11 July 2019

South Africa: Mystery of Why Transnet Used Yen to Price Chinese Locomotives Still Unresolved

The mystery of why state-run freight rail company Transnet used yen to estimate the price of 100 locomotives sourced from a Chinese company is no closer to being solved after the 'anomaly' was again examined at the state capture inquiry.

The state capture commission, chaired by Deputy Chief Justice Raymond Zondo, is investigating allegations of fraud corruption and maladministration at several state entities.

Former Transnet engineer Francis Callard, who testified for three days before the commission in mid-May, again took to the stand on Thursday.

The acquisition of the 100 locomotives was part of three related tenders meant to upgrade and modernise Transnet's ageing fleet. The other tenders were for 95 and 1064 new engines.

Callard previously told the commission that the estimated baseline price for the 100 locomotives was calculated in yen, the currency of Japan. However, the locomotives were sourced from China South Rail, which uses dollars for international transactions.

A section of a Transnet memorandum, previously submitted to the commission, stated that as the rand had devalued by 10.76% against the yen, the estimated total cost of the locomotives would increase by 10.76%.

Callard told the inquiry in May that the reference to yen appears to be linked to the fact that a Japanese company - Mitsui - was earlier in the running for the tender for the 100 new engines. A report submitted to National Treasury in late 2018 found that Transnet would have saved R1.2bn if it had procured the 100 locomotives from Mitsui.

On Thursday Callard again told the commission that he could not understand why yen was used to estimate the base cost for the Chinese-built locomotives.

Evidence leader Mahlape Sello put forward an argument by Transnet's former executive finance manager and chartered accountant Yousuf Laher, that Callard should have raised the anomaly with him.

This was based on a statement submitted to the commission by Laher after Callard gave evidence in May. According to the commission's rules, those implicated in testimony have a right to reply.

The inquiry's chair, Justice Zondo, chuckled when he then asked Callard if he thought a "chartered accountant should have been told by an engineer that this was not supposed to have been a particulate occurrence?"

"I think the person with the qualifications of a chartered accountant should have raised that anomaly," said Callard.

Source: Fin24

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