Molefe and Singh, who at the time of the deal was Transnet’s group chief financial officer, failed to conduct a cost-benefit analysis when a decision was taken to change the 95-locomotive tender from the Mitsui locomotive model to the CSR model, the report said.
“Transnet would have saved R1.2bn if it procured 100 locomotives from Mitsui at R3.188bn [rather] than procuring from CSR at R4.4bn. Molefe and Singh failed to follow a proper process when motivating for the acquisition of locomotives from CSR.”
The report recommended the Hawks launch criminal investigations into suspended senior Transnet officials Thamsanqa Jiyane and Lindiwe Mdletshe, and the state-owned company’s former group chief executive, Siyabonga Gama.
Jiyane, who is Transnet’s group chief procurement officer, and Mdletshe, who is Transnet’s executive manager for sourcing, were suspended two months ago in connection with the locomotive scandals.
The report’s recommendations are that the Hawks institute criminal investigations against the four for possible receipt of gratification and for contravening of the Prevention and Combating of Corrupt Activities Act.
It also recommends the Hawks launch corruption investigations into Transnet’s board members for possible dereliction of duty under the Companies Act and for violating the Public Financial Management Act (PFMA).
It states that the board allegedly violated the PFMA by “failing to act in the best interest of Transnet through the approval of amendments of the bid conditions which saw the irregular appointment of China South Rail for the supply of 95 locomotives valued at R2.6bn”.
The Treasury has also called for the Hawks to criminally investigate Gupta associates and businesses linked to the deal.
The authors also recommend that the Cabinet prevents officials who resigned before being disciplined from being employed by any state entity for five years and restrict officials who resigned or were dismissed for supply chain management misconduct from doing business with any state entity for five years.
In terms of the acquisitions, Transnet officials went “out of their way to assist China South Rail in their bid to be appointed for the supply of 95 locomotives” said the report.
“Mdletshe played a part in the said assistance by e-mailing tender documents to CSR … Mdletshe failed to comply with Transnet’s procurement processes … Mdletshe’s conduct contravened the [Transnet] code of ethics and conflict of interest.”
In arguing for criminal investigations to be conducted into Molefe, the authors say CSR compromised the integrity of the procurement processes by communicating with Molefe during the bidding process.
“Molefe’s communication with CSR was sent to individuals who have links with the Guptas and companies associated with the Gupta family.”
The document states the bid evaluation team began the tender evaluation for the acquisition of 95 locomotives before receiving appointment letters.
“Gama, Jiyane, Molefe, BADC [Board Acquisition and Disposal Council] and board members compromised the integrity of the procurement process and benefited CSR by changing the prescribed conditions after the bid closed.
“The amendment of the prescribed conditions after the bid closed prejudiced other potential bidders who bought the bid documents and never submitted the bids.”
The report states that Molefe, Gama, Jiyane and the board members’ actions “exposed Transnet to potential litigation and reputational risk, should other tenderers become aware of the irregular amendment of the evaluation criteria”.
“Gama, Jiyane, Molefe, the BADC and the Transnet board members failed to act in the best interest of Transnet [and] failed to ensure that the procurement process for the acquisition of the 95 locomotives was fair, equitable, transparent, competitive and cost effective.”
The report says CSR was irregularly appointed in that it should have been disqualified for receiving bid documents unlawfully, communicating with Molefe and failing B-BBEE requirements. “CSR submitted documents after the tender closed,” it said.
In terms of the 1,064 locomotive tender, the report said Molefe and Singh misrepresented facts to Transnet’s Board which saw the tender’s costs increasing from R38.6bn to R54.5bn.
Regarding the costs increasing, Molefe and other Transnet officials contravened the Public Financial Management Act in that they failed to take effective and appropriate steps to prevent irregular expenditure and fruitless and wasteful expenditure, the report said. “Singh and Molefe misled the board.”