National Treasury last month said that while Transnet had recorded an operating profit of R14.1billion in 2016/17, the company had to address concerns about governance failures, especially in relation to its supply chain management practices.
Software group SAP last year admitted paying millions to a Gupta-linked company, CAD House, that assisted it on contracts with Eskom and Transnet. SAP paid CAD House more than R90million in 2015 and 2016 to secure contracts with state-owned companies.
Chief executive Siyabonga Gama last week said that he had confidence in Transnet’s governance processes. “Our procurement processes are very strong. We are able to follow a path that gives us confidence in the manner we procure.
“The governance lapses referred to are not about Transnet in the main... They are about third parties who are alleged to be getting kickbacks as a result of some of our suppliers getting business from Transnet. That is the prevailing trend. Most of it was largely in the (information technology) space,” said Gama.
He said there were ongoing investigations to get to the bottom of the allegations. He said where Transnet was implicated, the entity reported these to law enforcement authorities, such as the police and the Directorate for Priority Crime Investigation, known as the Hawks.
He said “third parties” were responsible for the alleged governance problems at Transnet.
“What happens is that Transnet will enter into a contract with somebody, and we have a proper procurement process that takes place. It is auditable. All our procurement processes above R500m, there is an internal audit team, called the high value tender team, to audit the entire process.
“We do not award anything until that team says all of the processes and touch points have been audited and found to adhere to the process Transnet follows. What seems to have been happening is that third parties who go to entities and say the reason you were able to get this (tender) is because we were able to influence it ... so pay us. Transnet is not party to those shenanigans,” he said.
“We find ourselves in the middle of something not of our own making,” he said.
Meanwhile, commenting on the pace and scale of Transnet’s investment programme, Gama said the company’s capital investment profile could be reduced or increased, depending on access to long-term international funding. He said Transnet had scaled back on its multi-billion rand capital investment programme.
“The economy is going to guide us in terms of what we can do and cannot do. At this time we are in a sub-investment grade climate. That has impacted on liquidity in the debt market. You will see that before the credit rating downgrades, our ambitions were a little bit bigger. We had said we would do on average R30bn to R35bn, and (now) we do on average R22 to R28bn. So, yes, there has been a scale back in the capital investment programme,” said Gama.
- BUSINESS REPORT