Internal correspondence shows that Transnet officials were warned about procurement irregularities and the cost of materials-handling equipment contracts at the Richards Bay terminal in KwaZulu-Natal before the auditor-general flagged more than R100 million in fruitless and wasteful expenditure.
The Transnet Divisional Bid Adjudication Council (DBAC), a key procurement structure responsible for ensuring compliance with procurement and corporate governance requirements, was warned about concerns surrounding two materials-handling equipment contracts awarded to High Power Equipment Africa (HPE Africa).
The contracts, worth more than R900m, were awarded between August 2023 and January 2024 for operations at Transnet Port Terminals (TPT) in Richards Bay.
The auditor-general subsequently found that Transnet had paid lease fees for equipment that was not being used because there were insufficient drivers to operate all the machines.
“Upon inspection of the invoices and payments made, it was noted that the lease payments were made in full for all equipment, even those that were not used. Therefore some of these fees were paid in vain,” the auditor-general found.
The Mail & Guardian has examined correspondence and affidavits relating to the procurement process, which show that concerns about the number of machines, the cost of the contracts and compliance with tender specifications had been raised internally.
In one communication, a senior TPT executive warned DBAC members that the company did not have enough drivers to operate all the equipment being procured.
“Earlier today, we were working through a new scope of work for 90 pieces of equipment, the period is 12 months with an option to extend for another 12 months. This time we are targeting OEMS [original equipment manufacturers] and approved agents.
“We unfortunately do not have drivers to man all the 90 pieces of equipment, so the idea is to split the contract 50/50. Fifty percent of the fleet with drivers and the other 50% of the machines without drivers,” the executive wrote.
The correspondence also records concerns about the cost of the contract awarded to HPE Africa compared with rates submitted by Radds, a company that had successfully challenged aspects of Transnet's procurement process in court.
One official warned the DBAC that the procurement route used for the HPE Africa contract had resulted in a higher cost.
“What cost factors were considered in arriving at the decision to allow the current contract was procured at an emergency confinement route, which came with high bill compared to previous contracts. I’m also of a view that RADDS contract is far cheaper than the current HPE contract,” the official wrote.
Another employee raised concerns about whether HPE Africa was complying with the tender specifications.
According to the employee, HPE Africa had been awarded the contract on the basis that it would supply its own equipment, but it subsequently emerged that equipment owned by Radds was being used.
The employee said the matter had previously been raised with the DBAC.
“After my report to the Divisional Bid Adjudication Council, I was advised that an investigation would be conducted and consequence management implemented. However, the fruitless and wasteful expenditure continued unabated,” the employee stated in an affidavit submitted to the Directorate for Priority Crime Investigation (DPCI), commonly known as the Hawks.
The allegations are part of a wider dispute over the procurement of materials-handling equipment at Richards Bay, in which whistleblowers have accused senior officials of failing to act on concerns raised internally.
The auditor-general’s finding provides independent evidence that Transnet paid for equipment that was not being used, while the internal correspondence shows that concerns about the number of machines and availability of drivers had been raised with the procurement committee.
The procurement process has also resulted in disciplinary action at the Richards Bay operation. Transnet said a senior port executive had been suspended and that 45 other employees had been dismissed for various serious offences.
It did not, however, indicate that all 45 dismissals were linked to the materials-handling equipment procurement.
In response to questions from the M&G, Transnet said it had commissioned an independent investigation after becoming aware of issues at the Richards Bay terminal.
“As previously indicated to the Mail & Guardian, immediately upon becoming aware of the issues at the Richards Bay terminal, Transnet commissioned an independent investigation, broader aspects of which are still under way.
“Individuals who have been suspended based on the preliminary findings are now unfortunately not cooperating with the investigation.
“Informed by the findings of the independent investigation, Transnet filed a Precca [Prevention and Combating of Corrupt Activities Act] section 34 referral and the organisation has been cooperating with [the] DPCI investigation in this regard.
“Furthermore, Transnet is cooperating with the South African Police Service in respect of a criminal complaint received. Transnet has not yet been furnished with any signed affidavits.”
Transnet said it was cooperating with law-enforcement agencies in relation to the matters under investigation.
The company has previously said that after the Fundudzi forensic investigation, it had lodged a formal complaint with the DPCI in terms of section 34 of Precca and that the matter had been referred to the Durban Serious Corruption Investigation Unit.
The whistleblowers’ affidavits allege that concerns about the procurement were raised with Transnet's internal structures before the matter was escalated to the auditor-general.
The M&G has seen correspondence documenting some of those concerns.