Johannesburg - Chief Justice Raymond Zondo and former public protector Thuli Mandosela have been accused of failing to investigate officials who were allegedly involved in Transnet tender irregularities.
This was despite the forensic reports found that Transnet awarded contracts without proper tender processes between 2006 and 2010. The report, which was released in 2011, was submitted to the Public Protector’s office during Madonsela’s tenure.
This was after the late MP Vytjie Mentor, who was the chairperson of the Portfolio Committee on Public Enterprises, complained about allegations of irregularities in procurement at Transnet. Madonsela refused to investigate executives who were implicated, saying the report had not been completed.
She is said to have failed to take action against those who were involved even when the report was completed. Former Transnet board member and Gupta associate Iqbal Sharma also forwarded the information to Justice Zondo during his testimony at the State Capture Commission.
Asked why they did not investigate those who were implicated, Madonsela said she didn’t have full information about the investigation and asked if it was the one that resulted in a detailed report. However, she failed to answer questions even after the Sunday Independent confirmed the report.
Justice Zondo’s spokesperson, Mbuyiselo Stemela, referred questions to the State Capture Commission’s secretary Itumeleng Mosala, saying he was no longer in the employ of the commission. Mosala didn’t respond to questions.
The report was first compiled by auditing firm KPMG and its findings were confirmed by law firm Norton Rose. The report found that the then Transnet Capital Projects Tenders (CTP) chief executive Moira Moses, director Neville Eve, mega project manager Bernard Smith, and chief operating officer Louis van Niekerk were responsible for the irregular procurement.
The three companies, Voestalpine VAE, Oliver Wayman, and HMG JV, were awarded the contracts without following proper procedures. Voestalpine VAE was given a five-year contract for the supply of rails, turnouts, and rail-manufactured components in 2006.
Although the value of the contract was recorded in the contract itself, the original estimated value was recorded as R960 million and the total expenditure was R1 775 billion on various submissions for amendments to the contract.
Oliver Wayman was appointed in 2010 to conduct certain work on the Coal Line Expansion. The contract was valued at R55 million. HGM JV was awarded a tender as a supplier of engineering, procurement, and construct management (EPCM) services to support the implementation of the Transnet infrastructure investment programme.
The project, signed in January 2006, was budgeted for R800m. Transnet was accused of giving HMG preference after the competitor Murray and Roberts was allegedly prevented from making a presentation.
The report found that Transnet eliminated the HMG competition and allowed the company to be the sole bidder. It was found that the company also started work before authorisation by the Transnet board.
The report indicated that Bernard Smith lacked the authority to appoint HMG. The audit firm also submitted that Smith and van Niekerk also bypassed the divisional acquisition council (DAC) and the board to appoint HMG as consultants for over R10m while they had no authority to do so.
“We submit that the contract had been deliberately left without an estimated contract value, which would have allowed the persons concerned to bypass the governance structures.”
The report also found that HMG’s staff members were paid retention by Transnet and this irregularity cost the state utility R185.4m.
“The payment of retention bonuses in respect of staff of a service provider is not in line with the best business practice or with the policies of Transnet. Moses, in her capacity as chief executive of CTP, failed to put controls in place in order to avoid irregular and wasteful expenditure in the form of retention and completion bonuses and interest on late payments to HMG.”
KMPG said evidence also suggested that Moses entered into an irregular contract with HMG when she authorised the Option G contract in which additional work was granted to HMG using task orders – the list of task orders reviewed amounted to R202m.
As a result, the contract between Transnet and HMG was in contravention of the Public Finance Management Act (PFMA). Asked if they were aware of the report, HMG did not respond. Murray and Roberts group investor and media executive Ed Jardim said this was a contract of their construction business which was sold in 2017. He said none of the people who were involved were now with Murry and Roberts.
The forensic report also found that the approved budget of Transnet Freight Rail (TFR) was more than sufficient to cover the R960m contract with Voestalpine VAE for the acquisition of rails and maintenance. It said despite the adequacy of the approved budget, Van Niekerk, who was the chief operating officer, acted beyond his delegated authority by approving Capex and Copex to spend in the amount of R960 as he was authorised to amounts up, but not exceeding R200m for Capex in the approved budget to commence projects.
The report also found that Transnet continued with the payment and procurement of goods from Voestalpine VAE even after the expiry of the 2006 contract and while no prior approval was sought from the delegated authority. This, according to the report, constitutes a contravention of section 51 of the PFMA.
KMPG also said the appointment of Oliver Wayman wasn’t necessary to be approved by TFR Exco. The report indicated that the appropriate procurement processes were not followed in the appointment in August 2010.
Voestalpine VAE chief executive officer Pulane Tshabalala Kingston said the company was the only local supplier of rail components to the network, adding that there were no competitive RFP tenders that went out for adjudication.
“Contract or price negotiations were entered into and we received purchase orders on an ‘as and when required basis’. Important to be aware in this regard is that VAE SA would not have been aware of Transnet’s budget allocation for contracts.
“From 2006 onwards, you will be interested to know that there was a substantial investment by TFR in their main corridors (the iron ore and coal lines). This would have resulted in an increased spend against the contract of which we weren’t aware," Kingston said.
She added: “With effect from 1 October 2006, a three-year rail supply contract for rails, turnouts, and turnout components was entered into with an option to renew for two years at Transnet’s option. As far as I am aware, we supplied against the contract and its various amendments.”
Oliver Wayman failed to respond to questions. On Thursday, the Transnet Media desk said they were working on a response but failed to respond.