Molefe insisted on awarding IT contract to third bidder T-Systems, Zondo hears
Johannesburg - The state capture inquiry has heard how former Transnet CEO Brian Molefe irregularly rescinded a decision to award an IT contract to telecommunications company Neotel.
Former Transnet employee Gerhard van der Westhuizen told the commission on Monday how Molefe intervened in awarding an IT network management contract to Neotel without any substantial basis and pushed through the appointment of third bidder T-Systems.
Van der Westhuizen previously worked at Transnet’s procurement division.
He told the commission that in 2013 Transnet's contract with Neotel to provide and manage its IT network was coming to an end and the company had to advertise a tender to find a supplier.
Transnet had at the time relied heavily on Neotel. The telecommunications company managed its IT networks and owned its infrastructure following Transnet's sale of its network assets to Neotel years prior.
Van der Westhuizen explained that once bidders were received and were assessed, it was concluded that Neotel was best placed to continue providing network management and services to Transnet.
The board overseeing the appoint had agreed that Neotel should be awarded the contract.
Last week, Sharla Chetty from Transnet had confirmed to the commission that she had signed off on Neotel’s appointment and letters were drafted for the winning company and the rejected companies.
Chetty explained that at the time Molefe was not in the country and when he was briefed he instructed that the process of appointing a winning bidder to be halted until he returns.
When Molefe returned, Van der Westhuizen explained that there was a meeting held in Molefe’s office with other stakeholders. He said Molefe immediately made it clear that the tender should not be awarded to Neotel because of market concentration.
“When we arrived at the meeting we were told to leave our cellphones before we entered. He (Molefe) said we cannot give this thing to Neotel there is too much concentration risk. Mr Molefe was of the view that the R240 million should be included in the process which would have implied that T-Systems was the second best bidder and due to the concentration risk associated with Neotel, then it should go to the second bidder which was T-Systems,” van der Westhuizen said.
Van der Westhuizen said he told Molefe that his reasoning was not in line as Neotel was best placed to continue providing the service.
He explained that Molefe did not take kindly to his objections and insisted on considering the discount that was being offered by T-Systems.
Van der Westhuizen explained that T-Systems’s discount was never included during the bidding processes because the offer came after the bidding deadline.
He said if T-System’s late submission was to be considered then all other bidders would have to be given a chance to also make submissions.
The whole process would have had to be returned to the board committee dealing with the bid which was in line with processes.
He explained that this was not the case, Molefe insisted on T-Systems and instructed him to draft a memorandum which rescinded Neotel’s appointment and took into consideration the discount made by T-Systems and also mention T-Systems as the preferred bidder.
Van der Westhuizen said this was not in line with procedures. He was tasked with drafting the memorandum and told commission chair deputy Chief Justice Raymond Zondo that he had no choice but to draft the memo as he feared he may be fired if he did not do so.
“In that meeting, Mr Molefe’s body language had changed completely and I could see clearly that if I said another word security would escort me out,” Van der Westhuizen said.
Van der Westhuizen also explained how Transnet was left in a vulnerable position when Neotel was not appointed as the preferred bidder. Neotel representatives had objected to part of the reasons given for their bid being rejected.
The telecommunications company even increased the price of its monthly cost bill with Transnet. The cost of services increased from R42 million to R58 million. Transnet was able to negotiate the price to R50 million.
Another issue for the parastatal was that Neotel owned the infrastructure that its network depended on. It was decided that the Transnet would buy back its network assets that it had sold to Neotel.
Following tough negotiations, Transnet bought back its IT network for R25 million. Van der Westhuizen explained that Neotel had the upper hand in negotiations.
Van der Westhuizen left the company in 2014.