Alteration of locomotive business case 'a deliberate misrepresentation', Zondo hears
Johannesburg - The Zondo commission has heard that a contract for Transnet to secure over a 1000 locomotives from a Chinese firm ballooned to cost close to R50 billion.
Francis Callard, a former Transnet engineer, continued with his testimony at the Zondo commission on Monday.
Callard had explained last week that he had been tasked with putting together a business case for Transnet to acquire locomotives.
He drew up the business case and keeping in line with the needs, specifications and the urgency recommended that Mitsui & Co, a Japanese company, be selected.
He said his recommendations for Mitsui & Co was that the company already supplied Transnet and would be able to provide the locomotives with specific requirements with urgency.
Callard said he submitted his business case in October 2013.
He said when he eventually received the business case document back in early 2014 when he was asked to add slides by former supply manager Lindiwe Mdletshe, he noticed that the memorandum had been changed and would favour the confinement to China South Rail (CSR), a Chinese based company.
Callard said he was taken aback by the changes which excluded a number of important specifications which motivated for the confinement to Mitsui & Co.
He said he could not say with certainty who had made changes to the business case, but he suspected former Transnet CFO, and head of group procurement at the time, Garry Pita had made the amendments.
On Monday, he explained that there were various omissions from the business case which he believes allowed for the ballooning of the costs of the deal.
The original case had placed at R38.16 billion, and this had also taken into account the foreign exchange price escalation.
The business case that was presented to the board to approve had been made to appear as if the foreign exchange escalation had not been considered which was irresponsible.
Callard explained that multi-international consultancy firm McKinsey had erred in how it handled the presentation of the business case.
The firm had been appointed to develop and enhance the business case that was drawn up by Callard and his team. He said the firm had failed to take into account a number of issues while working on the business case.
“The altering of the final business case excluding the potential effects from forex hedging, forex escalation and other price escalations was a deliberate misrepresentation. This cannot have been an accident,” Callard said.