How the Guptas captured Transnet

The Gupta family captured Transnet by systematically taking over the state-owned entity’s board and top management, while weakening its internal controls and oversight structures to illegally syphon billions of rands to their companies.

This is according to part two of the state capture commission report, which was released this week.

Former president Jacob Zuma, cabinet members Malusi Gigaba and Lynne Brown — and the governing party’s top leadership including then secretary general Gwede Mantashe — all went to bat to ensure that Gupta deployees were appointed to key posts on the Transnet board and top leadership.

As a result, the family was able to loot Transnet’s R300-billion locomotive procurement fund under the leadership of group chief executive Brian Molefe and group chief financial officer Anoj Singh, collecting kickbacks from service providers through a network of companies owned by the Guptas and their associates.

The role of Zuma, Gigaba and other top ANC figures, including Jeff Radebe and Siphiwe Nyanda, in ensuring that Gupta nominees — including Molefe and another former Transnet group chief executive Siyabonga Gama — were appointed, was brought into focus again in the commission’s second report.

In the report, Acting Chief Justice Raymond Zondo described the capture of Transnet between 2010 and 2017 as a “systematic scheme” aimed at “securing illicit and corrupt control of the decision-making.”

This gave “corrupt actors” who had been placed in strategic positions to “secure control over staff appointments and governance bodies” the power to influence large procurement in favour of Gupta-linked companies.

Approval authority for high value tenders was centralised under the control of a small number of individuals — among them Singh, Gama, Molefe and Iqbal Sharma, chair of Transnet’s acquisitions and disposal committee — while internal controls and structures designed to prevent corruption were undermined.

Zondo says that collusion between players inside and outside Transnet resulted in the “strategic positioning of particular individuals in positions of responsibility”.

“A small group of senior executives and directors were positioned to collude in the award of contracts,’’  Zondo said.

The Gupta deployees to Transnet’s board and management ensured that the operational staff were excluded from procurement and controls were “relegated” so that “irregularities went unchecked”.

They also manipulated procurement to favour Gupta-linked companies and brought in Mckinsey, Regiments and Trillian, “advisory”’ companies that were paid billions for providing “services” for which Transnet’s treasury already had capacity.

Zondo’s plea to the media comes after Gordhan complained that his affidavit had been “inexplicably leaked to the media”.
Acting Chief Justice Raymond Zondo described the capture of Transnet between 2010 and 2017 as a “systematic scheme” aimed at “securing illicit and corrupt control of the decision-making.”(Gulshan Khan/AFP)

Kickbacks

The money for these “services”, which Zondo said added little or no value, was then laundered through Gupta-linked companies, with the inside men on the board and Transnet executives receiving paybacks for their work.

These included being given large amounts of cash by the Guptas at their Saxonwold mansion and sponsored trips to Dubai, paid for by Gupta companies.

“Transnet became the primary site of state capture in financial terms,” Zondo said, with the “key architects and implementers” being Singh, Molefe and Gama.

Gigaba, then minister of public enterprises, played his role in the conspiracy by ensuring the appointment of Molefe and Singh and the reinstatement of Gama, who had been fired for misconduct at Transnet Freight Rail, of which he was chief executive.

The three gave Gupta lieutenant Salim Essa “free reign” during the locomotive procurement process, during which he was paid about R7.32-billion in kickbacks from the China South Rail Corporation and the China North Rail Corporation. 

According to Zondo, Essa got 15% of the bribes paid by the service providers to shell companies while the Guptas got the rest.

In the case of McKinsey, Essa’s companies were paid 30% of all its takings from Transnet, with 5% going to Gupta fixer Kuben Moodley. Essa’s cut was later increased to 50%

McKinsey paid Transnet back R650-million last year.

Zondo said that a crane procurement deal for R1.6-billion with suppliers ZPMC and Liebherr in 2014 was also manipulated, with the Guptas being paid R34-million by ZPMC and$3-million by Liebherr through a Dubai company, JJ Treadfin.

Likewise, an IT contract and a manganese expansion project were also looted, with a company owned by Essa’s wife, Zeenat Osmany, scoring a cool R326-million as a result of a direct intervention in the IT deal by Molefe.

Zondo said that by involving the Transnet board in procurement after 2011, the entity’s good governance structures were bypassed.

After 2011 the Board Acquisitions and Disposals Committee (BADC) was allowed to conclude contracts with a value more than R500-million, while individual executives were also given more financial power from February 2011, when Molefe was appointed.

In 2012, the BADC was given powers to conclude deals up to R2-billion and the board approved those above that figure, while in 2013 Singh was given powers to conclude contracts valued at up to R750-million. Molefe’’s were capped at R1-billion.

This, Zondo said, allowed them to sign off on dubious contracts without any scrutiny.

Zondo said that between 2011 and 2017, the “bulk of the transgressions took place within the BADC or at the insistence of Molefe or Singh”. 

This included the use of confidential confinement — opening contracts only to selected service providers — and through variations in price of up to 40% to ensure Gupta companies were paid inflated fees for minimal or no work.

Turning to Zuma’s role, Zondo said the former president had “sought to thwart” attempts by Barbara Hogan, then the public enterprises minister, to appoint a Transnet group chief executive from 2009 to replace Maria Ramos.

This action “reflects the first steps taken by president Zuma towards the capture of Transnet by the Guptas, with president Zuma’s assistance”. 

Zuma had refused to appoint the candidate shortlisted by the board, Sipho Maseko, and instead insisted on Gama, who had been viewed as unsuitable for the post by an earlier selection committee.

Hogan was ultimately fired for her resistance to the appointment of Zuma’s “preferred candidate” and her replacement, Gigaba, ultimately appointing Molefe.

Gigaba’s successor, Lynne Brown, appointed Gama after Molefe was moved to Eskom in 2015.

"I have never been invited to Dubai and hosted by them
The role of Malusi Gigaba in the capture of Transnet has been laid bare by Acting Chief Justice Raymond Zondo.

A friend of the Guptas

Zondo said key ANC figures backed Gama at the time, among them Jeff Radebe and Gwede Mantashe, former defence minister Siphiwe Nyanda — whose contract with Transnet had resulted in Gama being fired — and a “certain faction within the ANC”.

The ANC Youth League, the South African Communist Party and the South African Transport and Allied Workers Union and its secretary, Randall Howard, had all come out in support of Gama, claiming he was the victim of a racist conspiracy in Transnet.

Zondo said Gigaba — who had tried to downplay his close relationship with the Guptas at the commission — had been responsible for the appointment of Molefe.

“In effect Gigaba (a friend of the Guptas) was central to the appointment of Molefe  (another friend of the Guptas) with his appointment having been predicted in the newspaper owned by the Guptas and initiated by Sharma (another friend of the Guptas).”

Zondo said Molefe was redeployed to Eskom at the “insistence” of the Guptas after Brown became public enterprises minister in 2015.

Brown then oversaw the process of reinstating Gama as Transnet Freight Rail chief executive, with the board paying him a salary of R13-million and covering R4-million of his legal costs.

Zondo said the decision was “indefensible”.

Gama was then appointed as acting group chief executive of Transnet, with the post being made permanent in 2016.

Gama was dismissed by the new Transnet board in 2018 for alleged violation of his fiduciary duties.

Zondo recommended that law enforcement agencies institute further investigations against Gigaba, Molefe, Gama and Singh, along with Garry Pita, who also served as a Transnet group chief financial officer.

Zondo heard evidence that the five had received a series of cash bribes from the Guptas — which had mainly been handed over at the family’s Saxonwold compound — that they had stored in safety deposit boxes rented at Knox Vaults
Transnet Freight Rail’s former head of procurement, Thamsanqa Jiyane, who witnesses said had received cash payments from the family and from Molefe, could also face prosecution for his role in furthering the Gupta’s criminal enterprise.

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Paddy Harper
Paddy Harper
Storyteller.

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