AMABHUNGANE: Locorruption reloaded: We reveal Gupta kickback contracts worth R9bn
Three years ago amaBhungane and its #GuptaLeaks partners revealed a kickback contract between the Guptas and a locomotive manufacturer contracted to Transnet . Now we publish details of eight more such contracts. These, and banking data, show how comprehensively the crime family pillaged SA’s state rail company – in cahoots with two Chinese manufacturers that have since merged to form the world’s biggest rail conglomerate. By Stefaans Brümmer for Amabhungane.
showZhou Qhinghe, then chief executive of CSR Zhuzhou Electric Locomotive Co, celebrating the delivery in Tshwane of the first locomotives from an order of 95 that Transnet had placed with his company’s South African subsidiary.Zhou now straddles corporate, party and parliamentary politics. He is board chair-cum-Communist Party secretary of the now-renamed CRRC Zhuzhou and a member of the National People’s Congress, China’s highest organ of state power.
In March 2014 Zhou, who is wont to expound on his company and country’s “go out” or “go global” strategy, was in South Africa again.This time he had come for the signing ceremony of new Transnet orders for 100 and 359 electric locomotives from his company and 232 diesel locomotives from a subsidiary of a second Chinese rail group, CNR.
This was reportedly the single biggest order of Chinese high-end rail equipment globally, making a not-insignificant contribution to the soaring fortunes of CRRC Corporation (2019 revenue: R567-billion), which arose from the subsequent merger of the CSR and CNR groups.
Anews reportreproduced on CRRC’s website recounts a “very interesting moment” when Transnet wanted a representative of the local CSR Zhuzhou subsidiary to sign their contract, while “Chinese regulation” dictated that Zhou as head of the parent company should sign.
The impasse was broken, according to the report, when a lawyer suggested the local representative issue a power-of-attorney delegating Zhou to sign for him. “The story of ‘the employee authorised his boss to sign contract’ is still a joke between colleagues.”
But Zhou was not done going global or signing.Think of a car salesman offering the proud owner of a new vehicle a service plan for “guaranteed peace of mind”. In this case the salesman was brought in help to convince the customer.Zhou’s signature appears alongside that of Essa, the Gupta lieutenant, on a “business development services” agreement dated 10 June 2015, Sandton. It provided that CSR Zhuzhou would kick back 21% to a Gupta front in Hong Kong should the latter convince Transnet to agree to a 12-year maintenance plan.
Transnet awarded the R6.2-billion deal to CRRC Zhuzhou, as it was by then called, the following year. Transnet eventually pulled out, but not before paying CRRC a 10%, R618-million, advance. Of this, according to our analysis, 21% went to the Guptas.Other senior CRRC executives’ names also litter the kickback contracts with the Guptas. They include Zhou’s colleagues Guo Bingqiang and Hu Yuewen from CSR, and Ma Zhan and Zhu Zhiyong from CNR.
Et tu, 232The R9-billion total value of the locomotive kickback agreements – against the R5.3-billion estimated before – includes a previously unknown 21% kickback agreement between the Guptas and CNR.A CNR Hong Kong subsidiary entered into an “exclusive agency agreement” with a second Gupta Hong Kong front represented by Essa, pledging it 21% of the R9.9-billion total contract price of the 232 diesel locomotives that CNR would supply Transnet.
Our analysis shows that CNR honoured the kickback commitment up to the point where our bank data ends.Like CSR, CNR and the Guptas also found a post-sale mechanism to relieve Transnet of more money. In this case it was under the pretext of Transnet’s decision to move the local assembly facility from Gauteng to Durban “to stimulate development in other parts of SA”.
We havepreviously reportedhow Gupta-linked consultants were roped in to convince Transnet of a R647-million payment to “compensate” CNR for the move. CNR paid the consultants R67-million, much of which flowed to local accounts controlled by Essa.Now our analysis of the bank data concludes that the Guptas got their cake and ate it. Over and above the local kickback, CNR transferred R116-million to one of the fronts Essa had set up in Hong Kong.
Cash for cover/coalThe day of the last nationwide municipal elections, 3 August 2016, stands out like a sore thumb in the Gupta kickbacks timeline.Effective that day, CRRC signed off on two addenda with the Gupta Hong Kong fronts amending their earlier kickback agreements in relation to the 95, 100 and 359 locomotive orders. The purpose was to put a quarter of a billion rands in Gupta pockets – fast.
By that time the maintenance plan kickback agreement which Zhou, the CSR Zhuzhou boss, had signed with Essa was covered in 14 months’ dust. Though Transnet had asked locomotive manufacturers to submit maintenance plan proposals a year earlier, it had yet to make an award.
Now there was urgency. The addenda specified that “within 10 days” of CRRC Zhuzhou receiving a letter of award from Transnet for the maintenance plan, CRRC companies would release the dollar-equivalent of R250-million that they had previously withheld from kickbacks paid to the Guptas.
To explain: Under the earlier kickback agreements, the CRRC companies were entitled to retain 15% of each kickback until Transnet had fully paid for the locomotives. This was to cover them against potential claims by money launderers who previously fronted for the Guptas at a 15% fee but got sidelined.
The release of these retained amounts was to be over and above the 21% promised to the Guptas on the maintenance contract itself.Nine days after the addenda effective date, Transnet’s letter of award was in the post.And another three weeks later, our bank data analysis shows, CRRC released the R67-million retained in respect of the 100 locomotives to the Guptas. Although our data is not conclusive, it likely released the 95 and 359 locomotive retentions of R53-million and R130-million too.
Why the urgency? It was not as if bringing the retention releases forward was all in favour of the Guptas, as the addenda entitled CRRC to offset the risk by withholding parts of future payments again.A theory, enticing because the addenda effective dates coincided with the date of the municipal elections, is that the Guptas had party funding obligations to fulfil; after all, political cover for a looting spree of this magnitude does not come for free. The Guptas are known to have made party contributions.
A plausible alternative is that the Guptas had overextended themselves when their Tegeta Exploration and Resources controversially bought Optimum Coal Holdings from Glencore a few months earlier for R2.15-billion.A former Gupta acquaintance said on condition of anonymity: “They always had cashflow issues, so [it] comes as no surprise. If you offered Tony [Gupta] $10-million today or $30-million in 18 months he would always have taken the today money.
“They had only just scraped the purchase money for [Optimum] together and a lot of ‘loans’ which were used to cover the purchase price needed to be unravelled around that time period.”Recovery railroadedWhen public money is stolen, two things are expected to follow: prosecution and recovery.
The National Prosecuting Authority’s investigative directorate was set up a year ago to unravel state capture crimes. To date it has little to show for its efforts.Directorate head Advocate Hermione Cronjéwas quotedin January as saying she was “gobsmacked at the scope and extent of the devastation” wrought by state capture.
Putting together successful prosecutions were hampered by the pervasiveness of corrupt practice. “In some institutions, it’s hard to pick out people who can credibly give evidence in a criminal trial about what happened because they were either complicit or will struggle to answer questions about what they did to stop what was happening.”
On the recovery front Transnet has achieved little. It pulled out of the 12-year maintenance plan and convinced CRRC to reimburse the R618-million advance.But that is a drop in the ocean of the R42-billion in procurement from CRRC companies tainted by the Gupta kickback agreements.
Last December Transnet said ina statementthat it planned to go to court to declare unlawful and set aside the CSR 359 and CNR 232 locomotive contracts. Transnet wanted a mixture of reimbursement and no further deliveries.Six months later, Transnet has yet to go to court. After Portia Derby’s appointment as Transnet chief executive in January, she brought in new top managers, including new chief legal counsel Advocate Sandra Coetzee. They went back to the drawing board.
Transnet said in response to questions that Coetzee “is reviewing all transactions and, based on legal and commercial grounds, will identify actions to be taken in relation to cancellation, negotiation, recovery, and any criminal proceedings to be instituted”.
Should Transnet pluck up the courage and go for CRRC – and Derby pass the test of raking through the ashes left by former CEO Brian Molefe – her ex-husband – it faces a booby trap left by the conspirators.While partial prepayment for large equipment orders is not unusual, Transnet took it to new levels for the CRRC companies. It paid advances of 10% on the 95 locomotives contract, 60% on the 100 contract, 30% on the 359 contract, 15% on the 232 contract, 50% on the 232 relocation and 10% on the maintenance plan.
About R10.8-billion left Transnet coffers before it saw its first locomotives. Putting aside the fact that part of each advance went straight to the Guptas, it also exposed Transnet to great risk.For a substantial part of each contract’s duration, Transnet would have paid the supplier more than the total price of the locomotives it had received up to that point. Cancelling the contract would have left Transnet, and not the CRRC company, out of pocket. Boom.
This still applies to the CNR contract, where only about 60 of the 232 locomotives have been delivered after six years, and to a lesser extent the CSR 359 locomotives contract, where about 100 locomotives remain outstanding.Advance payment guarantees were in place, but getting them honoured may be like pulling hens’ teeth. Trying to get the CRRC companies to make restitution beyond that – for the billions overcharged and paid to the Guptas – may be as futile as amaBhungane’s attempts to get answers from CRRC.
DMHow the Guptas’ R9-billion loco heist went down, our detailed analysis of each deal and the kickbacks paid on it.* In this article, unless specified, “the Guptas” is shorthand for the extended family headed by Ajay, Atul and Rajesh Gupta and relevant business associates. All amounts exclude VAT. Foreign currency amounts are converted to rand at our best estimate of the exchange rate used at the time, not current rates. Additional reporting by Susan Comrie.Read more: Daily Maverick »
Let's see proof of all your allegations first because you guys seem too desperate now. PLMyburgh And somebody still thinks jaykop is innocent We are sick and tired about Gupta's family please bring something else or closed Daily Maverick. Polly12346 IFC_org BBCWorld WHO EU_Commission eu_eeas AusGov NewZealandGov EnglandGov MoodysInvSvc stat_world questCNN MinPres NEDemocracy
These is a secret company paid R5 billion by eskom during the current tenure of 2 white guys at eskom. Can you do your service to the public because this money is 3 times more than the gupta tegeta deal. Please do the public justice. We want to know Rubbish recycled. 😂😂😂😂 It’s a relief that many South Africans are now woke and understand white supremacists nefarious agenda. The revolution is near.
Thanks for keeping SA clean, garbage recyclers. Your funders are getting a return on their investment 😂😂😂 Wrong narrative again . Daily sewerage This locomotion was presented at Zondo Commission Ax This dustbin media house 🤣🤣🤣🤣🤣🤣 Have you seen this one zinja? REALLY in 2020? You guys are funny for real
Mxm seems like a lot of trump fanatics here.either calling those they don’t agree with “bots” or fake news.🤣🤣🤣 Open a case. Can you please help here too ? Phela nina you do the digging SamSoleZA sajournalist here is R5bn stolen; please investigate amaBhungane Eskom_SA EskomSpokesper1 🤣🤣🤣🤣 shame,are you for real?
Why can't you guys go to Zondo commission 🤔 Propagandist media. They never exposed paraffin Gordon and white people's corrupt3at SAA but amaBhungane and brings this lies to the people... Voetsek Me when reading your rubbish article... 😂😂😂 ZeldalaGrangeSA We are tired of this Useless reporting Yazi.
CoruscaKhaya can you bhungane this one? Fake news at it. lol shame Good work. What irritates me is that there seems to be no action on the looters. Nada Under ANC government no thief will prosecuted the law is only for the poor pple who always putting them to power to make laws for them not for ANC administration they don't steal now they just take SA money without fear or fever .
Will only be happy when the implicated face the music How come none of your 'exposés' ever hold or are presented as evidence at the Zondo commission? When are you testifying there with all this evidence? 15mm pile length of papers! Good work guys, please go open a case in the nearest police station and also start doing the same job to the Steinhoff saga. We need arrest in both cases ASAP!
A fresh R9 billion? When are these patriots returning to help grow the economy? Need all the FDI we can get. It's just beyond my understanding that such corruption and thieving went on with out anyone going to jail or any money has been recouped and most of them live lavish life styles with out any worry of being arrested and all the evidence is there book films documentarys
PLMyburgh And still no-one in jail - or even charged. ZeldalaGrangeSA After spreading fake news on a front page with big forth later issue the apology back of the news pages 3 years ago, you published an EFF-VBS story and you claimed that the evidence you had will stand in court, and 3 years later, no EFF person has been charged with any VBS case🤡
YAWN😴 Ai not again this BS story,NPA,Hawks,Zondo,Police,FBI etc, all these institutions are not interested in this nosense of yours then why come dump it here?We need today's news taking the country forward not Gupta hogwash! Langz82L Why is everyone involved in state capture still free? Where’s the justice system?
CoruscaKhaya Y’all keep rehashing this story. All this was presented at Zondo. There’s nothing new here. You are just seeking relevance by repurposing an old article attempting to give it new life. Boring. Stale. And desperate to stay relevant. Unprofessional Nonsense. Ai stopo annoying us You resisted the headline Gravy Trains ... well done. 😅
Ayibuye Just looking at all the BOTs and those screaming fake news, simply authenticates this article. Amazing stuff by Amabhungane. Pity the NPA are so dysfunctional. Will the PresidencyZA demand answers from China. Wow wow!! Take this to state capture, its useless without any information. You must note the difference between commission and a kickback. Kindly check eskom, apparently there is a new looter there.
Take that evidence to the hawks and stop annoying us. Okay we no longer interested in your propaganda stories Why are Brian Molefe and Anoj Singh still free? Why is Matshela Koko still free? Why are Lucky Montana and Makhensa Mabunda still free? And the NPA are sitting on their hands. You've now done 90% of the work for the Zondo Commission and the NPA.
CoruscaKhaya Gosh that’s old news. None of you have been to the commission to explain this Useless fake news trying to be relevant. You're dead fake journos. Truth is here on Twitter Streets. PLMyburgh ANC scum stealing SA blind..... R9 000 000 000.00 of our taxes straight to the Guptas.... If you really cared about SOEs in this country, how much are the IPP contracts costing Eskom?
CoruscaKhaya Fake news again Watu_JayP There you go South Africans. Now you must surely realize, that’s where your water, power, homes, jobs, and dignity gone. To the Guptas So what will heppen about it? Close shop ancmustfall Keep on digging. Fefe70420079 😂😂😂😂😂 There we go, there's zondo commission, if it a state capture, we are enough of gossip now
Case Number? Where is Shamila Batohi? This is case a low hanging fruit. All these money looted must be returned period.
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Kylie Jenner is not a billionaire, Forbes magazine now saysFinancial filings show 'Kylie’s business is significantly smaller and less profitable than the family has spent years leading the cosmetics industry and media outlets, including Forbes, to believe,' magazine said. kyliejenner Forbes and all media outlets need to get themselves together. Y’all have accountant experts there how y’all miss all this for so long and right in the middle of a crises you wanna come report your mess up as her fault. Ain’t suspect this happens right after she speaks on Floyd Stop buying her cosmetics And how did she manage to convince everyone to believing she was one?
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