Inquiry hears Transnet fleet now worse off than before billion rand acquisitions

The performance of Transnet’s fleet of locomotives is now worse than it was in 2014 when the acquisition of 1064 new locomotives was initiated, the state capture inquiry has heard.

The multi-billion rand contracts for the locomotives have been beset by cost inflation and allegations of corruption and kickbacks. 

Former Transnet Engineer, Francis Callard, on Thursday appeared near to tears as he concluded three days of testimony about irregular procurement processes. The locomotives were meant to replace the state-owned freight rail group’s ageing fleet and improve its load carrying capacity. 

The state capture commission, chaired by Deputy Chief Justice Raymond Zondo, is investigating allegations of fraud corruption and maladministration at several state entities.

Callard is the third witness to present evidence about Transnet, following on from board chair Popo Molefe and acting CEO Mohammed Mahomedy.

“My understanding is the locomotive performance is now worse than before the acquisition process of the 1064 locomotives started. We shared a vision of recreating sustainable, viable, locomotive industry, to supply 60 to 100 locomotives annually to freight rail. Sadly the vision was not realised,” Callard said, pausing a few times to take sips of water and hold back tears.

“Where we are now may be more than a decade before the opportunity may arise again,” he mustered. Zondo called for a five-minute adjournment to allow Callard time to compose himself.

Flawed evaluation process

During his testimony Callard argued that the process for evaluating prospective bids at Transnet was flawed with “certain bidders” favoured. This led to a misrepresentation of bid prices in tender documents, he said. 

In January 2018, four years after the bid process started, Callard said he was asked by former Transnet executive Garry Pita to conduct a financial analysis of the transactions. The point was to try and justify the price escalation from R38.6bn – as stated in the initial business case – to R49.5bn.

Callard told the commisison he became aware of two spreadsheets which contained information about the locomotive transactions which he would need for his analysis. Access to the spreadsheets was restricted, however, and he was told by former Transnet executive finance manager Yousuf Laher that they were confidential. No reasons were given. 

“I cannot say what was in his mind for him not to give it to me. The information from the spreadsheets is highly relevant,” he said.   

He went over Laher’s head and successfully approached then-CFO Nomfuyo Galeni to access them. “There was a strict firewall relating to tenders at the time – consistently. It was just fortunate that I could access this spreadsheet which brought to light inconsistencies.”

The spreadsheets, authored by Laher, showed how the prices escalated from R38.6bn to R49.5bn. 

“There are anomalies here I cannot explain or which are very difficult to explain,” he said. “It is possible Laher did not share the spreadsheets because he did not wish to share the anomalies or he did not wish to explain the anomaly.”

Callard said he did eventually engage with Laher about the spreadsheets, but could not recall when. It was during a meeting that also involved MNS attorneys late in 2018. Laher, said Callard, could not explain the anomalies, saying his role was simply to capture the data on the spreadsheet and input the figures.

Callard said he did not believe that either Pita or Galeni were aware of the spreadsheets. When he had asked Galeni for them, she did not appear to be in the loop. 

When Zondo asked who made the final call to decide if prices were acceptable and signed off on transactions, Callard said that ultimately responsibility rested with then CEO-Brian Molefe. Molefe left Transnet in 2015 to join Eskom. 

He concluded his testimony with a quote from A Tale of Two Cities by Charles Dickens. 

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way.”

Callard may again appear for cross-examination by those implicated in his testimony. 

The inquiry continues with the testimony from chartered accountant Roberto Gonsalves, one of the minority directors from an entity which benefited from Transnet’s Durban relocation terminal project.