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STATEMENT BY TSHEPO LUCKY MONTANA,

FORMER PRASA CEO

PARLIAMENTARY INQUIRY INTO CORPORATE GOVERNANCE AT ESKOM

CAPE TOWN

30 JANUARY 2018

1. PURPOSE

I am fully aware that the Terms of Reference of this Parliamentary Inquiry by the

Portfolio Committee on Public Enterprises does not include the affairs of the

Passenger Rail Agency of South Africa (PRASA). However, I was drawn into its

work and ultimately invited to share my version of events after the Deputy

Minister of Public Enterprises and former Minister of Transport, Honourable

Dikobe Ben Martins addressed a media briefing on or about 8 November 2017

responding to the testimony to this Inquiry of Suzanne Daniels, former Legal

Advisor at Eskom. In her testimony, Suzanne Daniels mentioned meetings

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involving members of the Gupta Family and DM Martins held at the Melrose

Arch, Johannesburg. If I remember well, Ms Daniels stated that the Deputy

Minister attended meetings where certain ESKOM matters were discussed.

In his attempt to clear his name and distance himself from the Gupta Family,

Deputy Minister Ben Martins stated during the Media Briefing that he had met

members of the GUPTA Family on a few occasions. To my surprise, DM Martins

further stated that one such occasion was when he met members of the Gupta

family with Lucky Montana. I got the distinct impression that DM Martins

wanted to create the impression that I brought members of the GUPTA family

to him.

I was extremely disappointed because I felt that the statement was not entirely

truthful, fair and comradely. I felt strongly that he had a duty to call and inform

me that he intended to mention my name during the media briefing. I expected

this from him as my leader, friend and comrade. He knew that mentioning my

name in the manner he did, in this “polluted” political environment dominated

by issues of “State Capture”, would raise questions about whether I had a

relationship with the Gupta Family.

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I expected this from him because DM Martins and I had a long relationship

dating back to 1996 when I was first introduced to him in Parliament and we

became close friends. He also introduced me to his family. I worked very closely

with him as the Chairperson of the Portfolio Committee on Public Enterprises

where together we championed some of the most important legislative changes

during the period (1999 – 2004) of the Restructuring of State-Owned Enterprises

(SOEs). We worked together as comrades in the South African Communist Party

(SACP) where he was a member of the Politburo and I was the Deputy Provincial

Secretary of the Party in the Western Cape. This bond of friendship and

comradeship was further strengthened when he was appointed Minister of

Transport in 2012.

DM Martins remains my leader and a great inspiration to me. He is an intelligent

and highly knowledgeable man. He is a simple, humble man - a freedom fighter,

Communist and a Great South African. I have no doubt that he is committed to

serving the people of South Africa. This is the man who lives for the arts. He

would invite me during weekends when he visited art galleries. He would teach

me about paintings, the ideas behind them and the artists behind these. As you

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may be aware, he writes and publishes poems. This is a man I have huge respect

for.

I could however not believe it when I heard what he said at the media briefing.

I felt strongly that DM Minister Ben Martins was trying to protect his own name

at my expense. He knew that I had never met the Guptas until he had invited

me to his Ministerial House in Pretoria and introduced me to Duduzane Zuma

and Rajesh “Tony” Gupta. This happened in September 2012. What he had said

at the media briefing was totally not true and I felt it important that I set the

record straight. I issued a statement repudiating what he had said, to set the

record straight. I had a long interview with SAFM to clarify my statement. DM

Martins and I had a telephonic conversation immediately after the SAFM

interview where we agreed to meet and not escalate the matter further. I attach

hereto the copy of the Media Statement (Annexure A).

Unfortunately, my response to the Deputy Minister drew the attention of the

Evidence Leader to this Inquiry, Advocate Ntuthuzelo Vanara, who wanted to

know the context for my response and the contents of the letter referred to in

my statement. I met Advocate Vanara in Johannesburg in January 2018 and took

him through the letter I wrote in 2012 about attempts by certain members of

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the GUPTA Family and their associates to manipulate the procurement process

for the acquisition of new commuter trains.

The primary goal of my submission is therefore to provide the Inquiry with the

full details of these attempts by the Gupta Family and to formally release to

South Africa my 2012 letter to the Chairman of PRASA at the time, the current

the Deputy Minister of Finance, Honourable S’fiso Buthelezi.

I intend also to share with the Inquiry my experience working with State-Owned

Enterprises and the lessons that the Committee could possible draw from

various attempts at restructuring these entities over the past 20 years or so.

I will also briefly touch on the topical issue of “State Capture” and how this

affected PRASA during my tenure and after I had resigned and left the entity. I

resigned from PRASA on the 15th March 2015 (Annexure B) and left on 15 July

2015 when the Board resolved in my absence that I will no longer be required

to serve out the remainder of my notice period.

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2. ACADEMIC QUALIFICATIONS AND WORK EXPERIENCE

I am the former Group CEO of PRASA. I went through the ranks in the civil service

and in the process, acquired huge experience in developing and driving

corporate strategy, managing people and running companies. I was part of a

generation of young, black professionals that joined Government in the

aftermath of the first democratic elections of 27th April 1994. Many of us,

despite having been to university and had academic qualifications, were sent for

further study and technical training in the different areas of responsibilities. We

were former militants in the struggle against apartheid in the 1980s and early

1990s. The democratic government presented us with the opportunity and

honour to serve our beloved country and its people.

For me personally, I completed my Honours Degree in Industrial Sociology

(Social Research Methods) at the University of Cape Town (UCT) in 1993. I was

employed to undertake research by COSATU on grading and training

arrangements in various sectors of the economy. My area of research was Post

and Telecommunications. COSATU agreed to grant us permission to use the

research data, which the federation rightfully owned, towards the completion

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of our Honours Degrees. My Honours Thesis was on Strategic Unionism as a new

model to bring about social and economic transformation.

I worked for the ANC Western Cape as Elections Research Coordinator from April

1993 till April 1994 focusing on Voter Trends in the Western Cape and on

Opposition Strategy.

I joined the new Western Cape Provincial Government in May 1994 as a Member

of the Strategic Management Team (SMT) in the Department of Economic

Affairs and RDP. I was responsible for RDP Planning and Implementation.

In August 1994 I was selected, together with 25 other new recruits in the civil

service around the country, to participate in a Study Programme on “Economic

Policy Formulation” for Prospective South African Economic Policy Makers held

in the Hague, the Netherlands. We spent half of the year being trained in the

theory and practice of International Economics and Trade Policy, Fiscal Policy,

Monetary Policy, the Banking System and Taxation; the Political Economy of

Public Policy; Competition Policy, Economic Regulations, Transport Planning,

Social Security and Labour Market Policy.

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We studied the High-Performing Asian Economies, with specific focus on Japan,

Hong Kong, South Korea, Singapore and Taiwan. We spent time studying the

Maastrich Treaty and visited the new institutions of the European Union in

Belgium.

We received detailed training on the GATT System and its replacement with the

World Trade Organisation (WTO) in Geneva.

We studied the role of the World Bank and IMF in the world and Structural

Adjustment interventions.

Most importantly, we were trained to pull together information and put this into

a Policy Memo to guide Policy Makers, in this case Ministers in the Economics

Cluster.

To meet the requirements of this course, I completed a “Policy Paper on

Industrial Policy for Post-Apartheid South Africa”.

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During my stay at the Department of Economic Affairs and RDP, the Educational

Opportunities Council funded in 1995 another detailed training programme on

Macro-Economic Policy Analysis (MEPA).

The focus of this training programme was Inter-Governmental Fiscal Relations,

Policy Simulation and Interdependence, Budgetary Procedure as well as Fiscal

Policy and Growth.

We spent the latter half of 1995 in another study and training programme, this

time on Regional Economic Development in Germany, with a special focus on

rural development.

I joined the Department of Public Works as Director: Office of the Minister in

June 1996 until 1999. I was earmarked for a role in the Construction Industry

Development Board (CIDB) and was sent in 1999 to participate in the

Construction Management Programme (CMP) at the University of Stellenbosch.

This is the best programme in the construction industry.

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Many of the construction companies listed on the JSE sent their middle

managers and senior executives for training in the CMP, a programme delivered

jointly by the University of Natal, University of Witwatersrand, University of

Pretoria and University of Stellenbosch. I completed the requirements of this

vitally important programme.

This is the best training programme for those interested in infrastructure

development; with a strong focus on diagnostics engineering; procurement

methods; risk management; contract law, Applied Computer; strategic

management and finance. Again, I met the requirements of the programme.

I joined the Department of Public Enterprises in 1999 following the elections in

that year. This was the year of major changes in the area of state-owned

enterprises. One of the first task undertaken by the new Minister of Public

Enterprises was the upgrading of public enterprises from an Office to a fully-

fledged Department. A lot of new young skilled people were recruited with skills

specializing in Defense, Telecommunications, Transport, Energy, Forestry and

Finance. This was the most exciting period in the life of the Department of Public

Enterprises.

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I was promoted to Chief Director level in 2002 and given major responsibilities,

including the responsibility to coordinate the National Framework Agreement

(NFA) signed between Government and Labour Unions to guide the process of

restructuring.

I had the privilege to sit, participate and even chair key meetings between

Government and Labour considering restructuring options for SOEs such as

Denel, Eskom, Transnet, SAFCOL, Telkom, Airports Company South Africa,

Aventura, among others.

As part of this process, I was sent to the United Kingdom on a course on

restructuring and privatization of public entities.

Perhaps the biggest and most exciting restructuring initiative for me was the big

challenge to restructure Transnet. This was key for the economy and

Government had instructed us to work on what came to be known as the

“Transnet End-State” Project. This was a period of detailed analysis of data and

due-diligence exercises for the different business units with Transnet, working

with International companies such as Rothschild and Halcrow.

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The choice to separate freight rail and passenger rail was made during this

period, and it was to lead to the establishment of PRASA in March 2009.

I joined the Department of Transport in June 2004 and was appointed Deputy

Director-General for Public Transport. I was responsible for trains, bus and taxi

operations.

This was the biggest portfolio in the Department responsible for managing the

subsidies allocated by Government for commuter rail users and enabling

Provinces to manage the bus subsidies. I was appointed in 2005 to serve on the

Board of the South African Rail Commuter Corporation (SARCC), the predecessor

to PRASA. During this period, I was responsible to oversee the implementation

of the Taxi Recapitalization Programme (TRP).

I was seconded as Acting CEO of the SARCC in July 2006 on an 18-month

contract. Cabinet confirmed my appointment as SARCC in October 2007. One

of the key mandates was to prepare rail infrastructure and operations for the

2010 FIFA World Cup, consolidate passenger rail entities into a single entity

reporting to the Minister of Transport, which became PRASA and to drive a long-

term turnaround strategy and investment plan for passenger railways.

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3. LESSONS FROM THE RESTRUCTURING OF STATE-OWNED ENTERRPISES

The ANC Government has done a lot to restructure and strengthen SOEs since

the advent of democracy in 1994.

Major restructuring initiatives were undertaken, which were aimed at reducing

the foreign borrowing requirements, promote good corporate governance and

ensure SOEs and public entities contribute to Government social and economic

objectives.

In 1999, Government started the process for the development of the Policy on

the Restructuring of State-Owned Enterprises, where extensive and wide

consultation were undertaken with political structures, community-based

organizations, trade unions, business and international investors. The Policy was

formally adopted as Government Policy in 2001.

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This Policy, in my view, rank amongst one of the best policies the Democratic

Government has ever developed, especially when one takes into account the

context of the late 1990s and the pressures at the time to privatize SOEs. Despite

this, the Government was able to find that delicate balance between the role of

the Government in the economy and the private sector. The Policy defined the

strategic role that these SOEs should play and how they could contribute to

sustainable development in terms of investment in economic and social

infrastructure, development of skills in the economy, facilitating access to

services. It was also expected that SOEs will play a major role in difficult

economic conditions.

The Policy was clear that both the Government and Private Sector had an

important role to play in the economy. This was an attempt to transcend the

ongoing debate about either Government or private sector. This was not

winnable or sustainable.

The Policy required Government to balance the commercial goals of these SOEs

and their social mandate. This Policy enabled the Government to drive the key

trade-offs that needed to be made to achieve the economic goals that

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Government had set itself at that time. Government had also set as one of its

key objectives the separation of infrastructure and operations in certain

identified economic sectors.

Among key objectives for the restructuring of SOEs and key public entities was

to strengthen the financial position of these entities so that they could be in a

position to borrow against their own balance sheet and meet their own

investment requirements.

Government had wanted to introduce competition in sectors like ports

operations, telecommunications and energy. These would require creation of

independent regulatory capacity to determine sustainable tariffs, access to

networks and reduce market dominance. This was also a key condition for

private sector investment in key sectors like energy.

Some of the restructuring initiatives undertaken between 1999 and 2009 had

created the material basis for SOEs to contribute to sustainable economic

development. This includes the decision to transform Eskom from a State

Commission into a fully-fedged company through the passage by Parliament of

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the Eskom Conversion Bill in about 2003 and the introduction of proper

corporate governance mechanisms. These had enabled Eskom in later years to

go out to the Capital Markets to raise the necessary capital to invest in new

generation capacity.

The other example of Government example was the restructuring of the

Transnet pension fund, which served as a major break on this vitally important

SOE to play its strategic role in the economy. Parliament played a key role with

the amendments introduced to the Transnet Pension Scheme. This also ensured

the compensation to black widows whose husbands worked for decades at this

entity but there was no contribution made by the employer on their behalf,

unlike their white counterparts.

The Telkom IPO process and subsequent restructuring over the years had

created the modern company that we see today. Despite difficult domestic and

global market conditions, Government was decisive and ensured the listing was

a success. Many of the market analysts had thought then this would not be a

success.

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There is a story of South African Airways. Swissair came in as Strategic Equity

Partner (SEP) with 20% equity and had an option to increase this to 30%. The

SEP was critical in injecting much-needed capital into SAA, strengthen its

financial position and bring management skills into the business. We seem to

have forgotten that in recent times when the aviation sector faced massive

challenges and following the events of 9/11, the national carrier was in a far

stronger position than most of its competitors. The issue of SAA is not only

limited to how the business is run and issues of costs and efficiency but

fundamentally linked if not depended on POLICY. Many countries seem to adopt

robust policies about how they would support their aviation sector enabling this

to contribute to tourism and economic development. This, in my humble view,

is one of major shortcoming as a country.

Some of the measures to allow different airlines to land anywhere in the country

may be the major contributor to undermining OR Tambo International Airport

as the hub for SAA and eroded its revenue base. There is no way SAA could

sustain its huge asset base or debt levels when its revenue base keep on being

eroded. In my view, there is a major failure of Government Policy.

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There are many other examples of success in the manner the Government

managed its SOE portfolio and how these were restructured at the time. This

includes the changes at the Airports Company of South Africa (ACSA) and how

this enabled this entity to invest in its modern airport infrastructure around the

country. Government also adopted bold and long-term view that ensured King

Shaka International Airport become a reality, use this as a major anchor for the

Dube Trade Port and develop capacity to meet future demand for the aviation

sector. ACSA was at the time that keen from relocating from the old Durban

International Airport but Government was firm in its resolve. The same could be

said about Coega/Nquga Development in the Eastern Cape.

There are also failures in the restructuring of SOEs. One of the main failures was

the decision that the proceeds of restructuring must go into the National

Revenue Fund. Due to difficult economic conditions and competing priorities,

not all restructuring proceeds were invested back to strengthen these SOEs.

As the Portfolio Committee embarks on this critical clean-up process and

facilitates renewal at ESKOM and other SOEs, it is also vitally important that

through this Inquiry, the Committee should assist the country and contribute to

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the country building on its previous successes in respect of its SOEs. Not

everything about our SOEs is bad.

4. PRASA AND “STATE CAPTURE”

The notion of “State Capture” has different meanings. It is viewed by some to

refer to the unlawful activities undertaken by the Gupta Family and their

associates in Government Departments, SOEs and Public Entities. To others, it

is a proxy to fight political battles. For others, it embodies and captures the

national effort to combat corruption within Government and its different arms.

PRASA became a major battleground for political forces and vested economic

interests all fighting for control and the right to influence the award of its

tenders. There were the Guptas and their Associates who used underhanded,

unlawful methods to achieve their goals. I will return below to discuss in detail

their conduct. The Guptas and their Associates were resoundingly defeated in

2012 but unfortunately, they were not the only ones.

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There were vested interests within black business that had entered into

agreements with international rolling stock companies. They were unhappy with

the PRASA decision regarding the appointment of the 30% BBBEE Partner for the

Rolling Stock tender. PRASA gave the Original Equipment Manufacturers (OEMs)

the right to find their own black partners for 70% of the transaction but that this

would not be credited. PRASA insisted that only the 30% BBBEE Partners would

be credited but these would be selected through an open, transparent and

competitive process. This was to prevent politically connected individuals or

groupings from either fronting or manipulating the process.

There were the International Rolling Stock Manufacturers themselves, who

wanted to secure probably the biggest rolling stock tender at the time. They

maneuvered, played one player against the other and tried to manipulate, if not

blackmail, existing local industry players to lower their prices. Some of the

International companies had made provisions during bidding for marketing.

Marketing in this context could mean making provision for payment of bribes.

As the country intensify the fight against corruption, it is important that the flow

of funds for purposes of marketing is placed under serious scrutiny.

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However, the most powerful political force that won the day and changed the

course of PRASA forever, was driven by none other than the former Minister of

Transport, Honourable Dipuo Peters, working with the former ANC Treasurer-

General, Dr Zweli Mkhize. The two, with the support of other unnamed officials

at Luthuli House, were key to the appointment of the new PRASA Board that

served their interests.

It all began in March 2014 when the former Minister of Transport, Honourable

Dipuo Peters convened a meeting in Cape Town of the Chairs and CEOs of all

public entities reporting to the Minister of Transport. The purpose of the

meeting was to discuss Corporate Plans, Budgets and Deliverables of the

Department of Transport and its public entities for the 2014/15 Financial Year.

Each entity was given an opportunity to present to the Minister. When the turn

for PRASA came, the Minister focused her comments on the PRASA Rolling Stock

Fleet Renewal Programme. She further stated that “we cannot be dictated terms

to by the French” referring to the Gibela Rail Consortium led by French company,

Alstom that won the tender to supply 600 new commuter trains to replace the

entire fleet of Metrorail.

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We explained to the Minister that we were not driven by the French but by the

condition of Metrorail, which was facing collapse. The Minister concluded the

discussion by indicating that she will arrange a one-on-one meeting with PRASA

to discuss this matter further.

The follow-up meeting with the Minister, accompanied by the then Acting

Director-General, Mawethu Vilane took place in late April 2014 at Umjantshi

House, Braamfontein. PRASA was represented by its Chairman, S’fiso Buthelezi,

Group CEO Lucky Montana and Group Executive for Strategic Asset

Development, Piet Sebola.

Shockingly, the Minister demanded that we cancel the award to Gibela Rail

Consortium. We refused to accede to her request, indicating to her that this

would be unlawful. PRASA had obtained a Legal Opinion showing that such

cancellation will be in breach of the procurement laws of the country and

provisions of the RFP itself.

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S’fiso Buthelezi and I had discussed the matter prior to the meeting and had

agreed that we better be fired than give in to her unlawful and irrational

instruction. It was at this meeting that she informed us that she intended to

change the Board of PRASA and was considering bringing Popo Molefe as new

Board Chairman. Minister Peters was clearly unhappy that we defied her to

cancel the rolling stock tender.

Dr Zweli Mkhize, was furious with me for rejecting his demand in a meeting held

in a Sandton Hotel early in 2014. He demanded that 10% of R465 million of the

first payment that was due to Swifambo Rail Leasing in terms of the contract, be

paid to him. Like we did with the Guptas, I rejected this demand as unlawful and

stated firmly that it will not be done.

Like Minister Dipuo Peters, Dr Mkhize admonished us for appointing the “French

Colonialists” with “a terrible track record in Africa”. He made veiled threats that

he will deal with us. One of his accusations was that we were giving the ANC

“peanuts” whilst we took the bulk of the money for ourselves.

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I was angry with him for this unfair accusation. However, I left the matter to my

diplomatic, respectful, patient and forever dignified Chairman, S’fiso Buthelezi,

himself a long-time friend and comrade of Dr Zweli Mkhize, to explain the

process followed in appointing Gibela Rail Consortium and that this tender was

evaluated not only by PRASA but National Treasury, the dti and Department of

Transport.

S’fiso Buthelezi further explained that the ANC cannot come only to PRASA when

it needed help as if the two of us were the only deployed cadres in SOEs and

Public Entities. S’fiso Buthelezi explained that if indeed the ANC is afraid to

approach the Chairs and CEOs of other SOEs in the same manner they were

putting pressure on PRASA, then the ANC has failed to deploy the right cadres.

The appointment of the new Board of PRASA was therefore agreed to between

Minister Dipuo Peters and the former ANC Treasurer-General, Dr Zweli Mkhize.

This is what Minister Dipuo Peters kept on saying to S’fiso Buthelezi that he is

discussing the new Board with “Luthuli House”.

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Minister Dipuo Peters would bring in Popo Molefe and Willem Steenkamp, the

same persons she appointed to the PETROSA Board when she was Energy

Minister whilst Dr Zweli Mkhize had demanded the appointment of Ms Zodwa

Manase. She was to be in charge of the Audit Committee and PRASA Finances,

so that she could manage the flow of money in the business.

The new Board of PRASA was appointed by Cabinet in July 2014, with effect from

1 August 2014, with Popo Molefe as new Chairman, and Willem Steenkamp and

Zodwa Manase among the new Directors. I discussed the appointment of the

new PRASA Board with Dr Zweli Mkhize in August 2014 at the house of Maria

Gomes in Sandton. He assured me the new Board has been given the mandate

to work with me. At the next Audit and Risk Committee meeting, Zodwa Manase

mentioned to me the discussion I had with Dr Zweli Mkhize. However, later

events were to prove that I was being lied to.

However, there were other ANC leaders who were angry with me because their

demands for contracts and/or appointment of companies where they had

financial interests were not appointed. They accused me of being arrogant.

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However, I am not certain the specific role they played in the appointment of

the new Board.

For example, the Head of ANC’s Economic Transformation Committee, Mr Enoch

Godongwane, had met with me in Sandton to ask for my support for a particular

company that was bidding for a security tender at PRASA. He provided details of

the company he was representing. He was angry when the said company was

not appointed. We have not spoken since that time.

The ANC itself had failed to take firm measures against allegations of

impropriety against its own leaders. For example, the ANC had direct dealings

with Ms Maria Gomes of Angola but had consistently issued public statements

denying she had links with the party and made financial contributions on a

regular basis.

In fact, Dr Zweli Mkhize and I had met Ms Maria Gomes at her house on so many

occasions to discuss ANC Finances and fundraising. In September 2016, en-route

to the Innotrans in Berlin, I travelled to London to see Ms Maria Gomes and to

verify allegations made by Popo Molefe in his Affidavit that Swifambo Rail

Leasing, through her and George Sabelo, had paid R80 million to the ANC. She

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rejected this as nonsense but had confirmed that she was a business woman

who donated to the ANC and had paid, on many occasions, money into accounts

provided to her by the ANC Treasury-General.

In one instance, Dr Zweli Mkhize brought his wife, May, to the house where she

introduced her to Maria Gomes and that they should do business together. I was

at the house for a lunch meeting with Maria Gomes.

The ANC has issued statements rejecting that they have received any money

from Maria Gomes or Swifambo Rail Leasing. The most logical thing to do is for

the ANC, of which I am a loyal and disciplined member, to institute an

independence investigation to establish whether indeed such contributions

were made, if yes, in whose bank accounts were these donations made. Are

these ANC accounts or private accounts? If not, then Popo Molefe owes the ANC

an apology for his accusation. These are important questions if we are serious

about fighting corruption.

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Popo Molefe himself, a veteran of the ANC and the democratic movement in

our country, has been successful in projecting an image of corruption buster. He

spoke about fighting corruption but has been involved in corruption himself. On

three different occasions, Popo Molefe got companies contracted to PRASA to

make financial contributions to his Development Foundation.

The first was held in April 2015 at Sun City. I was still in the employ of PRASA

then and this was planned to coincide with my birthday on the 25th April. I pulled

out so that my name is not connected to this event.

This is not only a serious Conflict of Interest by a Board Chairman but these

activities constitute serious acts of corruption and money-laundering. Many of

the companies had mentioned to me personally that they were told “Lucky is no

longer here and if you do not pay, your contract will be investigated, declared

irregular and cancelled”.

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When relations between Minister Dipuo Peters and Popo Molefe started to

deteriorate, she instructed the Board of PRASA to pay back the huge monies that

the Board had unlawfully paid itself at PRASA.

Popo Molefe came to PRASA a bankrupt man and told me that his company,

Lereko was facing financial difficulties and no longer in a position to pay even

salaries. He told me the Directors of Lereko had agreed that only the CFO and a

few supporting staff members should remain in the full employment of the

company.

Today, Popo Molefe is doing so well after having served 3 years as Chairman of

PRASA. Popo Molefe will never be investigated, FIC authorized to follow the

money trail in the Foundation, the millions paid to Werksman Attoneys and

subject him to a lifestyle audit. This is because politically, he is part of the ANC

veterans that are seen to be against “State Capture” and fighting corruption in

Government. He speaks the language of the veterans.

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There are instances where the ANC had used PRASA resources for its events but

failed to pay. I had to find business people to settle bills on behalf of the ANC.

However, I have consistently refused to use PRASA money for ANC activities.

The Treasurer-General can confirm and had agreed with me that I approach

certain business persons or creditors for them to help the ANC settle its bills not

only with PRASA but other creditors as well.

The ANC has an Integrity Commission but it seems it is failing to investigate these

serious matters, is acting selectively and failing to hold its own leaders to the

highest of ethical standards. The ANC has called for “swift action” against many

of us but it fails to apply the same standards to its leading people.

I am making this point to remind the Inquiry that those making the loudest noise

about “State Capture” and “fighting corruption”, are usually the most corrupt.

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There will never be meaningful renewal in our country unless we deal with

corruption firmly irrespective of who is involved. Personally, I am being chased

and accused of corruption even if there is nothing found of any wrongdoing on

my part and/or activities that directly link me to corrupt and fraudulent

contracts. All I hear is that many wrong things happened at PRASA during my

tenure as Group CEO yet the people directly involved with these fraudulent

activities are still working at PRASA and never held accountable.

5. THE FIGHT AGAINST CORRUPTION AT PRASA

In October 2014, following PRASA’s Presentation to Parliament’s Standing

Committee on Finance, Popo Molefe requested a private meeting with the

Chairperson of the Portfolio Committee on Transport. He followed this with one-

on-one meetings with other members of the Transport Portfolio Committee. He

informed them that he was informed of corruption at PRASA and had been given

a clear mandate to address this. He claimed as Group CEO, I was not acting alone

in this but was doing dirty work for the Gupta Family and the “big fish” itself, HE

President JG Zuma, whom he apparently described in derogatory terms.

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He informed the Chairperson and other members of the Portfolio Committee

that his mandate was to investigate this corruption and in particular the

involvement of President Jacob Zuma.

A major assumption was made by Minister Dipuo Peters, Dr Zweli Mkhize, Popo

Molefe and others that PRASA was “captured” by the Gupta Family and

therefore they were the largest beneficiary of its investment programme. This

assumption led to the Strategic Blunder to chase after me and other people.

This resulted in Popo Molefe embarking on one of the biggest investigation

against individuals costing almost R200 million. They did not know that I had

fought the Guptas in 2012, and supported by S’fiso Buthelezi and the Board,

stood firm against Gupta attempts to manipulate the procurement process for

the acquisition of new trains. I will return to this below.

As part of his fight against corruption, Popo Molefe had irregularly appointed

Werksman Attorneys to conduct a forensic investigation into numerous

contracts. The contract was originally meant for Ngubane and Associates, who

were expected to sub-contract part of the work to Werksman Attorneys.

32
However, this had changed with Werksman Attorneys emerging as the main

contractor and Ngubane and Associates the sub-contractor. Employees at

Ngubane and Associates had complained that they were only given minor

administrative roles in the entire investigation and did not receive the bulk of

the money.

In their reports, Werksman Attorneys confirm “surveillance of individuals and/or

entities identified during the investigation process…”. PRASA had spent almost

R200 million on this investigation, with the bulk of the money directed to this

unlawful surveillance.

Werksmans Attorneys ran surveillance on certain individuals and/or companies

in violation of various laws of the Republic. The surveillance was mainly

conducted through the following companies: Basileus Concilium Professional

Services (BCPS) and Crowe Howarth Forensics (Crowe). They later enlisted the

services of “Ukhozi” and other individuals like the former SARS Executive, Ivan

Pillay, Paul ’O Sullivan, Deon Pienaar.

33
I had written to the Minister of State Security (Annexure C) as well as the Head

of the HAWKS (Annexure D) to call for urgent action against this criminality and

private companies being allowed to “capture” the security functions of the

State.

The said companies and individuals subjected me to a vicious campaign of illegal

surveillance. I was followed wherever I went. My house in Waterkloof, Pretoria

was broken into three times where computers, memory sticks and documents

were taken. Some of the documents taken illegally at my house found their way

into reports compiled by Werksman Attorneys. Individuals and companies were

summoned and interrogated on the basis of this. I had reported this to the

Brooklyn Police Station and the case numbers are included in the letters to

Minister of State Security and the Head of the DPCI.

I had to take urgent measures to protect my family. I had to procure private

investigators to establish the origin of this surveillance and the people involved.

At the time, I still had in my possession the firearm issued to me by PRASA. On

few occasions, I had to take out the firearm to protect my family or cgase after

those following me. PRASA pressurized the Police at Brooklyn to retrieve the

34
firearm from me, with the sole purpose to disarm me and expose my family to

danger.

The PRASA investigation was not making significant progress. Popo Molefe and

Werksman Attorneys chose to engage directly with the Directorate for Priority

Crimes Investigation (DPCI), commonly known as the HAWKS. PRASA claimed

that the HAWKS did not have the relevant capacity to investigate the matters

they had reported. To this end, Popo Molefe recommended that the HAWKS

appoints Howarth Forensics, a firm of forensic Chartered accounts, already part

of the Werksman Investigation, to assist DPCI with its investigation at PRASA’s

cost. This was clearly unlawful and a deliberate attempt to write the script for

the DPCI. Infact, this compromised the very independence of the DPCI. Howarth

Forensics could not be party assisting the complainant and at the same time

assisting DPCI with its independent investigation.

The complainant, PRASA in this case, had laid criminal complaints against certain

persons and entities. It was proper that DPCI was given the space to investigate

the complaint independently and conclude the matter.

35
As if this was not enough, PRASA and BCPS embarked on a massive media

strategy, with the help of certain journalists, to damage the reputation of some

of us being investigated by Werksman Attorney. The truth became the biggest

casualty in this media campaign.

I highlight below some of the most common stories and lies repeated in the

media:

Tender for the Modernization of the Braamfontein Depot

PRASA had issued a tender to the market on 6 January 2014, which was followed

by an optimised tender on 28 February 2014. The tender closed on 5 May 2014,

and six (6) bidders submitted their bids.

The technical and financial evaluation of the bids show that Nthuthuko Joint

Venture comprising of Aveng Grinaker LTA, Keren Kula and UvukoCivils

Maintenance and Construction won the bid and the award should have been

made to them in November 2014.

36
Auditors had found weaknesses in the process but these were not of a material

nature. The Board used this to cancel the tender. However, a review of

procurement documents on the Braamfontein Depot Modernization

demonstrates that the bidding process was substantially fair, transparent and

competitive in line with the requirements of the Constitution, the PFMA and

PPPFA.

However, the Board cancelled the award claiming there were tender

irregularities. The Media carried stories that there was tender fraud on the part

of management amounting to R2.4 billion. The tender was recommended to the

Board in November 2014 by a Committee of the Board (Finance, Capital

Investment and Procurement Committee of the Board) and dealt with in

December 2014.

If indeed tender fraud and corruption as alleged by PRASA, then this suggest that

the Nthuthuko Joint Venture comprising of companies listed in the JSE were

37
involved in paying bribes to win the tender. This was a serious allegation made

against the Ntuthuthuko Joint Venture led by Aveng.

The media focused its articles on me as Group CEO but failed to investigate and

verify if the story was first true, how much was paid and by whom and to whom,

failed to contact the JSE and establish what penalties could be imposed on listed

companies like Aveng if they were found to have paid bribes.

This was to be the first story in a long list of articles aimed at damaging my

reputation.

The Story of Tall Trains

The biggest of the media strategy was the false claim that PRASA purchased

trains that were “too tall for the South African rail network”. This has been

repeated so many times in the media that it sounded to be true. In court papers

confirming this lie, the Chairman of the Board of PRASA, Popo Molefe argued

that the Afro 4000 locomotives with a height of 4140 mm is “175mm higher than

what the Transnet Track Maintenance Manual requirement of 3965mm”.

38
In the same papers before the Gauteng South High Court, the Board further

argued “….any reduction in height of the TFR contact wire height from its

minimum allowed height as a result of tamping activities, will pose a greater risk

of contact with this locomotive than any other type of locomotive in the country.

This also increases the likelihood of a flashover”. This story was reported as

“Breaking News” by NEWS24.

Unfortunately, the previous PRASA Board and sections of the media were

gravely mislead. The Transnet Track Maintenance Manual is an internal

operational document of Transnet. It is not the standard that governs electrical

lines of South African railways.

The SANS 101280-1:2013 nrs 041-1:2013 Edition 2 (Annexure E) is the only

standard that regulates overhead power lines for conditions prevailing in South

Africa. This standard is given practical application in the railway environment by

the Transnet Freight Rail (TFR) Electrical Safety Instruction of 2012 (BBF

3690,2012) signed between Transnet and PRASA in the same year (Annexure F).

39
The SANS standard, supported by the Electrical Safety Instruction of 2012

stipulates that the electrical contact wire should be a minimum of 4,5m and

meet minimum clearance requirements or or clearance gap of 150mm. This

means that the gap between the electrical contact wire and the train should be

a minimum of 150mm.

The minimum height of the AFR4000 locomotive at 4140mm does not only

meets the minimum clearance requirement of 150mm but far exceeds this

requirement by 210mm.

Transnet Engineering, a division of Transnet, was unfortunately behind the story

of “tall trains”. They had briefed the unions about PRASA buying locomotives

from Spain whereas they have the full capacity to build these trains. At the time,

the former Minister of Public Enterprises, Honourable Malusi Gigaba, had

argued that Transnet had the capacity to build modern trains in South Africa. I

am on record challenging this erroneous conclusion.

40
The choice of Transnet’s Track Maintenance Manual by the board as the basis

of their legal argument was deliberate and used to mislead the nation into

believing that new PRASA locomotives were not suitable for the South African

rail network.

Transnet has massive infrastructure, workshops and facilities for heavy

engineering, maintenance and operations around the country. However, they

lacked at that time the capacity to design and build modern trains. They did not

have at the time design engineers, technology, drawings or even equipment to

build either modern locomotives or commuter trains. They had contracted the

building of their own new locomotives to General Electric (GE), and later China

South Rail (CRS), Bombadier Transportation and other rolling stock

manufacturers. Most of the locomotives were designed and manufactured

outside the country but assembled in Koedoespoort in Pretoria.

The main reason Transnet had embarked on this campaign was to put pressure

on PRASA to procure locomotives from Transnet, with the sole objective of

giving these to China South Rail to build and benefit the Guptas and their

associates. The GUPTAS worked with China South Rail on the Transnet

locomotive tender and during the bid for the new prasa commuter trains.

41
The Rail Safety Regulator (RSR) had granted conditional approval for the

introduction of the AFRO4000 locomotive (Annexure G). Evidence indicates that

the RSR applied the SANS standard and the Electrical Safety Instructions in its

decision. The RSR acted correctly in this regard.

There exist no other standards governing overhead lines other than what is

stipulated in sans 101280-1:2013 nrs 041-1:2013 edition 2.

Popo Molefe was grossly misled by Transnet Engineers to believe identified risks

would materialize. In a report dealing with “locomotive and infrastructure

height assessment”, the RSR identified numerous risks that may occur.

But such risks are not limited to the new PRASA locomotive or unique to South

African railways. The occurrence of flashovers, as an example, is so common and

widespread in railway operations all over the world, including in Europe.

railways operators and safety regulators all over the globe are always required

to implement mitigation strategies to deal with risks.

42
For example, there is a big risk of “stray current” between the Gautrain Rail Link

and Metrorail system in the Tshwane area. However, this could not be the

reason not to proceed with the implementation of the Gautrain Rapid Rail Link.

Instead, the RSR had issued directives to both Metrorail and Gautrain for them

as operators to implement plans and strategies in order to mitigate the risks

identified between the two systems.

THE RSR itself recognized that the height of the locomotive “poses an

operational risk on the 3kv lines where 3kv contact wire is lower than 4.5m”.

The RSR did not ask PRASA to cancel the purchase of these locomotives, instead,

it instructed Transnet and PRASA to take steps to address this and accepted

mitigating controls that were developed. The RSR Report states that PRASA and

Transnet Freight Rail conduct “a corridor by corridor assessment” to ensure that

adherence to a clearance of 150mm is adhered to.

This RSR statement is perhaps the clearest indication that that the problem does

not rest with the locomotive but in most instances with the poor maintenance

of infrastructure that has deteriorated below the minimum requirement of 4.5m

as required by the SANS standard and the Electrical Safety Instruction. The RSR

43
granted its conditional approval for the introduction of the locomotives into

“revenue service” on 4 November 2015.

“Overstating Irregular Expenditure to suite an Agenda”

It would appear that PRASA has deliberately withheld critical information and

supporting documents to the auditors on the 2016/17 financials of PRASA.

Irregular expenditure was overstated in order to sustain the lie that PRASA

under Montana was a “jungle”. This was not only deliberate misrepresentation

but the Accounting Authority at PRASA committed fraud and not only misled the

Minister of Transport and Parliament, but also the other USERS of its Financial

Statements.

But of serious concern is the fact that the Auditors from the Auditor-General

South Africa (AGSA) appear to have violated the Constitutional Mandate of the

AGSA and abdicated key of its legal responsibilities. A detailed analysis of the

Financials Statements, Audit Report and Management Letter, which was leaked

to the media before the audit process was concluded, suggests the audit team

may have abdicated their legal responsibilities or at worse, acted improperly and

colluded with the PRASA Board and Management.

44
Throughout the Audit Report and Management Letter, the audit team indicates

that PRASA failed to provide them with information and supporting documents

for major transactions. A simple calculation would indicate that the transactions

where PRASA failed to provide information amounts to R12 billion of the R14

billion of Irregular Expenditure. I raised these in a letter to the Speaker of

Parliament to institute an investigation and take appropriate action (Annexure

H). Nothing was done about this.

The Story of Toilet Seats

Another story leaked to the media was the extraordinary claim that PRASA

procured toilet seats for the new locomotives at R42 million per unit. The

journalist did not even bother to check the facts because there are simply no

toilets in these new locomotives, let alone toilet seats.

Documents leaked to the media indicate that the operational team at

Shosholoza Meyl requested for the introduction of toilets as part of the

modification of the Euro4000 locomotive. However, this request was never

45
approved because the development cost for such a toilet system would have

been costly.

However, it has been reported as “Breaking News” that PRASA had bought toilet

seats for R42 million each when this was not true. No such toilets or toilet seats

existed in the first place.

Blue Train with 10 Women

The City Press newspaper had reported that I had undertaken a trip to Cape

Town with a Group of Women on the Blue Train. This was based on pictures that

were apparently taken during the trip.

In her investigation of the complaint, the Public Protector wrote in her

Provisional Report that this was true and that the full cost of the Blue Train trip

was R170 000 of public funds abused by Montana. When the Public Protector

realized that there was never such a trip in the first place, she deferred the

matter to her final report on PRASA, which was never finalised.

46
The truth of the matter is that there was never a Blue Train trip with the women.

There was a trip on the Premier Classe. I was travelling with my two kids, two

nephews and a niece. There were many pictures taken of me and my family on

the train.

The women were on the same train and requested to take pictures with us in

one of the train stops in Klerksdorp and in Kimberley. However, the complainant

selected pictures where I was shown with the women but deliberately ignored

pictures where I was with my own children, nephews and niece on the same

train. If indeed I wanted to entertain these women on the train, why would I

take my children with on such a “jolly ride”. These pictures were sent to Fariel

Haffajee, Editor-In-Chief of the City Press, and she was more than happy to

publish another story to discredit Montana without supporting facts.

47
Story of Montana’s houses

It was claimed that Mr Montana owned houses bought for him by a lawyer

representing a contractor. I provided proof to the media that I bought all my

houses I owned. I obtained a bond facility of R10.5 million from ABSA and

another small one from FNB for my properties. My monthly bond repayment

was R97 000 covering 5 properties I owned at the time. The media was not

interested in these facts.

I issued a formal statement on the 8th February 2016 repudiating this allegation

and providing details of all my properties. I also confirmed the relationship I had

at the time with the lawyer, which had nothing to do with any contractor. This

was a relationship of two people who had invested in properties they owned to

make money and pursue legitimate business. This is absolute lawful.

Again, the story about houses was one of those published to damage my

reputation without any facts or legal basis to pursue.

48
Montana’s Friend paid R75 million by a Spanish Contractor

The most recent story published in News24 is the payment of R75 million by a

Spanish company to a friend of Montana. The story had nothing to do with me

but the headlines and pictures were of Montana. This is story about a

relationship between two private companies. I am not a Director of any of these

companies. I am not involved in any of their financial dealings. There is no

explanation what makes the said beneficiary a friend of Montana.

One of the complaints investigated by the Public Protector in 2012 was that Mr

Mabunda was awarded a contract because of his friendship to Montana. The

Public Protector in his report “Derailed”, dismissed this complaint. The author

of the News24 article failed to inform his readers of this important fact and

continue to repeat a lie as if it was a fact.

49
Most importantly, the News24 article further makes a startling claim that

Mabunda, a friend of Montana, has been awarded contracts at PRASA of R5

billion. No evidence is provided to substantiate theseclaim. It cannot be

supported by any evidence because it is simply false. Mr Mabunda has never

been awarded contracts amounting to R5 billion at PRASA during my tenure.

It is a case of the end justifies the means. It was more important to continue to

publish the stories that discredit Montana irrespective of the facts of the story.

6. THE PRASA ROLLING STOCK FLEET RENEWAL PROGRAMME (RSFRP)

PRASA embarked on a bold and ambitious programme to modernize the

passenger railways system through investing significantly in new rolling stock,

modernise depots, replace the old signaling system and embark on

infrastructure and station modernization. The plan would result in the

introduction of a new train service from 2017 and changing the travel

experience of South Africans.

50
In 2011, a detailed feasibility study was conducted to determine the number of

coaches that should be procured, the associated costs and the economic

viability of the project. The feasibility study concluded that the project was

economically viable and it was then recommended that the acquisition be

divided into two 10-year batches, with 3 600 vehicles included in each batch.

The overall investment outlook amounted to R123 billion over a twenty year

period.

On the 19th April 2012, the Minister of Transport launched the Request for

Proposals (RFP), inviting Bidders to submit their detailed proposals for the

design, manufacture and supply of rolling stock to PRASA over a period of 10

years (between 2015 and 2025) and the provision of technical support and

spares supply in respect of such rolling stock over a period of 18 years (between

2015 and 2033).

In addition to the supply of New Trains, the RFP solicited commitments to

achieve the following:

51
65% Local Content by 2021/22, with New Trains being delivered from a South

Africa factory by June 2016;

Use of Transnet Rail Engineering factory site for production;

Sustainable job creation for South Africans, including youth, women and people

with disabilities;

Intellectual Property transfer;

Skills development for artisans, technicians, engineers and technologists;

A minimum 30% B-BBEE equity participation in the South African incorporated

and domiciled Project Company which will enter into the Project Agreements

(namely the Manufacture and Supply Agreement (the MSA) and the Technical

Support and Spares Supply Agreement (the TSSSA) with PRASA);

The creation of a South African supply chain through the sourcing of locally

produced components from South African companies participating in the value

chain.

52
7. THE GUPTAS AND THE RSFRP

In September 2012, I was scheduled to travel and attend the biggest railway

exhibition and conference event in the World, the INNO TRANS that takes place

every two years in Berlin, Germany. On the eve of my departure, I was called by

the Minister of Transport, Dikobe Ben Martins who invited me to his Ministerial

House in Delphinus Street, Waterkloof Ridge in Pretoria. I arrived at the house

to meet the Minister. We had a conversation and tea was served.

We were joined 30 minutes later by two Gentlemen that the Minister

introduced to me. This was Duduzane Zuma and Rajesh “Tony” Gupta. The

Deputy Minister claim in his media briefing of 8 November 2017 that we had

met to discuss the Board of PRASA. This is not true. I had no business to discuss

the appointment of the Board of PRASA with the Guptas. The Minister had

introduced them to me and informed me they had expressed an interest in the

PRASA Rolling Stock Fleet Renewal Programme. I did not know or previously met

Duduzane Zuma and Tony Gupta.

53
I indicated to them that I was travelling abroad but would be keen to listen to

what they had to offer on my return. I made an undertaking that I will see them

on my return from Berlin.

When I got to Berlin, I was approached by representatives of rolling stock

manufacturers who made the claim that indicated they were approached by

representatives of the Gupta family. The Guptas were extorting money from

manufacturers and had wanted this money paid into some account in Dubai and

stated they were working for President JG Zuma, Minister Ben Martins and Lucky

Montana.

The manufacturers were apparently “summoned” to come to Zurich,

Switzerland to attend a meeting chaired by one Salim Essa. It was at this meeting

that they were instructed to pay monies if they wanted to get a share of the

PRASA new-built programme. I was so furious with this. I could comprehend this

conduct other than to explain it as extortion.

54
On my way back to South Africa, I called the Minister of Transport and requested

him to convene a meeting with Duduzane Zuma and Rajesh Gupta.

I went to the house of the Minister in Pretoria. Duduzane Zuma, Rajesh Gupta

and a third gentlemen from India whom I can’t remember his full name, arrived

at the house.

At the meeting, I spoke at length and condemned their conduct. I told them they

had no right to collect monies in our names and they had to stop. I told them

they were compromising the President by using his name to collect monies from

international companies. We had a big fight at the meeting and they even

suggested that I could work with them and get my money in Dubai as well. I

made it clear that what they were doing was unlawful and that they could not

collect monies in our names. They were arrogant and reminded Ben Martins that

they did not want me but he had convinced them that I was his comrade. After

an hour of fighting, they ultimately relented but after they had accused me of

favouring Bombadier over other companies. I rejected the accusation very

strongly.

55
They confirmed during the meeting that they will no longer make these

demands on rolling stock manufacturers but will henceforth work with China

South Rail. Rajesh Gupta indicated that the third gentleman will be responsible

for coordinating their relationship with China South Rail and will contact me

when they have issues.

Subsequent to the meeting, the man made contact with me and gave me a

cellphone to communicate on with him. I did not use the phone but gave it to

an unknown young man in the streets of Pretoria after our meeting.

A week later, the man called and met with me at the Park Hyatt Hotel where he

brought the CV of Salim Essa (Annexure I) and Iqbal Sharma (Annexure J),

demanding the two be appointed to the Bid Evaluation Committee (BEC) for the

rolling stock tender. I rejected this. They went to complain to the Minister that I

was still not cooperating.

During this time, I had appointed a BEC comprising PRASA, National Treasury,

the dti and Department of Transport, supported by teams of transaction

advisors.

56
The Evaluation results came and China South Rail and China North Rail were not

shortlisted. The Guptas were angry and demanded that the process be

cancelled. I refused. They pushed and demanded that the PRASA AGM be

postponed so that they could appoint new Directors. I was told by this man that

the PRASA AGM scheduled for September 2012 would be postponed. The PRASA

AGM, which is the meeting of the Shareholder, was indeed cancelled without a

valid reason. This is another prove that the Guptas were in charge.

Having failed to secure the tender for China South Rail, the Guptas pushed for

the dissolution of the PRASA Board and my dismissal as Group CEO. They pushed

the Department of Transport to appoint a new Board, with Mzwanele Jimmy

Manyi as Chairman. When I saw the draft Cabinet Memorandum from the

former Direcxctor-General, Gerage Mahalela, I was livid. We fought these

attempts and I threatened to resign and speak out if the Department of

Transport was to give in to GUPTA attempts to appoint a new Board and

interfere with the rolling stock procurement process.

I wrote a detailed letter to the Board Chairman detailing the sheninagans of the

Guptas and their associates attempts to capture and manipulate the PRASA

Rolling Stock tender (Annexure K).

57
Minister Martins met with Sfiso Buthelezi and I here at the Cape Town Station

in November 2012. He took us into his confidence and explain to us the

circumstance of inviting me to a meeting at his house. He indicated that PRASA

should proceed with its procurement process and that he will defend the Board.

He said he will fight alongside us as his comrades and will take the matter to

Cabinet for approval.

They lost the fight and the Evaluation Process was finalized in November 2012

and was submitted to the Board for approval. This was also taken though the

Cabinet by Minister Ben Martins to note the decision of the PRASA Board to

appoint the preferred bidder for the manufacture and supply of new commuter

trains.

8. BIDDERS AND EVALUATION RESULTS

Bidders

58
The following parties submitted Bid Responses by the closing date of 30th

September 2012:

Bidder Full Name Abbreviated Name

Gibela Rail Transport Consortium Gibela

CSR WICTRA (Pty) Limited CSR-Wictra

Bombardier Transportation (Rolling Bombardier

Stock) South Africa Pty

Dudula Rail (Pty) Limited Dudula

China CNR Corporation Limited CNR

CSR EMU Supply (Pty) Limited CSR

Construcciones y Auxiliar de CAF

Ferrocarriles S.A. (CAF)

9. EVALUATION RESULTS

The bid evaluation was undertaken in two stages:

59
stage 1 - qualification against defined threshold requirements for (i) Legal, (ii)

Technology, (iii) Financial, and (iv) Economic Development as set out in Part B of

the RFP (Qualification Criteria) and, if passed, the Bid Responses proceeded to

the stage 2; and

stage 2 - comparative evaluation where Bid Responses that had met all of the

qualification criteria were scored against (i) Price, which was out of 85 points

and (ii) Economic Development criteria as set out in Part C of the RFP, which was

out of 15 points.

Stage 1 Results

The Bid Response submitted by CAF was non-compliant and did not qualify as it

failed to submit an irrevocable binding Bid Response in accordance with the

requirements of clause 34 of Part A of the RFP (General Provisions, Rules and

Requirements). Clause 34 of Part A of the RFP (General Provisions, Rules and

Requirements) provided that all Bid Responses were to constitute an irrevocable

binding offer by the Bidder to PRASA. The offer submitted by CAF was still

subject to the approval of their board.

CAF was therefore not evaluated further, as it failed legal.

60
Gibela CSR-Wictra Bombardie Dudul CNR CSR CAF

r a

Legal Pass Pass Pass Pass Pass Pass Fail

Technology Pass Fail Pass Pass Fail Fail N/A

Economic Pass Pass Pass Pass Pass Pass N/A

Developmen

Financial Pass Pass Pass Pass Pass Fail N/A

and

Commercial

Overall Pass Fail Pass Pass Fail Fail Fail

Stage 1

Results

The failures of CSR-Wictra, CNR and CSR are attributable to their failure to meet

the technology requirements, as stated in the RFP. These failures were due to

failures to meet one or more of the following:

61
Rolling Stock Specification;

Response to Maintenance Requirements Specification;

Response to Capacity and Capability Requirements; and

Response to Programmes and Plans.

Stage 2 Results

The table below sets out the resulting total scores for each Bid Response that

fulfilled the qualification requirements, based on 85% weighting for Price and

15% weighting for Economic Development:

Bidder Name Total Score (out of 100) Ranking

Gibela 95.72 1

Bombardier 82.21 2

Dudula 71.23 3

10.BENEFITS OF THE PREFERRED BIDDER

The Preferred Bidder will offer the following:

3600 vehicles delivered over a 10 year period 2015 to 2025, with a cost

implication of R51 billion;

62
Maintenance, spares supply and technical support on vehicles over 18 year

period 2015 to 2033;

8,088 direct jobs created;

Ownership - 30% be set aside for Equity Partners, plus additional B-BBEE

participation in their structure (2.3% effective black shareholding through

Actom);

Spending of R797 million on skills development initiatives;

Preferential Procurement:

R 32.8 billion to be spent on subcontracting to black empowered entities;

R 5.3 billion to be spent on subcontracting to Qualifying Small Enterprises and

Exempted Micro Enterprises (SMMEs);

R 1.6 billion to be spent on subcontracting to entities owned by black women;

Spending of R746 million on the development of enterprises in the rail sector;

Spending of R273 million on Socio-Economic Development contributions;

Local Content of 69% by year 2

To utilize the Transnet Rail Engineering factory for production.

11. TNA BUSINESS BREAKFAST

63
Before I conclude, I want to state that the terrible conduct of the Guptas became

evident when we decided as PRASA to sponsor TNA Business Breakfast. I had

met with Nazeem Howa, still head of the New Age. I mandated two of my

executives to negotiate details of the sponsorship with him.

We were not getting the benefits of the sponsorship. I had a discussion with

Nazeem Howa to change the terms. However, Nazeem Howa failed to meet the

terms PRASA put on the table, I cancelled their contract immediately and

banned the New Age from PRASA.

Again, the GUPTAS were angry and Nazeem Howa ran to report me to the

Minister of Transport, Dikobe Ben Martins. This time, the Minister was angry

with him and supported me. He told Nazeem Howa he was not a Minister to

serve their interests and reminded all of us that he was a backbencher in

Parliament, a freedom fighter and a Poet. He did not agree to serve in the

Cabinet to serve narrow interests.

12. CONCLUSION

64
We defeated the Guptas and their Associates.

But we also defeated our own ANC Comrades who are similar if not worse than

the Guptas and their Associates.

We paid the price for this.

Thank you, Honourable Chairperson, Honourable Members and to you,

Advocate Ntuthuzelo Vanara, for affording me the opportunity to testify and tell

my own story.

Thank you!

65