/ 5 September 2023

SIU finalising Transnet state capture cases but financial recovery slow

Transnet Exec

The Special Investigating Unit (SIU) has completed eight investigations into state capture at Transnet but has recovered barely a fraction of tens of billions of rands that flowed into corrupt contracts, officials conceded before parliament’s watchdog standing committee on public accounts (Scopa) on Tuesday.

SIU programme manager Gina Pretorius told Scopa the SIU was involved in civil litigation of contracts worth a total R56.9 billion but has to date recovered R113.6 million. She said the figure was increasing, with several settlement agreements under discussion.

“That number is busy increasing as we speak,” Pretorius said.

Of the total contract value listed by the SIU, R54 million refers to the infamous procurement of 1 064 locomotives in a deal that has become a case study in state capture.

It saw Transnet, with Brian Molefe and Anoj Singh at the helm, sign contracts with General Electric, Bombardier Transportation, China South Rail and China North Rail. As per evidence led to the Zondo commission, millions in kickbacks flowed to two Hong Kong-based front companies for the Gupta family, Regiments Asia and Tequesta Group.

In March 2021, Transnet and the SIU asked the high court to set aside the deal. Later that year, the Special Tribunal granted a preservation order to freeze R4.2 billion held in bank accounts linked to CRRC E-Loco Supply, the South African subsidiary of the Chinese rail manufacturers, which stands accused of over-stating the value of the locomotives procured.

Pretorius said although litigation in this matter continued, settlement agreements were in the pipeline, with two about to be signed and a third being drafted.

Litigation is also ongoing before the Special Tribunal in the unit’s attempt to have the R1.3 billion contract for the expansion of container terminal berths in the Durban harbour set aside. The same applied, Pretorius said, to the SIU’s bid, launched earlier this year, to have Transnet’s R834 million contract with Liquid Telecommunications (formerly Neotel) for closed circuit cameras for ports set aside. 

“The Asset Forfeiture Unit is championing settlement discussions and the SIU and Transnet are involved therein, and we have agreed to stay the review application for a very specific period to allow space for these discussions to take place,” Pretorius said.

Evidence of criminal wrongdoing by 43 people, among them former Neotel directors and Transnet board members, in relation to the deal has been referred to the National Prosecuting Authority (NPA).

There were also settlement discussions with German software firm SAP, Pretorius said.

“A very recent development here is that there are now settlement discussions on the table being led by the NPA and Transnet and the SIU are participating therein, and the outcomes are a criminal referral as well as the SIU working with the Securities and Exchange Commission investigators from the American DoJ [department of justice] in respect of their investigations into SAP,” she said.

The negotiations ensued after the SIU had concluded its investigation, appointed senior counsel and prepared to sue for the recovery of commissions and bribes paid by the company. SAP in 2018 admitted to paying roughly R100 million to entities linked to the Gupta family in relation to software deals with Transnet and Eskom. 

The SAP matter is one of eight Transnet investigations flowing from the findings of the Zondo inquiry in which the SIU has concluded its work, SIU head advocate Andy Mothibi told Scopa.

Pretorius recalled that in another state capture related matter, McKinsey has agreed to a settlement payment of R870 million to Transnet, in respect of projects the US-based firm undertook with Regiments Capital as its local partner. 

Regiments, which was effectively controlled by the Guptas, served as a transaction adviser on the locomotive deal and agreed to a settlement of its own of R180 million.

“However, nothing has been paid as yet in terms of that settlement agreement and the SIU is reviewing that settlement agreement,” she said.

“Unfortunately, Regiments is also now in liquidation, under final liquidation, and Trillian is also in the process of going into liquidation, which frustrates our civil recoveries.”

Pretorius said the SIU was assessing several other matters flowing from the Zondo inquiry — including the TNA Media, Hatch Gobodo and Manganese expansion project — with a view to civil recoveries.

The SIU has been investigating corruption at Transnet since 2018. The presidential proclamation authorising it to do so has been extended twice to accommodate new allegations of malfeasance. 

Pretorius said the SIU has submitted an application for a new proclamation to cover, inter alia, the payment of a substantial share of legal fees incurred by former Transnet chief executive Siyabonga Gama when he was fired from the company for misconduct for the first time in 2010.

The Zondo commission heard that he was welcomed back in 2011 with a R17 million settlement. 

He was fired from Transnet in 2018 for misconduct relating to the locomotive tender, and arrested in 2022.