LIVE FEED: #StateCaptureInquiry May 30, 2019
Sharma has been accused of using his position on the Transnet board to ensure that China South Rail was awarded the bulk of the R54.5billion contract to supply electric and diesel locomotives.
The Transnet board acquisitions and disposals committee (BADC), which Sharma chaired between 2012 and 2014, recommended in January 2014 that the contract to supply 1064 locomotives be split between China South Rail (359 electric locomotives), Bombardier Transportation (240 electric), General Electric (233 diesel) and China North Rail (232 electric).
Mncedisi Ndlovu and Sedumedi (MNS) Attorneys managing director Tshiamo Sedumedi told the commission chaired by Deputy Chief Justice Raymond Zondo that Sharma used his position as BADC chairperson to ensure that China South Rail was awarded the contract to deliver 359 electric locomotives.
Sharma was a member of the Transnet board between 2010 and 2014.
According to the law firm’s findings, the procurement of the 1064 locomotives was required to comply with the Constitution and the Public Finance Management Act’s requirements for a competitive and fair tender process.
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Instead, Sharma’s business partner and fellow Gupta associate Salim Essa’s Tequesta concluded a business development services agreement with China South Rail Hong Kong in May 2015, for which MNS Attorneys found there was no rational basis.
Sedumedi said there was no need for Tequesta to prove the services rendered save for an acknowledgement by China South Rail that it would not have secured the 359 locomotives award but for its active efforts.
MNS Attorneys found that Tequesta’s “active efforts” undermined the competitive bidding process.
The business development services agreement included that Tequesta be paid 21% or nearly R3.1bn of the contract value between Transnet and China South Rail, which had already paid 3.9% of contract value or about R707million to a foreign-owned entity, JJT Trading FZE.
The R707m paid to JJT Trading FZE was deductible from the Tequesta fee.
In terms of the deal, Tequesta would provide services during the procurement period.
MNS Attorneys found there was no lawful and commercial reason for Essa to interpose between Transnet and its potential bidders.
The commission also heard that other Gupta-linked companies McKinsey and Regiments Capital were paid over R316m to provide transaction advisory services to the 1064 locomotives deal between November 2013 and June 2015.
Actuary Alister Chabi, who investigated the increase in the estimated total cost of the 1064 locomotives from R38.6bn to R54.5bn, started giving evidence on Wednesday.
Chabi said the initial R38.6bn estimated total cost was reliable, with the 465 diesel locomotives costing R13.4bn while the 599 electric locomotives would cost R25.18bn.
The locomotives, he said, were scheduled to be delivered over seven years between 2013 and this year.