High court orders CSR E-loco to reveal tender details

In September 2012 Transnet awarded CSR E-loco a contract to supply 95 electric locomotives as part of a multi-billion rand project to renew its ageing fleet. (Gallo)

In September 2012 Transnet awarded CSR E-loco a contract to supply 95 electric locomotives as part of a multi-billion rand project to renew its ageing fleet. (Gallo)

Who owns the company that won a controversial bid for a R4-billion locomotive tender? Following its recent court victory, with the list of shareholders of CSR E-loco Supply in hand, amaBhungane may be able to answer that question.

On November 8 this year, Judge Caroline Heaton-Nicholls of the high court in Pretoria handed down judgment ordering CSR E-loco to comply with amaBhungane’s request for its share register. CSR E-loco is to provide a copy (or allow inspection) of a complete list of shareholders within fourteen days.

Heaton-Nicholls’s judgment, invoking Section 26 of South Africa’s amended Companies’ Act, declared that the right of access to information about who owns companies is an ‘absolute’ one.

In a resounding affirmation of this right, she quoted a former judgment of the Supreme Court of Appeal which held that “a failure to comply with a legitimate request for access to the register of members renders a company, and every director or officer who knowingly is a party to the refusal guilty of a criminal offence.”

Upholding amaBhungane’s request as legitimate, the judge resisted CSR E-loco’s attempts to re-interpret the existing law’s provisions.

‘Right of refusal’
CSR E-loco’s lawyers argued that just as the Constitution and the Promotion of Access to Information Act (PAIA) recognise a ‘right of refusal’ in some circumstances, so must the Companies’ Act.

The Companies’ Act uses the words “reasonable request”, and so it must mean, the lawyers argued, that there are circumstances in which some requests are unreasonable.

CSR E-loco’s shareholders’ register, designed to give it a BBEEE edge over its competitors, amounted to a commercial secret, they claimed.

Disclosing it before the bids were closed would cause commercial harm to CSR E-loco. Therefore the request for the shareholders’ register was unreasonable.

The judge dismissed this argument.

Noting particular sub-clauses within Section 26 of the Companies’ Act, Judge Nichols elaborated on how the Companies Act extended and did not substitute for the rights of access guaranteed in PAIA.

She noted that “what the legislature had in mind was that a party could get access to the [shareholders’] register under section 26 [of the Companies’ Act] or [through] PAIA.”

In other words, there are no grounds for refusing a legitimate request to a share register. The right to inspect it is absolute. She also noted that the bids for the tender had closed.

Therefore the commercial harm caused by disclosing the “ingenuity” of CSR E-loco’s BBBEE structure was improbable at best.

Transnet contract
In September 2012 Transnet awarded CSR E-loco a contract to supply 95 electric locomotives as part of a multi-billion rand project to renew its ageing fleet.

The contract, announced at a press conference in October 2012, involved Chinese rail giant CSR and its Zhuzhou Electric Locomotive Company, as well as two little-known empowerment companies: Basadi Dirang Systems Development and Matsete Industrial Services.

In December, amaBhungane asked for copies of the shareholding registers for CSR E-loco and the two empowerment companies.

The revised Companies Act, which came into force in 2011, has a strict disclosure section that amaBhungane and its lawyers helped to frame when the Bill was processed through Parliament. The right to know who owns a company is considered a key tool in enforcing commercial accountability.

The transparency demanded by the Companies’ Act is not misplaced. Transparency of investments builds both investor and public confidence. Using delay tactics and needlessly preventing knowledge of who owns particular companies has the dangerous consequence of entrenching corporate secrecy.  

In such an environment, investors, analysts, firms performing due-diligence studies, journalists and many others are deprived of their only practical means to access such data. As such, the recent judgment marks a victory for corporate transparency.

AmaBhungane was represented by Advocate Steven Budlender, instructed by the Webber Wentzel media law team.

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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.



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