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                    MORE MONEY LAUNDERING EVIDENCE COMES OUT IN THE WASH

                     

                    Following OUTA’s extensive and ongoing investigations, we have handed over information to the National Prosecuting Authority (NPA) on how a Gupta-linked group obtained a payoff of R189.24 million – with R142 million of this going to the Guptas – on an expensive Transnet loan. We also found evidence of a $17.7 million payoff to an unidentified syndicate. 

                    In 2015, Transnet took a $1.5 billion loan from the China Development Bank (CDB), as part of the financing for its project to buy 1 064 freight locomotives. Transnet had initially walked away from the CDB loan, as it was too expensive. But, after intervention by Jacob Zuma, negotiations resumed and the loan was signed – on the same expensive terms.

                    OUTA Portfolio Manager for Transport and State Capture Rudi Heyneke says the OUTA submission on the Transnet-CDB financing deal includes a sworn affidavit, annexures and a detailed report with evidence on the planning, negotiation phase, conclusion and commissions that were paid, and how they were laundered.

                    “OUTA’s submission is based on documents retrieved from the #GuptaLeaks, various datasets submitted to OUTA, reports by whistleblowers, Transnet-related documents submitted to the Commission of Inquiry into State Capture, the Companies and Intellectual Property Commission database, and media reports,” Heyneke explains. 

                    “We have unpacked how various individuals conspired to obtain payments by ‘facilitating’ the CDB loan and how third parties, with no mandate or business with Transnet, received funds they were not entitled to through a sophisticated money laundering process.”


                    KEEPING TRACK

                    • In March 2014, Transnet awarded contracts totalling R50 billion for the procurement of  1 064 locomotives for the Transnet Freight Rail division.

                    • In May that year, Transnet started negotiating with the CDB for a loan to help fund this acquisition. The initial negotiations were suspended in October 2014, because of the high costs of a CDB loan. 

                    • Transnet’s treasurer at the time, Mathane Makgatho, questioned various aspects of the proposed CBD loan. The involvement of middlemen, the loan being more expensive than the rate Transnet could get in the market, the R3.7 billion in excessive interest and arrangement costs and the fact that it was in breach of the Public Finance Management Act (PFMA), all raised red flags.


                    Then, in December 2014, former President Zuma visited the People’s Republic of China, accompanied by 17 ministers and more than 300 business leaders. During this trip, he met with the Chairman of CDB and was accompanied by Brian Molefe and Anoj Singh. Molefe was Transnet’s CE at the time and Singh was its CFO. 

                    Four months later, Singh wrote to CDB, requesting that loan negotiations reconvene urgently:

                    “We terminated the proposed funding proposal from CDB in October 2014 due to the high cost of funding to Transnet, however this was with the view that we would continue working together to find a solution to the cost of funding,” Singh wrote to Guan Lian of the CDB South Africa Working Group. He referred to his own meeting with the CDB in December 2014 in Beijing. “In addition, the President of the Republic of South Africa and the Minister of Finance met with the Chairman of CDB to address the cost for funding from CDB. This meeting was also attended by Mr Molefe.”

                    Makgatho resigned at the end of 2014 and was replaced in April 2015 by Phetolo Ramosebudi as Transnet treasurer.

                    GRAVY TRAIN GATHERS MOMENTUM
                    In April 2015, the CDB wrote to Singh saying the loan was competitive and noting that the CDB was glad Transnet had found a solution to fund the costs without changing the terms and conditions of the loan. The bank sent Transnet an official mandate letter with terms for a $2.5-billion loan. Molefe signed this mandate the same day. The following day, then Minister of Public Enterprises Lynne Brown seconded Molefe to Eskom as CE there with immediate effect.

                    “Anoj Singh, Brian Molefe and Eric Wood were so desperate to continue negotiations with CDB that they had to rely on a meeting between former President Zuma and the CDB chairman to persuade Mr Guan Lian to proceed with negotiations with Transnet. One wonders why they were so desperate to do business with CDB, even after they were advised by Transnet’s group treasurer, Makgatho, that there were cheaper funding options available,” Rudi poses. (Wood was a director of Regiments Capital, which benefited from the loan fees.)

                    THERE’S MORE…
                    OUTA’s investigations uncovered excessive extra fees, which formed part of the deal – more than three times higher than the upfront fees of other funding for the locomotive deals.

                    • The “Arrangement Fee”: 1.18%, or $17.7-million (about R220-million at the time), on the $1.5-billion committed loan for “syndicate partners”. This information was given to OUTA by a whistle-blower. We have asked the NPA to establish who the recipients were of the arrangement fees. 

                    • Success contingency fee: Regiments Capital was paid R189.24-million. Regiments was part of the Transnet advisory team when it was included by McKinsey consultants (appointed as Transnet’s transaction advisor in 2012) as its social development partner without going through any procurement processes. OUTA tracked where the R189.24-million success contingency fee went:
                        o R2-million was transferred to the personal accounts of each of the directors of Regiments Capital: Eric Wood, Litha Nyhonyha and Magandheran (Niven) Pillay. 
                        o Regiments then paid R141.930-million (75% of the money from Transnet) to the Bank of Baroda account for Kuben         Moodley’s company, Albatime, which in turn distributed the money to Sahara Computers, Salim Essa and the newly            registered companies Hastauf and Forsure Consultants. Sahara Computers and Essa have been linked to the Gupta empire. Hastauf and Forsure were previously identified by OUTA as first-layer recipients in a money-laundering scheme driven by Essa, Wood and Ashok Narayan (a known Gupta administrator and employee). A further 3% of the funds received from Transnet was paid to Moodley into a separate bank account of Albatime.
                        o From Hastauf and Forsure, the funds were distributed to a further seven entities. OUTA has identified three of these companies and their directors: Fairchild Phiri was the director of two companies; Mod Urban Connexion and non-profit company Hip Hop Dance Championship NPO. These two businesses received almost R3-million of the money that could be traced back to the Transnet-Regiments payments. The other company, IPocket Global, was put into voluntary liquidation in August 2016 by its directors. IPocket received R15.5-million of the Transnet funds. 

                    OUTA believes that these people should be investigated. Click here