State Capture Commission of Inquiry chairperson Deputy Chief Justice Raymond Zondo. File picture: Karen Sandison African News Agency (ANA).
State Capture Commission of Inquiry chairperson Deputy Chief Justice Raymond Zondo. File picture: Karen Sandison African News Agency (ANA).

#StateCaptureInquiry hears Transnet overpaid relocation fee by R637m

By Zintle Mahlati Time of article published May 23, 2019

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Johannesburg - The Zondo commission has heard how state owned-enterprise Transnet overpaid R647 million for the relocation costs of a manufacturing plant from Pretoria to Durban. 

Roberto Gonsalves appeared at the commission on Thursday. Gonsalves is a minority shareholder in a company that formed a consortium with China North Rail (CNR), a Chinese locomotive company, to supply locomotives to Transnet. 

Gonsalves took the commission through a trail of meetings and documentation which outlined how Transnet would later overpay for a relocation fee. 

In 2013 Transnet had issued a tender for the supply of 1064 locomotives. 

Gonsalves explained that his company, along with a group of smaller companies and CNR, decided to group together to bid and supply diesel locomotives to Transnet.

In 2015, Transnet decided to split the tender and awarded the CNR-linked consortium the contract to supply of 232 locomotives while other companies such as General Electric would supply the other half of the deal. 

Gonsalves said as the deal between Transnet and CNR consortium was signed, it was known that the manufacturing would take place in Koedoespoort in Pretoria as there may have been facilities available for use. 

However, this later changed with Transnet requesting that location should take place to Durban.

Gonsalves said he and a number of stakeholders had disagreed with the need for relocation and insisted that the Gauteng location was best. 

He said even with the protests, Transnet insisted and even offered to be charged for the relocation fee. 

He said in the calculations of the fees, it was decided that the move would cost R9.7 million. 

The twist came when some CNR directors brought in a company called Business Expansion Structure Products (Bex). 

He said as a shareholder they were asked to sign an agreement which would appoint Bex as the agent to negotiate the relocation fee on behalf of the consortium with Transnet. 

Gonsalves said he and a few other shareholders had reservations about Bex’s appointment because he said they did not see a need for the company. He said he and other shareholders refused to sign the agreement. 

Gonsalves's other issue with the company was that it appeared to be a dormant shelf company which had one director. 

“CNR SA felt it necessary to appoint an intermediary such as Bex which appeared to be a newly formed company with no trading history and no background in assembling or manufacturing of locomotives. The reason why CNR had selected some of us is that we had experience in rail and instead they turned to Bex which made no financial sense,” he said. 

Gonsalves said even with the large relocation fee the acting CEO of Transnet Siyabonga Gama signed off and accepted the R647 million relocation fee. 

He said the Bex was appointed either way with the insistence of the CNR directors. 

The cost of the relocation of the project stood at R9,7 million, but it later ballooned to R647 million when Bex was included. The shelf company, Bex, was paid R67 million for being an agent on the project. 

Gonsalves said he had issues with the large amount that Transnet had to pay. He said he and others had notified Transnet executives about the large payment. 

“We went into the meeting (with Transnet executives) and raised our concerns about the Bex contract and how it was entered into and the amount that was claimed and how there was no commercial sense to it,” he said. 

“The response was a surprise from Transnet and there was even a comment from Siyabonga Gama about the amount should be investigated,” Gonsalves said. 

“When we left the meeting we had assumed that they (Transnet executives) had not been aware of this issue, but it is clear from the evidence that they were aware as there had been a variation order (granting the R647 million) signed by Gama and former Transnet CFO Anoj Singh. 

Gonsalves will continue with his testimony on Friday.

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