It is a sheaf of paper just 15mm thick. But the ink on its pages records kickbacks totalling R9-billion paid or pledged to the Guptas and their associates.

These pages and offshore banking data tell the story of how Transnet’s ambitious plan a decade ago to renew its locomotive fleet was repurposed to extract loot systematically and on an unprecedented scale.

We publish these pages – eight kickback agreements, most of them made public for the first time – and an analysis of bank data to show that, by late 2016, Gupta front companies had received at least R3.7-billion, two fifths of the promised R9-billion.

After 2016 the bank data goes dark but the pillage likely continued.

The kickbacks were paid by two locomotive manufacturers now merged to form CRRC Corporation, the Beijing-based conglomerate that boasts of being the world’s largest supplier of rail equipment.

But the money came from ordinary South Africans via Transnet, a state-owned company. It followed a simple formula: whatever Transnet paid the CRRC companies, they paid the Guptas a cut of, usually, 21%.

The Gupta-CRRC heist spans distinct Transnet orders for 95, 100, 359 and 232 locomotives, plus relocation and maintenance add-ons, with an aggregate value of about R42-billion – a twisted monument to the extent of their capture of the rail utility and the collusion of its executives, board members and politicians.

The kickback agreements reveal the complicity of CRRC officials at the highest level; not surprising considering that more than a fifth of their Transnet revenue was pledged to the Guptas. This does China no favours as it battles to establish itself as a champion of the developing world and to overcome the perception its firms bribe more readily than their Western counterparts.

Attempts over the course of weeks to reach CRRC for comment by email, phone and via the Chinese embassy have drawn no substantive response. CRRC is listed in Hong Kong and Shanghai but the Chinese state is its controlling shareholder.

In June 2017, after amaBhungane and its #GuptaLeaks partners published the first evidence of kickbacks having been paid on the locomotive contracts, Transnet wrote to a local CRRC subsidiary seeking “clarification”.

It wrote back, stating categorically: “We have never had any engagement and/or dealings with the Gupta Family and/or its associates in relation to the agreement Project 359.”

The Guptas, whose whereabouts are not clear, did not respond to emails sent to known addresses for a member of the family and their lieutenant Salim Essa.

Conglomerate corruption

“The 1st batch of Chinese E-loco landed at Africa!” shouts a November 2013 news item on CRRC’s website.

Accompanying photographs show Zhou Qhinghe, then chief executive of CSR Zhuzhou Electric Locomotive Co, celebrating the delivery in Tshwane of the first locomotives from an order of 95 that Transnet had placed with his company’s South African subsidiary.

Zhou now straddles corporate, party and parliamentary politics. He is board chair-cum-Communist Party secretary of the now-renamed CRRC Zhuzhou and a member of the National People’s Congress, China’s highest organ of state power.

In March 2014 Zhou, who is wont to expound on his company and country’s “go out” or “go global” strategy, was in South Africa again.

This time he had come for the signing ceremony of new Transnet orders for 100 and 359 electric locomotives from his company and 232 diesel locomotives from a subsidiary of a second Chinese rail group, CNR.

This was reportedly the single biggest order of Chinese high-end rail equipment globally, making a not-insignificant contribution to the soaring fortunes of CRRC Corporation (2019 revenue: R567-billion), which arose from the subsequent merger of the CSR and CNR groups.

A news report reproduced on CRRC’s website recounts a “very interesting moment” when Transnet wanted a representative of the local CSR Zhuzhou subsidiary to sign their contract, while “Chinese regulation” dictated that Zhou as head of the parent company should sign.

The impasse was broken, according to the report, when a lawyer suggested the local representative issue a power-of-attorney delegating Zhou to sign for him. “The story of ‘the employee authorised his boss to sign contract’ is still a joke between colleagues.”

But Zhou was not done going global or signing.

Think of a car salesman offering the proud owner of a new vehicle a service plan for “guaranteed peace of mind”. In this case the salesman was brought in help to convince the customer.

Zhou’s signature appears alongside that of Essa, the Gupta lieutenant, on a “business development services” agreement dated 10 June 2015, Sandton. It provided that CSR Zhuzhou would kick back 21% to a Gupta front in Hong Kong should the latter convince Transnet to agree to a 12-year maintenance plan.

Transnet awarded the R6.2-billion deal to CRRC Zhuzhou, as it was by then called, the following year. Transnet eventually pulled out, but not before paying CRRC a 10%, R618-million, advance. Of this, according to our analysis, 21% went to the Guptas.

Other senior CRRC executives’ names also litter the kickback contracts with the Guptas. They include Zhou’s colleagues Guo Bingqiang and Hu Yuewen from CSR, and Ma Zhan and Zhu Zhiyong from CNR.

Et tu, 232

The R9-billion total value of the locomotive kickback agreements – against the R5.3-billion estimated before – includes a previously unknown 21% kickback agreement between the Guptas and CNR.

A CNR Hong Kong subsidiary entered into an “exclusive agency agreement” with a second Gupta Hong Kong front represented by Essa, pledging it 21% of the R9.9-billion total contract price of the 232 diesel locomotives that CNR would supply Transnet.

Our analysis shows that CNR honoured the kickback commitment up to the point where our bank data ends.

Like CSR, CNR and the Guptas also found a post-sale mechanism to relieve Transnet of more money. In this case it was under the pretext of Transnet’s decision to move the local assembly facility from Gauteng to Durban “to stimulate development in other parts of SA”.

We have previously reported how Gupta-linked consultants were roped in to convince Transnet of a R647-million payment to “compensate” CNR for the move. CNR paid the consultants R67-million, much of which flowed to local accounts controlled by Essa.

Now our analysis of the bank data concludes that the Guptas got their cake and ate it. Over and above the local kickback, CNR transferred R116-million to one of the fronts Essa had set up in Hong Kong.

Cash for cover/coal

The day of the last nationwide municipal elections, 3 August 2016, stands out like a sore thumb in the Gupta kickbacks timeline.

Effective that day, CRRC signed off on two addenda with the Gupta Hong Kong fronts amending their earlier kickback agreements in relation to the 95, 100 and 359 locomotive orders. The purpose was to put a quarter of a billion rands in Gupta pockets – fast.

By that time the maintenance plan kickback agreement which Zhou, the CSR Zhuzhou boss, had signed with Essa was covered in 14 months’ dust. Though Transnet had asked locomotive manufacturers to submit maintenance plan proposals a year earlier, it had yet to make an award.

Now there was urgency. The addenda specified that “within 10 days” of CRRC Zhuzhou receiving a letter of award from Transnet for the maintenance plan, CRRC companies would release the dollar-equivalent of R250-million that they had previously withheld from kickbacks paid to the Guptas.

To explain: Under the earlier kickback agreements, the CRRC companies were entitled to retain 15% of each kickback until Transnet had fully paid for the locomotives. This was to cover them against potential claims by money launderers who previously fronted for the Guptas at a 15% fee but got sidelined.

The release of these retained amounts was to be over and above the 21% promised to the Guptas on the maintenance contract itself.

Nine days after the addenda effective date, Transnet’s letter of award was in the post.

And another three weeks later, our bank data analysis shows, CRRC released the R67-million retained in respect of the 100 locomotives to the Guptas. Although our data is not conclusive, it likely released the 95 and 359 locomotive retentions of R53-million and R130-million too.

Why the urgency? It was not as if bringing the retention releases forward was all in favour of the Guptas, as the addenda entitled CRRC to offset the risk by withholding parts of future payments again.

A theory, enticing because the addenda effective dates coincided with the date of the municipal elections, is that the Guptas had party funding obligations to fulfil; after all, political cover for a looting spree of this magnitude does not come for free. The Guptas are known to have made party contributions.

A plausible alternative is that the Guptas had overextended themselves when their Tegeta Exploration and Resources controversially bought Optimum Coal Holdings from Glencore a few months earlier for R2.15-billion.

A former Gupta acquaintance said on condition of anonymity: “They always had cashflow issues, so [it] comes as no surprise. If you offered Tony [Gupta] $10-million today or $30-million in 18 months he would always have taken the today money.

“They had only just scraped the purchase money for [Optimum] together and a lot of ‘loans’ which were used to cover the purchase price needed to be unravelled around that time period.”

Recovery railroaded

When public money is stolen, two things are expected to follow: prosecution and recovery.

The National Prosecuting Authority’s investigative directorate was set up a year ago to unravel state capture crimes. To date it has little to show for its efforts.

Directorate head Advocate Hermione Cronjé was quoted in January as saying she was “gobsmacked at the scope and extent of the devastation” wrought by state capture.

Putting together successful prosecutions were hampered by the pervasiveness of corrupt practice. “In some institutions, it’s hard to pick out people who can credibly give evidence in a criminal trial about what happened because they were either complicit or will struggle to answer questions about what they did to stop what was happening.”

On the recovery front Transnet has achieved little. It pulled out of the 12-year maintenance plan and convinced CRRC to reimburse the R618-million advance.

But that is a drop in the ocean of the R42-billion in procurement from CRRC companies tainted by the Gupta kickback agreements.

Last December Transnet  said in a statement that it planned to go to court to declare unlawful and set aside the CSR 359 and CNR 232 locomotive contracts. Transnet wanted a mixture of reimbursement and no further deliveries.

Six months later, Transnet has yet to go to court. After Portia Derby’s appointment as Transnet chief executive in January, she brought in new top managers, including new chief legal counsel Advocate Sandra Coetzee. They went back to the drawing board.

Transnet said in response to questions that Coetzee “is reviewing all transactions and, based on legal and commercial grounds, will identify actions to be taken in relation to cancellation, negotiation, recovery, and any criminal proceedings to be instituted”.

Should Transnet pluck up the courage and go for CRRC – and Derby pass the test of raking through the ashes left by former CEO Brian Molefe – her ex-husband – it faces a booby trap left by the conspirators.

While partial prepayment for large equipment orders is not unusual, Transnet took it to new levels for the CRRC companies. It paid advances of 10% on the 95 locomotives contract, 60% on the 100 contract, 30% on the 359 contract, 15% on the 232 contract, 50% on the 232 relocation and 10% on the maintenance plan.

About R10.8-billion left Transnet coffers before it saw its first locomotives. Putting aside the fact that part of each advance went straight to the Guptas, it also exposed Transnet to great risk.

For a substantial part of each contract’s duration, Transnet would have paid the supplier more than the total price of the locomotives it had received up to that point. Cancelling the contract would have left Transnet, and not the CRRC company, out of pocket. Boom.

This still applies to the CNR contract, where only about 60 of the 232 locomotives have been delivered after six years, and to a lesser extent the CSR 359 locomotives contract, where about 100 locomotives remain outstanding.

Advance payment guarantees were in place, but getting them honoured may be like pulling hens’ teeth. Trying to get the CRRC companies to make restitution beyond that – for the billions overcharged and paid to the Guptas – may be as futile as amaBhungane’s attempts to get answers from CRRC. DM

* Not for the fainthearted: Read How the Guptas’ R9-billion loco heist went down, our detailed analysis of each deal and the kickbacks paid on it.

* In this article, unless specified, “the Guptas” is shorthand for the extended family headed by Ajay, Atul and Rajesh Gupta and relevant business associates. All amounts exclude VAT. Foreign currency amounts are converted to rand at our best estimate of the exchange rate used at the time, not current rates. Additional reporting by Susan Comrie.

*The amaBhungane Centre for Investigative Journalism, an independent non-profit, produced this story. Like it? Be an amaB Supporter to help us do more. Sign up for our newsletter to get more.