africa

Aug. 30, 2022

CIARAN RYAN, MONEYWEB

6 min read

With the arrest of Molefe and Singh, law enforcement has found its mojo

With the arrest of Molefe and Singh, law enforcement has found its mojo

Former Transnet CEO Brian Molefe

Story highlights

  • Police and prosecutors have been criticised for failing to bring any successful prosecutions related to state capture - this appears to be changing.
  • The Hawks and the National Prosecuting Authority, apparently stirred into action by the Zondo recommendations.

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The Zondo Commission of Inquiry into allegations of state capture recommended further investigations by law enforcement into former senior Transnet executives and associates with a view to securing a prosecution over industrial scale corruption at the state-owned rail and port operator.

The Hawks and the National Prosecuting Authority, apparently stirred into action by the Zondo recommendations, have started to make their move. Where better to start than with the leading lights of Transnet, which Zondo says was the primary target for state capture.

On Monday August 29, former Transnet CEO Brian Molefe and former CFO Anoj Singh appeared in the Palm Ridge Specialised Crimes Court in Johannesburg in connection with R93 million paid to Trillian Capital, a company with close ties to the Guptas.

In May this year, five people, including former Transnet group CEO Siyabonga Gama, were charged with fraud, corruption, money laundering and contravention of the Public Finance Management Act. Others arrested in the case were former acting Transnet CFO Garry Pita, former group treasurer Phetolo Ramosebudi, former Trillian Capital Partners CEO Eric Wood, and former Trillian shareholder Daniel Roy.

Targeting Transnet

The corrupting influence of the Gupta brothers - who were arrested in Dubai in June and are awaiting extradition to SA - was graffitied all over the public sector, but perhaps most especially at Transnet.

A study by the South African Council of Churches and South African academics estimated R40 billion had been smuggled out of SA to Dubai by the Guptas and associated companies between 2010 and 2017.

Equally astonishing is how the project appeared to have been tailored to benefit China South Rail (CSR) over more established competitors like Mitsui of Japan, with a known reputation for manufacturing the kind of locomotives required by Transnet.

The cost of those locomotives then escalated from R38.6 billion to R54.4 billion - which is almost equivalent to the nominal cost of the massively corrupt 1999 arms deal.

There were three Transnet contracts for locomotives: the 95, 100 and 1 064. CSR was awarded the 95 and 100 contracts in 2012, and then the contract to produce 359 of the 599 electric locomotives as part of the 1 064 deal in 2014. All this happened during Molefe’s tenure.

National Treasury commissioned Fundudzi Forensic Services to look into the contracts, and in each instance it found wild irregularities, such as deviations from legal requirements and apparently preferential treatment for CSR.

Emails flowing between senior CSR director Wang Pan and Molefe “indicated a close relationship that presented a serious conflict of interest, one that should have been disclosed,” according to The Enablers, a report into state capture by investigative research and advocacy group Open Secrets.

The Fundudzi Report says the emails between Wang Pan and Molefe raised the suspicion that CSR knew it would be awarded the tender before any formal decision had been made.

The true test …

Says Michael Marchant, one of the authors of The Enablers report: “The successful prosecution of Molefe and Singh is vital for accountability, given that the Zondo Commission found them to be the prime architects of capture at Transnet which in turn was the primary site of extraction during state capture. However, the true test of law enforcement will be when the arrests are complete and the state is ready to proceed in court.”

The arrest of Molefe and Singh will no doubt be followed by others. There’s certainly no shortage of evidence, both in the Zondo and Fundudzi reports, to name just two.

The Fundudzi Report estimated that Transnet would have saved R1.2 billion if it had chosen Mitsui over CSR for the purchase of 100 of the required locomotives.

Mitsui was able to produce the coal transport locomotives originally required by Transnet, while CSR could not. Molefe twice requested a change to the contract to settle on the 21E class locomotive that CSR was actually able to produce.

Another oddity was that the original order for 112 locomotives was reduced to 100, but with no reduction in cost. Despite the request for fewer locomotives, the CSR deal for 100 locomotives ended up costing Transnet R4.8 billion, which was R969 million more than the original board-approved budget.

Deployment of Molefe

With the arrest of Molefe and Singh, law enforcement has found its mojo

The Gupta brothers, Ajay and Atul Gupta

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With the arrest of Molefe and Singh, law enforcement has found its mojo

Former Transnet CFO Anoj Singh

Molefe appeared in the 1990s as a prime candidate for cadre deployment.

This was at a time when no one questioned the ANC’s right to moonlight as a head-hunting agency and insert party loyalists into every sphere of the private and public sector.

Molefe was a political activist in the 1980s and early 1990s, worked first at FNB and then the Development Bank of Southern Africa. He held several senior positions in National Treasury, and was CEO of the Public Investment Corporation from 2003 to 2008.

His CFO at Transnet was Singh, who joined him when he moved on to helm Eskom in 2015.

Molefe resigned from Eskom in 2016 and took up a seat in parliament in 2017 for the ANC.

He resigned from parliament a few months later when the public protector released the State of Capture report.

The Zondo Commission found that Molefe, while at Transnet, had “facilitated the conclusion of irregular contracts at inflated prices, variously through deviations, improper confinements and the changing of tender evaluation criteria, in order to facilitate entry for companies involved in the extensive money laundering scheme” to the advantage of Gupta companies.

Singh’s secrets and lies

Singh’s role as CFO at Transnet, and later Eskom, and some of the dubious and costly decisions entered into “raised credible questions about his role in the capture of these institutions”.

This is according to the investigation by Open Secrets that resulted in the publication of The Enablers.

Singh is said to have lied to investigators from Fundudzi several times, and was unable to substantiate the sources of his income in his personal FNB account.

The gall of Gama

Siyabonga Gama took over as CEO of Transnet in 2016 but was dismissed in 2018, halfway through his five-year term for conduct deemed inconsistent with his fiduciary duties.

He lost that case earlier this year when the matter went to arbitration. The arbitration ruling found that his dismissal was unfair and had been predetermined, though Transnet eventually stumbled on a legitimate reason for his dismissal when he failed to make timeous submissions to the board on reasons why he should not be dismissed.

In 2021, Transnet and the Special Investigating Unit (SIU) approached the high court asking it to set aside the locomotive supply agreements and to impose a just and equitable remedy.

In its report, the Zondo Commission recommended that the police investigate Molefe, Gama and Singh for their alleged roles in siphoning money from Transnet to the Gupta family.

Trillian’s Eric Wood

Another name that features prominently in Transnet’s corruption is Eric Wood. He headed up Trillian Asset Management, which had also been involved in providing services to Eskom.

Based on banking data received, the Organised Crime and Corruption Reporting Project shows that Regiments Asia, another of Wood’s companies, received $65 million (R1.1 billion) from CSR.

Regiments Capital was recommended by the global consultancy firm McKinsey to advise Transnet on the procurement of the 1 064 locomotives.

Molefe and Singh have been through multiple rounds of gruelling testimony - from National Treasury and Fundudzi Forensics to the Zondo Commission, and now the courts.

This story will not be complete until the Guptas are extradited to SA to have their day in court.

* Ciaran Ryan is a Johannesburg-based freelance writer who has a background in finance and mining, having previously headed up a gold mining operation in Ghana. He currently writes for several SA and overseas journals on matters ranging from mining to investment.

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