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Brian Molefe’s Transnet legacy exposed: R8bn in dud trains bought from China?

Former Eskom boss Brian Molefe became a household name last year after claiming that he was at a Saxonwold shebeen rather than taking instructions from the controversial Gupta family, who live in the expensive suburb. He also famously burst into tears at a media conference where allegations of financial irregularity involving Eskom were raised. Until his name popped up in the former public protector’s state capture report as a key figure in the Gupta circle of influence, Molefe largely kept out of the limelight. Now he’s barely out of the headlines. He has actively promoted the controversial nuclear build programme with Russia, for example. Molefe has been busy wheeling-and-dealing at taxpayers’ expense for some years, it seems. In this investigation, News24 journalists have uncovered a financial scandal at state entity Transnet, which Molefe ran before moving to Eskom. Molefe placed the largest order ever for locomotives, opting for Chinese companies. The first ones that arrived are duds. The locomotives are so problematic, in fact, that Transnet can’t use them – and is refusing to accept another 18 that are ready to be shipped from China. All of this is no surprise, however, as Namibia had a similar experience that Molefe chose to ignore before he got out the Transnet cheque book and signed off on the deals with Chinese entities. With the rotten stench of irregularity rising around Molefe’s activities, it seems inevitable that the News24 journalists will do more digging into the flow of money around the multi-billion rand award. – Jackie Cameron

By Pieter-Louis Myburgh

Johannesburg – A Transnet contract worth almost R8bn for new Chinese-manufactured locomotives has hit a stumbling block as technical problems have plagued the first of the trains to arrive in South Africa.

News24 can reveal that the alternators of the first two diesel locomotives delivered to Transnet by CRRC Corporation, China’s state-owned rail behemoth, posed serious problems soon after they arrived in South Africa last year, rendering the locomotives unable to operate.

Railway workers walk across train tracks past a locomotive operated by Transnet SOC Ltd. at the company’s rail depot in Ermelo, South Africa. Photographer: Dean Hutton/Bloomberg

Transnet is now refusing to accept a further 18 locomotives that are waiting to be shipped to South Africa. The locomotives’ alternators “vibrate excessively”, say sources familiar with the development.

Alarmingly, problems with the alternators of similar Chinese-manufactured locomotives ordered by Namibia in 2004 played a role in that country’s decision to stop using them.

An alternator is one of the most crucial components on a diesel locomotive, as it generates the power that moves the train forward.

Transnet, however, maintains that the locomotives are still at “prototype stage” and that CRRC “has resolved the problem successfully”.

Problems from ‘day one’

Brian Molefe

In 2014 Transnet, under then CEO Brian Molefe, placed the largest order for locomotives in South Africa’s history when it awarded a tender worth R50bn to four international original equipment manufacturers (OEMs) for 1,064 new locomotives.

The tender was split between China North Rail (CNR, 232 diesel locomotives at R7.8bn), China South Rail (CSR, 359 electric locomotives at R14.6bn), General Electric (GE, 233 diesel locomotives at R7.1bn) and Bombardier (240 electric locomotives at R10.4bn). The overall contract cost of R50bn includes a provision for hedging and cost escalation.

CNR and CSR merged to form CRRC, the world’s largest manufacturer of rail equipment, after the tender was awarded.

CRRC’s first two class 45 diesel locomotives arrived in Durban in August last year. According to several sources familiar with the matter, the locomotives’ alternators caused problems from day one.

A team from Transnet will now travel to China in February in order to verify whether CRRC could fix the problem on the 18 other locomotives that have been completed and are waiting to be shipped.

The 2014 tender was awarded on the strict condition that the OEMs manufacture the bulk of the locomotives in South Africa using South African-produced components, but CRRC has been allowed to manufacture the first 20 of the 232 diesel locomotives in China.

‘Common phenomena’

Mike Asefovits, a senior manager at Transnet’s corporate affairs division, said the vibrating alternators are not cause for concern.

“The manufacturing process is at prototype stage and this is when you pick up niggles and fix them. It is common phenomena that from design to build to test there will always be a measure of technical issues that might arise,” said Asefovits. He said such issues are generally resolved during testing and commissioning.

However three sources familiar with Transnet’s huge contract say that CRRC has already completed 20 of the class 45 locomotives indicates that the project is past its prototype phase.

“Excessive vibration is a huge issue. The machines essentially failed their first test. Those 18 locomotives in China are completed, they’re sitting on the docks in China ready to be shipped here, so I don’t understand how Transnet can view them as prototypes,” says one source.

According to another source, the problem is that CRRC is using technology it is not familiar with, such as the MTU diesel engines that power the alternators and the Chinese-manufactured alternators themselves.

“The Chinese won the bid with bid documents that indicated they would use alternators manufactured by ABB [a Swiss technology group based in Zurich], but they ended up using Chinese-manufactured alternators,” says one source.

The decision to use alternators from a different manufacturer was an attempt to cut costs, the source maintains.

Repair costs

According to Asefovits, the Transnet team travelling to China in February will “validate technologies and sub-systems”.

The trip is “part of the contractual and costed process”, said Asefovits. He added that Transnet will not carry the repair costs.

“The cost of repair is not a Transnet problem. Such costs are for the OEM concerned,” said Asefovits.

Strangely, CRRC maintains that it has not yet handed over the locomotives to Transnet, despite several media reports on a handing over ceremony held in Durban in August 2016.

“The first two D45 locomotives [that] arrived in South Africa are still in type testing stage and they are not handed over to Transnet yet,” CRRC SA Rolling Stock said in an email. The company has vowed to provide further information on the faulty alternators.

The development comes in the wake of a disastrous locomotives contract awarded to the former China North Rail by TransNamib, Namibia’s national rail operator.

TransNamib bought four diesel locomotives from China North Rail in 2004, but ended up selling them in 2014 after a host of technical problems rendered them unfit for use.

TransNamib told The Namibian newspaper that “interface problems between engine and alternator”, along with “poor braking and poor filtration systems”, counted among the technical problems. – News24

Source: http://www.news24.com/SouthAfrica/News/exclusive-transnets-new-chinese-locomotives-fail-first-test-20170123

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