Transnet faces huge claims

A R112-million demand has already been received while the minister of public enterprises, Barbara Hogan, has ordered the Transnet board to investigate these matters and report back to her.

The timing could not have come at a worse time for acting CEO Chris Wells, who is reportedly embroiled in a leadership tussle with Transnet Freight CEO Siyabonga Gama to take over as chief executive.

Gustav Adams, Sibanyi Trade and Services (STS) director (the company which secured two contracts with the government-owned logistics company for R874-million and R3.1-billion ), said his company was now going belly-up and had been forced to lay off staff.

There is a dispute over one contract while the R3.1-billion contract for the supply of locomotives has been scrapped.

In 2006, STS formed a joint venture with American company Electro Motive Diesel (EMD) and made a successful, unsolicited proposal to upgrade 50 locomotives in a project dubbed the “like new” programme.

Adams says the concept was the brainchild of STS.

“It provided an interim solution to Transnet and involved taking second-hand locomotives and rebuilding them with new parts — hence the name ‘like new'.”

Transnet spokesman John Dludlu said in response: ‘‘We cannot confirm or deny this claim, but it is not new to the locomotive industry. It has been tried elsewhere.”

However, Adams says Wells and his executive team had chosen to do the deal directly with EMD — despite the concept being the intellectual property of STS.

He also claims that his company was forced into working with Transnet Rail Engineering (TRE) — despite STS having a subcontract with EMD to handle this specific portion of the tender.

Said lawyer Les Civin of Werkmans Attorneys: “We are looking at instituting proceedings against Transnet for damages, and at this stage we have sent a demand.

“They have repudiated liability, so we are now busy preparing papers which we hope will be filed by month end.”

He said the basis of the claim was that there was a subcontract between the joint venture and STS.

In a separate matter, an STS-EMD joint venture was announced in 2007 as one of three preferred bidders to supply Transnet with 212 new locomotives as part of what is known as the “212 programme” and which would have cost Transnet R6-billion.

The joint venture signed a contract to deliver 100 locomotives at a cost of about R3.1-billion.

The tender process was scrapped, however, following an audit and Transnet reissued another tender for the supply of 100 locomotives.

The audit took place after an anonymous complaint to the Public Service Commission's national anti- corruption hotline was made in November 2007.

The complainant alleged that there was a “corrupt relationship” between Adams and the chairman of Transnet's adjudication committee Percival Mosweu.

Adams admitted in court — he and EMD had unsuccessfully approached the high court in March to stop the tender for the 100 locomotives — that he and Mosweu used to be involved in a proposed business venture, but that he had subsequently pulled out of it.

This was why, he said, there was no need for Mosweu to declare any business interest that the two once had, during the procurement process.

However, Transnet maintained that although no fraud or corruption was uncovered or “alleged”, the relationship between the two men constituted a “perceived bias”.

It then chose to liaise directly with EMD, the lead partner in the joint venture with a 70% equity stake.

The court found several irregularities in respect of Adams's claims, saying he was given the tender documents earlier — which constituted an unfair advantage, while the BBBEE rating for the joint venture was incorrect.

Although there was some doubt about STS's prima-facie case, the judge did not rule on the merits as an urgent interdict was being sought.

Judge PA Meyer said the roll-out of the new locomotives was of national importance and was essential to Transnet's business operations.

“Any delay in the procurement of the locomotives will seriously inconvenience and detrimentally affect Transnet and the country at large.”

Regarding this matter Civin said: “We are still considering our position. As far as we are concerned, STS was the preferred bidder. We signed the contract and Transnet did not... and we are investigating the possibility of a further claim.”

Adams's company has been supplying parts to Transnet since 1997 and he maintains that in both deals his company was simply elbowed out of the way by Transnet.

Acting chief financial officer of Transnet, Anoj Singh, insisted that Adams had “excluded himself” from working with the parastatal while Dludlu described him as a “disgruntled supplier”.

“(He) is clearly attempting to use any avenue of publicity against Transnet to further his cause.”

While earlier insisting that no evidence of fraud or corruption was uncovered, Dludlu said:

“We also wish to point out that Transnet has a zero-tolerance policy towards fraud and corruption and has developed a sound governance structure which is considered to be in accordance with best practice.”

With regard to the 50 ‘‘like new” locomotive project, he said a signed agreement with STS was in place.

“No work has been performed by STS to date and which has been de facto ceded to their joint venture partner EMD.”

Dludlu denied that Transnet had demanded the exclusion of STS “on any occasion on any contract”.

Regarding the cancellation of the 212 tender, the head of internal audit, Viv Oates, stated that in addition to the conflict of interest between Adams and Mosweu, which had resulted in a perception of bias, other aspects of the procurement process were considered problematic.

He said the investigation into certain aspects of the 50 "like new"S locomotives contract had not been finalised.

Wells, in a letter dated 18 June, confirmed Transnet was aware of Adams's R112-million claim against Adams's joint-venture partner.

He urged Adams to attend the meeting “to ensure resolution of other matters”.

Adams said he was not prepared to meet with Transnet until all outstanding issues were discussed.

He said it was ironic that Transnet had informed the high court that the roll-out of the locomotives had to be completed by December 2009 and the judge had ruled on this basis.

However, earlier this week Transnet confirmed that the adjudication process was still under way.

“If I have done something criminal, then by all means charge me — but you cannot exclude my company from contracts based on a perceived bias.

“I have been forced to lay off staff because of this,” Adams said.

Ayanda Shezi of the Department of Public Enterprises said Hogan had received Adams's complaint.

“The minister has referred the matter to the Transnet board for investigation and report-back,” she said.

Source: Sunday Times

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