Regiments earned an 'excessive' R265.5m from Transnet, inquiry hears

Advisory firm Regiments Capital earned an "excessive" R265.5m from Transnet to facilitate loan transactions for the state freight and rail entity to finance its 1064 locomotive project, the state capture commission of inquiry heard.

On Friday the commission, chaired by Deputy Chief Justice Raymond Zondo, heard evidence from Jonathan Bloom of MNS Attorneys. In 2018 the firm was asked to probe allegations of fraud and irregularities by Transnet's former board. The firm produced six investigative reports. Bloom provided evidence pertaining to one of the reports, which he helped compile.

As far back as 2012, Transnet had tendered for manufacturers of 1 064 locomotives, needed to replace the ageing fleet and to bolster the fleet capacity to keep up with market demand, the inquiry previously heard.

Transnet had purchased locomotives from China, but could not afford to pay for them immediately. This required Transnet to borrow money, Bloom explained.

Initially Transnet was to borrow $2.5bn offshore. But is was later decided, it would only borrow $1.5bn from China Development Bank and it would source R12bn from a club loan. Transnet had acquired the expertise of Regiments Capital to facilitate this process.

In the evidence Bloom provided, he explained that Regiments was solely responsible for the transaction. The role of Regiments slowly expanded and so did the fees payable to the advisory, Bloom explained.

"The contract value increased from R35.2m in December 2012, to R41.2m in February 2014," he said. Fees further increased to R78.4m by April 2014 and eventually, in July 2015 the fees payable to Regiments was R265.5m.

"These amounts exclude VAT or tax," Bloom noted.

Zondo asked by what percentage the fees increased. It was revealed by Advocate Paul Pretorius to be an increase of 754%.

Bloom explained that Regiments' role was to advise on the loans and other financial instruments to mitigate risks associated with the transaction. Bloom described the fee as "excessive".

"It is extremely excessive for the purposes [of Regiments services]," he explained.

Bloom added that Transnet's treasury was more than capable of facilitating the loans, and that an advisory firm like Regiments was not needed. He noted that Transnet's treasury was ranked one of the best in the world in 2010.

"One wonders why this particular situation was allowed to occur," he said.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Rand - Dollar
16.40
+0.3%
Rand - Pound
19.84
-0.0%
Rand - Euro
16.68
+0.2%
Rand - Aus dollar
11.52
+0.3%
Rand - Yen
0.12
+1.0%
Gold
1,775.21
-0.2%
Silver
20.14
-0.7%
Palladium
2,155.12
+0.1%
Platinum
937.43
-0.1%
Brent Crude
95.10
-3.2%
Top 40
64,726
+1.1%
All Share
71,505
+1.1%
Resource 10
65,387
+3.2%
Industrial 25
87,072
+0.1%
Financial 15
16,239
+0.5%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders