In last week’s instalment of Unaccountable, we discussed the politicians, board members and institutions that enabled, participated in and covered up systemic corruption at Prasa. This is the first instalment that looks at the middlemen and corporations that made a mint from corrupt deals. 

The Passenger Rail Agency of South Africa’s (Prasa’s) service is in disarray. This includes Shosholoza Meyl, which runs the long-distance railway services across South Africa. Mainline Passenger Services (MPS), which oversees Shosholoza Meyl, reported a staggering 90% decline in passengers, from 3.8 million in 2008/2009 to 387,500 in 2018/2019. This is according to a presentation to Parliament by the director-general of the Department of Transport, Alec Moemi, last year. 

Moemi told Parliament that the dramatic decline in passengers and near collapse of South Africa’s long-distance railway service was because of a major shortfall in locomotives. Because of the shortfall, Prasa has had to lease old and unreliable locomotives at exorbitant prices, leading to frequent prolonged breakdowns.

The Swifambo Rail Leasing contract, signed in 2013, was supposed to provide a much-needed injection of modern locomotives into Prasa’s aged fleet, but instead it nearly collapsed Prasa’s long-distance railway service. 

At the heart of the contract is businessman Auswell Mashaba, the director of private company Swifambo Rail Leasing. Mashaba acted as the middleman for a corrupt contract between Vossloh España, a German locomotive company based in Spain, and Prasa. 

The now infamous contract resulted in R2.7-billion being spent on trains which were too tall for South African railway lines. Although it was valued at R3.5-billion, Prasa stopped making payments in 2015 after serious allegations of corruption and maladministration at Prasa were outlined by the Public Protector and Auditor-General. Prasa’s new board under Popo Molefe took the tender to court in November 2015.

In February this year, Mashaba’s lawyers sent a letter to the State Capture Commission of Inquiry stating that he “does not recognise that the summons issued against him” is legally binding after being called to testify about his role in the Swifambo contract. Mashaba, taking a page out of Jacob Zuma’s State Capture playbook, refuses to cooperate with the commission, undermining its vital task.

Instead of Mashaba’s testimony, the public heard shocking evidence of the illicit cash flows behind the R3.5-billion contract from forensic investigator Ryan Sacks, whose company, Horwath (now Crowe) Forensics, was commissioned by the Directorate for Priority Crime Investigation (DPCI/Hawks) in late 2015 to follow the money flows linked to the contract. This may be why Mashaba refused to testify at the Zondo Commission in February: he is deeply implicated in one of the most pernicious tender scandals of recent SA history.

Mashaba’s failure to appear at the commission indicates his commitment to choose profit over principle at the expense of working-class commuters across South Africa. The contract was set aside by the Gauteng High Court in 2017, but by then R2.7-billion had been paid into Swifambo’s pockets and 13 oversized locomotives had landed on South African soil.

Procurement at Prasa: Dodgy since Day One

The Swifambo locomotives contract has its origins in a Prasa public request for expressions of interest issued in July 2009. This was intended to supply 88 locomotives which would address a critical shortfall affecting passenger trains across SA.

In 2011, Prasa’s executive manager of engineering services, Mshushisi Daniel Mthimkhulu, sent a memorandum to Prasa CEO Lucky Montana recommending the upgrade of Prasa’s fleet by 88 (this was later reduced to 70) locomotives, at an estimated cost of R5-billion. This is according to high court documents from Prasa’s bid to have the contract set aside. Later that year, Prasa published requests for proposals after deciding to purchase 70 locomotives, based on the specifications provided by Mthimkhulu.

The first red flag was that these specifications were tailored for European locomotives made by Spanish manufacturer Vossloh España, rather than the usual specifications of South African railways. In the 2017 judgment that set aside the contract, the high court concluded that Vossloh España used Mashaba’s Swifambo Rail Leasing as a front in order to appear compliant with the BBBEE Act – which would otherwise have prevented Vossloh from doing business directly with Prasa.

In terms of standard procurement policy, specifications should have been designed by the Cross Functional Sourcing Committee. Instead the specifications were drawn up by Mthimkhulu himself.

The high court found that in “numerous instances items appeared to have been included in the specifications to ensure Swifambo was awarded more technical points” in the evaluation phase of the procurement process. An example was that the specifications stipulated the number of engine cylinders as 12, when in reality the number of cylinders was irrelevant for the tender. Vossloh’s locomotives had 12 cylinders. This is an age-old trick in procurement corruption and was used to great effect by middlemen and corporations in the corrupt 1999 arms deal.

Mthimkhulu was fired from Prasa in 2015 after it was discovered that he had lied about his qualifications. It was revealed that he did not hold a doctorate from Technische Universitat Munchen and was not a qualified engineer.

Swifambo Rail Leasing: A front for German grifters

Following a public tender briefing session in December 2011, Swifambo Holdings, under the directorship of Mashaba, bought a company called Mafori Finance Vryheid (Pty) Ltd in February 2012. Just two months later, Mafori Finance Vryheid submitted a bid for the Prasa locomotives contract, with almost identical specifications to the ones drawn up by Mthimkhulu. In May 2012, Mafori Finance Vryheid changed its name to Swifambo Rail Leasing to imitate previous involvement in the railway industry, according to a Supreme Court of Appeal judgment.  

According to the high court judgment in 2017, Swifambo’s bid was riddled with major irregularities. It did not have a tax clearance certificate, there was no broad-based black employment equity (BBBEE) plan for the procurement of goods and services and it did not comply with any local content requirements, as the locomotives were to be manufactured in Spain. Perhaps most revealing is that Mashaba did not submit any proof that his two-month-old company had any experience in the railway industry. 

The court concluded that “Swifambo under the agreement with Vossloh was merely a token participant that received monetary compensation in exchange for the use of its B-BBEE rating” because that was the only thing that prevented Vossloh from bidding on its own. There was no transfer of skills either, since Swifambo was effectively a shelf company with “virtually no employees, business customers and suppliers”.

Despite the serious irregularities in the proposal, the board of Prasa inexplicably approved Swifambo Rail Leasing as the preferred bidder in July 2012, with the contract being concluded in March 2013. In July 2013 Swifambo entered into a contract with Vossloh España, the Spanish subsidiary of the German railway company  (we return to them in a future issue of Unaccountable). 

Too tall to jail

It is clear that Swifambo Rail Leasing was never going to do any actual work. Mashaba was a middleman, who was there to buy exorbitantly expensive locomotives from Vossloh, pocketing wads of public funds in the process. The well-connected Mashaba’s only role was to procure locomotives from Vossloh and deliver them to Prasa. This plan was going smoothly until 2015, when a Rapport investigation revealed an extraordinary detail: the keenly anticipated Afro 4000 locomotives were too tall for South African railways. 

This was confirmed in a 2015 report on the Afro 4000 locomotives by South Africa’s Railway Safety Regulator (RSR). The RSR conducted a number of tests at different locations across South Africa’s railway system. The report concluded that the “Afro 4000 Series is designed and manufactured to a height of 4,140mm above rail head [which exceeds] the vehicle structure gauge of height of 3,965mm as required by the Transnet Freight Rail maintenance manual.”

This absurd outcome was not simply a logistical error. Rather, it was the result of the blatant manipulation of the tender and procurement processes which bypassed multiple bodies that were supposed to check the locomotives were financially and technically viable for Prasa and South African railways. The result was the purchase of trains that were unsafe for South Africans tracks, effectively wasting R2.7-billion. 

This was highlighted in the high court judgment, with the court concluding that one of the reasons money had been wasted on trains that were too tall was because “the locomotives acquired under the contract were not evaluated by the committee responsible for the technical evaluation”.

Six years later, only 13 of the 70 oversized locomotives have touched South African soil, while Prasa has only recovered an estimated R63-million. Where did the rest of the money go? 

How did Mashaba do it? Follow the money trail

In April 2013, Prasa transferred its first payment of approximately R460-million to Swifambo Rail Holdings, the holding company for Swifambo Rail Leasing. This irregular payment was made despite the fact that Swifambo Rail Leasing was the contracted company. 

Immediately after the payment, Mashaba began shifting massive amounts of funds to a number of different companies and individuals, few of which had any obvious links to the R3.5-billion contract. These suspicious payments continued until the last tranche of Prasa payments to Swifambo in 2015. This was revealed in the forensic investigation into the money flows of the Swifambo companies undertaken by Ryan Sacks of Horwath Forensics (now Crowe Forensics).

Of the R2.7-billion paid by Prasa to Swifambo, the latter paid Vossloh R1.8-billion. This meant that Swifambo retained around R500-million (excluding VAT) surplus – for doing no material work in the contract. At the end of the contract Swifambo was still liable to Vossloh for an amount of R462-million. However, Swifambo could not pay Vossloh as Mashaba had already “illicitly expended the money”, according to the forensic report.

Mashaba moved significant amounts of the Swifambo funds to trusts and companies under his control soon after receiving the Prasa money. This included a total of R85-million deposited into Mamoroko Makolele Trust (MM) Trust, which lists Mashaba and his wife, Joyce, as trustees. Additionally, around R20-million was diverted into other companies owned by Mashaba, such as AM Consulting Engineers and AM Investments.  In total Mashaba received around R103-million from Swifambo, which was channelled through his different businesses and the MM Trust across multiple payments from 2013-2015, according to the money-flows report.

Who else benefited? Meet Makhensa Mabunda, the king of kitchens

Another person allegedly paid by Mashaba is Makhensa Mabunda – a businessman with an apparent taste for very fine kitchens. Mabunda seems to have played an integral role in setting up the contracts between Swifambo and Prasa, and Swifambo and Vossloh España. He and his companies received an estimated R56.6-million from Swifambo, according to the forensic report. This included a payment of R5.2-million to Sterlings Living, a company that specialises in upmarket Italian kitchens. This payment was allegedly for the installation of a kitchen in Mabunda’s home in the upmarket Waterfall Equestrian Estate.

Mashaba was not alone in rewarding Mabunda with “consulting fees” for setting up the contract. According to a News24 report which was later confirmed by the Vossloh Group, Vossloh also paid R75-million to Mabunda’s company S-Investments, between 2013-2015. In court papers in Prasa’s bid to set aside the contract in 2017, Mashaba alleges that Mabunda was the mastermind behind setting up the Swifambo contract and was a close associate of Prasa CEO Lucky Montana.

Political connections: The Zuma family 

The forensic report also highlights that Mashaba received instructions to make payments totalling at least R86-million to “political affiliates” connected to the ANC, and Jacob Zuma in particular.

This included a minimum of R40-million to Angolan businesswoman Maria da Cruz Gomes through a company called Similex. Gomes is a close friend of Zuma. Meanwhile, another payment of around R30-million was made to the law firm Nkosi Sabelo, which is under the directorship of George Sabelo. Sabelo is an associate of Jacob Zuma’s son Edward Zuma and was implicated in corruption and bribery allegations at PetroSA in 2013. Mashaba was told that they were fundraising for the ANC. The Jacob Zuma Foundation also received a donation of R150,000.

A luxury lodge in Limpopo and a wine farm outside Robertson

Mashaba also allegedly spent large amounts of the Swifambo money on property. In 2015,  City Press reported that Mashaba spent over R50-million on property just days after Swifambo received the first payment from Prasa in 2013 – which amounted to about R460-million.  This included R27-million on the luxury AM Lodge in Limpopo, which he paid for in cash. Mashaba’s son Nsovo Mashaba works at the lodge, as does his sister Prudence Mashaba. AM Lodge charges R33,000 a night to stay in its luxury villa, more than most South Africans’ monthly income.

Large amounts of money also flowed from the two Swifambo entities to WKH Landgrebe, an auditing and accounting firm based in Randburg, Johannesburg, according to the forensic report. The firm received R27.9-million in 15 different payments from 2013 to 2016 from Swifambo Rail Holdings and Swifambo Rail Leasing. An investigation by Scorpio alleges that, “WKH Landgrebe used R24.5-million it received from Swifambo to secure a 60% shareholding in [private company] Okapi Farming on behalf of Mashaba’s MM Trust.” Okapi owns Orange Grove Farm outside Robertson, among other tracts of land.

In total, the forensic report documents at least R462-million in suspicious payments made to a web of accounts, trusts and businesses connected to Mashaba and his associates. This figure might just be the tip of the iceberg.

Eight years of impunity

The recent National Household Travel Survey provides an insight as to how deeply corruption at Prasa has affected the lives of commuters. In 2013, the year in which the Swifambo contract was initiated, 700,000 working South Africans – around 13% of the workforce – used trains to get to and from work. Fast-forward to 2020 and that number had dropped by 80%, with only 150,000 South Africans relying on trains to get to and from work. The majority of commuters have been forced to use more expensive forms of transport.

The Swifambo contract sent Prasa’s long-distance railway service into turmoil, and yet eight years later there have been little to no consequences for the parties involved. 

A glimmer of hope was seen in 2018 when the Pretoria High Court found that the Hawks had failed to conduct and finalise investigations into alleged irregular tenders between Prasa and Swifambo and Siyangena, and compelled them to do so. This case was brought to the courts by Prasa’s then board chairperson Popo Molefe and the Organisation Undoing Tax Abuse.

Mashaba has dodged the Zondo Commission and any investigations by the Hawks. He continues to enjoy the fruits of blatant corruption while the commuters of South Africa suffer. It is time he is held accountable. DM

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Previous articles in the Unaccountable series are:

Unaccountable 00001: Dame Margaret Hodge MP – a very British apartheid profiteer

 Unaccountable 00002: Liberty – Profit over Pensioners; 

Unaccountable 00003: Dube Tshidi & The FSCA: Captured Regulator?; 

Unaccountable 00004: Rheinmetall Denel Munition: Murder and mayhem in Yemen; 

Unaccountable 00005:National Conventional Arms Control Committee: handmaiden to human rights abuse?; 

Unaccountable 00006: Nedbank and the Bank of Baroda: Banking on State Capture.

Unaccountable 00007: HSBC – The World’s Oldest Cartel

Unaccountable 00008: FNB and Standard Bank- Estina’s Banks

Unaccountable 00009: McKinsey – Profit over Principle

Unaccountable 00010: Jacob Zuma – Comrade in Arms

Unaccountable 00011: Thales – How to buy a country

Unaccountable 00012: John Bredenkamp – Agent of BAE Systems

Unaccountable 00013: Fana Hlongwane – Agent of BAE Systems

Unaccountable 00014: BAE Systems: (Profit) Before Anything Else

Unaccountable 00015: The BAE Corruption Bombshell

Unaccountable 00016: Deloot- How Deloitte gets away with it.

Unaccountable 00017: EY- Incompetent, Negligent or Criminal?

Unaccountable 00018: KPMG at the heart of State Capture 

Unaccountable 00019: IRBA – soft-touch audit regulator in turmoil

Unaccountable 00020: Credit Suisse – An enabler of mega-looting in Mozambique

Unaccountable 00021: Bain & Company – The KGB of consulting 

Unaccountable 00022: The Chinese Railway Rolling Stock Corporation: China Inc boards the State Capture train

Unaccountable 00023: How Prasa was looted and left for scrap