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Transnet seeking to annul locomotive contracts

After years of corruption investigations, Transnet has asked the South African High Court to cancel controversial contracts for the acquisition of 1,064 new locomotives.

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Transnet seeking to annul locomotive contracts

The transport utility and the government’s Special Investigating Unit (SIU) have asked the court to “review and set aside” the four contracts that were placed in 2014 with a total value of ZAR54.4B (US$3.63B) with locomotive manufacturers Bombardier Transportation South Africa (BT); China South Rail (CSR), which is now called CRRC E-Loco Supply; China North Rail (CNR), now named CNR Rolling Stock South Africa; and General Electric South Africa Technologies (GE).


The four contracts represented one of the biggest procurement exercises ever undertaken by a state-owned company in South Africa. Allegations over bribes paid to secure the contracts lay at the heart of the tidal wave of corruption allegations that have swept South Africa over the past few years.


Both the SIU and Transnet’s new Board, led by chairperson Popo Molefe and group CEO Portia Derby, investigated the claims.


They argue that the four OEMS “are not entitled to benefit from locomotive supply agreements that were awarded to them in an irregular and illegal manner”.


The National Prosecuting Authority claimed that ZAR1.6B (US$87M) was illegally siphoned off the payments. Transnet found that kick-back agreements were made by the parent companies of CSR and CNR. It adds that BT and GE cannot reasonably claim that they did not know that the procurement process and subsequent contracts were irregular and unlawful.


Transnet argues that government tender regulations were deliberately ignored, both in awarding the contracts and making payments.


In December 2018, the parastatal asked the four OEMs to enter into negotiations “for a just and equitable remedy”.


In a statement released on 9 March, Transnet said that it “was unable to reach a negotiated agreement with BT, CNR and CSR, while the remedy agreed with GE requires supplementation in order to address Transnet’s obligations and the public interest.”


Their court application is based on analysis of an incredible 29 million documents.


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