Alstom and Prasa reject claims of tender fraud

French multinational Alstom has said its South African team followed the absolute letter of the law in bidding for a Passenger Rail Agency of SA (Prasa) contract to build rolling stock and dismissed charges of corruption levelled by the Federation of Unions of SA (Fedusa), calling them defamatory. Fedusa wanted Alstom to be investigated as it claimed it had uncovered “signs of possible corruption” in the R51 billion rolling stock manufacturing and maintenance tender that was awarded to Gibela Rail Transportation. Alstom owns 60 percent of the consortium. The tender was awarded to Gibela in December last year and involves the supply of 3 600 passenger coaches to Prasa between 2015 and 2025.

“Alstom’s ethics rules provide for the strict respect of laws and regulations in force in all countries where the group operates, with prevention of corruption measures as a priority concern,” the company said in an e-mailed response. “We strongly deny any such claims, and judge them false and defamatory.” Alstom said it had consistently strengthened its ethics rules over the past few years. But Fedusa said even if Alstom did not use underhanded tactics to win the Prasa tender, the government had to act to prevent further reputational damage to South Africa that would result from dealing with a company that had been discredited internationally. The World Bank fined Alstom $9.5 million and blacklisted two of its subsidiaries in February last year for offering bribes to win a Zambian power contract. The bank said Alstom made an improper payment of e110 000 (R1.4 million) in 2002 to a former senior government official in relation to the World Bank-financed project.

Alstom has been on corruption watch in the UK since 2008. “The obvious sign to us [that there is corruption] is Alstom being involved. Already they are corrupt and everyone jokes about South Africa being corrupt. So why involve them in our major projects?” Fedusa’s deputy general secretary Krister van Rensburg said. Prasa chief executive Lucky Montana said he was satisfied that the tender process for the rolling stock project was a clean one. “I am putting my head on the block. I am challenging this union to come forward with the evidence. I am challenging them to a public debate. And they don’t even have to give the evidence to me, they must approach the police or the public protector,” Montana said. He said Prasa had appointed SizweNtsalubaGobodo to oversee the tendering process and the audit firm was satisfied that there was no corruption.

Montana said the rail parastatal had chosen Alstom because no local company could provide modern train technology, as South Africa had not invested in its passenger trains for more than 30 years. Alstom has also won major contracts from Eskom, including the turbines for Medupi and Kusile. The power utility said it did not perform a due diligence on a supplier prior to entering into negotiations. “If a tenderer was barred, for example by the World Bank, to participate in a bank-funded project, then Eskom would not have considered a bid from such a tenderer. Eskom does, however, use business intelligence processes, which in turn rely on information available in the public domain, to gain knowledge on a particular supplier,” Eskom said in response to queries.

The power utility said the Medupi turbine contract was signed on September 30, 2007, and the Kusile contract on December 14 that year. Eskom added that Alstom’s involvement in alleged shady deals became public knowledge in early 2008 and “these in the main related to contracts in Asia and South America between 1995 and 2003”. Alstom and Prasa have concluded the negotiations to build the factory in Johannesburg where the rolling stock will be manufactured. Prasa and Transnet Rail Engineering have agreed that Transnet will build the factory. Prasa said that in the beginning, 65 percent of the train components would be made locally by Transnet Rail Engineering and other local companies. As the project unfolded, this local content was expected to grow to over 70 percent.