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Transnet asking suppliers to provide details of any third-party ‘commissions’

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Transnet asking suppliers to provide details of any third-party ‘commissions’

Photo by Duane Daws
Transnet CEO Siyabonga Gama

23rd October 2017

By: Terence Creamer
Creamer Media Editor

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Transnet CEO Siyabonga Gama says that the freight logistics group is investigating every allegation of possible corruption in relation to the State-owned group’s procurement programmes, revealing that the scope of its inquiries extends beyond the R50-billion locomotive contract, which is the subject of a board-led investigation by Werksmans Attorneys.

Speaking on the sidelines of the Transnet Indaba, a stakeholder strategy consultation event, taking place at the company’s Esselen Park Campus, in Gauteng, Gama stressed that most of the allegations related to Transnet suppliers and their relationships with individuals and companies not directly contracted to supply Transnet.

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In one report, amaBhungane and Scorpio allege that China South Rail (CSR) is paying a R10-million facilitation fee to a Hong Kong-based company owned by a Gupta-family associate, Salim Essa, for every R50-million locomotive being bought.

In another report, amaBhungane and Scorpio state that Shanghai Zhenhua Heavy Industries inflated the price of seven cranes purchased by Transnet for the Durban harbour to pay “commissions and fees” to a Gupta intermediary.

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A third report states that business software group SAP paid a 10% “sales commission” to a company controlled by the Guptas to secure a Transnet contract. And in its most recent report, amaBhungane alleges that McKinsey’s long-standing local partner at Transnet, Regiments, channelled at least R30-million to companies associated with Essa and the Gupta family.

Gama said all allegations were being investigated either directly by Transnet, or by Werksmans in the case of the locomotive contract. The Werksmans probe was initially expected to be completed in October, but has since been extended to mid-December.

“As and when these issues come up, we investigate them and we also report them to the police so that they can also investigate. But we investigate everything,” Gama said.

“What we have done is to go to each and every one of the suppliers and said to them: ‘In terms of the contracts that you have received from Transnet, are you paying any commission to a third party? Why are you paying it? Did someone at Transnet ask you to pay it? Do you believe you got the work you got because of someone else and not through the tender process?”

Some suppliers had responded and otherd would be responding in the coming days and the company had contracted with a team of auditors to verify the information. “Most of the people that are cited, we don’t know them, they don’t do any business with Transnet. That’s why we are dealing directly with those suppliers who have been named.”

Therefore, Gama insisted that the allegations were not about Transnet governance processes or Transnet’s integrity. “The issues that are playing themselves out in the public space are about Transnet suppliers, who have contracts Transnet does not have sight of. If we enter into a contract with a company, we don’t know who they enter into contracts with – it’s not our job to police that.”

He said he was also “comfortable” with the progress the group was making in the area of supplier development, despite reports suggesting that some of its locomotive suppliers were not meeting local content commitments. The issue will be the subject of an upcoming Parliamentary Portfolio Committee on Trade and Industry inquiry.

The South African Bureau of Standards, which has been appointed to verify local content in relation to the so-called ‘10-64’ locomotive contract, has confirmed that it has not yet conducted any audits, with funding being the main sticking point.

“I continue to extend an invitation to anyone who believes that supplier development is not taking place to go to our manufacturing facilities and to come in and talks to us. We have more than 26 different suppliers that are supplying the differing original equipment manufacturers (OEMs) with components and about six of those have now been absorbed into the global supply chains of some of the OEMs,” Gama said.

Earlier, CFO Garry Pita said that Transnet’s supplier-development contracts currently total R134-billion, of which there is R62-billion-worth of supplier development obligations. To date, there has been R32-billion-worth of delivery since the initiation of the programme.

“We have a ‘top-down’ and ‘bottom-up’ approach. Bottom-up, we look at preferential procurement and enterprise development and top-down, we have our Competitive Supplier Development Programme, where we work with suppliers and customers to help develop small businesses as part of our supply chain,” Pita explained.

In future, Transnet would be combining its enterprise supplier development and corporate social investment strategy to set up ‘mega hubs’ to support new entrepreneurs and create black industrialists.

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