Transnet board members may face R1.2 billion lawsuit

Former Transnet board members and executives, including Brian Molefe and Anoj Singh, face a R1.2 billion lawsuit should the recommendation from the explosive National Treasury report into the rot at the company be implemented to the letter.

Molefe, Singh and fired chief executive Siyabonga Gama were found to have not protected the interests of Transnet when they awarded China South Rail (CSR) a multibillion-rand locomotives tender. Investigators found that Transnet would have saved R1.2 billion if it procured 100 locomotives from Mitsui at R3.188 billion instead of procuring from CSR at R4.4 billion. The report called on the current board to consider trying to recover the R1.2 billion from the previous board and executives who were involved in the deal.

Investigators further determined that Molefe and Singh misled the board into believing that the R3.8 billion was for 100 locomotives. The contract proposed by Mitsui for 100 locomotives was R3.188 billion – R612 million cheaper than that of CSR. The report laid the majority of the blame at Molefe’s door. “We determined that Molefe concluded an agreement with CSR on March 17, 2014 for the supply of 100 locomotives at a cost of R4.38 billion. However, the board approved ETC of R3.8 billion. Molefe, therefore, committed Transnet to an additional cost of R509 million which was not approved by the board at the time of conclusion of the contract,” investigators said.

The then-Transnet board was also found to have approved the acquisition of the locomotives from CSR without a business case to support the memorandum submitted. The said board approval was done without a proposal from CSR. Popo Molefe, Transnet’s chairperson, said the board instructed a team of legal and forensic experts to investigate allegations of tender fraud and procurement irregularities within the company's acquisition of 1 064 locomotives. “Summonses are being issued, charge sheets are being drafted and criminal proceedings are continuing. We will also investigate any new evidence which may have emerged from the National Treasury report, once we have considered it in more detail,” Molefe said.

Gama was last month shown the door at the state-owned company. Other officials whose heads are on the block are Thamsanqa Jiyane, chief officer of advanced manufacturing at Transnet Engineering, and Lindiwe Mdletshe, senior manager for strategic sourcing at Transnet Freight Rail. Molefe was appointed by the Cyril Ramaphosa-led administration in May. His board fired former Prasa chief executive Lucky Montana and later took issue with Montana’s replacement, Collins Letsoalo, who was swiftly shown the door.