The report also looked into a series of general freight business contracts awarded to McKinsey as the main contractor and Regiments as a partner. Transnet thought Regiments had gained enough experience from McKinsey to take the lead from McKinsey.
The report found that:
- Regiments was awarded a R375m contract, which was more than the R300m in Regiment’s proposal;
- It was illegal for Regiments to accept the R375m contract; and
- Trillian was paid R46m despite there being “no evidence that Trillian rendered any service”.
The report recommended that Transnet start disciplinary proceedings against officials who facilitated the irregular contract.
According to the report, in 2014 Transnet wanted to maximise its coal supply by improving its coal line to 2-million tons a week. Singh compiled a memorandum for Molefe on March 31 2014 to request approval from the group chief executive for the financing of the increased coal line and to award McKinsey the contract as consultants in the renegotiation.
The investigation found that:
- McKinsey was given preferential treatment; its proposal was received after the closing date of June 10 2014;
- McKinsey and Regiment were paid R111.1m before a master service agreement (MSA) was signed;
- McKinsey and Regiments started working on the project before the MSA was signed; and
- Transnet officials contravened the PFMA.
The report recommended that Transnet recover R8.85m paid to McKinsey and R10.5m to Regiments because there are no documents to support these amounts. It said public enterprises minister Pravin Gordhan should bar former employees who abused the supply chain management system from being hired by state entities, or from doing business with them, for five years.
In 2014, Transnet renegotiating tariffs with Kumba Iron Ore.
The report found that:
- McKinsey prepared pointers for Singh to convince Molefe to hire McKinsey to help in the renegotiation of the tariffs, thus compromising the integrity of the procurement process;
- McKinsey and Regiments continued to invoice Transnet despite exceeding the approved budget of R100m; and
- McKinsey and Regiments were paid R12.476m and R7.689m respectively for out-of-pocket expenses with no document to support them.
The report recommended that Transnet recover the R12.476m and R7.689m. .