Transnet exec: We were told to exclude escalation costs from locomotives deal

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Transnet's locomotive tender has been at the centre of controversy.
Transnet's locomotive tender has been at the centre of controversy.
Tehillah Niselow, Fin24
  • Yousuf Laher was part of a six-person team that evaluated bids for the acquisition of over 1 000 Transnet locomotives.
  • The team’s criteria required that it include hedging and escalation costs for the tenders in its report.
  • Laher and his team were told to continue with the evaluation without the costs, he told the commission of inquiry into state capture.

Yousuf Laher, the executive manager in Transnet’s Freight Rail’s finance department, says its controversial tender for the acquisition of 1 064 locomotives was approved without critical hedging and escalation costs, without which it had been impossible to properly assess the tender's pricing.

Laher, who was part of the deal's six-person evaluation and negotiation team in 2014, said the hedging and escalation costs issue was one of several risks the team had highlighted, which were meant to be shared in a report with Transnet’s steering committee and its board.

However, the R38 billion price tag for the 1 064 later skyrocketed to R54 billion and the exclusion of the hedging and escalation costs was blamed.

On Wednesday Laher was the latest person to give testimony at the state capture inquiry on the tender. The scandal-ridden deal has been at the centre of irregularities leading to chief executive at Transnet Engineering, Thamsanqa Jiyane, and senior manager of strategic sourcing for Transnet’s Freight Rail, Lindiwe Mdletshe’s suspensions in 2018.

'We cannot evaluate this tender'

Laher told the inquiry that the negotiation and evaluation team’s criteria required that it include hedging and escalation costs for the tenders in its report.

He said that some bidders had provided their hedging and escalation costs while others did not.

"Mr Jiyane and Ms Mdletshe were in charge of supply chain services. We went back to them to say 'as a team we cannot evaluate this tender from a price perspective because we can’t evaluate apples with apples. What do you want us to do?'" said Laher.

He added that the team had wanted the bidders to clarify what those costs were, which would have been a fair way to do the evaluation.

According to Laher, the response was that they should continue with the evaluations without the costs, with Jiyane saying that asking the bidders for clarification would give them room to change their prices or extend the timeframe for the evaluation and could create further ambiguity.

Laher also told the inquiry that he had warned former Transnet CFO Anoj Singh that the budget for the deal would escalate but Singh had said the bidders built the risks into the contracts.

"The risks that we raised in that report effectively came home to roost when the pricing was finally agreed to," he said.

The tenders for the locomotives split between General Electric, Canadian jets and rail company Bombardier and CRRC-E Loco, a Chinese locomotives company.

Laher’s testimony on was part of his response to allegations of his involvement in the irregularities by former Transnet engineer Francis Callard, which he denied.

He will continue with his testimony on Thursday.

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