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DAVOS — An oft heard refrain from those cynics of South Africa’s clean-up is that nobody has been brought to account. That might be a consequence of the sheer scale of the corruption that took place in the past nine years – and the near daily uncovering of additional malfeasance. But even these pessimists will pause after listening to Transnet’s corruption-fighting chairman Popo Molefe. A shining example of public service, Molefe has been brought back into the headlines in recent years after standing firm in fighting deep corruption in the country’s rail and ports parastatal. He is resolute. The process of excising the cancer of corruption has begun. And even though it will take time, he and the new Transnet board and management are resolute. As Molefe reminds us, SA now has an extradition treaty with the UAE so even the Guptas aren’t safe. – Alec Hogg
Davos 2019 – this coverage of the global conversation on change is brought to you by BrightRock, the first ever needs matched life insurance that changes as your life changes.
I’m in Davos with Popo Molefe, former North-West Premier. I remember those days and that’s a long time ago now, it feels.
Yes, it’s a long time. That is 15-years ago.
And then private sector and now you’re back doing national service.
That’s correct. The country has been in trouble over the last nine-years and the damage rising out of the problems that started nine-years ago are more pronounced in this current period.
We’ll talk about that in a moment, but your own Province, the NW Province, it seems to have been really difficult stuff there. Is there progress now? Is it coming right?
Well, again, the NW is similar to many institutions that have been damaged. We have one of the architects of the South African public service, if you like, Doctor and Professor Job Mokgoro is leading that Province. I hope that they will give him enough time to turn the Province around. It’s very sad when you think of where we took that Province from, and how hard we worked to build integrated communities inclusive for society, and to build an integrated economy where everyone had the opportunity to participate, developing skills amongst young people. Of course, the NW was always in the top three performing Provinces in the country for the 10-years that I was a premier there. It is sad that it had to be dragged to this morass of chaos that it is finding itself in now.
But you are serving on a national level now, and particularly first of all with the Passenger Rail Association and now more with Transnet as a whole. Just tell us your story. Why did you decide to sign-up for national service again, given the amount that you’ve already contributed?
I decided to sign up for the national service because, as you might recall, I think 47-years of my life were dedicated to the struggle for freedom of my country, as well as the transformation of society, once we had attained our liberation in 1994. When, therefore, the country is in a state of crisis and all hands are required on the deck, being the kind of service-oriented person and a patriot that I have become – I could not close my ears and my eyes to the challenge and the call by the president of our country, to all go back to the frontiers to rebuild the country. We all have to do so and of course, restore the values that had, over a period of time, being eroded. Yet, there are values and principles that had inspired us over the years, and sustained the SA revolution and our determination to build what came to be as a Rainbow Nation, under the leadership of Nelson Mandela and Bishop Tutu.
You’ve taken a lot of flack though, for doing the exposures that you have done. It hasn’t been an easy ride.
That’s true, Alec, I did not expect to be cuddled, to be kissed as a darling of those who were the beneficiaries of corruption. I expected intensified push-back and intensified attack, which is exactly what has happened. Obviously, the intention was to defocus, me and those who were determined to confront corruption. But I was determined that I would not be diverted from the cause, which was correct and was for the benefit of SA.
That’s an interesting point, because you are getting, I wouldn’t say a ground swell, but there are people who think that the Zondo Commission, for instance, is going to get diverted. People like you, and the work that you are doing at Transnet is not going to be able to continue. How does one ensure that the message gets through that this is for keeps, this is for real?
Well, I think to the contrary. The Zondo Commission has created a ground swell of support, just by merely exposing the maleficence, which in the past appeared like mere allegations and suspicions. Now, many South Africans know that State Capture and corruption – the endemic of corruption is real. So, I think all of us realise that we were on the precipice of this big mountain and about to collapse the entire country, and I don’t think they would allow that to happen again. So, in many ways, I think the Commission’s work has created an all-round mobilisation of South Africans of goodwill, and actually put the beneficiaries of the maleficence that characterised the last nine-year on the run. But they’ve got no place to hide at the moment. So, the Commission will not be derailed. Naturally, those who still belong to your Bell Pottinger type networks, the Gupta type networks, which they have built on the basis of the largesse, they were dishing out. They will continue to fight back but they are fighting a losing battle.
If you take briefly, Prasa. We had said the locomotives, which we had procured from Spain, were not fit for purpose. They had departed from the design, which was set out in the RFP, before the procurement. The contract was given to a company with no track record of leasing or even manufacturing of locomotives here, in SA, which was created as a front fundamentally for the Vossloh, which was a Spanish company. We’ve been to court. We’ve won the first leg. They appealed – we won the appeal so, Prasa must simply now demand that the R2.6bn paid to the Spanish company and their black surrogates in SA, should be paid back to Prasa. So, that the taxpayer’s money can return so, we have to do that.
Then they must take their locomotives back. We’ve got a ruling of the court through mutual assistance between the SA Law Enforcement Agencies and the Justice System – they’ve got to make sure that globally, we pursue these people who have to pay back the money. So, we have established the fact that there was corruption and that corruption happened under the leadership of Mr Montana and the Board at that time. He made a lot of time trying to reduce this, to simply animosity between himself and Popo Molefe, and I refused to be dragged into the personal clashes. I remained focussed and it is the result of the work I did that bears testimony of what the real facts were. So, that we are done with.
Gama tried a similar tactic of Montana. It has not worked – he is out. But the corruption is deep. It’s scary when you look at the billions, which were diverted and the inflation of prices to create the cream for those who wanted part of the money to go into their pockets. Being the companies of the Guptas. If you think of a company called China South, Hong Kong, and then you had to question, which every time when China South Rail paid money it was paid money by Transnet. It was required through China South Rail, Hong Kong to then pass on 21% to Tequesta. Of course, I’m aware that they have subsequently deregistered Tequesta because they were creating lots of companies to launder money around but we’re going to get there.
The Law Enforcement Agency will have to do their work. Fortunately, we also now have an extradition treaty, with the United Arab Emirates (UAE), so it should be possible therefore, to demand that those suspects identified, who are hiding in those countries, in UAE, for example. They must be brought back to answer.
How important is it that they are seen that the individuals who committed this crime against the citizens of SA? How important is it that they are seen to be brought to book, that they go to jail?
You know, Alec, if SA is serious about confronting corruption and all types of maleficence the Law Enforcement Agencies, the organs of State must be seen to be resolute in bringing these individuals to book. They’ve got to do that. We are supplying evidence to all of them, the Hawks, the Special Investigating Unit, which was proclaimed by the president in April last year, and we are collaborating with them to get work done. Fundamentally, for me, as a head of a corporate citizen called Transnet, it is important that I get the money that was paid to individuals and companies in a manner that is undue and reflects undue enrichment. That that money gets back into the coffers of Transnet. We must be seen to be recovering some money and as you would have noticed last week, we reported that we had already received back R618m.
That’s big numbers. It rolls off the tongue but it’s a lot of money.
Yes, and I’m pleased that once we raised this matter with the China South Rail and CRRC, they immediately agreed to pay back the money. They didn’t even wait for the Bank of China, with whom the money was, to pay it back. They said, we will pay it back. We are now waiting for them to pay the VAT that was part of the money that they received because they received R700m. We got only R618m, which is without the VAT. So, we will continue to do so. We’re dealing with the over-payments, to various OEMs when the prices escalated from R38.6bn, for the procurement of 1,064 locomotives to R54bn. So, together with them, and we have to examine how the prices went up there.
And to agree that to the extent that some of the money they did not deserve. They will have to pay it back, but we also work on the basis that we’re going to have a long-standing relationship with these OEMs. Particularly, because they have already supplied locomotives, we have accepted some of them. But they are lagging behind by well over half or over 50% of what they should have supplied already, in 2017. So, we’re now revising the business case and our revisions suggests that we actually did not need 1,064 locomotives. We need 953 locomotives, over the period leading up to 2025. So, it could have been from the beginning been arranged in packages of delivery instead of going for what became the biggest, single order of locomotives in the entire world.
So, we are negotiating that because we’ve got to bear in mind that we have a drive to bring investments into our country and we’ve got to send a message to the ‘to be’ investors that when there are difficult problems, we will deal with those problems in a rational manner. Rational also, because if you were to say, like we did at Prasa, ‘take your locomotives back – give us our money.’ In this case, you would collapse Transnet and the differences that whereas at Prasa the locomotives were not fit for purpose. These ones are fit for purpose and the company needs them. It has got to move goods. It has to provide services to various customers in the country, who do exports and imports, therefore keeping the economy ticking so, it’s important for us to be rational.
Going back a little bit, to the role of McKinsey, it was exposed obviously, with what happened at Eskom, but it’s almost like their training ground was at Transnet. Is that on the agenda, at some point, to go and look into?
Well, we are busy looking into it. McKinsey, one of the transactional advisors that we’ll be engaging in the negotiations. Just before I came here, I met with the head of the lead partner responsible for risk. So, we will continue to engage them. We are engaging Regiment. Regiment, we have sent summons to them to pay back the money that they got out of Transnet for work that was not done. But we’re also asking the individual executives, through whose recklessness the company lost a lot of money, to pay back that money. So, we are pursuing them.
That’s always been a good strategy and certainly sends a message out to other executives.
Yes, to those who are remaining – they now know that the mess up, they will have to pay, in their personal capacities.
On a broader scale though, we’ve got the Tuna Bond scandal going on in Mozambique, Credit Suisse engineered the whole thing. We’ve got in Malaysia, the 1MDB scandal, $6.5bn, Goldman Sachs. What is it about multinationals that seem to have allowed this kind of behaviour in the past? The behaviour that is now being so investigated in State Capture. Why did the think they could get away with it, in developing countries?
Alec, I’m not an expert on those matters. But my sense is that the biggest mistake that these multinational or global banks made, is that in pursuant to increase the base of the deposit, the deposits from customers or increasing the customer base – they seem to have allowed the middle men to come into play, and those middle men purport to deliver customers. And it turns out that those customers acquired the monies that they give, in manners that are wrong. But it also suggests that these multinationals do not have robust risk management mechanisms to detect these things before they happen.
Onto Transnet itself. You have inherited quite a mess there. What are we likely to see when the financial results come out, as a result of the investigations of the corruptions that’s being uncovered?
Well, Alec, we expect that the irregular expenditure will increase. So, it’s not going to be better than the previous year. Obviously, once we have determined that the 1,064 locomotives procurement was irregular and therefore, unlawful. It has to go into the audit report. But the good thing about it is that it’s not like something uncovered, which was hidden by either management or the board of Transnet. It is something that through the transparent approach of the board and management we are now exposing and we are owning up to it as a company. So, that is what the difference is. Unlike in the past, where they were trying to cover up things. I think Parliament, Scopa, the DPE portfolio committees – when they look at our reports, they will look at it in a manner that reflects and understanding that before you fix, before things can be good, they’ve got to be worse. There’ll be the storm before the calm.
We expect that to be a problem. We expect these irregularities. We have to convey that message to the SA public, to business in SA so, that they have an understanding. But also, to say to them, whereas in some instances in the past, irregular expenditure included fruitless and wasteful expenditure. In our context it would be instances where procedures and processes were not followed, but value was derived out of the monies spent, and I made an example of the locomotives. They are fit for purpose. They have been delivered, tested and accepted so, whilst it might have been irregular it is not wasteful.
All change at Transnet, at the moment. You’ve also got a new CEO, how is he settling into the new role, and I ask this because Paul O’Sullivan, the ace investigator said, in the past, when he provided information to Transnet it would get forgotten. He provided information in November, and the board moved incredibly quickly to root out the bad elements on what was a R4bn potential fraud.
Alec, the difference between the current board of Transnet and the previous one is that the previous board was captured, together with management by the Guptas. So, they were part of this phenomenon of State Capture, and the agenda that advanced personal material accumulation. Whereas our board is a board that is committed and patriotic. It wants good corporate governance and it is working well with management of the company. That is why we can act quickly when any South Africa brings something to our attention something that is not well, inside Transnet.
So, we are working very well with the acting Group CEO. He’s a man with a long record of service in Transnet. Having served in various capacities in Transnet, freight rail as well as national ports authorities. So, we are comfortable working with him. But we need to change the mindset of several managers and get them to get used to doing things differently now. They were kept there, in the past, as people who merely had to carry out instructions of the big boss or a small group of people. Quite often even instructed by people outside Transnet. This time we want them to be active participants, in turning Transnet around, and we have challenged them to tell us what it is that they did to enable the capture of Transnet, and what it is that they were going to do, to help the board to fix Transnet?
So, we are in a process of allowing them, individually, to tell their story because that is going to help us to determine whether we have a team we can work with, in those who are remaining, or we simply have to go the wholesale advertisements and get new people. The important thing, of course, with Transnet is that it has got a lot of well-trained people. We just need to move them away from the culture of apartheid and also, from the culture of craft, those who are there. Because some of them are very skilled people and the company needs them. If they are willing to turn a new leaf, we can do wonders to this business.
And there are, clearly good people, and just to close off with. If one goes back to the VBS Report, and the scandal that went on there. Someone at Transnet said, ‘no’ with the money that was going to go into VBS, and it shows that clearly, in every organisation, it’s usually just a few bad eggs.
Yes, that’s good. We’ve got to send a message out there that we have picked-out and identified a couple of rotten apples but the majority of the apples are still good quality. They are edible – we South Africans can still enjoy them in the service of improving our freight and transport infrastructure. Building relationships with our customers a on a fundamentally new plane. Including using Transnet as an incubator or a crucible that builds emerging businesses and treating each one of the on the basis of equality and acceptance, purely on the excellence of the business ideas and proposals. Rather than trying to work only with those who are referred by some people in high political offices outside there, instructing the top people in management.
With this kind of Transnet, we are building, no politician is going to come or a party functionary comes and instructs anyone of us to carry out something that is not part of the developmental agenda of the country, and the State, or the mandate of Transnet as a State-Owned Company.
Davos 2019 – this coverage of the global conversation on change is brought to you by BrightRock, the first ever needs matched life insurance that changes as your life changes.
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