Secrecy and obstructive conduct continue to plague Transnet as clean-up efforts by a new board, now headed by Popo Molefe, seek to unravel and turn the tide on the multi-billion rot at South Africa’s state-owned freight and logistics company.
Molefe told the State Capture Commission that he and his new team found a state-owned company in a state of total paralysis when they arrived in May last year.
“The board was astonished by the widespread corruption and the willful disregard of procurement rules. The prevalence of this rampant disregard for systems and rules suggest that a state of paralysis that had set in,” said Molefe on Tuesday.
“We argue that the way in which money was being siphoned off and nothing being done to stop it, for those accustomed to working in normal environments, this represented a horror show.”
Molefe is the first witness testifying in the Transnet leg of the Commission which is examining allegations of fraud and corruption in the public sector and the roles of former President Jacob Zuma and his notorious friends, the Gupta family.
The Commission is set to hear from a dozen other witnesses who will testify against the backdrop of just under 20 forensic and investigative reports by legal and auditing firms that make up some 26 000 pages of documents relating to tainted deals going back to 2012.
Molefe provided a glimpse of that as he alerted the Commission chairperson, deputy chief justice Raymond Zondo about contracts for financial advisory services, port cranes, CCTV camera systems and Transnet’s controversial acquisition of more than a thousand locomotives across three deals that allegedly benefited the Guptas.
Molefe said the parastatal was set up for State Capture through a series of high-level appointments going back to 2011 at least.
The main protagonists, identified through the various investigations, are former executives Brian Molefe, Anoj Singh and Siyabonga Gama, he said.
“The records and exhibits will show that they signed for some of the big and irregular contracts. In some cases, this entailed deviations and confinements, changing the evaluation criteria to facilitate entry for those companies that were their ‘darlings’.”.
Their conduct, among others, were in violation of their fiduciary duties as directors – and all of them were appointed by former Public Enterprises Minister, Malusi Gigaba, Molefe said.
The deals under the microscope at the State Capture Commission implicate among others, international consulting firm, McKinsey & Co and local financial advisory firms, Regiments Capital and its offshoot, Trillian Capital Partners as well as T-Systems and Neotel.
“There was a clear pattern of how the capture was effected at Transnet.”
The starting point, Molefe said, was for the puppet masters to get a grip on the top decision makers and to identify other strategic positions that would play a critical role in the allocation of budgetary resources.
At Transnet, Molefe said, this involved the appointments of among others, Molefe, Singh and board members like Iqbal Sharma- a business partner of Gupta kingpin, Salim Essa at the time.
He said it was telling that Molefe’s appointment was announced by the then Gupta-owned newspaper, The New Age, some three months before it was officially announced.
And, Molefe’s arrival marked the beginning of the deployment of a collection of individuals with a common purpose – one that advanced the interest of those seeking a quick accumulation of wealth for themselves and some big businesses, Popo Molefe told the Commission.
They colluded to begin a process to centralise procurement and to weaken governance systems within Transnet.
“Those appointments came with a veneer of skill and professionalism at the top but what was lacking was the ethical and moral leadership to match it. It was a sophisticated operation.”
Molefe told the Commission that the State Capture project was crafty at Transnet in that it involved the appointment of individuals known to have served the country, with the right qualifications who would have been proclaimed as great corporate leaders.
“But once inside, they took control of the mechanisms that provided a counter-veil against rampant corruption or irregularities in the business,” he said.
They would then collude with others by identifying high-value deals and once awarded to the right external entity, the deals would often morph through deviations and contract extensions that spiked the costs thereof at the expense of the state-owned company. In the case of Transnet’s acquisition of 1,064 locomotives, the costs went from R38-billion to R54-billion.
Molefe said the Commission will hear expert evidence of how the money flowed for work not done and in some cases, to entities that had done no work.
He named Trillian Capital Partners as among those examples with the company having received a questionable R93-million in one case.
In addition to the publicly known high-value deals, Molefe said Transnet was uncovering further cases of suspected corruption on a continuing basis – he cited the lease agreement for the company’s new offices at Waterfall Corner among thousands of others being reviewed.
The parastatal’s new offices were previously occupied by Group Five which exited two years into a five-year lease agreement.
The take-over of that lease by Transnet, Molefe said, represents a “red flag” now that his team have had access to information and documents containing discussions between Transnet management, Group Five and a listed property management company.
It appears the Request for Proposals may have been designed to match the space instead of it having been determined by Transnet’s needs, he said.
“Transnet needed a lot of parking space if moving from the Carlton Centre and additional space for executives travelling there for meetings.
But in this case, Transnet seems to have designed the parking requirements to conveniently suit what was on offer at Waterfall Corner.
As a result, the company now has a shortage of parking space, Molefe said adding that the investigation continues.
As the new regime at Transnet systematically gets to the bottom of the rot, more and more whistle-blowers are coming forward.
Some, Molefe said, paint a picture of how Transnet during that time, was run through a regimental system – akin to a command system in the army whereby staff could allegedly not talk to executives, that they merely followed orders, even when they had been asked to do improper things.
Some skilled staff left because they were not willing to sacrifice their reputations, others were subjected to “selective justice”.
This entailed taking unbendable and problematic staff out through questionable disciplinary action while allegedly deliberately withholding damaging information to shield willing participants or those happy to turn a blind eye to the corruption.
Molefe’s testimony continues. DM