
"If the urgency was left, CSR would not agree, as none of their locomotives had been used by Transnet, the company had no production line in South Africa. "
"I do not agree with the amendments. I was surprised by them. It will not work, I thought. This is not right, (was) wrong in thinking and performance. "
Calardt said he was deeply concerned and wrote to Gamma and Jiane the next day, highlighting the shortcomings in the edited document.
Jiyane called him as if for some other reason besides asking, "Why did you send this email?"
Later, Gama sent an SMS that simply says he will explain "GCE's (Molefe) thinking about it.
This suggests that Molefe has contributed to the drastic change in thinking.
Calard said that besides editing, the document is a mess, in some cases it refers to General Electric when the author clearly means CSR.
The base price of the locomotives was given in the Japanese yen, as the initial proposal included the Japanese company Mitsui.
This means that the due thought was not given to the fully understood process of the note, Calard said.
"I can not talk who has made the decision to make the changes, but there is a trace of emails between me and various parties that show very strongly that Gary Pita is the author of the revised document, "he said.
He could not tell if he had done this on his own initiative or on the instructions of someone else.
But it was "extreme negligence or deliberate distortion," he said.
Over the next few days, this edited business case in favor of the Chinese railway company will go to the board's board of directors where it was approved before going to the final approval board.
He said the protocols show that Molefe, Singh, Gama, Jiyane and Pita attended this meeting, and there is no evidence that any of them had informed the committee of their concerns about the edited case.
"I have never been concerned about the concerns we have raised as a potential risk for this deal. "
Tunnel specifications needed by Transnet for its coal line were adapted to suit the capabilities of China South Rail and provide a new product – E21.
Calardt said the transaction has encumbered Transnet with short-term payments of a total amount of EUR2.6 billion, paid within six months of signing the CSR transaction.
This is part of a payment scheme of R7.23 billion due to four original equipment manufacturers in 1,064 transactions and less, including General Electric.
Against the backdrop of the February 2014 negotiations, a colleague of finance warned him that there was pressure to raise an initial deposit of R4 billion in the various deals.
Calard answered with the words: "My chic hat, what will the auditors say?"
She said, "We wanted an opinion. These guys are cowboys.
* Kalar's testimonies to the Commission are resumed on Monday. DM
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