The then chief executive Brian Molefe approved a price of R44m for the locomotives
A TRANSNET executive on Wednesday told the commission of inquiry into state capture that it took him by complete surprise that the entity bought 100 locomotives while busy negotiating a deal to source 1064.
Executive manager responsible for enterprise-wide business services in Transnet Freight Rail’s finance department, Yousuf Laher, said the state-owned rail, logistics, port and pipeline company’s former chief financial officer Anoj Singh informed him Transnet had decided to confine the supply of 100 electric locomotives to China South Rail (CSR).
At Transnet, confinement is a process where other procurement mechanisms would be impractical due to urgency, limited market or sole source supplier and then goods or services are confined to one or a limited number of bidders.
”At that point it took me by complete surprise because we were involved in 1064 negotiations. I’m wondering why do we need an extra 100 locomotives but in any case he said it was approved by the board, we need an extra 100 locomotives, it’s been confined to CSR,” Laher recalled Singh informing him.
He said while they were busy negotiating the deal to award the 1064 locomotives Singh asked him to prepare a reasonability calculation for the 100 locomotives.
According to Laher, he did his calculations and came to the conclusion that each locomotive was R41 million, which he presented to Singh and former Transnet Freight Rail chief procurement officer Thamsanqa Jiyane as a benchmark for the negotiations.
During negotiations, Jiyane pitched Transnet’s offer at R38.5m but CSR disagreed and demanded a price of R49m.
Laher said Singh then came in a day or two later and said then chief executive Brian Molefe approved a price of R44m for the locomotives.
”Obviously there must have been some other negotiations happening in the background,” he said.
Laher told Singh the locomotives manufactured by Japanese railways rolling stock leasing company Mitsui were cheaper but was informed this did not matter as Transnet had appointed CSR as the deal had already been approved by the board.
He said Molefe also approved the payment terms for CSR and instructed the lawyers to draft the contract accordingly.
”I raised with the bidders that in my view the pricing was excessive and too high and that they were using the incorrect exchange rates to determine their prices,” he said.
Laher also pointed out that the use of incorrect exchange rates to Singh and as a result CSR was adding R2.4m per locomotive to the price.