/‘South China Rail used us as a front to land Transnet tenders’

‘South China Rail used us as a front to land Transnet tenders’

Former directors of BEE partner say South China Rail used it as a front to land Transnet bribery-ridden tenders, then took all the money

China South Rail (CSR), which won three tenders worth more than R25 billion to supply Transnet with locomotives, paid “benefits and success fees” to a number of individuals who helped the firm secure the lucrative tenders.

Details about the benefits and success fees are contained in a hard-hitting letter written to the rolling stock manufacturer’s vice-president, Zhang Minyu, in May 2014.

The letter was written by Lietsiso Mohapeloa, who was the chairperson of Matsete Basadi Consortium (MBC) at the time.

“What is disturbing are the statements that there are other people who you will be giving benefits and success fees to while specifically mentioning that there is nothing that is due to MBC. We frankly found it weird that you were even willing to disclose this irregularity to us,” Mohapeloa said in his letter.

Mohapeloa is the second person to allege that CSR paid kickbacks to secure tenders from Transnet.

Two years ago, amaBhungane revealed how Gupta-linked companies scored R5.3 billion in kickbacks from CSR in connection with Transnet’s locomotive tender.

A significant number of the 554 locomotives supplied by CSR formed part of Transnet’s infamous 1 064 units of rolling stock.

Mohapeloa had written to Minyu asking him to honour and implement a BEE agreement between MBC and CSR after the two formed a joint venture called China South Rail E Loco in 2012 to bid for the locomotive tenders.

Transnet required successful bidders to give a significant portion of the work to local companies.

CSR owned 70% of CSR E Loco, while MBC had 30%, and they had agreed that both entities would be equal partners in the joint venture and be directly involved in the manufacturing of the locomotives, the supply chain and financial management.

However, CSR – which later became CRRC E Loco after the merger of China South Rail and China North Rail – reneged on the agreement.

Last week, City Press reported that CRRC failed to bring MBC on board after receiving the tenders from Transnet.

Read: How a local train builder lost billions as Transnet awarded massive tenders to Chinese company

This prompted MBC to lodge a complaint of fronting against CRRC with the Broad-Based Black Economic Empowerment Commission.

A report released by the commission in November found that CRRC used MBC as a front to win the Transnet tenders.

It also found that CRRC treated MBC’s directors as mere employees, instead of partners.

Mohapeloa’s letter followed a meeting with CSR in Zhuzhou, China, a month earlier, in which MBC’s directors had asked its Chinese counterparts to make good on the BEE agreement.

Two MBC former directors who attended the Zhuzhou meeting told City Press last week that Minyu’s benefits and success fees were bribes.

One former director said: “Minyu told us with a straight face that we would get nothing as he had used a lot of the money to pay people who helped the company win the tenders. He was quite shameless about it and he saw nothing wrong with telling us that he had to bribe people to help his company win tenders.”

Another former director said: “I can’t describe it more clearly than Mohapeloa did in his letter. Minyu told us in no uncertain terms that a significant number of millions ‘in success fees’ had to be paid to people who helped the company win the Transnet tenders. During the meeting, we were agitating for the company to give us what was due to us as black partners. Minyu told us that we would get nothing as he had to pay success fees. Let me clear up any confusion, if there is any. In this context, success fees is a respectable phrase for bribes. Unfortunately, he didn’t tell us who those people were. But we have a pretty good idea who the people might be.”

A CRRC spokesperson confirmed the April 2014 meeting, but poured cold water over claims that Minyu paid bribes to people who helped the company score Transnet’s tenders: “No, [those are] blatant lies intended to defame our officials.”

THE SUSPICIOUS BEE DEAL

The two former MBC directors told City Press that former Transnet Freight Rail capital programmes general manager Percival Mosweu put together the deal between themselves and CSR.

Mosweu left the parastatal under a cloud in 2009.

This was after Transnet cancelled a R6.5 billion locomotive tender that was due to be awarded to an entity called Electro-Motive Sibanye.

Transnet had identified Electro-Motive Sibanye as the preferred bidder for the supply of 212 locomotives.

However, the tender had to be cancelled after it was discovered that Mosweu, who chaired the adjudication steering committee, had a personal and business relationship with a director in one of the two companies that formed Electro-Motive Sibanye.

One of the two former MBC directors said he was personally approached and recruited by Mosweu to be part of MBC.

Siyabonga Gama was Transnet Freight Rail’s chief executive during the Electro-Motive Sibanye debacle, and when the division awarded the three tenders to CRRC.

“I didn’t know anything about locomotive tenders at Transnet or about CSR. I was recruited by Mosweu, who told me that he was looking for skilled, well-respected and qualified black people to partner with CSR. Whatever the case, it is now clear that the BEE deal with CSR originates at Transnet. Little wonder they did absolutely nothing when we complained numerous times that CSR was using us as fronts. We were used as fronts by CSR, with the full knowledge and blessing of Transnet.”

The other former director said: “Personally, I was not recruited by [Mosweu], I was recruited by a friend of mine. But I do know that [Mosweu] was the mastermind behind the BEE deal with CSR. It only dawned on us much later that the idea to find black people to be used as fronts was probably hatched by Transnet’s executives for their own benefit.”

While Mosweu conceded that, after he left Transnet, he consulted for CSR and helped the company put together localisation and supplier development plans, he denied that he had recruited MBC to form a joint venture with the Chinese company.

“I didn’t approach MBC. Please remember that MBC is a consortium formed by companies and individuals, some of whom I did not even know. I didn’t link the two and didn’t benefit from it. My reward from CSR, like other consultants, was purely based on the work I did in investigating and putting together their localisation and supplier development plans,” Mosweu said, adding that he was remunerated as a consultant.

Transnet declined to comment about the allegations of fronting, saying the company had not seen the commission’s report.

Gama said he had received and forwarded MBC’s complaints about fronting to Transnet’s management for resolution.

He said that the MBC deal with CSR had nothing to do with Transnet.

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