C O M M I S S I O N O F I N Q U I RY I N TO S TAT E C A P T U R E H E L D AT PA R K TO W N , J O H A N N E S B U R G 10 1 5 M AY 2 0 1 9 D AY 9 3 20 15 MAY 2019 – DAY 93 P R O C E E D I N G S O N 1 5 M AY 2 0 1 9 REGISTRAR: All rise. C H A I R P E R S O N : G o o d m o r n i n g M r M o k o e n a , g o o d m o r n i n g e v e r y b o d y. A D V P H I L L I P M O K O E N A S C : G o o d m o r n i n g C h a ir. CHAIRPERSON : Are you ready? A D V P H I L L I P M O K O E N A S C : W e a r e r e a d y C h a ir. C H A I R P E R S O N : Ye s . A D V P H I L L I P M O K O E N A S C : C h a i r t h e n e x t w i t n e s s fo r Tr a n s n e t i t is M r M o h a m m e d M a h o m e d y a n d fo r t h e p u r p o s e o f l e a d i n g h is e v i d e n c e 10 w e w il l b e r e f e r r i n g t o t w o m a i n f il e s w h ic h w e h a v e n o w t a k e n t h e li b e r t y o f m a r k i n g t h e m a s Ex h ib i t B B 3 A a n d Ex h i b it B B 3 B . C H A I R P E R S O N : E x h i b i t B B 3 A a n d Ex h i b it B B 3 B ADV PHILLIP MOKOENA SC: 3 – BB3B yes. C H A I R P E R S O N : O k a y. A D V P H I L L I P M O K O E N A S C : A n d s u b s e q u e n t C h a ir to h a v i n g f il e d o r d is p a tc h e d th e 3 . 3 N o t ic e s N e d b a n k d i d fi le a 3 . 4 A p p l ic a ti o n e v e n t h o u g h i t m i g h t n o t b e c o m p l e te a s th e y i n t e n d t o v e n t il a t e o t h e r is s u e s in d u e c o u r s e . A n d p u r s u a n t t o t h a t M r M a h a m e d y a ls o fi le d a s u p p l e m e n t a r y w i tn e s s s t a te m e n t w h e r e 20 he e ff e c t e d some c o r r e c t io n s a n d a ls o r e s p o n d e d to N e d b a n k ’s R u l e 3 . 4 a ff i d a v i t . minor We p r o p o s e M r C h a ir t h a t w e m a r k t h e N e d b a n k R u l e 3 .4 a ff id a v i t a s E x h i b i t B B 3 . 2 a n d t o m a r k t h e E x h i b i t – t h e s u p p l e m e n ta r y s t a t e m e n t o f M r M a h o m e d y a s E x h i b i t B B 3 . 3 a n d w e b e g le a v e to fo r m a l ly h a n d s a m e t o y o u C h a ir ? CHAIRPERSON : I a m j u s t th i n k i n g w h e t h e r w e s h o u l d g e t N e d b a n k ’s Page 2 of 154 15 MAY 2019 – DAY 93 a ffi d a v i t i n a t t h i s s ta g e b e f o r e t h e – th e ir w i t n e s s c o m e s in . A D V P H I L L I P M O K O E N A S C : Ye s C h a ir w e a r e s i m p l y i n d i c a t in g a s a m a t t e r o f p r o c e s s th a t t h a t i s w h y t h i s h a p p e n e d w e m i g h t n o t e v e n h a v e t o f o r m a ll y h a n d t h e m o v e r t o y o u a t t h is s ta g e b u t s i m p ly t o in d i c a t e th a t s u b s e q u e n t to t h e in i ti a l s t a t e m e n t … C H A I R P E R S O N : T h a t t h e y a r e r e s p o n d i n g to – a r e th e y r e s p o n d i n g t o t h e w i t n e s s ’s s t a te m e n t i n s o f a r a s i t e ff e c t s t h e m ? A D V P H I L L I P M O K O E N A S C : I n a s f a r – in a s fa r i t a ff e c ts t h e m t h e y in d i c a t e a r e a s w h e r e t h e y a r e n o t in a g r e e m e n t w i th c e r ta i n a s s e r ti o n s 10 a r i s i n g fr o m t h e r e . CHAIRPERSON : Hm. A D V P H I L L I P M O K O E N A S C : B u t t h e y a l s o s a y i n t h e ir a ff id a v i t th a t in d u e c o u r s e th e y w i ll s e e k l e a v e fr o m th e C h a ir t o le a d e v id e n c e a n d to c r o s s - e x a m in e M r M a h o m e d y i f th o s e i s s u e s a r e n o t b e i n g r e s o lv e d b y t h e p a r ti e s b e f o r e t h a t – b e f o r e t h a t t i m e . CHAIRPERSON : T h e fir s t le v e r a r c h f il e w il l b e m a r k e t E x h ib i t B B 3 A a n d t h e s e c o n d o n e w ill b e m a r k e d Ex h i b i t B B 3 B a n d y o u h a v e a s m a ll fi le th a t y o u h a v e m a d e a v a i l a b le h e r e w h ic h c o n s is t s o f a n a ff id a v i t fr o m – b y – i s i t Mr M c C a r th y ? 20 A D V P H I L L I P M O K O E N A S C : M r M c C a r t h y t h a t is fr o m N e d b a n k y e s . CHAIRPERSON : McCarthy from Nedbank. T h a t o n e w il l b e m a r k e d Exhibit 33 you said 2? A D V P H I L L I P M O K O E N A S C : Ye s , y e s C h a ir. C H A I R P E R S O N : 3 3 .2 a n d M r M a h o m e d y i s 1 B B 3 . 3 . A D V P H I L L I P M O K O E N A S C : Ye s C h a ir. T h a t s h o u l d b e i n o r d e r. Page 3 of 154 15 MAY 2019 – DAY 93 C H A I R P E R S O N : W h a t h a p p e n e d t o 3 3 .1 ? A D V P H I L L I P M O K O E N A S C : C h a ir ? C H A I R P E R S O N : W h e r e i s 3 3 .1 ? CHAIRPERSON : T h e y t o o k t h a t – th e s t a te m e n t o f Mr M a h o m e d y m a y b e i n i ts e l f w i ll b e 3 3 . 1 b u t th e y d i d n o t r e fe r t h i s o n e s b y f ir s t ly n u m b e r i n g w i t h a n u m b e r 1 n u m b e r. C H A I R P E R S O N : Yo u s e e i f w e d o n o t c h a n g e t h e m s o m e b o d y fo ll o w i n g t h e p r o c e e d i n g s tr y in g to r e a d th is th i n g w il l t h i n k th e r e i s B B 3 . 1 m is s i n g a n d … 10 A D V P H I L L I P M O K O E N A S C : Ye s d e f in i te ly … C H A I R P E R S O N : T h e y m i g h t s p e n d t i m e t r y in g t o f in d th a t . A D V P H I L L I P M O K O E N A S C : I n te r m s o f t h e s e q u e n c i n g y e s . CHAIRPERSON : Ja. A D V P H I L L I P M O K O E N A S C : Ye s I h e a r y o u . C H A I R P E R S O N : S o m a y b e w e s h o u l d c h a n g e to s a y E x h i b it B B 3 . 1 . ADV PHILLIP MOKOENA SC: Ja. C H A I R P E R S O N : W il l b e Mr M c C a r t h y ’s a ffi d a v it a n d B B 3 . 2 w il l b e Mr M a h o m e d y ’s s u p p le m e n t a r y a ffi d a v i t . ADV PHILLIP MOKOENA SC : That makes sense. 20 C H A I R P E R S O N : J a le t u s d o it t h a t w a y a n d t h e n d u r i n g t h e b r e a k … A D V P H I L L I P M O K O E N A S C : W e w ill a m e n d . C H A I R P E R S O N : T h is c a n b e c h a n g e d . A D V P H I L L I P M O K O E N A S C : W e w ill a m e n d t h e m a c c o r d i n g ly. C H A I R P E R S O N : J a . O k a y. A lr i g h t . T h a n k y o u . ADV PHILLIP MOKOENA SC: M r C h a i r w e a r e r e a d y to le a d t h e Page 4 of 154 15 MAY 2019 – DAY 93 e v i d e n c e o f Mr M a h o m e d y a n d m a y t h e w it n e s s b e w i t n e s s b e s w o r n i n ? C H A I R P E R S O N : O k a y. P l e a s e a d m in is t e r th e o a t h o r a ff ir m a ti o n . R E G I S T R A R : P le a s e s t a te y o u r fu ll n a m e s f o r th e r e c o r d ? MR MOHAMMED SULEMAN MAHOMEDY: Mohammed Suleman M a h o m e d y. REGISTRAR: D o y o u h a v e a n y o b je c t i o n s t o m a k in g t h e p r e s c r i b e d a ffir m a t io n ? MR MOHAMMED SULEMAN MAHOMEDY : No. REGISTRAR: 10 S o y o u s o le m n l y a ffi r m th a t t h e e v i d e n c e th a t y o u w i ll g iv e w il l b e t h e tr u t h ; t h e w h o le tr u t h a n d n o t h in g b u t t h e tr u t h ; i f s o p l e a s e r a is e r i g h t h a n d a n d s a y, I t r u ly a ff i r m . M R M O H A M M E D S U L E M A N M A H O M E D Y : I tr u ly a ffir m . REGISTRAR: Thank you. C H A I R P E R S O N : T h a n k y o u . Yo u m a y p r o c e e d M r M o k o e n a . ADV PHILLIP MOKOENA SC: T h a n k y o u C h a ir. Mr Mahomedy as a lr e a d y in d ic a t e d t o t h e C h a i r w e w il l b e r e fe r r i n g to fo u r e x h i b i ts w h i c h I s e e t h e y h a v e a lr e a d y b e e n p la c e d b e fo r e y o u . Yo u w il l s e e th a t t h e t w o b i g fi le s t h e fir s t o n e s h o u l d b e m a r k e d E x h i b i t B B 3 A t h a t w il l b e t h e f ir s t fi l e . A n d t h e s e c o n d o n e is E x h i b i t B B 3 B . Yo u h a v e a lr e a d y 20 a ls o h e a r d t h a t t h e r e w a s a – a n a ffi d a v i t b y N e d b a n k w h i c h w e h a v e now amended it… CHAIRPERSON : L e t – I a m s o r r y Mr M o k o e n a le t m e c h e c k w h e t h e r e v e r y b o d y c a n h e a r y o u a t th e b a c k ? N o b o d y s h a k e s t h e ir h a n d s s o i t m e a n s th e y h e a r y o u . A D V P H I L L I P M O K O E N A S C : Ye s C h a ir. Page 5 of 154 15 MAY 2019 – DAY 93 C H A I R P E R S O N : O k a y th a n k y o u . A D V P H I L L I P M O K O E N A S C : T h e y a r e c o n t a i n e d in a s e p a r a t e f o l d e r a n d t h e y a r e m a r k e d r e s p e c ti v e ly E x h i b i t B B 3 . 1 a n d E x h i b i t B B 3 . 2 b u t f o r t h e p u r p o s e s o f b e g in n in g w i th y o u r t e s t i m o n y c o u ld y o u p le a s e c o n c e n tr a t e o n E x h i b i t B B 3 A a n d s h o u ld I m o v e to a n o th e r fi le I w i ll a l e r t y o u a n d n o t i fy y o u a c c o r d in g ly. N o w le t m e a s s is t y o u t o n a v ig a t e t h a t fir s t f il e . Yo u w i ll s e e o n t h e f ir s t i t is a c o v e r p a g e . d o c u m e n t i m m e d i a te ly t h e r e i t is a n i n d e x . The I t w il l h e l p y o u o r a s s is t y o u t o l o c a t e th e d i ffe r e n t d o c u m e n ts w h ic h w e w il l b e r e fe r r i n g to f r o m 10 ti m e t o t i m e a n d i m m e d i a te ly a f te r th e in d e x t h e r e is a d o c u m e n t M r M a h o m e d y c a n y o u p l e a s e i d e n t i fy t h a t d o c u m e n t fo r u s i m m e d ia t e l y a ft e r t h e in d e x ? M R M O H A M M E D S U L E M A N M A H O M E D Y : A d v o c a t e M o k o e n a t h is is m y s t a te m e n t to t h e c o m m i s s i o n . ADV PHILLIP MOKOENA SC: Ye s . M a y y o u t h e n r e fe r t o p a g e 3 9 – p a g e 3 9 C h a i r ? Is y o u r s ig n a t u r e a p p e a r i n g t h e r e ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s t h a t is c o r r e c t . ADV PHILLIP MOKOENA SC: Ye s . A n d d o y o u c o n fir m t h a t y o u r s t a te m e n t i t is i n a f o r m o f a n a ffi d a v i t ? 20 M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s t h a t is tr u e . ADV PHILLIP MOKOENA SC: A n d y o u a ls o c o n fir m t h e c o n t e n t s o f y o u r s t a t e m e n t to b e b o th tr u e a n d c o r r e c t ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s A d v o c a t e . A D V P H I L L I P M O K O E N A S C : Ye s . N o w M r M a h o m e d y c a n y o u p le a s e s h a r e w it h u s y o u r q u a l if ic a ti o n s ? Page 6 of 154 15 MAY 2019 – DAY 93 MR MOHAMMED SULEMAN MAHOMEDY: I a m a q u a l i fi e d C h a r t e r e d A c c o u n t a n t in S o u th A fr ic a . A D V P H I L L I P M O K O E N A S C : Ye s . A n d p r i o r t o jo in i n g Tr a n s n e t w h a t did you do? M R M O H A M M E D S U L E M A N M A H O M E D Y : A d v o c a te I t h i n k i t w o u l d b e g o o d t o j u s t g i v e a b r i e f h is to r y. I t h i n k … A D V P H I L L I P M O K O E N A S C : Ye s p l e a s e . MR MOHAMMED SULEMAN MAHOMED Y : I t h in k i n 2 0 0 1 I j o i n e d E s k o m a s a D i v is i o n F i n a n c e M a n a g e r in t h e Tr a n s n e t – s o r r y i n t h e 10 Tr a n s m i s s i o n D i v is i o n . T h e r e a f te r I jo in e d Tr a n s n e t Fr e ig h t R a i l w h ic h w a s t h e n c a ll e d S p o o r n e t i n S e p t e m b e r 2 0 0 4 . It w a s th e r e u n t il M a y 2 0 0 6 a t w h ic h ti m e I r e s i g n e d a n d j o i n e d a c o m p a n y c a ll e d C u t t in g E d g e C o m m e r c e w h e r e I w a s e m p lo y e d u n ti l A p r il 2 0 0 8 . B e tw e e n A p r i l 2 0 0 8 a n d S e p t e m b e r 2 0 0 8 I w o r k e d a t C u t t in g E d g e Fi n a n c e a s a Fi n a n c i a l a n d M a n a g e m e n t C o n s u l ta n t a n d I h a v e b e e n a t Tr a n s n e t s in c e O c to b e r 2 0 0 8 i n a v a r ie ty o f fu n c t io n s . A D V P H I L L I P M O K O E N A S C : N o w c a n y o u s h a r e w it h u s y o u k n o w j u s t b r i e fl y y o u r e m p lo y m e n t h i s to r y w i th in Tr a n s n e t i ts e l f ? MR MOHAMMED SULEMAN MAHOMEDY : 20 I w il l s ta r t w i t h m y c u r r e n t r o l e in w h i c h I w a s a p p o i n te d b y t h e H o n o u r a b le M i n is te r Pr a v in G o r d h a n o n t h e 1 M a y 2 0 1 9 a s th e A c ti n g G r o u p C h i e f E x e c u t iv e . T h a t is n o t i n c l u d e d in m y s t a te m e n t a s i t w a s s u b s e q u e n t t o t h i s – t h e s u b m is s io n o f t h e s ta t e m e n t. A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir p e r s o n . P r i o r t o th a t I Page 7 of 154 15 MAY 2019 – DAY 93 w a s t h e A c t in g G r o u p C h i e f F in a n c ia l O ff i c e r o n c e a g a i n a p p o in t e d b y t h e H o n o u r a b le M i n i s t e r P r a v i n G o r d h a n t h e P u b li c E n t e r p r is e s M in is t e r on the 15 May 2018. I w a s t h e G e n e r a l M a n a g e r o f Fi n a n c e w i t h i n Tr a n s n e t G r o u p C a p i t a l a b u s in e s s u n i t w i t h i n Tr a n s n e t fr o m A u g u s t 2 0 1 6 t o t h e 1 5 M a y 2 0 1 8 . A n d b e fo r e th a t I w a s th e G e n e r a l M a n a g e r o f a d e p a r t m e n t c a ll e d G r o u p C a p it a l I n t e g r a t io n a n d As s u r a n c e fr o m F e b r u a r y 2 0 1 3 to A u g u s t 2 0 1 6 . Th e k e y r e s p o n s i b i li t ie s i n t h a t f u n c t io n w a s th e c a p i t a l s tr a t e g y o f Tr a n s n e t a s w e ll a s t h e c a p i t a l p o r t fo li o m a n a g e m e n t o f Tr a n s n e t . 10 A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : Fr o m O c t o b e r 2 0 0 8 t o J a n u a r y 2 0 1 3 I s p e n t t h a t ti m e a s a n E x e c u ti v e M a n a g e r o f F i n a n c e a t Tr a n s n e t Fr e ig h t R a i l a n d a m o n g s t m y k e y r e s p o n s i b i li ti e s i n th a t s p a c e w e r e t h e – s o m e o f t h e f in a n c e r e l a te d m a t t e r s b u t a ls o s p e c if ic a l ly p a y r o l l m a n a g e m e n t a n d t h e i n t e r n a l fi n a n c i a l c o n tr o l s o f Tr a n s n e t Fr e i g h t R a il . I t h in k i t m u s t b e – i t is n e c e s s a r y t o a ls o s t a te t h a t d u r i n g t h e p e r io d t h a t I w a s r e p o r t in g i n t o t h e G r o u p F in a n c e S p a c e b e t w e e n 2 0 1 3 a n d 2 0 1 5 o n o c c a s io n I w o u l d h a v e a c ti n g a s th e G r o u p C h i e f F i n a n c i a l O ff i c e r i n t h e a b s e n c e o f t h e t h e n C F O A n o j S i n g h a n d 20 it is o n t h is b a s is t h a t y o u m a y fi n d m y s ig n a t u r e a p p e a r i n g i n a v a r ie ty o f d o c u m e n ts a n d m e m o r a n d a a s th e A c ti n g C h i e f Fi n a n c i a l O ff ic e r. A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMM ED SULEMAN MAHOMEDY : During that period. ADV PHILLIP MOKOENA SC: N o w a t t h e ti m e w h e n y o u d e p o s e d t o t h is s t a t e m e n t w h ic h c a p a c i ty d i d y o u o c c u p y ? Page 8 of 154 15 MAY 2019 – DAY 93 M R M O H A M M E D S U L E M A N M A H O M E D Y : I w a s th e A c ti n g G r o u p C h i e f Fi n a n c i a l O ff ic e r o f Tr a n s n e t . ADV PHILLIP MOKOENA SC: Ye s a n d i n th a t c a p a c i ty c o u l d y o u p l e a s e s h a r e w i t h t h e C h a ir y o u r r e s p o n s i b ili t ie s ? MR MOHAMMED SULEMAN MAHOMED Y : Right up top the key r e s p o n s i b i li ti e s o f t h e F i n a n c ia l S u s t a i n a b il i ty o f Tr a n s n e t a n d t h e Fi n a n c i a l M a n a g e m e n t o f Tr a n s n e t . I t w o u l d a ls o l o o k a t th e c o n tr o ls w i t h i n Tr a n s n e t , t h e f in a n c ia l c o n tr o ls a n d th e t r e a s u r y f u n c t i o n o f Tr a n s n e t w h ic h is 10 l a r g e ly w h e r e Tr a n s n e t p r o c u r e s funding and m a n a g e m e n t o f th e c a s h fl o w s o f Tr a n s n e t . ADV PHILLIP MOKOENA SC: N o w t h e – th a t r e s p o n s i b i li ty o f th e tr e a s u r y f u n c ti o n w h a t d i d i t e n ta il ? D i d y o u – w e r e th e r e p e o p l e r e p o r t in g to y o u ? Wa s it a u n i t o n i t s o w n ? H o w d id it o p e r a t e w i t h i n t h e b i g g e r s tr u c tu r e o f Tr a n s n e t ? MR MOHAMMED SULEMAN MAHOMEDY : Tr a n s n e t b u t r e p o r t s t o t h e C F O ’s o ffic e . I t is a d e p a r t m e n t w i th in T h e r e i s a t r e a s u r e r th a t is o r d i n a r i ly i n t h a t p o s it i o n w h o w i ll r e p o r t t o t h e C F O a n d I t h i n k t h e – a s I s a i d th e l a r g e r e s p o n s i b i li ty o f th a t d e p a r t m e n t is l o o k i n g a t t h e c a s h fl o w s , lo o k i n g a t t h e f u n d i n g r e q u ir e m e n t s o f t h e b u s i n e s s a n d 20 t h e n g o in g o u t t o t h e m a r k e t a n d ta lk in g t o a v a r i e t y o f l e n d e r s t o lo o k at whether you know when we borrow money who we borrow it from and a t w h a t r a t e s a n d th a t is a s y n o p s i s o f th a t . ADV PHILLIP MOKOENA SC: Ye s . Fr o m p a g e 3 s t a r t in g f r o m p a r a g r a p h 3 M r C h a ir M r M a h o m e d y y o u p r e f a c e d y o u r e v id e n c e b y h i g h l ig h ti n g o r p r o v i d in g h ig h le v e l o b s e r v a ti o n s c a n y o u p l e a s e ta k e u s Page 9 of 154 15 MAY 2019 – DAY 93 t h r o u g h t h o s e h ig h l e v e l o b s e r v a ti o n s ? MR MOHAMMED SULEMAN MAHOMEDY : I t h i n k a l s o it w o u l d b e n e c e s s a r y A d v o c a te t o g iv e t h e c o m m is s io n a v i e w a s I s a id it in h i n d s i g h t t h a t w e a c t u a ll y h a v e d o n e a l l o f th e s e r e v i e w s . I was a p p o i n t e d o n th e 1 5 M a y 2 0 1 8 t h e n e w b o a r d o f d ir e c t o r s w e r e a p p o i n t e d a r o u n d th e 2 3 M a y 2 0 1 8 . A t t h is ti m e Tr a n s n e t w a s i n t h e m i d s t o f t h e ir fi n a n c i a l c lo s e p r o c e s s w i t h t h e e x te r n a l a u d it o r s . I t w a s s u b s e q u e n t ly q u a li f ie d a s a s e t o f a c c o u n ts w h i c h c r e a t e d c e r ta i n c h a l le n g e s f o r Tr a n s n e t a n d t h e q u a l i fic a ti o n w a s l a r g e ly a r o u n d P F M A , 10 ir r e g u l a r e x p e n d i t u r e . I th in k t o g e t h e r w i t h t h e b o a r d a t t h e t i m e th e n u m e r o u s m e d ia r e p o r t s a n d p e r v a s iv e r e p o r ts a r o u n d c o r r u p t i o n o r a l le g a ti o n s o f c o r r u p t io n a t Tr a n s n e t w e r e r e a l ly s o m e t h i n g t h a t w a s p u t u n d e r th e m ic r o s c o p e b y th e b o a r d . A s t h e A c ti n g G r o u p C h i e f Fi n a n c i a l o ffi c e r I w o u ld s t a te I a m – I a m a m e m b e r o f t h e b o a r d o f d ir e c t o r s o f Tr a n s n e t a s w e ll . T h e p r o c e s s o f u n d e r s ta n d i n g e x a c tly what transpired in the years that were preceding the appointment of the b o a r d a n d m y s e lf w e c o m m e n c e d a r e v i e w o f a n u m b e r o f tr a n s a c t i o n s . P a r t ic u l a r l y t h o s e t h a t h a d r e c e iv e d a f a ir a m o u n t o f m e d i a s c r u ti n y. A m o n g s t th e m w e r e tr a n s a c ti o n s th a t w o u l d l o o k a t 1 0 6 4 w h i c h w a s 20 c o m m o n ly c a l l e d 1 0 6 4 i n Tr a n s n e t t h e a c q u is i ti o n o f 1 0 6 4 lo c o m o t iv e s ? T h e r e w e r e r e l a t e d tr a n s a c t i o n s t o t h a t lik e t h e m a in t e n a n c e a g r e e m e n t t h a t w a s s i g n e d w i t h C h i n a S o u th R a i l . N e o t e l w h ic h w a s i n t h e p r e s s f o r a n u m b e r o f i s s u e s a r o u n d p a y m e n t s th a t w e r e m a d e to o t h e r e n t i ti e s . R e g i m e n ts C a p i t a l , Tr i ll ia n C a p i t a l a n d Tr i ll i a n – th e r e w e r e o th e r e n ti ti e s w i th i n th e Tr ia ll i a n g r o u p o f c o m p a n i e s t h a t w e r e a l s o y o u Page 10 of 154 15 MAY 2019 – DAY 93 k n o w d i s c u s s e d i n th e m e d i a . A n d th e D u r b a n r e l o c a t i o n p r o g r a m m e w h ic h w a s t h e r e l o c a t i o n o f t w o o r i g i n a l ly e q u ip m e n t m a n u f a c tu r e r s o r w h a t w e c o m m o n ly c a ll O E M ’s . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : Fr o m J o h a n n e s b u r g t h r o u g h t o D u r b a n a n d a l s o t h e s e r v i c e p r o v id e r N k o n k i . T h e s e w e r e th e h i g h le v e l tr a n s a c ti o n s o r c o n tr a c t s t h a t w e d e e m e d w e r e n e c e s s a r y t o l o o k a t, a t t h e t i m e . I t is n o t a n e x h a u s ti v e l is t . T h e r e h a v e b e e n a n u m b e r o f r e v i e w s t h a t a r e o u ts id e o f t h i s l is t a n d I t h i n k I w o u l d a l s o s tr e s s 10 t h a t t h e p r o c e s s e s in s o m e o f th e s e tr a n s a c t io n s c o n ti n u e . They are n o t li m i t e d t o t h e 1 6 A p r i l s u b m is s i o n t h e y w i ll c o n ti n u e . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMED Y : F o r a v a r ie ty o f r e a s o n s Advocate. A D V P H I L L I P M O K O E N A S C : Ye s . A n d if y o u g o t o p a r a g r a p h 3 . 1 i f y o u r e a d i t i n t o th e r e c o r d a n d e x p a n d fl o w i n g o b v i o u s l y fr o m a n e x p e r i e n c e w h e n y o u n o w r e v i e w e d y o u k n o w t h e d i ff e r e n t c o n tr a c ts . MR MOHAMMED SULEMAN MAHOMEDY : C h a i r p e r s o n I t h i n k i t is n e c e s s a r y a t t h is p o i n t t o s t a t e t h a t o n th e r e v i e w o f g o v e r n a n c e w i t h i n 20 Tr a n s n e t w h a t w e fo u n d w a s t h a t c e r t a i n t r a n s a c t io n s w e r e a p p r o v e d t h r o u g h n o r m a l p r o c e s s e s a n d s o m e o f t h e tr a n s a c t i o n s d i d n o t g o t h r o u g h th e g o v e r n a n c e p r o c e s s e s p r e s c r i b e d w it h in Tr a n s n e t. I d e t a il u n d e r 3 .2 s o m e o f t h e e x a m p l e s w h ic h I w i ll p r o v i d e m o r e i n s i g h t a n d a t a l a te r s t a g e h o w e v e r s u ff ic e t o s a y t h a t i f w e l o o k a t t h e N e o te l tr a n s a c ti o n a s a n e x a m p le t h e r e w a s a n a p p r o v e d m e m o r a n d u m t o Page 11 of 154 15 MAY 2019 – DAY 93 appoint Neotel in October 2013. In about the 20 November 2013 a m e m o r a n d u m w a s s ig n e d b y th e t h e n C h i e f Ex e c u ti v e o f Tr a n s n e t M r B r i a n M o l e f e n u ll i fy i n g th e d e c is io n o f t h e p e o p le t h a t a p p r o v e d t h e m e m o r a n d u m o f t h e 3 1 O c t o b e r a n d r e p l a c i n g N e o t e l w i t h T - S y s te m s . S u b s e q u e n t t o t h a t p e r i o d o f t h e 2 0 N o v e m b e r 2 0 1 3 t h e r e s e e m s to b e a lo t o f i n a c tiv i ty a n d t h e n o n t h e 5 D e c e m b e r o r a r o u n d t h e 5 D e c e m b e r 2 0 1 4 a f u r th e r m e m o r a n d u m s u r f a c e s t h a t a p p r o v e s t h e a p p o i n t m e n t o f N e o te l . Th is is s o m e th i n g t h a t is n o t o r d i n a r i ly i n t h e p r o c e s s o f p r o c u r e m e n t a t Tr a n s n e t . 10 W h e n y o u g iv e c o n s i d e r a t i o n t o t h e fa c t t h a t N e o t e l w a s i n i ti a lly r e c o m m e n d e d t h r o u g h a n o p e n t e n d e r p r o c e s s a n d th e y w e r e a l l o f th e n e c e s s a r y p r o c u r e m e n t e v e n ts t h a t had been adhered to. The memorandum of the e s s e n ti a l ly j u s t n u l li fi e d a p r o p e r p r o c u r e m e n t p r o c e s s . 20 November That is one example. A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: If we look at th e m a in t e n a n c e a g r e e m e n t w i t h C h in a S o u t h R a il t h is a g r e e m e n t w a s a u t h o r i s e d o r r e c o m m e n d e d t o t h e t h e n M in is te r o f P u b l ic E n t e r p r is e s . I t w a s a s u b m is s io n th a t w a s m a d e d i r e c tl y t o t h e b o a r d o f d ir e c t o r s , 20 t h e f u ll b o a r d o f d ir e c to r s . As far as we have checked out records C h a ir p e r s o n … ADV PHILLIP MOKOENA SC: W h e n y o u s a y d ir e c tly i t m e a n s t h a t i t n e v e r u n d e r w e n t a n y p r o c u r e m e n t s tr u c t u r e s w i t h i n Tr a n s n e t ? M R M O H A M M E D S U L E M A N M A H O M E D Y : As f a r a s w e h a v e r e v ie w e d Advocate we have not seen any evidence of it surfacing at any Page 12 of 154 15 MAY 2019 – DAY 93 m a n a g e m e n t c o m m i t t e e m e e ti n g . N e it h e r h a d i t g o n e t h r o u g h t h e s tr u c t u r e s o f m a n a g e m e n t a n d a ls o w i th in th e b o a r d t h e r e w a s a s u b c o m m i t t e e o f t h e b o a r d t h a t s h o u l d h a v e r e v ie w e d t h e s u b m i s s i o n a n d w e d o n o t fi n d a n y e v i d e n c e o f t h a t. b o a r d o f d ir e c to r s . I t w a s p r e s e n t e d d i r e c t ly t o th e T h e f u ll b o a r d m e e ti n g a n d th e n s u b s e q u e n t ly d e li v e r e d to t h e m i n i s te r s o f o ffic e fo r a p p r o v a l . A D V P H I L L I P M O K O E N A S C : M r C h a i r t h i s n o w li n k s w i th t h e e v i d e n c e o f M r Vo l m in k w h e n h e r a is e d t h o s e c o n c e r n s o f i m p o r t a n t s tr u c t u r e s w i t h i n p r o c u r e m e n t s i m p ly b e in g u n d e r m in e d a n d tr a n s a c ti o n s b e i n g 10 sometimes approved by a single person without giving regard to p r o c e s s a t a ll . C H A I R P E R S O N : Ye s t h a n k y o u . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir … ADV PHILLIP MOKOENA SC : And had – yes you may proceed. MR MOHAMMED SULEMAN MAHOMEDY : S o r r y. C h a ir p e r s o n I th in k a ls o w h e n w e l o o k a t t h e e n ti t ie s R e g i m e n ts a n d Tr il li a n t h e y h a v e f e a t u r e d q u i t e s i g n i fi c a n tly. W e h a v e d o n e a fa ir a m o u n t o f r e v ie w i n t h e w o r k i n g s o f R e g i m e n ts . W h a t w e h a v e f o u n d is a g a in tr a n s a c t i o n s 20 where Regiments would be given approval or approval would be granted f o r R e g i m e n t s to p r o v i d e c e r ta in s e r v ic e s . A n e x a m p le o f t h a t is t h e C h i n a D e v e lo p m e n t B a n k L o a n fo r w h ic h R e g i m e n t s w a s p a i d R 1 6 6 m il li o n a s a s u c c e s s fe e . T h a t p a r ti c u l a r tr a n s a c ti o n w a s a p p r o v e d b y t h e A D C a n d i t h a d n o t s e r v e d a t a n y m a n a g e m e n t c o m m i t t e e i n te r n a l ly a t Tr a n s n e t n e i t h e r h a d i t s u b s c r i b e d to t h e p r e s c r ip ts o f Tr a n s n e t i n Page 13 of 154 15 MAY 2019 – DAY 93 t e r m s o f p o l ic i e s t h a t w e h a v e w i t h i n Tr a n s n e t . Th e r e is a n u m b e r o f fr a m e w o r k s a n d p o lic i e s a n d p r o c e s s e s t h a t w e h a v e w h ic h a r e w e ll e s t a b li s h e d a n d tr a n s a c t io n s a r o u n d R e g i m e n t s a n d Tr il li a n s e e m t o h a v e b y p a s s e d th e s e p r e s c r i p t s i n Tr a n s n e t c o m p l e te ly. In f a c t a n u m b e r o f e x e c u ti v e s a t Tr a n s n e t w e r e c o m p le t e l y i g n o r a n t o f t h e f a c t t h a t t h e s e tr a n s a c ti o n s e v e n o c c u r r e d . S o m e o f th e m w o u l d h a v e c o m e t o k n o w o f t h i s th r o u g h t h e m e d i a r e p o r ts a n d n o t th r o u g h t h e r e l e v a n t c o m m i t t e e s th a t t h e y m a y h a v e s a t o n . A D V P H I L L I P M O K O E N A S C : Ye s . A n d a l l th a t – I m e a n t h e r e v i e w s 10 t h a t y o u h a v e c o n d u c t e d a n d c l e a r e v id e n c e o f s tr u c tu r e s b e in g u n d e r m i n e d m a k e s y o u to c o m e t o a n o b s e r v a t io n a t 3 .1 w h e r e y o u s a y : “ W i th t h e b e n e f i t o f h i n d s i g h t a n d i n m y n e w r o l e I understand – I now understand that there was a s y s te m w h e r e a s e t o f k e y r o le p la y e r s b o t h i n te r n a l a n d e x t e r n a l a n d Tr a n s n e t e x e c u ti v e b o a r d m e m b e r s a n d c e r t a in c o m p a n ie s a c te d i n c o n c e r t t o th e d e tr i m e n t of Tr a n s n e t ’s best interest causing [i n d is t in c t] lo s s e s t o t h e c o m p a n y.” A n d t h a t is w h a t y o u a r e m a in t a i n in g ? 20 MR MOHAMMED SULEMAN MAHOMEDY : Ye s A d v o c a te I m a in t a i n that. A D V P H I L L I P M O K O E N A S C : Ye s . M a y I t h e n r e f e r y o u t o p a g e 4 a n d take us what you saying in paragraph 3.2.5? MR MOHAMMED SULEMAN MAHOMEDY : Ye s . A g a in t h e D u r b a n r e l o c a ti o n w h i c h is n o w w h a t w e c o m m o n l y c a ll th e D u r b a n R e l o c a ti o n Page 14 of 154 15 MAY 2019 – DAY 93 b u t t h is w a s t h e r e l o c a ti o n o f t w o O E M ’s t h a t w e r e o r ig i n a ll y e n v is a g e d t o a s s e m b le t h e i r l o c o m o t iv e s in J o h a n n e s b u r g o r in th e s u r r o u n d s o f G a u t e n g w e r e m o v e d to D u r b a n . O n c e a g a in w h e n w e r e v i e w e d t h e d o c u m e n t a ti o n i t a g a i n s e e ms a s t h o u g h i n d iv id u a l s a u t h o r is e d t h is p a r t ic u l a r m o v e a n d t h i s p a r t ic u l a r m o v e h a d n o t s e r v e d a t a n y r e l e v a n t c o m m i t t e e w i t h i n t h e e x e c u t iv e s t r u c t u r e s . So m e t h in g a s s ig n i f ic a n t a s t h is w i t h t h e i m p a c t t h a t i t h a d o n t h e d e li v e r y s c h e d u l e s h o u l d h a v e o r o u g h t t o h a v e a t l e a s t s u r f a c e d a t t h e E X C O a t th e E x e c u tiv e C o m m i t t e e o f Tr a n s n e t i f n o t e v e n a t th e b o a r d l e v e l. 10 T h e v a l u e th a t w e r e f e r e n c e o n t h e D u r b a n R e l o c a t i o n is j u s t i n e x c e s s o f R 1 . 2 b ill i o n . ADV PHILLIP MOKOENA SC: Ye s . A n d in o r d e r f o r u s t o a p p r e c i a te w h a t y o u a r e s a y in g t o t h e C h a ir y o u m a k e r e f e r e n c e to tw o a n n e x u r e s t h e r e , A n n e x u r e M S M 2 , 3 a n d 4 . M a y I r e f e r y o u to p a g e 4 7 t h e s a m e b u n d l e C h a ir. CHAIRPERSON : Thank you. A D V P H I L L I P M O K O E N A S C : Yo u c a n t a k e u s th r o u g h t h a t – t h r o u g h t h o s e d o c u m e n ts i n a c h r o n o l o g y t h a t m ig h t b e s t s u it y o u r e v id e n c e b e c a u s e y o u c a n s e e t h a t t h e y a r e – fr o m p a g e 4 7 u p u n t il p a g e 4 9 . M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s A d v o c a t e . C h a ir I t h in k 20 if w e lo o k a t t h e d o c u m e n ts t h a t a r e a n n e x e d o n a n n e x u r e 3 a n d 4 it a c t u a ll y p r o v i d e s t h e c o r r o b o r a t io n t h a t t h i s D u r b a n R e lo c a t i o n f o r b o t h t h e O E M ’s w a s a p p r o v e d t h r o u g h a s e t o f in d iv i d u a ls r a t h e r t h a n s u r f a c in g a t a n y c o m m i t t e e . I n f a c t i t h a s t h e s ig n a tu r e s o f fi v e o r s ix e x e c u tiv e s b u t i t h a d n o t s e r v e d a t a n y s p e c i f ic c o m m i t te e i n te r n a l ly a t Tr a n s n e t a t a n e x e c u t iv e le v e l f o r a p p r o v a l. W e a ls o w o u l d n o te th a t i t Page 15 of 154 15 MAY 2019 – DAY 93 s a y s t h a t: “ T h e r e is a n o u t c o m e t o th e fi n a l n e g o ti a ti o n .” A n d t h a t a g a i n is b e i n g a p p r o v e d b y a s e t o f i n d iv i d u a ls . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : I m u s t h a s t e n to s a y t h a t t h e d e l e g a ti o n o f a u th o r i ty m a y h a v e a l lo w e d t h e s e tr a n s a c t i o n s to b e p r o c e s s e d i n t h is p a r ti c u l a r w a y. H o w e v e r g o o d g o v e r n a n c e w o u ld a c t u a ll y c a ll f o r s o m e l e v e l o f r e p o r ti n g a n d s o m e p r o c e s s p a r ti c u la r ly w h e n w e d id h a v e s t e e r i n g c o m m i t te e s e t c e t e r a t h a t w e r e in p l a c e a t 10 t h e ti m e . A D V P H I L L I P M O K O E N A S C : Ye s . N o w l e t u s p l a c e t h e m p r o p e r l y o n r e c o r d s o t h a t w e c a n b e a b le t o f o ll o w a n d a p p r e c i a t e y o u r e v id e n c e . I t y o u t u r n to p a g e 5 0 y o u w ill s e e it m u s t b e s a y i n g M S S 5 0 . C a n y o u p l e a s e i d e n ti fy t h a t d o c u m e n t f o r u s ? MR MOHAMMED SULEMAN MAHOMEDY : S o r r y m y a p o lo g ie s . T h is w o u ld b e a m e m o r a n d u m . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : T h a t is a d d r e s s e d to t h e G r o u p C h i e f E x e c u t iv e a t t h e ti m e fr o m t h e A c ti n g C h ie f E x e c u t iv e o f 20 Tr a n s n e t Fr e i g h t R a il a t t h a t t i m e r e q u e s ti n g f o r t h e A c t i n g G r o u p C h i e f E x e c u t iv e to a p p r o v e t h e r e l o c a ti o n o f C h i n a N o r t h R a il t o T E ’s f a c i li t ie s i n D u r b a n Tr a n s n e t E n g i n e e r i n g F a c il i ti e s i n D u r b a n f o r t h e m a n u f a c t u r e o f 2 3 3 C la s s 4 5 D i e s e l – E l e c tr ic l o c o m o ti v e s . It should a c t u a ll y r e a d D ie s e l L o c o m o t iv e s . ADV PHILLIP MOKOENA SC: Ye s . A n d if y o u g o t o th e p a r a g r a p h Page 16 of 154 15 MAY 2019 – DAY 93 u n d e r th e p u r p o s e , w h a t is t h e p u r p o s e a s d e s c r ib e d i n t h a t d o c u m e n t? MR MOHAMM ED SULEMAN MAHOMEDY : It says: “ R e q u e s t t h e A c ti n g G r o u p C h i e f E x e c u t i v e t o n o t e t h e f in a l o u tc o m e o f th e n e g o ti a ti o n fo r th e r e l o c a ti o n t o D u r b a n w i t h C N R . A p p r o v e t h e v a r ia t io n o r d e r f o r t h e r e l o c a ti o n t o D u r b a n t o a m a x i m u m v a l u e o f R 6 4 7 m il li o n t h a t is 6 4 7 1 8 1 4 9 4 . 0 0 w i t h C N R .” ADV PHILLIP MOKOENA SC : No tender processes? MR MOHAMMED SULEMAN MAHOMED Y : 10 T h e r e is – a s f a r a s I a m c o n c e r n e d t h e r e w a s n o t a p r o c e s s t h is w a s s o m e t h i n g th a t w a s p u t t o g e th e r th r o u g h a n e g o ti a ti n g t e a m w h o t h e n m a d e th is p r o p o s a l I a m – my a s s u m p t i o n is th e n to t h e A c ti n g C h i e f E x e c u tiv e o f Tr a n s n e t Fr e i g h t R a i l . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : A n d th e n i t a s k f o r a s i g n o ff o f a l e tt e r t o b e i s s u e d t o C N R t o a c c e p t t h e ir f in a l p r o p o s a l . A n d t h a t le t t e r is in t h e e v id e n c e p a c k a s w e l l A d v o c a t e . A D V P H I L L I P M O K O E N A S C : If y o u g o t o p a g e 4 7 . W o u l d t h a t b e th e le t t e r t h a t y o u a r e r e f e r r i n g t o o r w h a t is t h e p u r p o s e o f t h is l e t te r o n 20 page 47? MR MOHAMMED SULEMAN MAHOMEDY : Chair it would be page 48 w h ic h w o u l d b e t h e le t t e r to C h i n a N o r th R a i l. A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: S o i t is e x a c t ly t h a t l e t t e r t h a t w a s s ig n e d w h ic h a p p r o v e s t h e v a r ia t i o n o r d e r a n d u n d e r p o i n t o n e Page 17 of 154 15 MAY 2019 – DAY 93 w h ic h s a y s t h e D u r b a n v a r i a ti o n o r d e r f o r a n a m o u n t o f 6 4 7 1 8 1 4 9 4 a n d i t a s k s f o r t h e d e t a i l i n v o ic i n g b a s e d o n t h e v a r ia t io n o r d e r p a y m e n t t e r m s s ti p u l a te d . A D V P H I L L I P M O K O E N A S C : A n d w h e n i t s a y s v a r ia t io n o r d e r w h a t is being referred to? M R M O H A M M E D S U L E M A N M A H O M E D Y : I n t h i s c a s e i t is b a s i c a lly a n in c r e a s e in t h e c o s t o f t h e p r o j e c t e s s e n ti a l ly b e c a u s e i t is a v a r i a ti o n fr o m t h e o r i g in a l a g r e e m e n t th a t w a s e n te r e d in t o i n M a r c h 2 0 1 4 . CHAIRPERSON : 10 A D V P H I L L I P M O K O E N A S C : A n d d o y o u k n o w w h a t w a s t h e o r ig in a l a m o u n t a n d to w h a t a m o u n t w a s i t n o w v a r ie d to ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir I t h i n k la t e r o n y e s t h e a m o u n t fo r C h i n a N o r t h w a s s o m e w h e r e i n t h e r e g io n o f a p p r o x i m a t e ly 9 .9 b i ll io n . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: A n d th is 6 4 7 m i ll i o n i s o n t o p o f t h a t. A D V P H I L L I P M O K O E N A S C : A s a n a d d i t i o n a l? M R M O H A M M E D S U L E M A N M A H O M E D Y : I t is a n a d d i ti o n y e s . 20 ADV PHILLIP MOKOENA SC: Ye s a n d t h e n w h o s i g n s th e le t t e r o n page … MR MOHAMMED SULEMAN MAHOMEDY: Th e Ac t in g Group Chief E x e c u t iv e - Mr G a m a – a t th e ti m e . A D V P H I L L I P M O K O E N A S C : Ye s . N o w m a y I r e f e r y o u t o – b a c k to y o u r s t a t e m e n t w i th p a r tic u la r r e f e r e n c e C h a ir to p a r a g r a p h 4 . 1 ? Page 18 of 154 15 MAY 2019 – DAY 93 C H A I R P E R S O N : W h a t p a g e ? I a m s o r r y. ADV PHILLIP MOKOENA SC: I a m tr y i n g to ( in d i s ti n c t) . I t is p a g e 4 M r C h a ir. CHAIRPERSON : Thank you. ADV PHILLIP MOKOENA SC: Now we may proceed Mr Mahomedy to d e a l w i t h th e s p e c i fi c tr a n s a c t i o n . C a n y o u j u s t g iv e u s a n o v e r v i e w a s t o w h a t tr a n s a c ti o n s w e r e u n d e r r e v i e w a s p e r y o u r p a r a g r a p h 4 a n d t a k e u s t o t h e d e t a i ls o f e a c h i n t h a t s u m m a r y ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir p e r s o n a s I s a i d e a r li e r 10 o n w e s e l e c te d c e r t a in t r a n s a c t io n s f o r r e v i e w t h a t w e r e p e r v a s iv e i n m e d i a r e p o r t s a s w e l l a s s o m e c o n c e r n s t h a t w e r e r a is e d b y t h e n e w Board at the time and we s p e c i fic a ll y fo c u s e d on certain key tr a n s a c ti o n s . ADV PHILLIP MOKOENA SC: Ye s a n d w h e n y o u g o a n d l o o k a t t h e lo c o m o t iv e s y o u th e n s t a t e – y o u k n o w – t h e v a r i o u s s u b t o p i c s th a t y o u d e d ic a te d y o u r ti m e o n i n o r d e r t o e x p a n d o n h o w – h o w i t w a s r e v ie w e d . C a n y o u p le a s e ta k e t h e C h a ir t h r o u g h t h a t? MR MOHAMMED SULEMAN MAHOMEDY: S o th e 1 0 6 4 l o c o m o tiv e s w a s o b v io u s ly a v e r y s i g n i f ic a n t tr a n s a c ti o n in t h e li f e o f Tr a n s n e t. A t 20 t h e t i m e th e is s u e s th a t w e r e b e i n g a d d r e s s e d w a s t h e fa c t t h a t t h e lo c o m o t iv e b u s i n e s s c a s e w h ic h w a s p r e p a r e d i n a r o u n d A p r il 2 0 1 3 w a s f o r a v a l u e o f R 3 8 .6 b i ll io n a n d t h e c o n tr a c ts th a t w e r e e n te r e d in t o i n M a r c h 2 0 1 4 to t a l l e d a p p r o x i m a t e ly R 4 9 . 4 b i ll io n a n d t h e q u e s ti o n w a s a l w a y s w h e t h e r t h i s i n c r e a s e w a s ju s t i fi a b l e o r n o t . Amongst other t h i n g s C h i n a S o u th R a il h a d a ls o r e c e i v e d c e r t a i n o t h e r c o n tr a c ts f o r Page 19 of 154 15 MAY 2019 – DAY 93 t h e b u il d o f l o c o m o t iv e s w h ic h w e r e p r io r t o t h e 1 0 6 4 p r o g r a m . T h e y h a d r e c e i v e d a c o n tr a c t t o b u i l d 9 5 l o c o m o tiv e s w h ic h w a s th r o u g h a n o p e n te n d e r p r o c e s s a t t h e ti m e a n d t h e n t h e y h a d r e c e iv e d a c o n tr a c t w h ic h w a s t h r o u g h c o n fi n e m e n t t o b u i ld 1 0 0 l o c o m o tiv e s f o r t h e c o a l li n e . Th e a ll e g a ti o n s a r o u n d t h e 1 0 0 l o c o m o ti v e s w a s s p e c i fi c a ll y a r o u n d t h e p r o c e s s w h e r e o r i g in a l ly i t w a s e n v is a g e d t h a t M i ts u i w il l b u il d th o s e lo c o m o t iv e s b e c a u s e t h e y h a d b u il t t h e p r e v i o u s s e t o f 1 0 0 lo c o m o t iv e s o n t h e c o a l li n e a n d th e r e w e r e t h e a ll e g a ti o n s a r o u n d t h e f a c t t h a t C h i n a S o u t h R a il w e r e r e p la c e d a s th e s e r v ic e p r o v i d e r. T h is 10 is j u s t s o m e c o n t e x t a s to w h y … A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: We looked at these tr a n s a c ti o n s . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : O b v io u s ly w e a ls o t h e n k n e w o f th e d e p o s i t th a t w a s p a id o n t h e m a i n t e n a n c e a g r e e m e n t w i t h C h in a S o u th R a i l . W e a ls o l e a r n t t h a t C h in a S o u t h R a il w a s t h e o n ly e n ti ty t h a t h a d r e c e iv e d th is m a in t e n a n c e a g r e e m e n t . We had not entered in t o th e m a i n t e n a n c e a g r e e m e n t w i t h a n y o f t h e o th e r O E M s a t t h e t i m e 20 a n d th e n w e l o o k e d a t th e L o c o m o ti v e Tr a n s a c t io n A d v i s o r y S e r v i c e C o n tr a c t w h ic h o r i g in a l ly w a s w i t h M c Ki n s e y a n d w h i c h h a d m o r p h e d in t o a R e g i m e n t s l e d c o n s o r ti u m w h e n R e g i m e n ts w e r e o r i g i n a l ly n o t e v e n p a r t o f th e c o n s o r t i u m th a t h a d b i d fo r t h a t p a r tic u l a r p i e c e o f w o r k . S o m e o f t h e s i g n s th a t w e r e p r o b l e m a t ic f o r u s w a s t h e f a c t t h a t w e h a d p a i d a s p a r t o f th e L o c o m o t iv e Tr a n s a c t i o n A d v is o r y a 1 6 6 Page 20 of 154 15 MAY 2019 – DAY 93 m il li o n a s I s a i d e a r l ie r o n f o r t h e f a c i li t a ti o n a n d w h a t w a s c a l le d t h e s u c c e s s fe e fo r t h e C h in a D e v e lo p m e n t B a n k l o a n . T h e p a y m e n ts fo r r e l o c a ti o n c o s ts a s I a ll u d e d to e a r l ie r o n . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: W h a t w e t h e n b e l i e v e is unwarranted and Tr a n s a c t i o n A d v is o r y fees costs on the C hina D e v e l o p m e n t B a n k lo a n a n d t h e r e a s o n a n d t h e c l u b l o a n t h i s is a tr a n s a c ti o n t h a t w e w il l e x p o u n d o n la t e r o n w h ic h i s c a ll e d t h e Z A R C l u b L o a n . C h a i r p e r s o n v e r y s i m p ly a ll it is – is a s y n d ic a ti o n o f b a n k s 10 to lend us money for w h ic h Tr i ll i a n charged us in c l u d i n g VAT a p p r o x i m a te ly R 9 3 . 5 m il li o n . ADV PHILLIP MOKOENA SC : For what? MR MOHAMMED SULEMAN MAHOMEDY: Th a t is e x a c t ly t h e q u e s t io n t h a t w e a s k e d b e c a u s e t h e Tr e a s u r y Te a m a t Tr a n s n e t h a d t h e c a p a b il it y t o e x e c u t e a ll o f th e s e tr a n s a c t io n s a n d w e c o u l d n o t u n d e r s t a n d w h y. I n fa c t a t o n e o f t h e m e e ti n g s I c l e a r ly r e m e m b e r t h e C h a ir p e r s o n o f t h e B o a r d a s k a q u e s t io n a r o u n d w h y w a s o u r Tr e a s u r y Te a m r e p l a c e d w i t h R e g i m e n ts a n d Tr i ll ia n a n d t h a t w a s v e r y e a r ly o n in t h e t e n u r e o f t h e n e w B o a r d a n d t h a t p r e c ip i ta t e d a ll o f th e r e v i e w s 20 t h a t h a v e ta k e n p l a c e o n t h e Tr a n s n e t Tr e a s u r y f u n c ti o n w h i c h w e w i ll a ls o ta lk a b o u t la t e r o n . T h e r e a r e c e r ta i n d i s c u s s io n s a r o u n d c o n tr a c ts w i t h M c K in s e y. T h e o n e s t h a t I h a d p e r s o n a l i n v o lv e m e n t i n fr o m a m a n a g e m e n t p e r s p e c ti v e w a s w h a t is c a ll e d t h e S W AT c o n tr a c ts . I t h a s g o t n o t h in g t o d o w i th a n y o f t h e A m e r ic a n A g e n c i e s C h a ir. I t is a c o n tr a c t t h a t w a s p u t t o g e t h e r. F o r s o m e r e a s o n t h e n a m e S WAT w a s Page 21 of 154 15 MAY 2019 – DAY 93 g iv e n b u t it i s la r g e l y a p r o c e s s th a t w a s to p u t t o g e t h e r t e a ms th a t w o u ld a s s i s t Tr a n s n e t i n t h e c a p i t a l s t r a te g y a n d s tr u c t u r e o f t h e business. A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: capital partners as I w il l a ls o W e a ls o l o o k e d a t Tr i ll i a n d e n u n c ia t e fu r t h e r down in the s u b m is s io n . I w a s p e r s o n a ll y in v o lv e d i n s o m e o f t h e t r a n s a c t io n s t h a t w e r e p u s h e d th r o u g h t h e s y s t e m f o r Tr ill i a n w h e n n o w o r k i n th e d e p a r t m e n ts w e r e d o n e a n d t h a t w a s s o m e th i n g w e h a d t o l o o k a t 10 b e c a u s e t h e r e w e r e d i ff e r e n t e n ti t ie s w i t h i n Tr i ll i a n t h a t w e r e g e t t in g p a i d a n d w e w i ll t a l k a b o u t t h a t a s w e l l . Nkonki I think the A u d i t o r - G e n e r a l i n a r o u n d M a r c h 2 0 1 8 is s u e s a n o tic e t o S t a t e O w n e d E n ti t ie s a n d s t a t e o r g a n s a r o u n d t h e in v o l v e m e n t o f N k o n k i i n p o s s i b l e s t a te c a p t u r e a t t h a t t i m e a n d N k o n k i w e r e th e s e r v i c e p r o v i d e r to Tr a n s n e t f o r a n i n t e r n a l a u d it fu n c t io n w h i c h w e n t o u t o n o p e n t e n d e r i n 2 0 1 3 . I n a r o u n d J a n u a r y / F e b r u a r y 2 0 1 7 t h e r e w a s a s u b m is s i o n t o t h e A D C w h i c h w a s a B o a r d S u b C o m m i t t e e – t h e A c q u is i ti o n s a n d D i s p o s a l s C o m m i t t e e w h ic h m a d e p r o c u r e m e n t d e c i s i o n s t o a w a r d N k o n k i a n i n c r e a s e i n th a t i n te r n a l a u d i t s e r v ic e c o n tr a c t f o r R 5 0 0 20 m il li o n . A D V P H I L L I P M O K O E N A S C : W i t h a n y te n d e r p r o c e s s ? MR MOHAMMED SULEMAN MAHOMEDY: N o te n d e r p r o c e s s . v io l a t i o n a n d c o n tr a v e n t io n o f t h e P F M A . Vi o la t io n a n d c o n t r a v e n ti o n o f N a ti o n a l Tr e a s u r y n o t e s a n d in s tr u c ti o n n o t e s ? A D V P H I L L I P M O K O E N A S C : Ye s . Page 22 of 154 A ls o 15 MAY 2019 – DAY 93 MR MOHAMMED SULEMAN MAHOMEDY: T h e 5 0 0 m i ll io n i n c o n t e x t N k o n k i h a d a c o n tr a c t f o r f iv e y e a r s i n i ti a l ly fr o m 1 A u g u s t 2 0 1 3 to 3 1 J u ly 2 0 1 8 . T h a t to t a l c o n tr a c t w a s f o r 5 0 0 m i ll io n o v e r f iv e y e a r s f o r t h e i n te r n a l a u d i t s e r v ic e w o r k a n d t h i s a p p r o v a l in F e b r u a r y 2 0 1 7 w a s e ffe c t iv e l y g iv i n g t h e m a 5 0 0 m i ll io n i n c r e a s e o n a 5 0 0 m il li o n c o n tr a c t o v e r a 2 4 m o n t h a v e r a g e p e r io d . ADV PHILLIP MOKOENA SC: S o m e a n in g t h a t in to t a l it w o u ld h a v e a c t u a ll y s c o r e d a l m o s t … M R M O H A M M E D S U L E M A N M A H O M E D Y : A b i lli o n R a n d . 10 ADV PHILLIP MOKOENA SC: A b ill i o n – a c o n tr a c t t o t h e v a l u e o f a b i ll io n – o n e b i ll i o n ? MR MOHAMMED SULEMAN MAHOMEDY: Ye s t h a t is c o r r e c t a n d o b v i o u s l y N e o t e l - a s I a l s o e x p l a i n e d a li t tl e e a r li e r - a n d T- S y s t e m s . T- S y s te m s i n – i n Tr a n s n e t G r o u p C a p i t a l w h i le I w a s th e r e I h a d id e n t i fi e d i n t h e e x e c u t io n o f m y fu n c t io n t h e r e c e r t a i n i r r e g u l a r it i e s . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: Those are the key tr a n s a c ti o n s . ADV PHILLIP MOKOENA SC: 20 N o w le t u s f o c u s o u r a t t e n t i o n t o th e 1 0 6 4 l o c o m o ti v e s . W h a t w a s y o u r i n v o lv e m e n t i n t h is tr a n s a c t i o n – if any? MR MOHAMMED SULEMAN MAHOMEDY: C h a ir i n my r o le a s t h e G e n e r a l M a n a g e r o f G r o u p C a p i t a l I n te g r a ti o n a t Tr a n s n e t o n e o f t h e k e y a c c o u n t a b i li ti e s t h a t I h a d w a s m a n a g e m e n t o f t h e c a p it a l p o r tf o li o o f Tr a n s n e t a n d t h a t i n c l u d e d a ll o f t h e k e y p r o je c t s a n d m e g a p r o j e c ts Page 23 of 154 15 MAY 2019 – DAY 93 t h a t Tr a n s n e t w a s c o n t e m p la t in g a t t h e t i m e u n d e r w h a t w a s t h e n c a l l e d t h e M a r k e t D e m a n d S tr a te g y o r s h o r t t h e M D S . T h is w a s a s tr a t e g y t h a t w a s i m p l e m e n te d i n a r o u n d 2 0 11 w i t h a s e v e n y e a r v ie w o f e x e c u ti n g c a p i t a l t h a t w a s i n e x c e s s o f R 3 0 0 b i ll i o n . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: To c r e a te c a p a c i ty a h e a d o f d e m a n d . Th a t w a s t h e p u n c h l in e . W e w a n te d t o c r e a te c a p a c i ty a h e a d o f d e m a n d s o t h a t w h e n th e k e y c o m m o d i ti e s w i t h – w o u ld a c tu a lly m a t e r i a lis e th e i n fr a s tr u c tu r e w o u ld b e in p l a c e a n d w e w o u l d n o t b e 10 d is a d v a n t a g e d a s a c o m p a n y o r a c o u n tr y. O n e m e g a p r o j e c t w i t h in th e 3 0 0 b i ll io n w a s t h e a c q u i s i ti o n o f l o c o m o t iv e s . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: There was a detailed p r o c e s s t o u n d e r s ta n d w h e t h e r t h e r e w a s a b u s i n e s s n e e d f o r Tr a n s n e t a s to w h e t h e r th e y r e q u ir e d l o c o m o ti v e s a n d s p e c i fic a lly t h i s w a s in t h e Tr a n s n e t F r e i g h t R a il D i v is i o n . T h e p r o c e s s o f c r e a ti n g a b u s i n e s s c a s e t a k e s i n t o c o n s i d e r a ti o n t h e b u s i n e s s n e e d , fi n a n c i a l a s s u m p ti o n s a n d a w h o l e h o s t o f o t h e r a c t iv i ti e s . The ownership of that business c a s e is a l w a y s w i th i n t h e o p e r a ti n g d i v is i o n t h a t w il l u t ili s e t h o s e 20 a s s e ts a n d i n th is c a s e i t w a s Tr a n s n e t F r e ig h t R a i l . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: H o w e v e r a t t h e ti m e th e r e w a s a – t h e r e w a s a l e v e l o f in t e n t w h i c h w a s is s u e d t o M c K in s e y o r t h e M c K in s e y C o n s o r ti u m to a s s is t w i th t h e b u s i n e s s c a s e a m o n g s t o t h e r t h i n g s r e l a t e d t o th e a d v is o r y o n 1 0 6 4 . M y r o l e w a s to a c t u a ll y a s s i s t Page 24 of 154 15 MAY 2019 – DAY 93 M c K in s e y i n c o o r d i n a t in g t h e a c ti v i t ie s b e tw e e n F r e ig h t R a il a n d t h e g r o u p fu n c t io n s a n d a ls o m a n a g in g th e p r o c e s s o f g e tt i n g t h e b u s i n e s s c a s e c o m p le t e d a t th e ti m e . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t is l a r g e ly w h e r e i t w a s . A D V P H I L L I P M O K O E N A S C : Ye s a n d a b u s i n e s s c a s e w a s c o m p le t e d . M a y I r e fe r y o u t o p a g e 5 7 ? MR MOHAMMED SULEMAN MAHOMEDY: Ye s a d v o c a t e . T h a t is t h e b u s i n e s s c a s e th a t w a s c o m p l e te d a n d s u b m i t te d . 10 ADV PHILLIP MOKOENA SC: Ye s . N o w in o r d e r f o r u s t o a p p r e c ia t e w h a t d i d i t e n ta il a n d w h e t h e r i t d id a c h ie v e a ls o i t s p u r p o s e m a y I r e fe r y o u t o p a g e 9 0 o f t h e v e r y s a m e d o c u m e n t – t h e b u s i n e s s c a s e – a n d u n d e r t h e h e a d i n g – u n d e r p a r a g r a p h 4 . 3 C h a ir – u n d e r th e h e a d i n g “ A p p r o a c h t o C o s t C a lc u l a ti o n ” a n d t e ll u s w h a t w a s s o u g h t t o b e a c h i e v e d i n th a t p a r a g r a p h a n d w h a t r e a l ly tr a n s p ir e d . MR MOHAMMED SULEMAN MAHOMEDY: C h a i r I t h i n k w h e n y o u lo o k a t t h e a p p r o a c h t o c o s t. A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : T h e fir s t t h i n g th a t w e s p e a k 20 a b o u t h e r e is t o l o o k a t t h e li f e c y c le c o s t o f t h e – o f th e l o c o m o ti v e s a n d a ls o t o fo c u s o n t h e c a p i t a l a n d o t h e r c o s ts . S o n o t n e c e s s a r i ly ju s t w h a t i t w o u ld c o s t t o b u y t h e lo c o m o t i v e s … . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : B u y o u w o u ld h a v e to a s s e s s w h a t i t w o u ld b e o v e r t h e li f e c y c l e o f th is p a r t ic u l a r a s s e t . Page 25 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC: A n d a l l t h o s e is s u e s w o u ld b e f a c t o r e d at that stage? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . ADV PHILLIP MOKOENA SC: S o t h a t in t h e f u t u r e th e r e a r e n o a n y o th e r s u r p r is i n g c o s ts th a t m ig h t b e f e l l Tr a n s n e t . A m I c o r r e c t ? M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t is c o r r e c t . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : I th in k u n d e r 4 . 3 . 1 … A D V P H I L L I P M O K O E N A S C : Ye s . 10 MR MOHAMMED SULEMAN MAHOMEDY: S o m e o f t h e s a li e n t is s u e s o f t h i s p a r t ic u l a r p a r a g r a p h i s a ls o t o w a r d s t h e m i d d l e o f t h a t p a r tic u l a r p a r a g r a p h . It s a y s th a t : “ T h e lo c a li s a t io n c o m p o n e n t w r a p s u p o v e r ti m e . The USD p r ic e component was fo r e c a s t e d by e s c a l a t in g a t U S D in f la t io n a n d c o n v e r ti n g b a c k t o ZAR …” W h i c h is th e S o u th A fr ic a n R a n d . “ …u s i n g f o r w a r d Z A R / U S D h e d g e r a t e s . T h e lo c a l p r i c e c o m p o n e n t w a s e s c a l a t e d a t S o u t h A fr ic a n 20 PPI.” W h y th a t b e c o m e s c r i tic a l a n d i m p o r t a n t i s t h a t w h e n t h e b u s in e s s c a s e w a s p r e p a r e d - a n d a s I s ta t e f u r t h e r d o w n i n m y s ta t e m e n t a s w e l l – w e c a n n o t r e a d t h e b u s i n e s s c a s e i n is o la ti o n o f t h e f in a n c i a l m o d e l that was prepared at the time. A D V P H I L L I P M O K O E N A S C : Ye s . Page 26 of 154 15 MAY 2019 – DAY 93 MR MOHAMMED SULEMAN MAHOMEDY: W h ic h w a s v e r y i n d e p th a s w e ll . W h ic h w a s p r e p a r e d b y Tr a n s n e t F r e i g h t R a il a t t h e ti m e a n d in t h e f in a n c ia l m o d e ls a s w e ll a s i n t h e b u s i n e s s c a s e w e f a c t o r e d i n th e e s c a l a t io n f o r t h e l o c o m o t iv e s . I t w o u l d b e n o r m a l p r a c t ic e a t Tr a n s n e t w h e n y o u c o n s id e r t h a t y o u w o u ld l o o k a t p u r c h a s i n g s o m e t h i n g o v e r p e r i o d o f t i m e . I f y o u w e r e p u r c h a s i n g s o m e t h i n g ju s t f o r th is y e a r y o u m a y n o t h a v e t h e i m p a c t o f e s c a l a t i o n b u t t h is w a s o r ig i n a ll y e n v is a g e d t o b e a s ix y e a r d e l iv e r y p r o g r a m a n d t a k i n g i n t o c o n s i d e r a t i o n th e v a l u e s t h a t w e r e a t p la y o n e w o u l d h a v e h a d to h a v e b r o u g h t i n 10 e s c a l a t io n s o n th e p r ic i n g a n d i t i s c l e a r in b o t h t h e f i n a n c i a l m o d e l a n d o n p a g e 9 0 o f t h e s u b m is s i o n t h a t t h e l o c a l P P I r a t e s a s w e ll a s t h e U S in fl a ti o n r a t e a n d i f m y m e m o r y s e r v i c e s m e c o r r e c t ly I t h i n k i t w a s a t a b o u t 2 . 3 p e r c e n t e s c a l a ti o n . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: O n U S D o ll a r r a t e s t h r o u g h t h e b u s i n e s s c a s e . Th a t m e a n t th a t i n t h e 3 8 .6 b i ll io n w e h a d a lr e a d y f a c to r e d i n a l e v e l o f e s c a la t io n a n d i n fl a ti o n . A D V P H I L L I P M O K O E N A S C : Ye s . N o w m a y I r e fe r y o u t o p a g e 9 7 – in th e s a m e d o c u m e n t M r C h a ir - w i th p a r t ic u l a r r e f e r e n c e t o p a r a g r a p h 20 5 .2 s o t h a t y o u m u s t – w e h a v e to u n d e r s t a n d a s t o w h a t w a s c o n s i d e r e d a t th e t i m e w h e n th e a m o u n t w a s e s ti m a t e d a n d w h a t f a c to r s w e r e ta k e n i n t o c o n s i d e r a t io n . Ta k e u s t h r o u g h p a r a g r a p h 5 . 2 . MR MOHAMMED SULEMAN MAHOMEDY: I t h i n k s u ff ic e t o s a y i n p a r a g r a p h 5 .2 is E X H I B I T 2 9 w h ic h is v e r y c le a r. A D V P H I L L I P M O K O E N A S C : Ye s . Page 27 of 154 15 MAY 2019 – DAY 93 M R M O H A M M E D S U L E M A N M A H O M E D Y : A t t h e t i m e t h a t t h e b u s in e s s c a s e w a s p r e p a r e d t h e fo r e i g n e x c h a n g e – th e s p o t r a t e – w a s R 9 . 1 3 f o r a – f o r o n e S o u t h A fr ic a n R a n d a n d t h e r e a f t e r w e w o u l d h a v e o b t a i n e d t h e f u tu r e p o s s i b le r a te s a n e s ti m a t io n o f th e fo r w a r d c u r v e w h a t w e c a ll t h e fo r w a r d c u r v e . W e w o u l d h a v e o b ta in e d t h a t fr o m e i t h e r fi n a n c i a l i n s t i tu t io n s o f th e e n ti ti e s th a t w e n o r m a lly u s e ( in t e r v e n e s ) . ADV PHILLIP MOKOENA SC: H a v in g r e g a r d t o t h e d u r a ti o n o f th e c o n tr a c t i ts e l f ? 10 M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: So what is important here a d v o c a t e i s t h a t w e d i d f a c t o r i n a n e s c a la ti o n - i f y o u w a n t t o c a l l i t t h a t - i n t h e f o r e i g n e x c h a n g e r a te a g a i n s t t h e U S D o ll a r g iv i n g c o n s i d e r a ti o n t o t h e f a c t t h a t a n u m b e r o f t h e c o m p o n e n ts o f a n y o r i g in a l e q u i p m e n t m a n u fa c tu r e r s u b m i s s i o n w o u l d h a v e a d o ll a r c o m p o n e n t b u t I a ls o th i n k t h a t o n e o f t h e v e r y i m p o r t a n t p o i n ts is t h e la s t p a r a g r a p h o n p a g e 9 7 . A D V P H I L L I P M O K O E N A S C : Ye s . 20 M R M O H A M M E D S U L E M A N M A H O M E D Y : W h i c h ta lk s a b o u t t h e i m p a c t o f l o c a l is a t i o n . Es s e n t ia lly 5 5 p e r c e n t a n d 6 0 p e r c e n t o f th e d i e s e l s a n d e l e c tr i c lo c o m o t iv e s w e r e to h a v e h a d a l o c a l – t h a t i m p a c t o r th a t p e r c e n t a g e o f l o c a lis a ti o n o r t h e l o c a l c o n te n t . T h a t w o u l d m e a n t h a t t h a t p e r c e n t a g e w o u l d n o t n e c e s s a r il y b e s u b j e c t e d t o a fo r e ig n e x c h a n g e i m p a c t b e c a u s e i t w o u ld b e s p e n t l o c a l ly i n o u r c o u n t r y a n d I Page 28 of 154 15 MAY 2019 – DAY 93 t h i n k th e p a r a g r a p h e x p l a i n s i t v e r y, v e r y s i m p ly. I t s a y s : “ L o c a l is a t i o n o f p r o d u c ti o n is a n a tu r a l h e d g e .” ADV PHILLIP MOKOENA SC: Hm. MR MOHAMMED SULEMAN MAHOMEDY: “Exposure would in c r e a s e w i t h a l o w e r l e v e l o f lo c a li s a t i o n . The e x h i b i t b e lo w s h o w s fo r e ig n c u r r e n c y e x p o s u r e f o r a 1 0 p e r c e n t d e v a lu a ti o n s c e n a r i o t o b e 1 . 2 b ill i o n . G iv e n a 7 0 p e r c e n t l o c a l is a ti o n c o m p o n e n t w i th o u t a n y l o c a l is a t i o n e x p o s u r e u n d e r t h is s c e n a r io w o u ld 10 b e 4 b il li o n .” T h a t a ls o e x p l a in s th e i m p a c t o f t h e fo r e i g n e x c h a n g e t o t h e e n ti r e tr a n s a c ti o n . A D V P H I L L I P M O K O E N A S C : Ye s . N o w m a y I r e f e r y o u b a c k to p a g e 5 ? T h a t is n o w y o u r s t a t e m e n t b e f o r e t h e C o m m i s s io n a n d p r o c e e d to t a k e u s th r o u g h p a r a g r a p h 5 . 1 p o i n t t w o o n w a r d s o n t h e 1 0 6 4 lo c o m o t iv e s . MR MOHAMMED SULEMAN MAHOMEDY: I n t e r ms o f t h e b u s i n e s s c a s e f o r th e 1 0 6 4 a s I s a i d e a r li e r o n t h e r e w a s a n a d v is o r y c o n tr a c t t h a t w a s i n i t ia ll y a l s o h a n d e d t o t h e M c K in s e y C o n s o r t iu m . 20 I had no r o l e in t h e p r o c u r e m e n t o f t h a t o r t h e p r o c e s s t h a t w a s fo ll o w e d in t h a t tr a n s a c ti o n a d v i s o r s . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: 2012 at some point. That process commenced in W h e n I g o t t o th e g e n e r a l – s o r r y – t h e G r o u p C a p it a l I n t e g r a t io n a n d A s s u r a n c e D e p a r t m e n t th e le t t e r o f i n t e n t h a d Page 29 of 154 15 MAY 2019 – DAY 93 a lr e a d y b e e n i s s u e d t o M c Ki n s e y. Th r o u g h t h e p r o c e s s w e l e a r n t t h a t t h e Mc K i n s e y C o n s o r ti u m h a d h a d s o m e c h a n g e s . Amongst others L e t s e m a w h o w e r e p a r t o f t h e o r ig i n a l s u b m i s s i o n a n d t h e r e w a s a n in d i c a t io n - a n d a g a in I h a v e n o t s e e n t h e d o c u m e n t a ti o n – b u t th e r e w a s in d i c a t io n t h a t L e ts e m a w e r e s e r v ic e p r o v id e r s o r p l a n n in g t o b e s e r v ic e p r o v i d e r s t o a n e n ti t y t h a t m a y h a v e o r c o u l d h a v e b id i n th e 1 0 6 4 p r o g r a m a lr e a d y. O n c e a g a i n j u s t t o g iv e c o n t e x t . ADV PHILLIP MOKOENA SC: Ja. M R M O H A M M E D S U L E M A N M A H O M E D Y : A d v o c a t e i f y o u w o u l d a l lo w 10 me. A D V P H I L L I P M O K O E N A S C : Ye s p l e a s e . MR MOHAMMED SULEMAN MAHOMEDY: T h e R F P h a d g o n e o u t in J u l y 2 0 1 2 fo r t h e 1 0 6 4 . Ti m e li n e s a r e q u it e i m p o r t a n t a s w e p r o g r e s s t h r o u g h t h is c o n v e r s a ti o n . M c K in s e y. S o in D e c e m b e r 2 0 1 2 t h e L O I is is s u e d t o S u b s e q u e n tl y L e t s e m a i s f o u n d t o h a v e a p o s s ib l e c o n fl ic t o f in t e r e s t a n d l a t e r o n N e d b a n k w e r e a l s o d e e m e d t o h a v e a p o s s i b l e c o n fli c t o f i n te r e s t w h ic h w a s d o c u m e n t e d t h r o u g h l e t t e r s b e t w e e n Tr a n s n e t a n d Mc K i n s e y a s M c K i n s e y w e r e - th e h e a d s o f a g r e e m e n t w e r e h e l d w i t h t h e m - w h e r e i t w a s e x p r e s s e d th a t N e d b a n k h a d s h o w n 20 a n i n t e r e s t in d o w n s tr e a m f u n d i n g a c ti v i ti e s a n d a c c o r d in g l y t h e y d e e m e d to b e h a v in g a c o n fl ic t o f in t e r e s t . R e g i m e n ts h a d b e e n th e r e p l a c e m e n t e n ti ty f o r b o t h – a s f a r a s w e a r e a w a r e – f o r b o t h L e t s e m a a n d N e d b a n k . T h a t c h a n g e d t h e c o n s o r ti u m i n a ll o f i ts fa c e s a n d w e h a v e l e a r n t s u b s e q u e n t to t h e r e v i e w s t h a t h a v e b e e n c o n d u c t e d a ls o b y M N S th a t t h i s p a r tic u l a r c o n t r a c t i s d e e m e d ir r e g u l a r i n t e r m s o f Page 30 of 154 15 MAY 2019 – DAY 93 p r o c u r e m e n t p r o c e s s e s a n d – a n d t h e P F M A a s w e ll . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: W e th e n – o b v i o u s l y t h e business case commenced – the process of preparing the business c a s e c o m m e n c e d w i t h T F R a n d M c K i n s e y. There were a number of is s u e s e t c e t e r a b u t t h e T F R / M c K i n s e y – w h e n I s a y T F R . I t i s th e Tr a n s n e t Fr e ig h t R a i l Te a m s – M c K in s e y a s w e l l a s t h e G r o u p C a p it a l I n t e g r a ti o n Te a m s w o r k to g e th e r. Mr S i n g h – Mr A n o j S in g h – t h e t h e n C F O o f Tr a n s n e t p r o v i d e d t h e k e y o v e r s i g h t r o le in t h i s p r o c e s s o f th e 10 p r e p a r a ti o n o f t h e b u s i n e s s c a s e . I t – i t r e q u ir e d l o n g h o u r s w o r k in g o v e r w e e k e n d s a n d M r S in g h w a s v e r y, v e r y in v o lv e d i n t h is p r o c e s s a n d a t p o i n ts d u r i n g t h e p r o c e s s h e a ls o l ia is e d w it h th e T F R C h i e f E x e c u t iv e - w h o w a s u l ti m a t e l y t h e o w n e r o f th e b u s in e s s c a s e – h e li a is e d w i t h h i m a n d a t th a t ti m e i t w a s M r S iy a b o n g a G a m a . A s I s a i d a d v o c a t e a n d C h a ir th e b u s i n e s s c a s e m u s t b e r e a d i n c o n ju n c t io n w i t h t h e fi n a n c i a l m o d e l . I n s o m e c a s e s s o m e d e t a i l m a y b e in t h e fi n a n c i a l m o d e l b u t m a y n o t b e e x p l ic it ly s ta t e d i n t h e b u s in e s s c a s e . H o w e v e r I t h i n k th e b u s i n e s s c a s e i s q u i t e c o m p r e h e n s i v e . A D V P H I L L I P M O K O E N A S C : Ye s . 20 MR MOHAMMED SULEMAN MAHOMEDY: And I think we have gone t h r o u g h t h e r e le v a n t p a g e s w h e r e i n 5 . 1 7 a s I s t a te : “ T h e b u s i n e s s c a s e i n c l u d e d t h e fo r w a r d c u r v e o n t h e f o r e i g n e x c h a n g e r a te f o r th e U S D o ll a r.” A D V P H I L L I P M O K O E N A S C : A n d t h is w a s a s p e r t h e fi n a n c i a l m o d e l w h ic h w a s p r e p a r e d Mr K a h la ? Page 31 of 154 15 MAY 2019 – DAY 93 MR MOHAMMED SULEMAN MAHOMEDY: Ye s . T h is w a s p r e p a r e d b y Tr a n s n e t Fr e i g h t R a i l. O b v i o u s ly M r K a h l a p r e p a r e d a ll o f i t a n d th e n i t w e n t t h r o u g h s o m e r e v i e w p r o c e s s e s b y M c Ki n s e y a s w e ll a s o u r t e a m s a n d i t i s i n c l u d e d i n th a t p a r t ic u l a r m o d e l a s w e l l a s i t is s t a te d i n th e business case document. A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : A s I s a i d t h e fi n a n c i a l m o d e l p r o v i d e d f o r i n fl a ti o n a d i ff e r e n t r a t e s a t e s ti m a t e s o f b e tw e e n 5 . 9 p e r c e n t fo r t h e S A P P I a n d a p p r o x i m a t e l y 2 .3 p e r c e n t fo r t h e U S D o ll a r. 10 T h e r e i s a n a s s u m p t i o n in th e b u s i n e s s c a s e w h i c h i s 5 0 p e r c e n t lo c a l c o n te n t . W e a r e a w a r e t h a t t h a t is n o t i n li n e w i th t h e D T I c o d e s b u t t h a t w a s a n a s s u m p ti o n i n t h e b u s i n e s s c a s e . I n f a c t th e D T I c o d e s a r e h i g h e r t h a n t h e 5 0 p e r c e n t. T h e a s s u m p ti o n a ls o i n t h e b u s in e s s c a s e is a s ix y e a r d e liv e r y s c h e d u l e . T h e s e t h i n g s b e c o m e r e le v a n t a s w e … ADV PHILLIP MOKOENA SC : (Intervenes). MR MOHAMMED SULEMAN MAHOMEDY: W i ll p r o g r e s s f u r t h e r. C h a ir in t e r m s o f 5 . 1 .7 5 t h e t o ta l c a p it a l a c q u is i t io n c o s t w h ic h w a s e s t i m a t e d in th e b u s in e s s c a s e i n A p r il 2 0 1 3 o f R 3 8 . 6 b i ll i o n a ls o i n c l u d e d R 2 . 2 4 b i ll io n i n w h a t w e c a l l c o n ti n g e n c i e s m a k in g p r o v is io n f o r s o m e t h i n g s 20 t h a t w e m a y n o t h a v e t h o u g h t o f i n th e b u s i n e s s c a s e a n d t h a t i s e x p l ic i t o n p a g e 9 6 o f th e s u b mi s s io n – E X H I B I T 2 8 – w h ic h t a lk s a b o u t t h e lo c o m o t iv e c o n t in g e n c y o v e r t h e p e r io d a t R 2 . 2 4 b il li o n . A D V P H I L L I P M O K O E N A S C : S o e v e r y t h i n g e q u a l Mr M a h o m e d y if o n e lo o k s a t th e b u s i n e s s c a s e a n d t h e fi n a n c i a l m o d e l o n e w o u l d n o t h a v e e x p e c te d a n y in c r e a s e i n to t h e a c q u i s i ti o n o f th e 1 0 6 4 l o c o m o tiv e s a n d Page 32 of 154 15 MAY 2019 – DAY 93 h a v i n g ta k e n u s t h r o u g h a ll t h e fa c to r s t h a t w e r e a c tu a l ly e s t i m a t e d a n d f o r e c a s te d ? MR MOHAMMED SULEMAN MAHOMEDY: A d v o c a t e I t h in k w h e n w e lo o k a t t h e c o m p l e t e b u s in e s s c a s e t h a t w a s s u b m i t te d I th in k w e s h o u l d h a v e a 9 0 t o 9 5 p e r c e n t c o m f o r t – c o n fi d e n c e le v e l i n t h e n u m b e r s th a t w e r e p r o p o s e d . I f th e r e w a s s o m e t h i n g th a t w a s e x tr a n e o u s c o m p le t e l y o u t o f k il t e r w it h w h a t w e h a d p r o je c t e d a n d a n e x a m p l e w o u ld b e if t h e e x c h a n g e r a te w e n t f a r b e y o n d w h a t w e h a d p u t in – y e s t h e r e w o u l d b e a n – t h e r e w o u l d b e a n e x p e c t a t i o n o f a n 10 in c r e a s e . H o w e v e r t h e R 2 . 2 b il li o n c o n ti n g e n c y w o u l d h a v e g iv e n y o u t h a t fir s t r o o m t o m a n o e u v r e a n d o n ly if y o u w e n t b e y o n d th e 2 . 2 b il li o n w o u ld t h e r e b e a n e x p e c ta t io n t o g o b e y o n d R 3 8 .6 b il li o n . S o I h a v e a c o n fi d e n c e i n t h e n u m b e r s t h a t w e r e s u b m i t te d a t th e ti m e b e c a u s e o f t h e b u ff e r t h a t w a s c r e a t e d a n d 2 . 2 b il li o n i s q u i t e a s i g n i fi c a n t n u m b e r w h e n o n e c o n s i d e r s a n y b u s in e s s c a s e . A D V P H I L L I P M O K O E N A S C : Ye s . Fr o m p a g e 6 p a r a g r a p h 5 .1 . 9 y o u p r o c e e d t o h i g h l ig h t c e r t a i n is s u e s f o r t h e C h a ir. Could you please proceed? MR MOHAMMED SULEMAN MAHOMEDY: 20 O n e o f th e k e y a s s u m p t io n s in t h is b u s in e s s c a s e is w h a t w e c a l l t h e d e m a n d p r o f il e w h ic h ta lk s t o t h e e x p e c te d v o l u m e t h a t th e g e n e r a l fr e i g h t b u s in e s s w o u l d d e l iv e r o n . I t b e c o m e s q u it e s i g n i fi c a n t a s a t t h e ti m e o f p r e p a r in g t h e b u s in e s s c a s e w e h a v e t o c o n s i d e r w h e r e t h e m a c r o e c o n o m ic f a c t o r s w e r e . W h e r e w e w e r e a s a c o u n tr y. W e h a d s i g n i fic a n t c h a ll e n g e s fr o m t h e 2 0 0 8 fi n a n c i a l c r is i s – g l o b a l c r is is . T h e r e w a s a l o t o f d is c u s s i o n Page 33 of 154 15 MAY 2019 – DAY 93 around – as I remember talking about – people were talking about g r e e n s h o o ts i n e c o n o m ie s a c r o s s t h e w o r l d . T h e r e w a s a n e x p e c t a ti o n t h a t c o m m o d it i e s w o u l d p ic k u p . S o t h e r e w a s a v i e w t h a t th e r e w a s a – t h e r e w a s a n e e d f o r l o c o m o tiv e s t h a t w e r e r e la t in g to a g r o w t h i n – w h a t w e c a l l – t h e g e n e r a l fr e i g h t b u s i n e s s . Ve r y, v e r y h i g h l e v e l . T h e g e n e r a l f r e ig h t b u s in e s s is a l l o f t h e c o m m o d i t ie s e x c e p t f o r t h e e x p o r t c o a l a n d e x p o r t ir o n o r e . S o a l l o f t h e o t h e r c o m m o d i ti e s t h a t Tr a n s n e t Fr e i g h t R a il m o v e s w o u l d fa ll u n d e r t h e a u s p i c e s o f g e n e r a l f r e ig h t . A t t h a t ti m e w e h a d a p r o j e c t e d v o lu m e f o r g e n e r a l fr e i g h t. To g e t h e r w i th 10 t h e - t o g e t h e r w i th th e q u a l i ty o f l o c o m o t iv e s t h a t e x is te d a t th e t i m e t h e r e w a s a n e e d f o r n e w lo c o m o t iv e s . T h e l a s t b a tc h o f l o c o m o t iv e s t h a t Tr a n s n e t h a d p r o c u r e d in a n y b i g s ig n i f ic a n t p r o c u r e m e n t e v e n t w e n t b a c k to t h e 7 0 s – la t e 7 0 s – I b e l ie v e it w a s . So we had an a v e r a g e a g e i n o u r g e n e r a l fr e i g h t fl e e t t h a t w a s a lr e a d y m o r e t h a n 3 0 y e a r s . L o c o m o t iv e s w o u ld n o r m a lly – t h e y h a d a u s e f u l li f e o f a b o u t 3 0 y e a r s d e p e n d in g o n u t il is a ti o n e tc e te r a . T h e r e a s o n t h i s is i m p o r t a n t is b e c a u s e t h a t p r o j e c t e d d e m a n d , w h i c h w a s in t h e b u s in e s s c a s e , d i d n o t m a t e r i a lis e . N o w o n c e a g a i n in th e d o c u m e n t t h a t w e s u b m i t te d t h e 20 b u s i n e s s c a s e is v e r y c l e a r i n t h e e x e c u t iv e s u m m a r y t o w a r d s t h e la t t e r p a r t o f t h e e x e c u t iv e s u m m a r y w h e r e i t s a y s t h a t – i t ’s o n p a g e 6 6 , i t s a y s Tr a n s n e t ’s p r o c u r e m e n t s tr a te g y r e l a ti n g t o t h i s l o c o m o tiv e s w i ll b e f le x i b l e e n o u g h t o a d a p t t o a c tu a l l o c o m o t iv e d e m a n d t h a t is r e a l is e d o v e r ti m e . T h i s is q u i t e k e y, u p t o y e a r o n e , y e a r t w o t h e r e w a s n o Page 34 of 154 15 MAY 2019 – DAY 93 d e m a n d , i t d i d n o t m a te r i a l is e . A D V P H I L L I P M O K O E N A S C : T h e r e w a s n o d e m a n d a t th e ti m e . MR MOHAMED SULEMAN MAHOMEDY : T h e d e m a n d d id n o t m a t e r i a lis e t o t h e e x p e c t a ti o n i n th e b u s i n e s s c a s e . If w e l o o k a t t h e v a l u e s t h a t w e r e a n t ic ip a t e d w e s h o u l d h a v e b e e n d o in g u p w a r d s o f 11 0 / 1 2 0 m il li o n t o n s a y e a r i n g e n e r a l fr e i g h t . W e c u r r e n t ly h a v e r e a c h e d , l a s t – w e ll t h e p r e v i o u s y e a r w e d i d 9 0 m i ll io n t o n s s o c l e a r ly t h e d e m a n d w a s n o t m a t e r i a lis i n g a s e x p e c t e d . We then had to have lo o k e d a t w h a t t h e r e v is e d p r o f il e s h o u ld h a v e b e e n a n d a c t io n s h o u l d 10 h a v e b e e n ta k e n a n d th a t w a s n o t d o n e . ADV PHILLIP MOKOENA SC : Ye s . MR MOHAMED SULEMAN MAHOMEDY : S o I t h in k t h a t w h e n w e t a l k a b o u t 5 1 8 w e a r e a c t u a l ly t a lk i n g a b o u t t h e d e m a n d a n d a s i t w o u ld h a v e – a s i t w a s e n v is a g e d i n t h e b u s in e s s c a s e . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMED SULEMAN MAHOMEDY : I t h i n k th e o t h e r k e y m a t te r is th a t w h e n w e lo o k a t t h e – a n d a l l o f t h is b e c o m e s q u i t e r e l e v a n t w h e n w e s ta r t l o o k i n g a t t h e i n c r e a s e i n E T C o r t h e i n c r e a s e i n th e e x p e c te d to t a l c o s t o f t h e p r o j e c t a li t t le l a te r o n . W h e n w e m o d e l l e d 20 a l l o f t h e n u m b e r s r e l a ti n g to t h e e x p e c t e d v o l u m e s , th e e x p e c te d r e v e n u e , t h e c o s ts , th e t o t a l c o s t o f o w n e r s h i p t h i s p r o j e c t y i e l d e d C h a ir p e r s o n w h a t is c a ll e d a n e t p r e s e n t v a l u e p o s i ti v e , m e a n i n g th a t t h is b u s i n e s s c a s e w o u l d a t th e e n d o f th e d a y y ie ld a p o s i tiv e b e n e f i t t o Tr a n s n e t . It ’s q u i t e i m p o r t a n t , i t ’s in t h e d o c u m e n ts . ADV PHILLIP MOKOENA SC : Ye s . Page 35 of 154 15 MAY 2019 – DAY 93 MR MOHAMED SULEMAN MAHOMEDY: O b v io u s ly a s I s a i d i n J u l y 2 0 1 2 w h e n t h e R F P w e n t o u t t e n d e r s w o u l d h a v e b e e n r e c e iv e d , b u t t h e y w o u l d h a v e b e e n , t h e y w o u l d r e m a in e d c lo s e d b e c a u s e w e h a d n o t a t t h a t p o i n t r e c e iv e d th e a p p r o v a l fr o m t h e M i n i s t e r i n t e r m s o f S e c t i o n 5 4 o f th e P F M A , w h ic h w a s n e c e s s a r y, s o t h e d o c u m e n ts w o u l d h a v e a l l s t a y e d s e a l e d , t h e p r o c e s s o f a p p r o v a l w i t h i n Tr a n s n e t , i n t e r n a l ly c o m m e n c e d i n a b o u t A p r il 2 0 1 3 w h e r e it w e n t t h r o u g h t o r e l e v a n t m a n a g e m e n t c o m m i t t e e s a n d th e n th r o u g h t o t h e s u b - c o m m i t t e e s o f t h e B o a r d a n d t h e n u lt i m a t e ly t o th e B o a r d , w h o t h e n m a d e a s u b m is s i o n t o 10 t h e s h a r e h o l d e r M i n i s t e r fo r th e S e c ti o n 5 4 a p p r o v a l , w h ic h w a s r e c e i v e d i n A u g u s t 2 0 1 3 fr o m t h e th e n M in is te r o f P u b l ic E n te r p r is e s w h ic h I t h i n k w a s M r M a l u s i G i g a b a . ADV PHILLIP MOKOENA SC : Ye s . MR MOHAMED SULEMAN MAHOMEDY : O n c e th a t a p p r o v a l w a s r e c e i v e d th e n t h e e v a l u a ti o n p r o c e s s e s w o u l d c o m m e n c e a n d t h e evaluation processes would look at a number of factors, it would look at s u p p ly d e v e l o p m e n t , B B B E E , t h e fi n a n c ia l a s p e c t s , t h e t e c h n i c a l a s p e c ts and the – you know whether t h e r e ’s c o m p l ia n c e r e s p o n s iv e n e s s fr o m a l l o f t h e t e n d e r e r s a t th e ti m e . 20 and T h is w a s c o n d u c t e d b y t e a ms w i th i n th e Tr a n s n e t Fr e i g h t R a il s p a c e a n d t h e r e w a s n o i n v o lv e m e n t f r o m e it h e r m y s e l f o r m y t e a m i n t h a t p a r ti c u la r p r o c e s s o f e v a lu a ti o n a c r o s s a n y o f th a t . ADV PHILLIP MOKOENA SC : Why was your team or that Department e x c lu d e d ? MR MOHAMED SULEMAN MAHOMEDY : Page 36 of 154 T h a t w o u ld b e n o r m a l 15 MAY 2019 – DAY 93 p r o c e s s th a t t h e o w n e r s o f th e b u s in e s s c a s e a n d t h e o w n e r o f th e p r o c u r e m e n t tr a n s a c ti o n w o u l d c o n d u c t th o s e e v a lu a ti o n s . It w o u l d n ’ t h a v e b e e n , i t ’s n o t u n c o m m o n t h a t t h e g r o u p t e a m s g e t in v o lv e d a t s o m e p o i n t , b u t in t h i s c a s e w e r e n o t i n v o l v e d a t a l l. ADV PHILLIP MOKOENA SC : Ye s , n o w fr o m p a r a g r a p h 5 . 1 .11 y o u ’ r e t a lk in g a b o u t th e v e r y s a m e i s s u e t h a t y o u a r e n o l o n g e r in v o lv e d p o s t that stage. MR MOHAMED SULEMAN MAHOMEDY : S o I th i n k A d v o c a t e t o g iv e s o m e c o l o u r t o t h i s s u b s e q u e n t t o th e c o m p le t io n o f th e b u s i n e s s c a s e 10 t h e a p p r o v a l s a n d t h e e v a l u a t i o n s t h e r e w a s a d is c u s s i o n a r o u n d w h o w o u ld fo r m p a r t o f t h a t n e g o t i a t i n g te a m t o n o w g e t i n t o c o n t r a c t i n g s t a g e , b e c a u s e y o u n o w h a d th e e v a lu a ti o n s , y o u h a d e v e r y t h in g t h a t w a s n o w c o m p l e te d , a n d o n e w o u l d e x p e c t t h a t t h a t w o u ld h a v e b e e n a l l d o n e i n t e r m s o f a ll o f t h e l e g i s l a t e d p r o c e s s e s a n d i n t e r n a l procedures. Yo u w o u ld n o w e n g a g e i n w h a t w e n o w c a ll t h e p o s t - t e n d e r n e g o t ia t io n s . T h i s w a s t o h a v e b e e n – t o h a v e c o m m e n c e d i n a b o u t t h e f ir s t w e e k o f F e b r u a r y a n d a s I m e n ti o n e d a r o u n d t h e 3 r d o r 4 t h o f F e b r u a r y 2 0 1 4 , my m e m o r y is n o t e x a c t , b u t I r e m e m b e r it w a s e i t h e r a M o n d a y 20 o r Tu e s d a y i n t h e f ir s t w e e k o f F e b r u a r y I w a s i n fo r m e d b y M r Ar n o t S i n g h t h a t I w o u ld n o t h a v e a n y f u r th e r r o l e in t h e n e g o ti a ti o n s a n d th a t I w o u l d b e s p e n d in g ti m e a t th e o ff ic e a n d m a k i n g s u r e th a t th a t w o u l d c o n ti n u e i n t e r m s o f t h e s u s t a i n a b il it y o f f i n a n c e a n d h e w a s a p p o i n t e d t h e n , a n d t h is is w h a t h e in f o r m e d m e t h a t h e w a s a p p o in t e d b y M r M o le f e , Br ia n M o le f e a t t h e ti m e , t o h e a d u p t h e n e g o t ia t io n s . Page 37 of 154 15 MAY 2019 – DAY 93 O n th e s a m e d a y I w a s a ls o in f o r m e d b y o n e o f t h e m e m b e r s o f t h e M c K i n s e y te a m o f t h e ir w i t h d r a w a l fr o m t h e n e g o t ia t io n t e a m . I n i ti a l ly i t w a s e n v i s a g e d t h a t t h e y w o u ld b e s i g n i f ic a n t ly i n v o lv e d in t h e n e g o ti a ti o n t e a m , a s s is t in g Tr a n s n e t , n o t n e c e s s a r i ly d ir e c tl y i n v o lv e d b u t a s s is ti n g Tr a n s n e t i n n e g o t i a t i o n t h r o u g h w h e t h e r i t w a s th e s tr a t e g y of negotiation through whether it was th e s tr a t e g y of n e g o ti a ti o n d e f in in g t h e p a r a m e t e r s a n d a ls o a s s is ti n g i n t e r m s o f p r o v i d in g Tr a n s n e t w i t h i n s i g h ts f r o m t h e ir g lo b a l e x p e r i e n c e i n n o t n e c e s s a r i ly j u s t lo c o m o t iv e s b u t o th e r s i g n if ic a n t tr a n s a c ti o n s . 10 ADV PHILLIP MOKOENA SC : Ye s , b u t w h y – w h a t w a s th e r e a s o n fo r t h e m w i th d r a w i n g ? MR MOHAMED SULEMAN MAHOMEDY : I’ m n o t e n tir e l y c l e a r b u t I w a s g i v e n s o m e i n d ic a ti o n th a t t h e r e w a s a – t h e r e w a s d i s c o m f o r t fr o m M c K in s e y a r o u n d t h e ti m i n g , o r t h e p r o p o s e d ti m i n g t h a t Tr a n s n e t w a s p u t t in g o n t h e t a b l e to n e g o t ia t e s u c h a s ig n i f ic a n t tr a n s a c ti o n . T h e r e w a s t a lk s o f a s ix w e e k n e g o t ia t io n p e r i o d w h ic h o b v i o u s ly d id n ’ t m a k e t o o m u c h s e n s e w h e n y o u g iv e c o n s i d e r a ti o n t o t h e f a c t t h a t w e r e t a lk in g a b o u t w h a t o f t h e ti m e , i f m y m e m o r y s e r v e s m e c o r r e c tl y w a s o n e o f th e s i n g l e b ig g e s t l o c o m o ti v e tr a n s a c t io n i n t h e w o r l d , a n d w e 20 w e r e ta lk in g a b o u t n e g o t i a t i n g th is o v e r s i x w e e k s . W e h a d n e g o ti a te d a n d I w a s i n v o lv e d i n t h e 9 5 l o c o n e g o t ia ti o n w h ic h t o o k p r o b a b ly t h e s a m e p e r io d o f ti m e a n d t h a t w a s f o r 9 5 lo c o m o t iv e s , s o I t h i n k w h a t in d i c a t io n I h a d g o t a t th e t i m e , a n d it m a y b e tr u e o r n o t , b u t I h a d g o t t h a t i n d ic a ti o n fr o m a n i n d i v i d u a l a t M c K i n s e y th a t t h e r e w a s d is c o m f o r t in t e r m s o f Tr a n s n e t “ r u s h i n g ” t h e n e g o t ia t i o n p r o c e s s . Page 38 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC : W h a t t h e n h a p p e n e d a f t e r i t w i th d r e w, a ft e r M c K in s e y w i th d r e w ? MR MOHAMED SULEMAN MAHOMED Y : A s fa r a s I ’ m a w a r e Mc K i n s e y t h e n w i t h d r e w a n d t h e r e w a s a c e s s io n o r a – f o r p u r p o s e s I k n o w t h e la w y e r s t h a t a r e s i t ti n g h e r e w il l s a y t o m e i t w a s n o t a s e s s io n , t h e r e w a s a p u r p o r t e d s e s s i o n o f t h e M c K in s e y lo c o m o t iv e a d v i s o r y c o n tr a c t a n d t h e r e a s o n I s a y th a t C h a ir i s b e c a u s e w e h a v e n o t b e e n a b l e t o fi n d a c e s s i o n a g r e e m e n t b e tw e e n M c Ki n s e y a n d R e g i m e n ts o n t h is c e s s i o n . W h a t w e d o h a v e is a le t t e r, I t h i n k th a t ’s m a r k e d I t h i n k i t ’s 10 A n n e x u r e 6 i f I c a n r e f e r e n c e i t w h e r e M c K in s e y a c tu a lly w r i te s to Tr a n s n e t . . .( in t e r v e n ti o n ) ADV PHILLIP MOKOENA SC : I th in k i t ’s p a g e 1 7 5 . MR MOHAMED SULEMAN MAHOMEDY : Ye s i t’s p a g e 1 7 5 . CHAIRPERSON : Thank you. MR MOHAMED SULEMAN MAHOMEDY : P a g e 1 7 5 i s a le t t e r fr o m M c K in s e y s t a ti n g t h a t th e – a l l r ig h ts a n d o b l i g a t io n s c r e a te d t h r o u g h t h e 1 0 6 4 l o c o m o t iv e a d v i s o r y w a s c e d e d a n d / o r d e l e g a t e d t o R e g i m e n ts c a p i t a l i n a c c o r d a n c e w i th s u c h a g r e e m e n t t o d is c u s s i o n . T h e r e is n ’ t a c e s s i o n a g r e e m e n t a s f a r a s w e a r e a w a r e , h o w e v e r i t is a ls o w o r t h y to 20 n o t e C h a ir th is l e t te r i s w r it t e n t h e 1 6 t h o f A p r il 2 0 1 4 . A s w e g o f u r t h e r d o w n i n t h e d o c u m e n t y o u w il l a l s o f in d t h a t t h e e x a c t M S A , w h ic h is t h e M a s t e r S e r v ic e L e v e l A g r e e m e n t, w a s a c t u a ll y o n ly s i g n e d b y M c K in s e y o n t h e 2 1 s t o f F e b r u a r y 2 0 1 4 , w h ic h is s u b s e q u e n t t o t h e c e s s i o n d a t e , a n d it m a y b e i n t e r e s ti n g b u t t h a t ’s t h e f a c ts t h a t w e h a v e a t t h i s p o i n t i n ti m e . Page 39 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC : N o w o t h e r t h a n t h e l e tt e r t h a t y o u s e e o n p a g e 1 7 5 y o u a r e s a y in g t h a t f r o m t h e r e c o r d s o f Tr a n s n e t t h e r e w a s never a cession agreement? MR MOHAMED SULEMAN MAHO MEDY: Not in my understanding there was not a cession. ADV PHILLIP MOKOENA SC : W h a t I w a n t to a ls o u n d e r s ta n d w h a t w a s t h e s t a tu s o f th e l e tt e r o f i n te n t i f is r e c o r d e d , b e tw e e n M c K in s e y a n d Tr a n s n e t a t t h is s t a g e o f th is p u r p o r t e d c e s s io n ? MR MOHAMED SULEMAN MAHOMEDY: 10 A s f a r a s I ’ m a w a r e in – t h e r e w e r e c e r ta i n e x t e n s i o n s t o t h e l e t t e r o f i n t e n t a n d a t s o m e p o i n t a g a in i n m y d o c u m e n t I th i n k i t’s la t e r o n , w e t a l k a b o u t t h e le t t e r o f in t e n t ; t h e v a l id i ty p e r i o d h a d b e e n e x te n d e d t o th e 3 0 t h o f N o v e m b e r 2013. I d o n ’ t b e l i e v e fr o m t h e d o c u m e n ts t h a t w e ’v e r e v ie w e d th a t t h e r e w a s a f u r th e r e x t e n s i o n t o th is L O I , a n d t h e r e f o r e t h is l e tt e r o f in t e n t h a d e s s e n ti a l ly e x p ir e d . ADV PHILLIP MOKOENA SC : N o w a s s u m in g th a t th e r e c o u l d h a v e b e e n t h a t c e s s i o n , I k n o w y o u s a id p u r p o r te d c e s s i o n , w h a t r i g h t s , if a n y, w o u ld M c K i n s e y h a v e to c e d e y o u k n o w t h e c o n tr a c t, h a v i n g r e g a r d t o t h e f a c t t h a t th e l e t t e r o f i n t e n t h a s l a p s e d ? 20 MR MOHAMED SULEMAN MAHOMEDY : I guess that you know s o m e t h i n g t h a t t h e la w y e r s w o u ld h a v e t o d e b a te b u t i f t h e l e t te r o f in t e n t e x p ir e d w i th o u t a M a s t e r S e r v i c e L e v e l A g r e e m e n t b e i n g d r a w n u p t h e r e e s s e n t i a l ly is n ’ t a c o n tr a c t t h a t c a n b e e n t e r e d in t o a s f a r a s I understand. ADV PHILLIP MOKOENA SC : Ye s . But we know that when this Page 40 of 154 15 MAY 2019 – DAY 93 c e s s i o n o c c u r r e d th e r e w a s n e v e r a n y t e n d e r p r o c e s s in r e l a ti o n t o th e s e r v ic e s t o b e r e n d e r e d b y R e g i m e n t s ? MR MOHAMED SULEMAN MAHOMEDY : No there wasn’t a tender p r o c e s s t h a t w e n t t h r o u g h a n d i n f a c t I th i n k w h e n w e l o o k a t t h e R e g i m e n t s ’ i n v o lv e m e n t i n t h is a s w e p r o g r e s s e d , i f I c a n c a l l i t t h a t, in t o 2 0 1 5 t h is c o n tr a c t m o v e d fr o m a v a l u e o f a p p r o x i m a te ly R 3 5 m il li o n t o o v e r o r c lo s e t o 2 7 0 / 2 8 0 m ill i o n a n d R e g i m e n t s w e r e t h e p r i m a r y b e n e fic i a r i e s in t h a t e x t e n s i o n o f v a l u e i n t i m e . ADV PHILLIP MOKOENA SC : 10 Ye s . M a y I t h e n r e f e r y o u b a c k t o y o u r s t a te m e n t , p a g e 7 M r C h a ir. C H A I R P E R S O N : I t h i n k M r M o k o e n a . .. ( i n t e r v e n t i o n ) MR MOHAMED SULEMAN MAHOMEDY : 177. CHAIRPERSON : is . .. looks l ik e t h is th e time for the short adjournment. ADV PHILLIP MOKOENA SC : I w a s a s s u r e d t h a t I w o u l d n e v e r m is s t h a t ti m e . CHAIRPERSON : W e a r e g o i n g t o t a k e th e s h o r t a d j o u r n m e n t a n d w e w i ll r e s u m e a t h a l f p a s t e l e v e n . W e a d j o u r n . I N Q U I RY A D J O U R N S 20 I N Q U I RY R E S U M E S C H A I R P E R S O N : Yo u m a y p r o c e e d Mr M o k o e n a . ADV PHILLIP MOKOENA SC: Ye s . M r C h a ir b e f o r e I p r o c e e d I a m in f o r m e d t h a t w e h a v e n o w e ffe c t e d t h e n e c e s s a r y c h a n g e s t o E x h ib i t B B 3 . 1 a n d E x h ib i t B B 3 . 2 s o t h a t th e y m u s t n o t b e a n y s e n s e t h a t t h e r e is a n y n u m b e r o r … Page 41 of 154 15 MAY 2019 – DAY 93 C H A I R P E R S O N : J a n o t t h a t is fi n e . ADV PHILLIP MOKOENA SC : E x h i b i t t h a t i t is m i s s in g fr o m t h e proceedings. CHAIRPERSON : Thank you. A D V P H I L L I P M O K O E N A S C : Ye s . Mr M a h o m e d y j u s t b e f o r e th e t e a a d j o u r n m e n t I w a s a b o u t t o r e fe r y o u t o p a g e 7 o f y o u r w i tn e s s s t a te m e n t w i th p a r t ic u l a r r e fe r e n c e t o p a r a g r a p h 5 .1 . 1 3 f o r y o u to please take us through that. M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir a s I a ll u d e d t o e a r l i e r 10 o n t h e r e w a s a p u r p o r te d s e s s i o n o f t h e M c Ki n s e y c o n t r a c t f o r t h e 1 0 6 4 a d v is o r y w h ic h t h e e a r li e s t w a s e ff e c t iv e o n t h e 4 F e b r u a r y 2 0 1 4 i n t e r m s o f t h e d o c u m e n t n u m b e r e d 1 7 5 o r o n t h e 5 Fe b r u a r y – m y a p o lo g i e s . H o w e v e r C h a ir i n – I h a v e r e v i e w e d s o m e d o c u m e n t a ti o n t h a t s u g g e s t t h e r e w a s a c o n tr a c t t h a t w a s e n te r e d in t o b e tw e e n Tr a n s n e t r e p r e s e n t e d b y M r A n o j S i n g h a n d R e g i m e n t s r e p r e s e n t e d b y M r N i v e n P il la y a t t h e t i m e t h a t d a t e s to t h e 2 0 J a n u a r y 2 0 1 4 w h ic h is f o r t h e v e r y s a m e s e r v ic e s a n d i t is h e a d e d ‘ Tr a n s a c ti o n A d v is o r y S e r v ic e s r e la t e d t o t h e a c q u is i ti o n o f 1 0 6 4 l o c o m o t iv e s o v e r a p e r i o d o f t w e lv e m o n t h s . ’ A n n e x u r e s – p a g e 1 7 7 . 20 A D V P H I L L I P M O K O E N A S C : Ye s b e f o r e w e g o th e r e . B u t i f y o u l o o k a t t h e ti m e li n e y o u k n o w i n r e l a ti o n to t h e p u r p o r te d s e s s i o n a n d th is a g r e e m e n t th a t y o u s a y t h a t y o u h a v e n o w r e v i e w e d h o w w a s th is p o s s i b le , h o w – w h a t h a p p e n e d ? MR MOHAMMED SULEMAN MAHOMEDY : Th is is e x a c t l y p a r t o f t h e c o n fu s i o n a n d w h e r e o n e g e ts t o t h e c o n c l u s i o n th a t t h e r e s e e m s to b e Page 42 of 154 15 MAY 2019 – DAY 93 o r s e e m e d t o h a v e b e e n p a r a l le l p r o c e s s e s i n p l a y a t t h e t i m e . The p u r p o r t e d s e s s i o n r i g h t fu ll y o r w r o n g f u l l y t h e – h a p p e n e d o n t h e 5 February 2014. However before that date on the 20 January 2014 there s e e m s a lr e a d y t o b e a n a g r e e m e n t b e t w e e n R e g i m e n ts a n d Tr a n s n e t to e x e c u te o n th e v e r y s a m e c o n tr a c t t h a t Mc K i n s e y i s t h e h e a d s o f a g r e e m e n t w i th . ADV PHILLIP MOKOENA SC : And no procurement processes obviously? MR MOHAMMED SULEMAN MAHOMED Y : 10 Th e r e is n o p r o c u r e m e n t p r o c e s s e s a s f a r a s w e a r e a w a r e t h a t w e r e o n t h i s m a t t e r b u t in a d d it i o n if w e a c t u a l ly l o o k a t p a g e 1 8 0 o r t h e s a m e d o c u m e n t … ADV PHILLIP MOKOENA SC : Mr C h a i r m a y I r e fe r y o u fi r s t – Mr Mahomedy let us go to page 177. M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . A D V P H I L L I P M O K O E N A S C : A n d t h e n p l e a s e id e n ti fy t h a t d o c u m e n t ? MR MOHAMMED SULEMAN MAHOMEDY : C h a ir t h i s i s th e d o c u m e n t t h a t I a m r e f e r e n c i n g w h ic h s a y s t h a t t h e r e i s a n a g r e e m e n t b e t w e e n Tr a n s n e t a n d R e g i m e n ts . I n f a c t i t is o n a le t t e r h e a d th a t i n c o r p o r a t e s b o t h e n ti t i e s . 20 A D V P H I L L I P M O K O E N A S C : Ye s a n d … M R M O H A M M E D S U L E M A N M A H O M E D Y : Tr a n s n e t a n d R e g i m e n ts . A D V P H I L L I P M O K O E N A S C : A n d w h a t is t h e d a t e o f t h a t le t t e r ? MR MOHAMM ED SULEMAN MAHOMEDY : The 20 January 2014. A D V P H I L L I P M O K O E N A S C : Ye s . N o w l e t u s g o t o t h e p a g e th a t y o u w a n t e d t o t a k e t h e C h a ir to t h a t w i ll b e p a g e 1 8 0 . Ye s . Page 43 of 154 15 MAY 2019 – DAY 93 M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . C h a ir i f w e l o o k a t t h e s ig n a tu r e s o n th e d o c u m e n t M r A n o j S i n g h is a s ig n a t o r y a n d n e x t to t h a t – n e x t t o h is s i g n a t u r e i s m a r k e d s u b j e c t t o it e m s lis t e d b e l o w. A n d a m o n g s t th e t h i n g s t h a t a r e l is t e d b e l o w i t s a y s : “ C o s ts a n d p a y m e n t a g a i n s t th is s c o p e m a y n o t b e made.” A D V P H I L L I P M O K O E N A S C : Te ll – t e l l u s – t e l l t h e C h a ir w h e r e y o u are reading? M R M O H A M M E D S U L E M A N M A H O M E D Y : I a m r e a d in g th e l a s t l in e o n 10 p a g e 1 8 0 C h a ir – m y a p o l o g i e s . A D V P H I L L I P M O K O E N A S C : T h e h a n d w r i t te n . MR MOHAMM ED SULEMAN MAHOMEDY : Thank you. MR MOHAMMED SULEMAN MAHOMEDY : The handwritten. I t is handwritten. C H A I R P E R S O N : T h e h a n d w r i t te n n o t e ? A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s C h a ir. C H A I R P E R S O N : O k a y. MR MOHAMM ED SULEMAN MAHOMEDY : It says: 20 “ C o s ts a n d p a y m e n t a g a i n s t th is s c o p e m a y n o t b e m a d e a b o v e R 9 m il li o n w i t h o u t s p e c if ic a p p r o v a l .” T h i s is 2 0 1 4 . A D V P H I L L I P M O K O E N A S C : Ye s . C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : Page 44 of 154 W e l a te r le a r n th a t t h is 15 MAY 2019 – DAY 93 a m o u n t e x c e e d e d R 2 8 4 m i ll io n . CHAIRPERSON : Hm. A D V P H I L L I P M O K O E N A S C : I t w a s n o t t o e x c e e d R 9 m i lli o n … M R M O H A M M E D S U L E M A N M A H O M E D Y : T h i s is … ADV PHILLIP MOKOENA SC : But upon review it is – it exceeded how much? MR MOHAMMED SULEMAN MAHOMEDY : I t e x c e e d s R 2 8 0 m i ll io n . T h i s w a s – a n d i t s a y s w i t h o u t t h e s p e c i f ic a p p r o v a l b y Tr a n s n e t . H o w e v e r t h e d o c u m e n t is o u t o f s y n c i n t e r m s o f t i m e l in e s , c l e a r l y o u t 10 of sync. I t d o e s n o t m a k e s e n s e t h a t Tr a n s n e t w o u ld b e n e g o t i a t i n g w i t h a s e r v ic e p r o v i d e r w h o is g o i n g t o b e c o m e th e – w h a t w o u ld y o u c a l l i t ? Th e c e s s i o n a r y o r t h e c a d e n t o f t h e t r a n s a c t io n . C H A I R P E R S O N : J a t h e c e s s i o n a r y. MR MOHAM MED SUL EMAN MAHOM EDY : While – the cessionary while t h e r e is a – s e e m s a s t h o u g h t h e r e is a c o n v e r s a ti o n t a k i n g p la c e w h i ls t t h is is s ti ll b e i n g d i s c u s s e d . CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : S o e ff e c t iv e ly t h e c e s s i o n a s I u n d e r s t a n d i t b e t w e e n Tr a n s n e t a n d M c K in s e y w a s a – w a s a n 20 ir r e l e v a n t d is c u s s i o n b e c a u s e th is a g r e e m e n t w a s a l r e a d y d r a w n b e fo r e that date. CHAIRPERSON : Hm. ADV PHILLIP MOKOENA SC: A lr e a d y b e fo r e t h a t d a t e t h e r e w a s a n e x i s ti n g a g r e e m e n t ? MR MOHAMM ED SUL EMAN MAHOMEDY: Agreement. Page 45 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC : B e t w e e n th e t w o p a r t ie s ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : W h a t is a ls o I th in k to a d d to t h is A d v o c a te is t h e f a c t t h a t th is a g r e e m e n t o r t h i s s u p p o s e d a g r e e m e n t is d r a f t e d w i t h Tr a n s n e t a n d R e g i m e n ts o n a Tr a n s n e t a n d R e g i m e n t s le t t e r h e a d . T h a t i s n o t n o r m a l p r a c ti s e i n Tr a n s n e t . Th a t is n o t w h e r e w e p r e s e n t l e g a l d o c u m e n ts w i t h s h a r i n g l e t te r h e a d s o r b r i n g i n g i n l o g o s o f d i ffe r e n t e n ti t ie s o n to l e g a l c o n tr a c ts . 10 A D V P H I L L I P M O K O E N A S C : Ye s . CHAIRPERSON : m e n ti o n i n g W e ll M r M o k o e n a th e f is s u r e th a t M r M a h o m e d y i s sounds l ik e s o m e t h in g I have heard before in th is c o m m i s s io n a n d i t m a y h a v e b e e n in r e l a ti o n to E s k o m w h e r e t h e le t t e r h e a d o f a S O E o r a l e t t e r r e fl e c t e d t h e le t t e r h e a d o r e m b l e m o r lo g o o f th e S O E ’s a s w e l l a s o f t h e … A D V P H I L L I P M O K O E N A S C : S e r v i c e p r o v id e r. C H A I R P E R S O N : P r o p o s e d s e r v ic e s u p p l i e r a n d i n r e g a r d t o t h a t th e r e was also queries about how that came about and I thin k whoever was g iv i n g e v i d e n c e m a y a ls o h a v e s a id t h a t w a s u n u s u a l. 20 I think I r e m e m b e r I a s k e d th e q u e s ti o n h o w it w a s p o s s i b l e th a t i t s h o u l d b e lik e t h a t . S o s o m e b o d y w il l ju s t n e e d t o g o a n d c h e c k a n d s e e w h e t h e r m a y b e th is i s h o w s o m e o f th e s e t h i n g s w e r e b e in g d o n e . A D V P H I L L I P M O K O E N A S C : I n d e e d C h a ir. N o w y o u c o n c l u d e n e a tl y o n t h a t a s p e c t w i t h r e f e r e n c e t o y o u r p a r a g r a p h 5 . 1 .1 4 . P le a s e ta k e t h e C h a ir t h r o u g h i t e v e n t h o u g h I a m s u r e t h a t y o u mi g h t h a v e v e n ti l a t e d Page 46 of 154 15 MAY 2019 – DAY 93 s a m e t h r o u g h y o u r e v id e n c e . MR MOHAMMED SULEMAN MAHOMEDY : ill u s tr a t e s f u r t h e r t h e r e w a s a C h a ir I t h in k th e a b o v e p a r a ll e l s y s te m a t p l a y because M c K in s e y h a v i n g b e e n a p p o i n te d t h r o u g h a p r o c u r e m e n t p r o c e s s f o r t h e tr a n s a c ti o n a d v is o r y s e r v ic e th e r e w a s a p a r a ll e l a p p o i n t m e n t o f R e g i m e n t s i n J a n u a r y 2 0 1 4 f o r t h e s a m e s e r v ic e . A n d I t h i n k t h a t is e x p l a i n e d t h r o u g h t h e ti m e li n e t h a t I p o i n t e d o u t e a r li e r o n . A D V P H I L L I P M O K O E N A S C : Ye s . N o w e a r l ie r o n w h e n y o u g a v e t h e C h a ir t h e s u m m a r y o f t h e t o p ic s t h a t y o u w i ll b e c a n v a s s i n g y o u d id 10 a ls o t a l k t o t h e u n j u s t if i e d i n c r e m e n t o f t h e E T C . N o w c o u l d y o u p l e a s e p r o c e e d to p r o v id e m u c h m o r e d e t a i ls a n d c la r i ty a r o u n d t h is i s s u e ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir w h e n th e n e g o ti a ti o n s w i t h th e O E M ’s w e r e c o m p le t e w e w e r e t h e n in f o r m e d t h a t t h e E T C w h a t w e c a l l th e E T C th e e s ti m a t e d t o ta l c o s t o f c o m p le t io n o f t h e 1 0 6 4 lo c o m o t iv e t r a n s a c t io n w a s n o w g o i n g t o b e i n t h e r e g io n o f R 5 4 b i ll i o n w h ic h i n c l u d e s a c o n ti n g e n c y. I r a is e d t h e m a t t e r w i th M r A n o j S i n g h to e n q u ir e i n te r ms o f w h a t h a d t r a n s p ir e d a n d h e g a v e m e s o m e v e r y h i g h le v e l r e a s o n s s t a ti n g e s c a la t io n s , if w e n e e d e d t o g o o u t o n t h is lo n g t e r m o r l o n g e r te r m f o r e ig n e x c h a n g e t h e r a t e h a d d e t e r i o r a te d a t t h e 20 ti m e g iv e n th a t b u t h e s a id t h a t th e r e w a s a d e ta il e d r e p o r t t h a t w a s b e i n g p r e p a r e d fo r th e a p p r o v a l o f t h e b o a r d w h o w a s th e a c c o u n ti n g a u t h o r i ty a t th e t i m e . A n d t h a t w a s w h e r e t h a t m a t te r w a s le f t f o r t h a t p o i n t . H o w e v e r o n e o f th e t h i n g s t h a t w e a r e n o t a w a r e o f , w e h a v e n o t s e e n t h e d o c u m e n t a ti o n i n te r m s o f … CHAIRPERSON : I a m s o r r y a s a m a tt e r o f i n t e r e s t w h a t w a s y o u r Page 47 of 154 15 MAY 2019 – DAY 93 r e a c ti o n t o w h a t y o u s a y h ig h l e v e l r e a s o n s t h a t h e g a v e y o u ? MR MOHAMM ED SULEMAN MAHOMEDY : We did… C H A I R P E R S O N : W e r e t h e y c o n v i n c in g to y o u ? M R M O H A M M E D S U L E M A N M A H O M E D Y : N o t n e c e s s a r i ly C h a ir. CHAIRPERSON: Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : T h e r e w e r e a s I s a i d th e t w o c le a n m a t t e r – t h e c le a r m a t te r s t h a t h e p u t o n t h e ta b le a t t h e ti m e w a s e s c a l a ti o n s w h ic h i f w e l e f t i t o u t fo r s ix o r s e v e n y e a r s i t w o u ld cost the company too much and the foreign e xchange. I remember him 10 s a y in g t h a t i t w o u l d h a v e c o s t u s m o r e t h a n – m o r e th a n a n o t h e r R 1 0 b i ll io n i f w e l e ft i t . S o w h e n I s a y a n o th e r R 1 0 b il li o n i t w o u l d h a v e g o n e t o b e y o n d R 6 0 b i ll io n . Th a t w a s h is a s s e s s m e n t a t t h e t i m e . H a v i n g n o c o n t e x t to a n y o f t h e d is c u s s i o n s b e c a u s e I h a d n o r o l e a t a ll in th e n e g o t ia t io n s w e d i d n o t a c c e p t i t b u t I th i n k w e l o o k e d a t i t c ir c u m s p e c t ly. T h e r e w e r e – i t w a s n o t c l e a r t o m e t h a t w e w o u l d h a v e a j u s ti f ia b l e i n c r e a s e f o r t h is v a lu e o n th e t a b l e p a r ti c u l a r l y in li g h t o f t h e R 3 8 . 6 b il li o n b u s in e s s c a s e . C H A I R P E R S O N : O k a y. T h a n k y o u . ADV PHILLIP MOKOENA SC : 20 B u t a l s o t o p i g g y b a c k fr o m t h e C h a ir ’s q u e s t io n a t t h is s t a g e M r M a h o m e d y t h e r e w a s a d e ta il e d b u s in e s s c a s e t h a t y o u h a v e ta k e n t h e C h a i r th r o u g h . T h e r e w a s a c o s ti n g m o d e l t h a t f a c to r e d a n u m b e r o f is s u e s a n d I a m s u r e th a t M r S i n g h m u s t h a v e b e e n a w a r e o f th o s e d o c u m e n ts ? MR MOHAMMED SULEMAN MAHOMEDY : Mr S i n g h w a s d e fi n i t e l y a w a r e o f a l l o f t h o s e d o c u m e n ts C h a ir. A s I s a i d h e w a s t h e e ff e c t iv e Page 48 of 154 15 MAY 2019 – DAY 93 s p o n s o r o f t h e e n t ir e b u s in e s s c a s e p r o c e s s a t t h e t i m e i n A p r il 2 0 1 3 . H e h a d f u l l o v e r s i g h t o f a l l o f t h e p r o c e s s e s in t h e p r e p a r a ti o n o f business case. A s I a ls o s t a t e d t h a t w e h a d l o n g h o u r s – l o n g d is c u s s io n s a n d d e b a te s a n d m e e t in g s s o m e o f w h i c h w e r e a t Tr a n s n e t o th e r s w e r e a t t h e M c K i n s e y o ffi c e s e v e n o n w e e k e n d s a n d M r S i n g h u s e d t o b e p r e s e n t f o r a l o t o f t h o s e m e e t i n g s a t M c K i n s e y. S o h e h a d a n in t i m a te u n d e r s t a n d i n g o f t h e b u s i n e s s c a s e . A D V P H I L L I P M O K O E N A S C : Ye s . A n d o n p a r a g r a p h 5 . 2 . 3 y o u s e e m t o b e h i g h li g h t i n g i n f a r m u c h m o r e c l a r it y t h e is s u e s th a t t h e C h a i r w a s 10 posing to you. M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir I a l s o t h in k t h a t i n – a t s o m e p o in t i n A p r il 2 0 1 3 th e b u s in e s s c a s e w h ic h is p r e s e n t e d i n fr o n t o f th e c o m m is s i o n to d a y i n th e Ex e c u ti v e S u m m a r y p a r t r e f e r e n c e s t h a t t h e b u s i n e s s c a s e o r t h is b u s i n e s s c a s e e x c lu d e s t h e i m p a c t o f p r ic e e s c a l a t io n s a n d f o r e i g n e x c h a n g e . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t I d o n o t b e l ie v e is tr u e . T h e r e h a v e b e e n a n u m b e r o f r e v i e w s t h a t w e h a v e c o n d u c te d i n th a t r e g a r d a n d I t h in k th a t t h a t w a s a n o v e r s i g h t o n t h e p a r t o f Tr a n s n e t i n 20 t e r m s o f a li g n i n g t h i s d o c u m e n t w i t h s o m e o t h e r d o c u m e n t s th a t w e r e p r e s e n t e d a n d n o t n e c e s s a r i ly b y s o m e b o d y w h o w a s i n v o lv e d i n t h is p r o c e s s w h o u n d e r s t o o d t h a t i t i n c l u d e d a l l o f t h e s e c o s ts . S o th e s u b m is s io n b e f o r e y o u i n t h e E x e c u t iv e S u m m a r y s a y s i t e x c lu d e s b u t i t d o e s in c l u d e . It m a y e x c l u d e a s I s a i d a n y e x tr a n e o u s e v e n t o r e x tr a n e o u s c o s t n o t n e c e s s a r i ly e s c a l a t io n s a n d i n fl a ti o n t h a t w a s Page 49 of 154 15 MAY 2019 – DAY 93 s p e c i f ic a l ly i n c l u d e d . ADV PHILLIP MOKOENA SC : Ye s . A n d w h e n t h is i n c r e m e n t w a s s o u g h t w a s t h e r e a m e m o r a n d u m t h a t w a s p r e p a r e d t o th e b o a r d ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s C h a ir. I th i n k in r e c e n t m o n th s I h a v e b e e n p r o v i d e d w it h a m e m o r a n d u m t h a t w a s s u b mi t t e d t o t h e b o a r d o f d ir e c t o r s – o n c e a g a i n C h a ir i t w a s s u b m i tt e d d ir e c t ly to t h e b o a r d o f d ir e c to r s i n M a y 2 0 1 4 w h ic h e n d e a v o u r s t o e x p la i n t h e in c r e a s e i n th e E T C fr o m R 3 8 . 6 t o R 5 4 b i lli o n . ADV PHILLIP MOKOENA SC : 10 Ye s . A n d f o r c o m p l e te n e s s C h a i r I a m r e fe r r i n g t h e w i tn e s s t o p a g e 1 8 2 . 1 8 2 . M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s h e r e . A D V P H I L L I P M O K O E N A S C : A r e y o u th e r e ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s C h a ir. A D V P H I L L I P M O K O E N A S C : I a m ju s t w a i ti n g f o r t h e C h a ir t o l o c a t e the relevant document. C H A I R P E R S O N : I s i t o n d iv id e r M S M 8 ? A D V P H I L L I P M O K O E N A S C : I t i s 8 C h a ir i t i s M S M 8 . CHAIRPERSON : Ja. A D V P H I L L I P M O K O E N A S C : T h a t w e a r e r e fe r r i n g t o . 20 CHAIRPERSON : O k a y. T h a t – m e n t io n in g t h e M S M o r t h e d iv i d e r might. ADV PHILLIP MOKOENA SC : Might help. C H A I R P E R S O N : H e l p w i t h l o c a t i n g it ja . A D V P H I L L I P M O K O E N A S C : W e w ill d o t h a t C h a ir. Ye s . CHAIRPERSON : Ja thank you. Page 50 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC : N o w c o u l d y o u p l e a s e i d e n t if y t h a t document for us? MR MOHAMMED SULEMAN MAHOMED Y : C h a ir t h is is a d o c u m e n t fr o m th e th e n G r o u p C h i e f Ex e c u ti v e M r B r i a n M o le f e to th e Tr a n s n e t b o a r d o f d ir e c to r s u n d e r t h e s u b j e c t ‘ I n c r e a s e i n E s ti m a t e d To t a l C o s t o f t h e a c q u is it i o n o f 1 0 6 4 l o c o m o ti v e s f o r Tr a n s n e t Fr e i g h t R a i ls g e n e r a l fr e i g h t b u s i n e s s . ’ ADV PHILLIP MOKOENA SC : A n d c a n y o u t a k e u s th r o u g h t h e c o n te n ts o f t h a t p a r a g r a p h u n d e r t h e h e a d i n g ‘ P u r p o s e ? ’ 10 MR MOHAMMED SULEMAN MAHOMEDY : The purpose of this memo is f o r t h e b o a r d t o n o t e t h e r e a s o n s f o r th e i n c r e a s e i n E T C . To r e q u e s t t h a t t h e b o a r d a p p r o v e a n in c r e a s e i n t h e E T C o r e s t i m a te d t o t a l c o s t f o r t h e a c q u is i t io n o f t h e 1 0 6 4 lo c o m o t iv e s f o r t h e g e n e r a l fr e i g h t b u s in e s s o f Tr a n s n e t Fr e i g h t R a i l fr o m R 3 8 .6 b il li o n t o R 5 4 . 5 b i ll io n . A D V P H I L L I P M O K O E N A S C : Ye s . A n d I k n o w t h a t l a t e r o n y o u w il l b e c o m m e n t in g o n t h is m e m o b u t f o r u s t o a p p r e c i a t e y o u r c o m m e n ts ta k e u s th r o u g h w h a t i s s ta t e d i n t h e Ex e c u ti v e S u m m a r y ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . C h a i r I t h in k l a r g e ly i n 20 t h e E x e c u tiv e S u m m a r y i t e n d e a v o u r s t o p r o v i d e a n e x p la n a ti o n o f t h e m o v e m e n t f r o m R 3 8 b i ll io n o r R 3 8 . 6 t o R 5 4 b i lli o n i n d i ff e r e n t c a t e g o r ie s . I t p u ts i t d o w n to u p d a te o n b u s in e s s c a s e f o r u p d a te d e c o n o m ic a s s u m p ti o n s , f o r e x a n d e s c a la t io n r is k m i ti g a ti o n , Tr a n s n e t E n g i n e e r i n g s c o p e , c o n t in g e n c i e s a n d th e n i t g o e s o n t o s a y t h a t w a s a c t u a ll y s o m e o f th e c o s ts w e r e l o w e r th a n t h e c a p i t a l a c q u is i t io n c o s t Page 51 of 154 15 MAY 2019 – DAY 93 o f m i n u s 6 . 5 b i ll io n . ADV PHILLIP MOKOENA SC : Ye s . Refer please to page 185 and u n d e r d i s c u s s io n t h e i t e m s th a t a r e lis t e d in p a r a g r a p h 3 w o u l d t h a t b e a j u s ti f ic a t i o n f o r th e i n c r e m e n t ? P a g e 1 8 5 . MR MOHAMMED SULEMAN MAHOMEDY : C h a ir I d o n o t b e li e v e th a t t h e s e a r e p r o p e r j u s ti f ic a t i o n s … A D V P H I L L I P M O K O E N A S C : N o I u n d e r s t a n d th a t … MR MOHAMMED SULEMAN MAHOMED Y : For in terms of the s u b m is s io n . 10 A D V P H I L L I P M O K O E N A S C : I u n d e r s t a n d t h a t y o u m i g h t n o t b e l ie v e it . M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . A D V P H I L L I P M O K O E N A S C : B u t f o r n o w I a m s a y i n g th a t a s t h e y a r e recorded there… M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t is th e r e c o r d e d … ADV PHILLIP MOKOENA SC : Th e s e w o u l d a p p e a r t o h a v e b e e n a ju s t i fic a ti o n f o r t h e in c r e m e n t ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C o r r e c t. ADV PHILLIP MOKOENA SC : Can you just take us through? What was 20 t h e ju s t i fic a ti o n ? MR MOHAMMED SULEMAN MAHOMEDY : “ T h e i n c r e a s e in E T C o f R 1 5 . 9 b i ll io n is d u e t o t h e f o ll o w i n g : E s c a l a ti o n s fr o m t h e a p p r o v e d b u s in e s s c a s e t o award date. Page 52 of 154 15 MAY 2019 – DAY 93 F o r e x fr o m t h e a p p r o v e d b u s i n e s s c a s e t o a w a r d date. A d d i t io n a l Engineering scope of for the work allocated s tr a te g y e v e n t u a l ly tr a n s f o r m t o A n to to e n a b le OEM of Tr a n s n e t TE to l o c o m o ti v e s s tr a t e g ic . T h e c o s t o f r e d u c i n g t h e b a tc h s i z e s tr a t e g ic a n d r i s k m i ti g a ti o n . T h e c o s t o f f u t u r e e s c a la t io n s o v e r th e li fe o f t h e 10 c o n tr a c t f o r w a r d lo o k i n g a n d r is k m i t ig a ti o n . T h e c o s t o f f ix in g f o r e x e x p o s u r e o v e r th e li f e o f t h e c o n tr a c t f o r w a r d lo o k i n g a n d r is k m i t ig a ti o n . And c o n t in g e n c i e s related to v a r i a ti o n orders, o p t io n s s u c h a s e l e c tr o n i c a ll y c o n tr o l l e d p n e u m a ti c braking and wire d is tr i b u t iv e p o w e r and capital spares. I te m G o f Ta b le 2 .” ADV PHILLIP MOKOENA SC : Ye s . A n d y o u h a d a n o p p o r tu n it y t o r e v ie w th e s e g r o u n d s o f j u s ti f ic a ti o n s i n li g h t o f t h e d o c u m e n t s t h a t y o u 20 h a v e r e v i e w e d a n d h a v i n g r e g a r d t o th e p r e v i o u s b u s in e s s c a s e c a n y o u t a k e u s th r o u g h y o u r o v e r a ll a s s e s s m e n t o f th is m e m o r a n d u m ? MR MOHAMM ED SULEMAN MAHOMEDY : Chair I think before we go to t h e i f i t w il l p l e a s e t h e C h a ir – b e f o r e w e a c t u a lly g o t o t h e a c tu a l n u m b e r s a n d t h e j u s ti f ic a ti o n . C H A I R P E R S O N : Ye s y e s . Page 53 of 154 15 MAY 2019 – DAY 93 M R M O H A M M E D S U L E M A N M A H O M E D Y : I t is a ls o q u i t e i m p o r ta n t t o understand the process th a t w a s fo ll o w e d once a g a i n w i th the s u b m is s io n . A D V P H I L L I P M O K O E N A S C : Ye s . C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMED Y : C h a ir o n c e a g a i n th is s ig n if ic a n t i n c r e a s e is p r o v i d e d o n a m e m o r a n d u m d i r e c t ly t o th e b o a r d o f d ir e c t o r s . Th e r e is n o m a n a g e m e n t p r o c e s s th a t h a s l o o k e d a t th e v e r a c i ty o f t h i s s u b m is s i o n . O r d in a r ily w i t h i n Tr a n s n e t a s u b m is s io n o f 10 t h is n a t u r e w o u l d h a v e to s e r v e a t a n i n v e s t m e n t f o r u m , th e c a p i t a l in v e s t m e n t c o m m i t t e e a n d t h e e x e c u ti v e c o m m i t t e e fr o m a m a n a g e m e n t p e r s p e c t iv e . W it h in t h e b o a r d ’s s tr u c t u r e s a t th a t ti m e r i g h t o r w r o n g ly it w o u l d h a v e s e r v e d a t t h e A D C , t h e a c q u i s i ti o n s a n d d i s p o s a ls c o m m i t t e e b e fo r e s u b m i tt i n g t o t h e b o a r d it s e l f. T h a t p r o c e s s w a s n o t f o ll o w e d a t a l l . It s e r v e d d ir e c tly a t t h e b o a r d . Th e s e c o n d k e y m a t t e r is t h e d a t e . I a m s o r r y C h a ir. CHAIRPERSON : B e f o r e y o u g o th e r e . S o a r e y o u s a y i n g o r d i n a r i ly w h e n th e r e is a t r a n s a c t io n t h a t h a s b e e n s u b j e c t e d t o a te n d e r p r o c e s s a n d i f th e r e a r e – t h e r e is a n i n c r e a s e i n c o s ts t h e r e is a p r o c e d u r e 20 through which… M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . C H A I R P E R S O N : T h e r e is a p r o c e d u r e f o r t h e a p p r o v a l o f t h o s e c o s ts o f t h e i n c r e a s e i n c o s t s a n d i n t h i s c a s e a t t h a t ti m e i t s h o u l d h a v e g o n e th r o u g h t h e b o d ie s th a t y o u h a v e m e n ti o n e d b u t y o u s a y i t d i d n o t d o t h a t . T h a t w a s n o t d o n e . I t w e n t s tr a i g h t to th e b o a r d a n d y o u s a y Page 54 of 154 15 MAY 2019 – DAY 93 t h a t w a s u n u s u a l? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s C h a ir. C H A I R P E R S O N : O k a y. T h a n k y o u . M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t w a s e n ti r e ly u n u s u a l . C H A I R P E R S O N : Ye s , o k a y. T h a n k y o u . M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir t h e o th e r s i g n i fi c a n t p o i n t i n t h e t i m i n g o f t h i s tr a n s a c t i o n . Th e c o n tr a c ts w e r e s ig n e d a r o u n d o f t h e 1 7 M a r c h 2 0 1 4 . T h i s a p p r o v a l is d a te d M a y 2 0 1 4 w h ic h is e s s e n ti a lly a p o s t f a c t o r a p p r o v a l . T h e p r o c e s s o n c e a g a i n d i c ta t e s 10 t h a t y o u c a n n o t e n t e r i n to a p r o c u r e m e n t tr a n s a c ti o n i f t h e c a p i t a l in v e s t m e n t v a l u e h a s n o t b e e n in c r e a s e d t o t h e v a l u e o f t h e c o n t r a c t. W h i c h w o u ld m e a n t h a t th is a p p r o v a l w o u l d h a v e b e e n r e q u ir e d p r i o r to u s e n t e r i n g i n t o t h o s e c o n t r a c t s w h ic h d i d n o t h a p p e n s o t h is is w h a t w e c a ll a p o s t f a c t o r a p p r o v a l w h i c h a g a in c o n tr a v e n e s t h e Tr a n s n e t processes. C H A I R P E R S O N : I f – i f th is k in d o f s u b m i s s i o n h a d b e e n s u b je c te d t o t h e n o r m a l p r o c e s s e s w h ic h w o u ld h a v e in c l u d e d t h e i n v o l v e m e n t o f m a n a g e m e n t is i t lik e l y t h a t m a n a g e m e n t w o u ld h a v e s a i d b u t h o w c a n t h is h a p p e n y o u k n o w w h il e y o u a lr e a d y h a d a n a g r e e m e n t a n d n o w y o u 20 bring this? T h e y w o u l d – i n a l l p r o b a b i l it y t h e y w o u ld h a v e q u e r ie d that, management? M R M O H A M M E D S U L E M A N M A H O M E D Y : M o s t d e f i n i t e ly C h a ir. C H A I R P E R S O N : Ye s , y e s . M R M O H A M M E D S U L E M A N M A H O M E D Y : B e c a u s e h e c o n t r a c t s – th is w a s e s s e n t ia ll y a n o n - e v e n t . Page 55 of 154 15 MAY 2019 – DAY 93 C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : Fr o m a n a p p r o v a l p r o c e s s . C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : I s a y t h a t w i th c a u ti o n b u t i t w a s a n o n - e v e n t b e c a u s e i t w a s – th e c o n tr a c ts h a d a lr e a d y b e e n e n t e r e d i n t o . Tr a n s n e t w a s a lr e a d y c o m m i t te d . C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : To t h e R 4 9 . 4 p l u s t h e R 4 . 9 b i ll io n . 10 C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMED Y : But we were already c o m m i t t e d i n t o th e tr a n s a c ti o n . C H A I R P E R S O N : Ye s , y e s . MR MOHAMMED SULEMAN MAHOMEDY : A n d th e r e w a s n o e x p l ic i t approval C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : P r i o r t o t h e e x e c u ti o n o f t h o s e c o n tr a c ts . C H A I R P E R S O N : A n d I g u e s s t h a t y o u p r o b a b l y c a n th in k o f n o b a s is 20 o n w h ic h th o s e w h o w a n t e d t h i s a p p r o v a l c o u l d h a v e a d v is e d i f th is h a d g o n e t h r o u g h m a n a g e m e n t a n d m a n a g e m e n t s a id w h a t a r e y o u d o i n g ? T h i n g d o n o t h a p p e n t h is w a y y o u h a v e g o t t o h a v e th is f ir s t . Or are y o u a b l e to t h i n k t h a t m a y b e th e y m i g h t h a v e h a d s o m e b a s is o r t o ju s t i fy d o in g th e s e t h i n g s t h is w a y ? MR MOHAMMED SULEMAN MAHOMEDY : Page 56 of 154 C h a ir i n t e r m s o f a n y 15 MAY 2019 – DAY 93 p r o c e s s o n t h e i n c r e a s e o f a n e s ti m a t e d to t a l c o s t o f a p r o je c t i n Tr a n s n e t. CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMED Y : W e h a v e a d e l e g a t io n o f a u t h o r i ty d o c u m e n t w h ic h i s v e r y c le a r. CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: Which e x p la i n s the p r o c e s s e s a n d t h e a p p r o v a l li m i ts t h a t e x is t . CHAIRPERSON : Hm. 10 MR MOHAMMED SULEMAN MAHOMEDY : And it should have in all p r o b a b i li ty h a d t o h a v e g o n e t h r o u g h th e m a n a g e m e n t s tr u c t u r e s . CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY : S o c l e a r ly i n m y o p i n io n t h e r e w a s a c o n c e r n s o m e w h e r e a l o n g t h e li n e t h a t h a d i t g o n e t h r o u g h m a n a g e m e n t i t m a y h a v e r a is e d r e d f l a g s . CHAIRPERSON : management was Ye s e x a c tl y t h a t is w h a t I w a s w o n d e r i n g w h e th e r being bypassed because it was foreseen that m a n a g e m e n t w o u ld d is a g r e e a n d – a n d it w o u ld b e d i ff ic u l t t o ju s ti fy t o e n g a g e m a n a g e m e n t w i t h – i n a n y r a ti o n a l m a n n e r to g e t th e m t o a g r e e 20 a n d t h a t t h e r e f o r e it w a s t h o u g h t w e ll le t i t – l e t u s s e n d i t t o th e b o a r d o f d ir e c t o r s m a y b e t h e b o a r d o f d i r e c to r s a r e u n a w a r e – w e r e s e e n a s u n li k e ly t o r a is e o b j e c t io n s . MR MOHAMMED SULEMAN MAHOMED Y : C h a ir t o il lu s tr a t e t h e p o in t t h a t m a n a g e m e n t w o u l d d e fi n i t e l y h a v e d is a g r e e d is t h e f a c t t h a t i n t h e o r i g in a l b u s i n e s s c a s e w e s a i d t h a t t h e b u s in e s s c a s e w a s n e t t p r e s e n t Page 57 of 154 15 MAY 2019 – DAY 93 v a l u e p o s it iv e w h i c h m a d e s e n s e t o m a k e t h i s in v e s t m e n t . I n t e r m s o f t h e n e t t p r e s e n t v a l u e a t th e ti m e i t w a s r e fl e c t e d a s is r e fl e c t e d i n th e b u s i n e s s c a s e a t a p o s i ti v e R 2 . 7 b il li o n . T h e – in m y o p i n i o n m o v i n g fr o m R 3 8 to R 5 4 .5 b il li o n th e b u s in e s s c a s e i s d e f in i te ly n e g a t iv e . I t i s a N P V n e g a t iv e n u m b e r. Th a t w a s – w o u l d h a v e b e e n a n i m m e d ia t e r e d fl a g f o r m a n a g e m e n t . M a k i n g in t h is c a s e a R 5 4 b il li o n in v e s t m e n t w i t h a n e g a t iv e N P V i s t h e f ir s t a n d m o s t i m p o r t a n t s ig n th a t th e r e i s s o m e t h i n g w r o n g . A n d t h a t w o u l d h a v e b e e n b a s e d o n th e ; f o r w a n t o f a b e tt e r w o r d th e o p t i m is tic p r o j e c ti o n s o n t h e r e v e n u e n u m b e r s . A n d 10 w i t h t h a t i t w o u l d g iv e y o u a n e g a ti v e N P V. T h e r e a s o n I p u t th is o n t h e t a b le is b e c a u s e i n p o in t 7 o n p a g e 1 8 3 i t s a y s t h a t : “ T h e N P V o f t h e b u s in e s s c a s e r e m a i n s p o s i ti v e a t R 11 . 6 8 b i ll io n .” A n d th a t i s b e c a u s e th e y c h a n g e t h e i r a s s u m p t io n s i n h o w t h e y c a l c u l a te d t h e N P V. T h a t is t h e f ir s t r e d f la g C h a ir. The second red fl a g t h is w a s n o t a n i n c r e a s e o f 3 % o r 5 % a n d e v e n i f i t w a s 5 % o r 3 % it w a s s ig n i f ic a n t . B u t C h a ir t h i s w a s a n i n c r e a s e t h a t w a s f r o m R 3 8 to R 5 4 b i lli o n . I t w a s a p p r o x i m a t e ly 5 0 % j u s t a b o u t 4 0 o d d p e r c e n t in c r e a s e in E T C . T h e fir s t t h in g t h a t m a n a g e m e n t w o u l d h a v e a s k e d f o r 20 w a s if th e f i n a n c i a l m o d e ls w e r e u p d a te d ? A n d a n e w b u s i n e s s c a s e b e presented. memorandum. This memorandum is not a business case it is a I t d o e s n o t g o t h r o u g h t h e s a m e r is k m i ti g a t i o n p r o c e s s e s a s t h e o r i g i n a l b u s in e s s c a s e h a d u n d e r g o n e . N o w c le a r ly i f w e m o d e l t h e R 5 4 b i ll io n i n t o t h e b u s in e s s c a s e o r i n t o t h e f in a n c ia l m o d e l y o u w o u l d n o t c o m e u p w i th a p o s i t iv e N P V. Page 58 of 154 Based on the 15 MAY 2019 – DAY 93 a s s u m p t io n s o f t h e b u s i n e s s c a s e . W h a t t h e y t h e n d i d w a s th e y u s e d d i ff e r e n t a s s u m p t i o n s . S o w e n o r m a ll y u s e w h a t i s c a l le d t h e w e ig h t e d a v e r a g e c o s t o f c a p i t a l to d o t h e – to d o th e n e t t p r e s e n t v a l u e c a l c u l a ti o n w h i c h is a t t h e t i m e w a s a b o u t 1 2 . 5 % . I f y o u u s e a h i g h e r r a te y o u w i ll g e t a b i g g e r n u m b e r a n d t h e y u s e d a h i g h e r r a t e t o g e t R 11 . 6 8 b ill i o n b u t i t is n o t c o m p a r a b l e t o w h a t w e u s e d in t h e b u s i n e s s c a s e . Th is w a s d o n e t o s u i t t h e o u t c o m e . Th a t is e s s e n ti a l ly m y v i e w o n t h e m a t t e r C h a ir. CHAIRPERSON : Thank you. 10 ADV PHILLIP MOKOENA SC : P e r h a p s C h a ir t h is f e ll u n d e r th o s e c a t e g o r ie s o f c o n f i d e n ti a l c o n fi n e m e n t o r v a r i a ti o n . CHAIRPERSON : Oh. ADV PHILLIP MOKOENA SC : Might be. C H A I R P E R S O N : Ye s . Ye s . ADV PHILLIP MOKOENA SC: A n d t h a t M r Vo l m i n k w a s c o m p la in i n g a b o u t. CHAIRPERSON : Hm. A D V P H I L L I P M O K O E N A S C : T h e n y o u p r o c e e d M r M a h o m e d y t o g iv e u s y o u r o v e r a ll a s s e s s m e n t o n th e m e m o r a n d u m i n m u c h m o r e d e t a i ls 20 b e c a u s e w e w a n t t o u n d e r s ta n d w h y y o u t o o k i s s u e w i t h i t ? MR MOHAMMED SULEMAN MAHOMEDY : C h a ir th e fo r e ig n e x c h a n g e a s p e c t o f t h e i n c r e a s e i n E T C w h ic h i s i n c l u d e d in t h is m e m o r a n d u m t h e l a r g e p a r t o f th e i n c r e a s e i n E T C is r e fe r e n c e t o fo r e ig n e x c h a n g e fl u c t u a t i o n s a s w e l l a s e s c a la t io n s . T h e f ir s t a n d v e r y i m p o r t a n t c o n s i d e r a ti o n fr o m o u r p o i n t o f v i e w is t h e p o i n t o f l o c a lis a ti o n w h ic h I Page 59 of 154 15 MAY 2019 – DAY 93 t o u c h e d o n e a r l ie r o n . T h a t 5 5 % a n d 6 0 % o f t h is c o n tr a c t w a s s u b je c t t o l o c a lis a ti o n w h ic h w o u l d m e a n t h a t t h e r e w a s n o f o r e ig n e x c h a n g e i m p a c t o n th a t n u m b e r. C h a ir i f w e ta k e t h e c o n tr a c t v a l u e i n te r m s o f what was sig ned. I am not referencing the business case of R49.5 b i ll io n a n d w e r e m o v e a n a v e r a g e o f 5 5 % w h ic h w a s f o r l o c a l c o n t e n t o f a p p r o x i m a te ly R 2 7 . 2 b il li o n w e a r e le f t w i t h R 2 2 b il li o n t h a t i s s u b j e c t e d t o f o r e ig n e x c h a n g e . ADV PHILLIP MOKOENA SC: Hm. MR MOHAMMED SULEMAN MAHOMEDY: 10 W h a t is a ls o c r u c ia l i s t h a t a t t h e o u ts e t a n d w i t h in a f e w m o n t h s o f s ig n in g th e c o n tr a c t Tr a n s n e t p a i d s i g n i f ic a n t d e p o s i ts t o th e o r i g in a l e q u i p m e n t m a n u f a c t u r e r s o n t h e a s s u m p t io n th a t t h o s e m o n ie s w e r e s e n t o ff s h o r e t o th e i r h o ld in g c o m p a n i e s o r t h e ir e n t i ti e s t h a t w e r e r e g is t e r e d o u t o f t h e c o u n tr y. T h a t w a s m a d e o n t h e fir s t d a y o r w i th i n a fe w m o n th s o f t h a t . I t w o u l d a ls o n o t b e s u b j e c t t o f o r e i g n e x c h a n g e b e c a u s e i f w e p a i d y o u t h e m o n e y t o d a y y o u w o u l d r e m i t t h o s e f u n d s o ff s h o r e a n d th e r e is n o f o r e i g n e x c h a n g e i m p l ic a ti o n . C h a ir t h e d e p o s i ts t h a t w e p a id w i th in a s ix m o n t h p e r i o d o f t h e s ig n i n g o f t h e s e a g r e e m e n ts t o t a ll e d 9 p o i n t – a p p r o x i m a te ly – R 9 . 6 b il li o n . 20 A D V P H I L L I P M O K O E N A S C : I n d e p o s i ts – d e p o s i ts o n ly ? MR MOHAMMED SULEMAN MAHOMEDY: I n d e p o s i ts o r w h a t w e c a l l advance payments. A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: S o w e h a d th e 2 2 .3 b i ll io n . W e r e d u c e i t b y a fu r t h e r 9 . 6 b i ll i o n w h ic h le a v e s o n l y R 1 2 b i lli o n Page 60 of 154 15 MAY 2019 – DAY 93 s u b j e c t t o fo r e ig n e x c h a n g e m o v e m e n t . W e c a n n o t th e n b e s a y i n g th a t t h e b u l k o f th e 1 4 b i ll io n m o v e m e n t is t h e n f o r e i g n e x c h a n g e a n d e ffe c t iv e l y C h a ir in the documents that have been provided a p p r o x i m a te ly – I th i n k i t is – s o r r y m y a p o l o g i e s C h a ir – R 5 . 7 b il li o n is a tt r i b u t e d n o w t o fo r e i g n e x c h a n g e m o v e m e n t b u t t h e e n t ir e c o n tr a c t w a s n o t s u b j e c t t o f o r e i g n e x c h a n g e m o v e m e n t a n d a s I h a v e p o in t e d o u t in m y c a lc u l a ti o n i n m y o p in i o n w e b e l ie v e t h a t b e tw e e n 2 5 p e r c e n t and 32 percent of th e c o n tr a c t v a l u e had a fo r e ig n exchan ge i m p l ic a t i o n . S o t o s a y t h a t i f i t i s b e t w e e n 1 2 a n d R 1 5 b il li o n t h a t t h e 10 f o r e i g n e x c h a n g e m o v e m e n t w a s i n t h e r e g i o n o f R 5 . 7 b il li o n d o e s n o t make sense in the context of what I have just pretended. A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : I t h i n k t h a t is t h e f ir s t is s u e a n d t h a t is q u i t e s i g n i fic a n t b e c a u s e 5 .7 o f t h e 1 6 b i ll io n w a s a t tr i b u t e d to foreign exchange. C H A I R P E R S O N : As y o u c o n ti n u e t o g iv e m e y o u r a s s e s s m e n t o f – o f t h is s u b m is s io n m a d e t o t h e B o a r d a t s o m e s t a g e I w o u l d li k e y o u t o d e a l w i t h t h e q u e s ti o n w h e t h e r t h e k i n d s o f e r r o r s o r w h a t m a y a p p e a r t o b e e r r o r s c o u ld p o s s i b ly h a v e b e e n g e n u i n e e r r o r s . 20 Somebody m a k i n g – o v e r l o o k in g s o m e t h i n g a n d m a k i n g a m i s t a k e o r w h e t h e r y o u – there are some where you say that somebo dy with this kind of q u a li fi c a t io n s a n d t h i s k i n d o f e x p e r i e n c e c o u l d n o t h a v e m a d e th is k i n d o f m is ta k e . S o m a y b e t h e r e i s s o m e th in g m u c h m o r e t h a n j u s t a g e n u i n e e r r o r in s a y i n g t h is o r th a t in t h e – in t h e m e m o r a n d u m a b o u t w h a t i n c r e a s e d t h e – t h e s e c o s t s . O k a y, y o u m a y p r o c e e d . Page 61 of 154 15 MAY 2019 – DAY 93 M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a n k y o u C h a ir. C h a ir t h e o th e r s i g n i f ic a n t p a r t o f t h e in c r e a s e i n t h e E T C s a s th e d o c u m e n ts t h a t a r e i n fr o n t o f y o u s u g g e s ts is R 9 b il li o n t h a t t a l k s t o w h a t is c a ll e d th e e s c a l a t io n s . N o w t h e o n e t h i n g t h a t d o e s n o t m a k e s e n s e is th a t w e a r e n o t s e e i n g a n y n e g a t iv e c o s t is s u e s i n t h e s e n s e t h a t c o s t s h a v e c o m e d o w n a n d t h e r e a s o n I s a y th is C h a ir th e i n i ti a l b u s i n e s s c a s e w a s s u b m it t e d fo r a s ix y e a r d e l iv e r y s c h e d u l e a n d e s c a l a ti o n w o u l d h a v e b e e n p u t i n f o r e a c h y e a r. If y o u n o w c o m p r e s s t h e ti m e li n e a n d y o u c o m e d o w n to t h r e e y e a r s y o u s h o u l d h a v e fo r t h e t h r e e y e a r s o n 10 t h e o u ts id e y o u s h o u l d h a v e a s a v i n g . S o t o b la n k e tl y s a y th a t t h e e s c a l a t io n s h a d to h a p p e n d o e s n o t m a k e s e n s e f ir s tl y. S e c o n d ly in c l u d e d in t h e b u s i n e s s c a s e w e r e e s c a l a ti o n s a n d s o m e h o w t h o s e a r e b e i n g ig n o r e d … CHAIRPERSON : So … M R M O H A M M E D S U L E M A N M A H O M E D Y : I n c a lc u l a ti o n s . CHAIRPERSON : S o t h e m e m o r a n d u m o u g h t t o h a v e d e a l t w it h t h e q u e s t io n o f w h a t a b o u t t h e e s c a l a ti o n c o s t t h a t w e r e c o n t e m p l a t e d i n t h e b u s i n e s s c a s e . H o w d o y o u f a c to r th a t - t h e m i n , i n o r d e r to a r r iv e at the new escalation cost? 20 It should have dealt with among other t h i n g s t h a t o n e – th a t i s s u e . T h a t is p a r t o f w h a t y o u a r e s a y i n g ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s m o s t c l e a r l y. C H A I R P E R S O N : J a , o k a y. MR MOHAMMED SULEMAN MAHOMEDY: A n d t h a t is w h y C h a ir I a l lu d e d t o e a r li e r o n t o s a y t h a t t h e b u s i n e s s c a s e s h o u ld h a v e b e e n r e d o n e i n i ts e n tir e ty. Not supported by a simple memorandum but Page 62 of 154 15 MAY 2019 – DAY 93 r a th e r p u t t in g i n a l l o f th e n e w a s s u m p ti o n s i n t o a b u s i n e s s c a s e a n d t h e fi n a n c i a l m o d e l t o d e te r m i n e h o w t h e 5 4 b i ll i o n w o u l d c o m e – h o w how it was arrived at. CHAIRPERSON : Thank you. M R M O H A M M E D S U L E M A N M A H O M E D Y : A t t h i s p o in t a l l w e s e e i n g i s u n s u b s t a n ti a te d – i f I c a n c a l l i t th a t – n u m b e r s t h a t a r e p u t o n t o a m e m o r a n d u m . W e h a v e n o t s e e n t h is tr a n s la t e o r w e h a v e n o t s e e n t h e fi n a n c i a l m o d e l t h a t tr a n s l a te s i n to t h e s e n u m b e r s . H o w i t w a s d e r iv e d a t. 10 W h a t n u m b e r – w h a t a s s u m p ti o n s w e r e m a d e ? What were the c h a n g e s ? W h a t w e r e t h e d i ff e r e n c e s b e t w e e n t h e b u s in e s s c a s e ? T h a t is n o t n e c e s s a r il y e x p l a i n e d i n – i n th e l e v e l o f d e ta il t h a t i t s h o u l d b e e x p l a i n e d i n . C h a ir I th i n k a s I s a i d – y o u k n o w – t h e r e a r e t h r e e k e y c a t e g o r ie s . explain. Th e f ir s t is th e f o r e i g n e x c h a n g e w h ic h I h a v e tr i e d to T h e s e c o n d is e s c a l a ti o n s . T h e m e m o r a n d u m a g a in i g n o r e s t h e f a c t t h a t e s c a l a t i o n s w e r e a lr e a d y in c l u d e d i n t h e b u s i n e s s c a s e . I t ju s t s a y s t h a t th is i s – I t h i n k – R 9 b i ll io n f r o m t h e d a t e o f t h e t e n d e r to t h e d a t e o f t h e a w a r d a n d g o in g fo r w a r d . Ye t w e h a d e s c a l a ti o n s in c l u d e d i n th e b u s i n e s s c a s e – a s I s a i d e a r l ie r o n – o f fiv e – a p p r o x i m a te ly – 5 .9 p e r c e n t fo r S o u t h A fr ic a n P P I a s w e l l a s 2 . 3 20 p e r c e n t f o r U S in f la t io n . T h e th ir d a s p e c t is w h a t is p u t h e r e u n d e r t h e t e r m c o n t in g e n c i e s . In th e o r i g i n a l b u s i n e s s c a s e C h a ir w e h a d R 2 . 2 b i ll io n f o r c o n t in g e n c i e s . T h e r e i s a f u r th e r 4 . 9 b i ll io n b e e n p u t in fo r c o n ti n g e n c ie s in th is m e m o r a n d u m . T h e k e y is s u e fr o m o u r p e r s p e c tiv e is th a t a t t h a t ti m e in M a y 2 0 1 4 th e s e w e r e fi x e d p r i c e c o n tr a c ts . W e h a d a lr e a d y e s t a b l is h e d t h e fi x e d p r ic e p e r s p e c ti v e w i th a ll o f th e Page 63 of 154 15 MAY 2019 – DAY 93 h e d g i n g t h a t w a s i n c l u d e d . A l l o f t h e e s c a l a ti o n s w e r e i n c lu d e d . T h e n o n e c a n n o t u n d e r s t a n d w h y w e w o u l d h a v e s u c h a h i g h c o n ti n g e n c y i n a d d it i o n to a ll o f th e c o s ts t h a t h a v e b e e n p u t i n . The design was la r g e l y d o n e . T h e y w e r e s t ill g o i n g t h r o u g h s o m e o f th e fi n a l t o u c h e s b u t a 1 0 p e r c e n t c o n t i n g e n c y is d e e m e d h i g h w h e n y o u h a v e a f ix e d p r i c e c o n tr a c t . S o t h a t i s t h e t h i r d p a r t o f it i n te r ms o f n o t n e c e s s a r i ly a g r e e i n g w i th t h e le v e l o f d i li g e n c e a n d e x p e r ti s e t h a t y o u r e f e r e n c e d fr o m t h e i n d iv i d u a l s w h o w e r e s i g n i n g th i s d o c u m e n t to a c t u a l ly a g r e e w i t h t h e c o n t e n t o f th is d o c u m e n t a n d I t h i n k th e s e w o u ld h a v e b e e n t h e 10 r e d f la g s t h a t a s m a n a g e m e n t w e w o u ld h a v e i d e n t i fi e d . W e s o m e t i m e s d o n o t e v e n a ll o w 1 0 p e r c e n t c o n ti n g e n c ie s o n p r o j e c ts th a t a r e i n e x e c u ti o n t h a t h a v e n o t e v e n b e e n f in a l is e d a n d i n t h is c a s e w e w e r e s a y in g - w e a r e s a y in g h e r e th a t t h e c o n t r a c ts h a v e b e e n e s t a b l is h e d . A ll o f th e r is k s h a v e b e e n m it i g a t e d . T h a t is w h a t t h e d o c u m e n t s a y s – t h e r i s k s h a v e b e e n m i t ig a t e d a n d y e t o n t o p o f a l l o f t h e m i t ig a t e d r is k s t h e r e is a n a d d i t io n a l R 4 . 9 b il li o n t h a t is p u t i n fo r c o n ti n g e n c ie s a n d o n e n e e d s t o q u e s t io n w h a t t h e p u r p o s e o f t h e 4 . 9 b il li o n w o u l d h a v e b e e n a t a l a t e r s ta g e . C h a ir I t h in k t h e … A D V P H I L L I P M O K O E N A S C : Ye s . 20 M R M O H A M M E D S U L E M A N M A H O M E D Y : T h e r e a r e v a r i o u s d o c u m e n ts t h a t h a v e b e e n p r e p a r e d t h a t q u e s t i o n t h e – th e v e r a c i t y o f t h e in c r e a s e i n E T C a n d o n e o f t h e m i s th e M N S Vo l u m e 1 R e p o r t t h a t I b e li e v e w e w i ll s e r v e a t t h is C o m m i s s io n a s w e l l ( i n te r v e n e s ) . . A D V P H I L L I P M O K O E N A S C : A ls o i n v e s t i g a t in g th e s a m e is s u e ? MR MOHAMMED SULEMAN MAHOMEDY: T h a t i n v e s ti g a te d - a m o n g s t Page 64 of 154 15 MAY 2019 – DAY 93 o th e r s … A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: O n e o f t h e is s u e s is t h e in c r e a s e i n E T C t h a t h a s g o n e th r o u g h q u i t e a s i g n i fic a n t r e v ie w fr o m MNS. ADV PHILLIP MOKOENA SC: N o w l e t u s d e a l w i t h th e q u e s ti o n o f – C h a ir I th in k i t is q u i t e i m p o r t a n t – t h a t h a v i n g r e g a r d t o th e f a c t th a t t h e r e w a s a c o s t ( in d i s ti n c t) , th e b u s i n e s s c a s e a n d th e r e w a s th is s ig n if ic a n t i n c r e m e n t d i r e c t ly fr o m e i t h e r t h e e n d u s e r t o t h e B o a r d 10 it s e l f w i th o u t h a v in g t o g o – t o g o t h r o u g h o th e r p r o c u r e m e n t s t r u c t u r e s a n d th e th i n g s t h a t y o u a r e h i g h l ig h ti n g i n p a r a g r a p h 3 . 1 o f y o u r s t a te m e n t – c o u l d t h i s h a v e b e e n j u s t a g e n u in e m is t a k e t h a t happened? MR MOHAMMED SULEMAN MAHOMEDY: C h a ir I th in k I a m g o in g t o tr y t o a d d r e s s t h a t to g e th e r w i t h th e q u e s ti o n t h a t t h e C h a ir p o s e d . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: In any Tr a n s n e t’s s iz e y o u h a v e m a n a g e m e n t s tr u c t u r e s . n o n - e x e c u ti v e s tr u c t u r e s . 20 business of Yo u a ls o h a v e Th e r e a s o n y o u h a v e t h a t is s o t h a t t h e c o m b in e d in t e l le c t o f th e g r o u p i n g o f p e o p l e w h o s i t t o g e t h e r is f a r b e t t e r t h a n t h e i n t e l le c t o f a n in d i v i d u a l s i tt i n g o n a d o c u m e n t . Now w i t h i n th e d o c u m e n t th a t i s i n fr o n t o f u s h a d t h i s d o c u m e n t s e r v e d a t a C o m m i t t e e fir s tly I w o u l d l ik e t o s tr e s s th a t n o i n d i v i d u a l i n m y h u m b le o p i n i o n h a s g o t t h e e x p e r tis e a c r o s s e v e r y fa c e t o f a b u s in e s s . I t h in k it is s o m e t h i n g t h a t w e c a n … Page 65 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC: Ja. MR MOHAMM ED SULEMAN MAHOMEDY: We can agree on. Therefore w h e n y o u h a v e a C o m m i t t e e t h a t lo o k s a t s o m e o f t h e tr a n s a c t io n s t h e y in t e r r o g a t e t h e d o c u m e n t o r t h e s u b m i s s io n b a s e d o n t h e ir a r e a s o f e x p e r t is e a n d y o u h a v e th e c r o s s fu n c t i o n a l s k il l s e t t h a t w ill s i t i n those Committees. T h o s e C o m m i t te e s h a v e b e e n d e s ig n e d t o e n s u r e t h a t y o u b r i n g t h e c r o s s f u n c ti o n a l s k i ll s e t to t h e o r g a n i s a t io n s o t h a t w e a ll a c t i n t h e b e s t in t e r e s t o f th e c o m p a n y. b y p a s s in g 10 the management of th e b u s in e s s This document by and b y p a s s in g the s tr u c t u r e s t h a t w e r e p u t i n p l a c e w i t h t h e c r o s s f u n c ti o n a l s k i ll s e t t h a t e x i s te d a t t h e t i m e is c l e a r t h a t t h e r e w a s e i t h e r a n i n te n t t o b y p a s s t h e p r o c e s s o r g e n u in e l y th e r e w e r e – t h e r e w a s a n e r r o r o f ju d g m e n t b u t I d o n o t b e li e v e t h a t y o u c a n s a y t h a t t h e r e w e r e g e n u i n e a c c e p t a b l e m is t a k e s . A g a in fr o m t h e p e o p l e w i t h t h e e x p e r i e n c e a n d e x p e r tis e b u t f o r m e i t is n o t a b o u t th e a r e a o f e x p e r t is e w h o d r a f te d t h is m e m o r a n d u m . I t i s a b o u t t h e p r o c e s s b e c a u s e t h e r e is a p r o c e s s th a t w o r k s t h a t w ill a ll o w f o r a n y e r r o r s o f j u d g m e n t C h a i r t h a t w il l b e p i c k e d u p . I n th is c a s e b y b y p a s s in g a ll o f t h o s e m a n a g e m e n t s tr u c t u r e s y o u r e m o v e d t h e o p p o r t u n i ty f o r a c r o s s f u n c ti o n a l t e a m t o i d e n ti fy i f th e r e 20 w e r e g e n u in e e r r o r s fo r t h o s e t o b e id e n t if ie d a n d c o r r e c t e d b u t o n c e a g a in I t h i n k i t is a l s o c r i t ic a l t o r e e m p h a s is e t h e p o i n t C h a ir th a t t h i s w a s a l l d o n e a f t e r t h e c o n t r a c t s w e r e s ig n e d w h ic h is l a r g e ly ir r e l e v a n t in a n y c o n v e r s a ti o n b e c a u s e I m e a n i f t h e r e w e r e e r r o r s w h a t w o u ld t h e outcome have been or what would the recourse have been. c o n tr a c ts w e r e a lr e a d y s i g n e d . The Tr a n s n e t w e r e a lr e a d y c o m m i t te d to Page 66 of 154 15 MAY 2019 – DAY 93 R 4 9 b i ll io n fo r t h e e x e c u ti o n o f t h e s e c o n tr a c ts . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: I h o p e I h a v e a n s w e r e d th e q u e s t io n . A D V P H I L L I P M O K O E N A S C : Ye s , y o u d e fi n i t e l y d i d . N o w m a y I r e fe r you to page 10? C H A I R P E R S O N : I a m s o r r y. Yo u r e v ie w e d a l o t o f tr a n s a c t io n s . Yo u f o u n d a l o t o f d o c u m e n ts - w e n t t h r o u g h t h e m . W o u l d th is h a v e b e e n o r w a s t h i s o n e o f th o s e p u t t h r o u g h t h a t is t h e tr a n s a c ti o n u n d e r 10 c o n fi d e n ti a l … ? A D V P H I L L I P M O K O E N A S C : C o n f in e m e n t . C H A I R P E R S O N : C o n fi n e m e n t ? M R M O H A M M E D S U L E M A N M A H O M E D Y : N o C h a ir. C H A I R P E R S O N : It w a s n o t ? MR MOHAMM ED SULEMAN MAHOMEDY: No, no it was not. C H A I R P E R S O N : O k a y. MR MOHAMM ED SULEMAN MAHOMEDY: This was an open tender and a l l o f th e e v a l u a t i o n e tc e t e r a . C H A I R P E R S O N : Ye s . 20 M R M O H A M M E D S U L E M A N M A H O M E D Y : B u t t h e r e a r e q u e s t io n m a r k s o v e r th e e v a l u a t io n p r o c e s s . C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: But t h is was not a c o n fi d e n ti a l c o n fi n e m e n t. CHAIRPERSON : D id y o u c o m e a c r o s s a n y d o c u m e n t t h a t c o n t a in e d Page 67 of 154 15 MAY 2019 – DAY 93 any explanation or ju s ti fi c a t io n why t h is memorandum was n ot s u b j e c t e d t o m a n a g e m e n t s c r u ti n y i n t e r m s o f t h e b o d ie s th a t y o u h a v e told me about? M R M O H A M M E D S U L E M A N M A H O M E D Y : N o C h a ir. W e h a v e n o s e e n ( in t e r v e n e s ) . C H A I R P E R S O N : Yo u d i d n o t f i n d a n y th i n g ? MR MOHAMM ED SULEMAN MAHOMEDY: Any document. CHAIRPERSON: Ja. MR MOHAMMED SULEMAN MAHOMEDY: 10 That suggest t h is was d is c u s s e d a n y w h e r e a s t o w h y i t w a s g o i n g t o n o t b e p r e s e n te d t o a n y m a n a g e m e n t s tr u c tu r e , n o . C H A I R P E R S O N : Ye s , o k a y. ADV PHILLIP MOKOENA SC : May I – ma y I then refer you to page 10 of your witness statement and at paragraph 5.3 you deal with a new t o p ic r e f e r r i n g to th e Tr a n s n e t b i a s i n fa v o u r o f t h e C S R a n d b e fo r e y o u d e a l w i t h t h e c o n te n ts o f th a t t o p ic b r i e fl y e x p l a i n t o t h e C h a ir a s t o who is CSR. 20 MR MOHAMMED SULEMAN MAHOMEDY: C h a ir C S R i s C h in a S o u t h R a il l o c o m o tiv e s an e n ti ty th a t produced the 95 fo r Tr a n s n e t . S u b s e q u e n t ly t h e y p r o d u c e d 1 0 0 l o c o m o ti v e s a n d th e n w e r e g iv e n 3 5 9 e l e c tr ic l o c o m o t iv e s o f t h e – o f t h e 1 0 6 4 . CHAIRPERSON : I a m s o r r y. I a m i n t e r r u p t in g y o u b u t t h e r e is a q u e s t io n t h a t is – th a t I w a n t to a s k a n d I a m t a k in g y o u b a c k to w h a t w e w e r e ta lk in g a b o u t i n r e g a r d t o t h a t m e m o r a n d u m . Yo u h a v e m a d e it q u i te c l e a r t h a t i f th a t m e m o r a n d u m h a d b e e n p r e s e n t e d to t h e Page 68 of 154 15 MAY 2019 – DAY 93 management bodies to which it should have been p r e s e n te d m a n a g e m e n t w o u ld d e f in i te ly h a v e p ic k e d u p c e r t a i n p r o b l e ms i n r e g a r d t o t h e r e q u e s t fo r t h e a p p r o v a l. Are you able to tell me what the d i ff e r e n c e w a s b e t w e e n m a n a g e m e n t a n d th e B o a r d t h a t m a y h a v e resulted in a situation where the Board did not or could not pick up w h a t m a n a g e m e n t c o u ld o r w o u l d h a v e p i c k e d u p ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir … CHAIRPERSON : Is th a t s o m e t h in g t h a t y o u a b le to – t o in te r m – n o r m a l ly o f c o u r s e m a n a g e m e n t m a y b e d e a l in g w i t h a l o t o f t h in g s q u i t e 10 o ft e n . M a y b e m u c h m o r e o f te n t h a n t h e B o a r d . T h e B o a r d s i ts o n l y s e v e n t i m e s b u t a l s o y o u m a y h a v e a B o a r d th a t d o e s n o t h a v e c e r t a i n e x p e r t is e th a t is r e q u ir e d f o r c e r ta i n t h i n g s t h a t t h e m a n a g e m e n t – w h ic h th e m a n a g e m e n t h a s . M a y b e th e y j u s t h a v e l a w y e r s o n ly - fo r a r g u m e n t s a k e – o n t h e B o a r d a n d t h e r e i s n o a c c o u n ta n t a n d y o u – i t is s o m e t h in g w h e r e y o u n e e d a n a c c o u n t a n t o r s o m e b o d y w it h s o m e e x p e r t is e . Ar e y o u a b l e – is t h a t s o m e t h i n g y o u a r e a b l e t o t a lk a b o u t o r i s i t s o m e t h i n g y o u w o u ld r a t h e r r e f le c t o n a n d d e a l w i t h a t s o m e o th e r s t a g e ? MR MOHAMMED SULEMAN MAHOMEDY: 20 C h a ir I t h i n k I w il l h a v e t o r e fl e c t o n t h a t a s a r e s u l t o f th e f a c t t h a t w e h a v e h a d a n u m b e r o f Boards … C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : A t Tr a n s n e t a n d I j u s t … C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : N e e d to g o b a c k a n d c o n fi r m Page 69 of 154 15 MAY 2019 – DAY 93 … C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: Th e c o m p o s i ti o n o f t h a t Board. C H A I R P E R S O N : Ye s , o k a y. MR MOHAMMED SULEMAN MAHOMEDY: A n d w il l c o m e b a c k o n th a t C h a ir. C H A I R P E R S O N : Ye s , t h a n k y o u . A D V P H I L L I P M O K O E N A S C : Ye s . 10 C H A I R P E R S O N : I a m s o r r y. I i n t e r r u p t e d y o u . Yo u w e r e d e a l in g w i t h … ADV PHILLIP MOKOENA SC: CSR. C H A I R P E R S O N : Ye s , A D V P H I L L I P M O K O E N A S C : S t i ll e x p l a i n in g to u s w h a t i s C S R , y e s . MR MOHAMMED SULEMAN MAHOMEDY: Chair as I said the China S o u th R a il h a d g o t – t h e fir s t o n e w a s t h e 9 5 l o c o m o t iv e s t o d e l iv e r - t o m a n u f a c t u r e a n d d e liv e r 9 5 l o c o m o tiv e s t h a t w e r e g o i n g to b e u s e d e s s e n ti a l ly o n th e m a n g a n e s e c h a n n e l f o r Tr a n s n e t . T h is p r o c e s s c o m m e n c e d in 2 0 11 a n d i t w a s a n o p e n te n d e r. W e w i ll t o u c h o n s o m e 20 o f t h e c h a l l e n g e s o f t h a t t e n d e r l a te r o n b u t I a m g i v i n g a v ie w o n C h i n a S o u th R a il . S u b s e q u e n t ly i n a r o u n d 2 0 1 4 t h e r e w a s t h i s c o n fi n e m e n t t o C h i n a S o u t h R a i l t o p r o d u c e 1 0 0 l o c o m o t iv e s a n d t h e n t h r o u g h t h e 1 0 6 4 p r o g r a m t h e y g o t – o f th e 1 0 6 4 t h e y r e c e iv e d th e li o n s h a r e o f t h e e l e c tr ic l o c o m o ti v e s a n d t h e y h a d to m a n u f a c t u r e o r t h e ir c o n t r a c t f o r m a n u fa c tu r e w a s 3 5 9 lo c o m o t iv e s . S o I th in k th a t i s Page 70 of 154 15 MAY 2019 – DAY 93 e s s e n ti a l ly C h in a S o u t h R a i l b u t a f te r t h e c o n c lu s i o n o f t h e 1 0 6 4 p r o g r a m w i t h th e 3 5 9 i n a r o u n d 2 0 1 6 t h e r e w a s a ls o a m a i n t e n a n c e a g r e e m e n t th a t w a s – I w o u l d n o t s a y c o n c lu d e d – b u t I t h i n k t h e r e w a s – t h e r e w a s a l e t te r o f i n te n t t h a t w a s i s s u e d to C h in a S o u t h R a il to m a in t a i n a ll o f t h o s e l o c o m o t iv e s t h a t t h e y w i ll p r o d u c e d fo r Tr a n s n e t . u l ti m a t e l y h a v e It was a 12 year agreement that was in the r e g i o n o f - a t o t a l o f – R 6 . 1 8 b il li o n . S o th e s e w e r e q u i t e s i g n i f ic a n t tr a n s a c ti o n s f o r a n e n ti ty a n d I th in k t h a t i s la r g e l y t h e o v e r v i e w … A D V P H I L L I P M O K O E N A S C : Ye s . 10 MR MOHAMMED SULEMAN MAHOMEDY: O f C h in a S o u t h R a il a t Tr a n s n e t. A D V P H I L L I P M O K O E N A S C : Ye s a n d t h e n a t p a r a g r a p h 5 . 3 . 1 y o u n o w c o m m e n c e te ll i n g u s a b o u t w h y a f te r h a v in g r e v i e w e d e v e r y t h i n g y o u c o m e t o t h e c o n c l u s i o n th a t t h e r e w a s b i a s n e s s i n fa v o u r o f C S R . MR MOHAMMED SULEMAN MAHOMEDY: C h a i r u n d e r t h e h e a d in g o f M S M 1 2 w e h a v e i n c l u d e d th e R F P – t h e r e q u e s t f o r p r i c i n g - th a t w e n t o u t f o r t h e 9 5 l o c o m o ti v e s a n d t h e 9 5 l o c o m o ti v e s th e is s u e d a t e w a s 6 D e c e m b e r 2 0 11 a n d t h e c l o s i n g d a te w a s 2 8 F e b r u a r y 2 0 1 2 . T h i s i s q u i te a n i m p o r t a n t d a t e i n th e p r o c e s s t h a t e n s u e s . 20 id e n t i fi e d - in our s u b m is s i o n as w e ll under What we have M S M 11 – are c o m m u n ic a ti o n s b e tw e e n a n e x e c u t iv e a t C S R – Mr Wa n g A n – w r it i n g to … A D V P H I L L I P M O K O E N A S C : I t i s p a g e 2 0 2 C h a ir. MR MOHAMM ED SULEMAN MAHOMEDY: Page 203. CHAIRPERSON : Thank you. Page 71 of 154 15 MAY 2019 – DAY 93 MR MOHAMMED SULEMAN MAHOMEDY: Mr Wa n g A n w r it e s t h r o u g h t o M r G a r r y P i ta w h o is th e th e n C h i e f – s o r r y – h e is th e n C h i e f S u p p ly C h a in O ff ic e r o f Tr a n s n e t . M r P it a w a s th e S u p p ly C h a in O ff i c e r a t t h a t ti m e . I t i s a ls o g o i n g t o c o m e u p l a t e r w h e r e h e w a s th e C F O l a t e r o n b u t a t t h a t ti m e h e w a s t h e G r o u p S u p p ly C h a i n O ff ic e r a n d i t f o ll o w s a n e m a il tr a i l t h a t s a y s th a t – a n d I w i ll r e a d o u t … A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: If it pleases Commission. 10 A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMM ED SULEMAN MAHOMEDY: It says: “ D e a r M r Pi t a , t h a n k y o u f o r y o u r e m a il . We were v e r y p le a s e d to h a v e a c h a n c e t o m e e t w i t h y o u r Group CEO – Mr Brian Molefe – at the beginning of D e c e m b e r. W e e x p r e s s e d o u r i n te r e s t i n y o u r t e n d e r f o r th e 9 5 e l e c tr ic l o c o m o ti v e s a n d t h e S o u th A fr ic a n m a r k e t a s w e ll . R e g a r d in g t h e te n d e r d o c u m e n t w e a r e c o n t a c t in g Mr … ” T h a t is a n e r r o r b e c a u s e i t i s M s . 20 “ … M s L in d i w e M d l e ts h e a n d t r a n s f e r r in g t h e m o n e y t o y o u r a c c o u n t f o r g e t ti n g t h e d o c u m e n t . Due to o n ly S o u t h A fr i c a n R a n d b e i n g a c c e p t a b l e th e money tr a n s f e r r i n g process is a li t tl e bit c o m p lic a t e d b u t w e b e l i e v e w e c o u ld g e t t h e t e n d e r d o c u m e n t w it h in t h i s w e e k . Yo u a r e v e r y k i n d to Page 72 of 154 the 15 MAY 2019 – DAY 93 f a c i li t a t e u s y o u r s u p p o r t o n t h e t e n d e r d o c u m e n t i f w e n e e d a n in f o r m y o u .” ADV PHILLIP MOKOENA SC: So … MR MOHAMM ED SULEMAN MAHOMEDY: The challenge … ADV PHILLIP MOKOENA SC: Ye s . This – this c o m m u n i c a t io n r e fe r e n c e s a m e e ti n g th a t t o o k p l a c e b e tw e e n M r M o le f e a n d th e p e o p le fr o m th e C S R a n d a t t h is t i m e i t w a s e v e n b e f o r e t h e p r o c u r e m e n t o f t h e lo c o m o t iv e s w a s d o n e . A m I c o r r e c t ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . S o t h e r e if y o u l o o k a t 10 t h e b o t t o m p a r t o f th e e m a i l Mr P i t a w r i te s t o M r Wa n g A n a n d h e s a y s : “ My C E O – M r M o l e fe – a d v i s e d m e t h a t y o u m e t e a r l ie r.” H e c o n fir m s t h e m e e ti n g . H e a ls o s ta t e d t h a t : “CSR E le c tr i c L o c o m o tiv e showed interest in p a r t ic ip a ti n g i n o u r n e x t t e n d e r.” W h a t i s i n t e r e s ti n g i s th a t t e n d e r w a s a lr e a d y in p la y. O n 6 D e c e m b e r t h a t t e n d e r w a s a lr e a d y o p e n e d . These notes 1 9 D e c e m b e r. 20 are being T h e is s u e d d a t e is 6 D e c e m b e r. exchanged between 16 December and I n t e r m s o f g o v e r n a n c e a n d in te r m s o f p r o c e s s w it h in Tr a n s n e t n o e x e c u t iv e is a l lo w e d to e n g a g e w i t h a b i d d e r i n a – w h a t i s c a l l e d a c l o s e d t e n d e r p e r i o d a n d t h e G r o u p S u p p l y C h a i n O ff ic e r h e r e is n o w e n g a g i n g w i th a b id d e r in f o r m i n g h i m t h a t t h e r e is a b i d o u t t h e r e o r t h e r e i s a – th e r e is a n R F P o u t in t h e m a r k e t w h e r e a s t h is R F P w a s a n i n te r n a ti o n a l R FP. S o b id d e r s fr o m a c r o s s th e w o r l d i f t h e y h a d a n in t e r e s t w o u l d h a v e a t t h a t ti m e c o m m e n c e d t h e ir p r e p a r a t i o n Page 73 of 154 15 MAY 2019 – DAY 93 for the bid documents. ADV PHILLIP MOKOENA paragraph 5.3.2. SC: Ye s . Yo u conclude saying w i th P l e a s e t a k e u s t h r o u g h t h e c o n te n ts o f t h a t paragraph. M R M O H A M M E D S U L E M A N M A H O M E D Y : W h a t w e a r e s a y i n g is t h a t i f – w h ic h is a b i g i f b e c a u s e i t i s n o t a l lo w e d i n t e r m s o f t e n d e r p r o c e s s e s – b u t i f M r M o le f e a n d M r P i t a w e r e w a n ti n g t o e n g a g e w i t h bidders then o p p o r t u n i ty. 10 a ll b id d e r s should have been a ff o r d e d that equal W e a r e n o t s u r e w h a t t h e c o n v e r s a ti o n s w e r e i n t h o s e m e e ti n g s a n d w e a r e n o t s u r e w h a t t h e d is c u s s i o n s w e r e . H o w e v e r i t is c e r t a i n t h a t t h e r e s e e m s t o b e p r e f e r e n ti a l t r e a t m e n t g iv e n to o n e b i d d e r o v e r t h e o th e r w h e r e a p a r ti c u l a r b i d d e r – b i d d e r i s t o ld I a m n o t s u r e w h e t h e r C S R is a w a r e o f t h i s R F P. W e d o n o t o r d in a r il y p ic k u p t h e p h o n e i n a n R F P p r o c e s s a n d s a y t o p e o p l e t h e r e is a n R F P. Yo u n e e d t o p l e a s e r e s p o n d . T h a t i s t h e ir r e s p o n s i b i li ty a s a b u s i n e s s i n – in t h e g l o b a l s p a c e . S o t h e r e – t h e r e s e e ms t o b e a s p e c i a l r e l a ti o n s h i p t h a t C S R e n j o y e d i n t h e c o n te x t o f th e p r o c u r e m e n t p r o c e s s b e c a u s e t h e r e d e f in i te ly w a s u n t o w a r d d i s c u s s io n s - a n d w h e n I s a y u n t o w a r d m e a n i n g u n p r o c e d u r a l d is c u s s i o n s in a c l o s e d te n d e r 20 p e r i o d - b u t i n a d d i ti o n C h a ir I t h i n k w i t h i n g o o d g o v e r n a n c e p r i n c ip le s it i s a l s o n o t e x p e c t e d t h a t a n e n t i ty p a r ti c u l a r l y t h e ir G r o u p S u p p ly C h a in O ff ic e r a n d C h i e f E x e c u t iv e e n g a g e w i t h o n e p a r ty i n a n R F P p r o c e s s . S o i t is n o t j u s t t h e p r o c e d u r e s w i t h i n Tr a n s n e t b u t I t h in k a s e x e c u tiv e s i n a b u s i n e s s w e w o u ld n o t e x p e c t th a t c o n v e r s a ti o n s a r e h a p p e n in g b e h i n d th e s c e n e s w h e n a te n d e r i s li v e . Page 74 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC: Ye s . N o w c o u l d y o u a d d r e s s th e n e w t o p ic o n p a g e 1 0 fr o m p a r a g r a p h 5 . 3 .3 ? Yo u a r e d e a li n g w it h t h e c h a n g in g o f t h e e v a lu a t io n c r i t e r i a in r e l a ti o n t o t h e 9 5 l o c o m o ti v e s tr a n s a c ti o n . MR MOHAMMED SULEMAN MAHOMEDY: Chair if I may refer the C o m m i s s i o n to p a g e 2 1 8 u n d e r th e A n n e x M S M 1 2 p a r a g r a p h 6 .2 . – page 218 T h is is t h e R F P C h a ir t h a t w a s i s s u e d to th e m a r k e t a n d t h is w o u l d h a v e b e e n a s t a n d a r d R F P t h a t w o u ld h a v e g o n e t o a ll m a r k e t p a r ti c i p a n ts a t t h e ti m e . 10 W h a t it d e t a ils is t h e B B B E r a ti n g r e q u ir e m e n t s . I d o n o t i n t e n d r e a d i n g a l l o f i t b u t I t h i n k w h a t i t d o e s s a y m i d w a y t h r o u g h th a t p a g e : “ T h e r e s p o n d e n ts w il l b e r e q u ir e d t o f u r n is h p r o o f o f t h e a b o v e t o Tr a n s n e t S O C L i m i t e d . That is a d e t a i l e d s c o r e c a r d a s s ti p u l a te d a b o v e i n r e s p e c t o f la r g e e n t e r p r i s e a n d Q S E s o r p r o o f o f tu r n o v e r i n r e s p e c t o f E M E s . N B – n o te w e l l – fa il u r e to d o s o w i ll r e s u l t i n a s c o r e o f z e r o b e i n g a l lo c a t e d f o r BEE.” T h i s b e c o m e s q u it e r e le v a n t a s I p r o c e e d C h a ir. 20 r e q u ir e m e n t in t h e R F P. Th a t is t h e – t h e What we then have under Annexure 13 – M S M 1 3 p a g e 2 6 8 - i s a m e m o r a n d u m w h ic h is – w h ic h is a d d r e s s e d fr o m t h e C h i e f E x e c u t iv e o f Tr a n s n e t Fr e i g h t R a il a t th e t i m e M r Si y a b o n g a G a m a – to th e G r o u p C h ie f E x e c u t iv e – Mr B r i a n M o l e fe . The purpose of this memorandum it says: “ Is t o p r o v i d e a n u p d a t e t o t h e Tr a n s n e t G r o u p Page 75 of 154 15 MAY 2019 – DAY 93 C h i e f E x e c u ti v e o n t h e p r o g r e s s o n t h e te n d e r e v a l u a t i o n a s i n d ic a te d i n t h e m e m o r a n d u m t o th e GCE dated 20 April 2012. the Group Chief I t is a ls o t o r e q u e s t f o r E x e c u t iv e to approve the s h o r tl is ti n g o f th e t e n d e r e r s th a t h a v e m e t t h e S D t h r e s h o ld o f 6 0 p e r c e n t a n d t o a p p r o v e t h e i s s u i n g o f l e t te r s t o u n s u c c e s s f u l t e n d e r s t h a t d i d n o t m e e t the SD threshold for stage 1 of the evaluation p r o c e s s .” 10 T h e r e a s o n t h is b e c o m e s q u it e c r i tic a l is b e c a u s e w e – i n t h e d o c u m e n t – i n t h e R F P w e s a i d t h a t i f a b id d e r d o e s n o t s u b m i t th e B B B E c e r t if ic a te s t h e y a r e s c o r e d z e r o . C h a ir l a te r in th e d o c u m e n t y o u w il l fi n d u n d e r p a r a g r a p h 7 o f t h a t d o c u m e n t C h a ir o n p a g e 2 6 9 … ADV PHILLIP MOKOENA SC : Before you go to that paragraph can you take us through paragraph 4 on page 269? MR MOHAMED SULEMAN MAHOMEDY : C h a ir p a r a g r a p h fo u r s a y s : “ B B B E E r a ti n g c e r ti fi c a t e s in r e s p e c t o f J V p a r tn e r s a n d s u b c o n tr a c to r s a s w e ll a s t h e d is tr i b u ti o n o f th e B B B E E s t a t u s w e r e to b e fu r n is h e d w i th th e te n d e r e r s u b m is s i o n s t o e n a b le a 20 f a ir e v a l u a ti o n o f a l l s u b m i s s io n s r e c e iv e d . In c o r p o r a te d J V ’s a ls o h a d t o p r o v id e a c o n s o li d a te d B B B E E c e r ti fi c a t e f o r l e g a l e n t i ty, u n - i n c o r p o r a t e d J V ’s w e r e r e q u i r e d t o s u b m i t B B B E E c e r t if ic a te s o f a ll o f t h e c o n s o r t i u m p a r t n e r s . As s u c h a n y foreign – the foreign companies would not have provided a B B B E E c e r ti fi c a t e a n d t h e r e f o r e w o u l d n o t s c o r e a n y B B B E E Page 76 of 154 15 MAY 2019 – DAY 93 p o i n t s .” ADV PHILLIP MOKOENA SC : S o th is w a s p a r t o f th e r e q u ir e m e n t ? MR MOHAMED SULEMAN MAHOMEDY : ADV PHILLIP MOKOENA SC : Ye s . Ye s y o u w a n t e d to t a k e t h e C h a i r t o a d i ff e r e n t . . . MR MOHAMED SULEMAN MAHOMEDY : ADV PHILLIP MOKOENA SC : To p a r a g r a p h s e v e n . Ye s . MR MOHAMED SULEMAN MAHOMED Y : P a r a g r a p h s e v e n s a y s th a t in l i g h t o f t h e a b o v e a n d it e x p l a in s a fe w t h in g s a b o u t t h e B B B E E a s 10 S D , t h e c r o s s - f u n c ti o n e v a lu a ti o n t e a m w h a t is c a l le d t h e C F E T p r o p o s e d t w o o p ti o n s f o r s t a g e o n e . O p t i o n o n e , a s p a r t o f s t a g e o n e o f th e S D e v a l u a t io n a n d a s p e r th e R F P – i t’s i m p o r t a n t C h a i r b e c a u s e it s a y s a s p e r t h e R F P, a n d t h e B A D C s u b m is s i o n w h ic h w a s t h e B o a r d A c q u is i t io n s a n d D is p o s a ls C o u n s e l C o m m i t t e e s u b m i s s i o n , th e S D e v a l u a t i o n i n c lu d e s B B B E E a n d F R C . Th e e ff e c t o f t h is i s t h a t f o r e i g n t e n d e r e r s t h a t d o n o t h a v e lo c a l r e p r e s e n t a ti o n a r e p r e j u d ic e d a n d w il l r e c e i v e z e r o o n B B B E E . T h is o p ti o n d o e s n o t s u p p o r t t h e B B B E E c o d e o f g o o d p r a c tic e w h ic h a ll o w s f o r s u c h fo r e i g n c o m p a n i e s , i f r e g is t e r e d lo c a lly t o s t a r t u p e n t e r p r is e s e tc e t e r a a n d t h e n w h a t i t s a y s is , b a s e d 20 o n o p ti o n o n e , th e f o l lo w i n g th r e e t e n d e r e r s m e t t h e m in i m u m t h r e s h o l d o f 6 0 % . C h a ir th is is r e la t in g t o th e 9 5 l o c o m o t iv e s s o t h is a s s e s s m e n t is b a s e d o n w h a t t h e R F P s a i d . Based on the RFP assessment three b i d d e r s q u a li fi e d , S i e m e n s , B o m b a r d i e r, S S M M C o n s o r ti u m . Then t h e r e ’s a n o p t i o n t w o w h ic h is p r e s e n te d b e l o w w h ic h e s s e n t i a ll y s a y s , w e w i ll d o e v e r y t h i n g e x c e p t f o r t h is in t h e R F P w e ’ ll i g n o r e th is a n d Page 77 of 154 15 MAY 2019 – DAY 93 t h e n n o w t h e r e a r e fiv e b i d d e r s t h a t q u a li fy a n d t h e b i d d e r s a r e , S i e m e n s , B o m b a r d i e r, M a lc o m C S R , t h e r e ’s a c o m p a n y c a l le d M a l a s k o Tr a d in g 8 5 a n d S S M M a n d o n t h e f o l lo w i n g p a g e , C h a ir, w h a t is n o w s u b m i tt e d f o r a p p r o v a l t o th e G C E a t t h e t i m e i t s a y s o n t h e l a s t b u ll e t u n d e r p a r a g r a p h n i n e i t s a y s , “ I t is r e c o m m e n d e d th a t t h e G C E a p p r o v e s th e is s u i n g o f l e t t e r s t o a n s w e r s u c c e s s f u l t e n d e r e r s d u e t o t h e ir b i d s n o t m e e t i n g t h e m in i m u m S D e v a l u a ti o n th r e s h o l d f o r s t a g e o n e w h i c h is b a s e d o n o p ti o n t w o ” , w h i c h w a s n o t i n a g r e e m e n t w i t h th e R F P b y t h e w a y. 10 S o t h a t p r o c e s s w a s n o t w i th i n th e r e a l m s o f t h e G C E ’s m a n d a t e a n d t h e r e a s o n I s a y t h a t i s b e c a u s e t h e y a r e e x p li c i t i n t h e d o c u m e n t t h a t s a y s t h a t t h e B A D C a p p r o v e d t h e te r ms o f t h e R F P. T h e B A D C w o u l d b e t h e o n ly c o m m i t t e e th a t c a n c h a n g e t h a t . T h i s k i n d o f c h a n g e c o u l d b e p r e ju d ic i a l to a n o th e r b i d d e r b e c a u s e h a d t h e b i d d e r s k n o w n t h a t y o u w e r e n o t g o i n g t o l o o k a t t h is , y o u w e r e g o i n g t o ig n o r e it , e v e n t h o u g h y o u s a i d i n y o u r R F P t h a t y o u w i ll b e s c o r e d z e r o , h a d o th e r b i d d e r s t h e y m a y n o t h a v e – I m e a n y o u m a y h a v e h a d a n u m b e r o f o th e r b id d e r s o n t h e t a b l e b e c a u s e th e y w o u l d h a v e k n o w n t h a t t h is p a r t ic u l a r p i e c e w a s n o t r e le v a n t . 20 So we issue it out as being m a n d a t o r y a n d th e n w e i g n o r e i t a n d t h e n a p o i n t – o r b r i n g C S R i n t o t h e m ix o f b i d d e r s a n d t h a t ’s w h y w e ’ r e s a y in g th a t i t ’s u n d e r a b i a s w h e r e C S R tr u t h f u ll y, i f y o u lo o k a t th is , a n d i f i t w a s e v a l u a t e d i n t e r m s o f t h e R F P, th e y w o u l d n o t h a v e q u a li fi e d i n t h e f ir s t p h a s e – t h e fir s t s ta g e a n d t h e y w o u ld h a v e b e e n e x c l u d e d b u t y e t th e y w e r e a b l e to g o t h r o u g h s ta g e tw o C h a ir. Page 78 of 154 15 MAY 2019 – DAY 93 CHAIRPERSON : O r d i n a r il y i f y o u h a d is s u e d a r e q u e s t f o r p r o p o s a ls a n d y o u h a d s a id th e s e w il l b e t h e c r i te r i a a g a in s t w h ic h b id s w i ll b e e v a l u a t e d a n d s u b s e q u e n t t o t h e is s u in g o f th a t r e q u e s t y o u c h a n g e y o u r m in d a b o u t s o m e o f th e c r i te r i a , o n e o r m o r e , d o e s th e Tr a n s n e t P r o c u r e m e n t r e g i m e s a y w h a t s h o u l d h a p p e n , n a m e ly w h e t h e r y o u s h o u l d r e - is s u e o r y o u s h o u ld i s s u e a n a m e n d e d r e q u e s t f o r p r o p o s a ls o r w h e t h e r i t d o e s a l l o w t h a t , w i t h o u t a m e n d in g t h e r e q u e s ts fo r p r o p o s a l s a n d l e t ti n g e v e r y b o d y k n o w o f t h e a m e n d m e n t w h e th e r i t d o e s a l lo w th a t y o u c a n c h a n g e t h i n g s p r o v i d e d , m a y b e , c e r ta in 10 r e q u ir e m e n t s a r e m e t ? MR MOHAMED SULEMAN MAHOMEDY : C h a ir I t h in k t h e f ir s t t h in g t h a t h a p p e n s i s a n a s s e s s m e n t o f t h a t c h a n g e o f c r i t e r ia t o d e t e r m i n e w h e t h e r i t i s a f u n d a m e n t a l c h a n g e , w e h a v e t o l o o k a t t h e – o b v i o u s ly a ls o t h e i m p a c t o n o t h e r c o d e s w i t h i n t h e P P P FA t h e Tr a n s n e t p r o c u r e m e n t p r o c e s s e s a s w e ll a s t h e P F M A . If the change is not d e e m e d s ig n if ic a n t c h a n g e t h e n w e w o u l d o r d i n a r i ly i n f o r m o r w e h a v e t h e r i g h t t o in f o r m a l l o f t h e b i d d e r s t o s a y t h is is a c h a n g e t h a t h a s b e e n e ffe c te d a n d w il l i t c h a n g e a n y th in g i n y o u r s u b m i s s i o n b u t a c h a n g e o f th is n a tu r e w h e r e y o u h a d it a s a m a n d a to r y a n d y o u s a i d 20 t h a t i t’s a – i n te r ms o f f ir s t w e s a i d , w h a t w e s u b m i t t e d , w e s a id , f a il u r e to d o s o w il l r e s u l t i n z e r o a n d n o w w e ’r e i g n o r in g t h a t w e w o u l d h a v e h a d t o h a v e g o n e b a c k t o t h e B o a r d A c q u is i ti o n D is p o s a ls C o m m i t t e e t o a s k f o r g u i d a n c e . T h e r e ’s a n u m b e r o f w a y s y o u c a n d e a l w i t h t h i s , th e f ir s t is y o u c a n a c t u a ll y c a ll t h is a n o n - a w a r d a n d s a y t h a t w e a r e n o w c h a n g in g – f u n d a m e n t a l ly c h a n g i n g s o m e o f t h e c r i te r i a a n d Page 79 of 154 15 MAY 2019 – DAY 93 r e - is s u e t o t h e m a r k e t. O r d i n a r il y i f i t w a s n o t d e e m e d to b e a s ig n if ic a n t d e v i a ti o n i t w o u l d h a v e a t l e a s t h a v e r e q u i r e d u s t o i n fo r m a l l o f th e p a r ti c i p a n ts th a t in i ti a l ly h a d i n d ic a te d a n in t e r e s t b e c a u s e t h is p a r t ic u l a r o n e w e n t th r o u g h c o m p u l s o r y b r i e fi n g a n d th e r e w a s a w h o le h o s t o f p r o c e s s e s t h a t w e f o l lo w e d a t t h e t i m e a n d w e s h o u l d h a v e a t l e a s t d is c l o s e d i t a t s o m e o f t h o s e b r i e fi n g s b u t c le a r ly, a g a i n it ’s t h r e e s i g n a t u r e s o n a d o c u m e n t. CHAIRPERSON : O k a y th a n k y o u . ADV PHILLIP MOKOENA SC : 10 Now if I may refer you to page 270 and id e n t i fy fo r t h e C h a ir a s t o w h o s i g n s t h e d o c u m e n t ? MR MOHAMED SULEMAN MAHOMEDY : C h a i r th is d o c u m e n t i s s ig n e d b y t h e C h ie f Pr o c u r e m e n t O ff ic e r o f Tr a n s n e t Fr e i g h t R a i l a t t h a t ti m e M r T h a m s a n q a J i y a n e , t h e C h ie f E x e c u ti v e o f Tr a n s n e t Fr e i g h t R a il a t t h a t ti m e M r S i y a b o n g a G a m a a n d t h e G r o u p C h i e f E x e c u t iv e o f Tr a n s n e t S O C L i m i te d , Mr B r i a n M o l e fe a t t h a t ti m e . ADV PHILLIP MOKOENA SC : Ye s i n t h e li g h t o f w h a t y o u ’ v e t o ld t h e C h a ir a b o u t th e c h a n g i n g o f th e c r i te r i a o r th e m a n d a t o r y r e q u ir e m e n ts o f t h e te n d e r i ts e l f , w o u ld t h i s h a v e b e e n a g e n u i n e m i s ta k e o f p e o p l e n o t u n d e r s t a n d i n g t h e R F P o r n o t r e a ll y u n d e r s t a n d in g w h a t w e r e t h e 20 r e q u ir e m e n t s o f th e t e n d e r ? MR MOHAMED SULEMAN MAHOMEDY : C h a ir in s i g n i n g t h is a s t h e C h i e f P r o c u r e m e n t O ff ic e r o n e w o u l d e x p e c t t h a t t h e P r o c u r e m e n t O ff ic e r i s a u fa i t w i t h t h e s e r u l e s a s t h e y a r e t h e r u l e s o f th e g a m e o f procurement. So I wouldn’t – you know I would expect that the Chief P r o c u r e m e n t O ff ic e r o f a n e n t it y l ik e Tr a n s n e t F r e i g h t R a i l k n o w th a t Page 80 of 154 15 MAY 2019 – DAY 93 t h is w a s a d e v ia t io n a n d t h a t t h e d e v ia t io n h a d t o h a v e b e e n a p p r o v e d b y t h e c o m m i t te e t h a t o r i g i n a l ly a p p r o v e d t h e tr a n s a c ti o n a n d a ls o o n e more th i n g , I think i t’s a ls o i m p o r ta n t t o note that t h is is a c o n tr a v e n ti o n o f t h e P F M A a s w e ll i n t e r ms o f t h e p r o c e s s e s o f th e P F M A t h a t ’s a p p l ic a b l e t o Tr a n s n e t . ADV PHILLIP MOKOENA SC: Ye s , m a y I n o w r e f e r y o u t o p a g e 11 o f y o u r s t a t e m e n t a n d l e t’s n o w i n t e r r o g a t e t h e is s u e s u n d e r t h e h e a d i n g , “ p a y m e n t o f a n u n u s u a l h i g h a d v a n c e p a y m e n t” , c a n y o u p l e a s e p r o c e e d h i g h li g h ti n g t h o s e i s s u e s fr o m p a r a g r a p h 5 . 3 .5 ? 10 MR MOHAMED SULEMAN MAHOMED Y : C h a ir Tr a n s n e t h a d e x e c u te d a f e w tr a n s a c t i o n s w i t h lo c o m o ti v e O E M ’s b e f o r e t h e 1 0 6 4 . S o m e o f t h e m d a t e b a c k in th e l a s t t e n o r t w e lv e y e a r s b u t n o n e t h e le s s r e l e v a n t w i t h M i ts u i a n d t h e r e w e r e o t h e r c o n tr a c ts w i t h G e n e r a l E l e c tr i c , w h e n I r e f e r e n c e o th e r, m e a n i n g o u ts i d e o f t h e 1 0 6 4 . I n t h e c o n tr a c ts w i th G e n e r a l E l e c tr i c t h e n e g o ti a ti o n s y i e l d e d th a t w e p a y a d e p o s it o r a n u p fr o n t f e e o f 1 0 % o f th e c o n tr a c t. T h e s e a r e l a r g e ly r e l a t e d t o c o s ts t h a t t h e O E M w il l i n c u r b e f o r e t h e f ir s t lo c o m o t iv e is d e li v e r e d o r b e fo r e t h e d e li v e r y o f a n y lo c o m o ti v e s ta k e p l a c e , t h e O E M h a s t o s p e n d m o n e y in s e t ti n g u p c o s ts , i n , y o u k n o w, t h e p la n ts th a t 20 t h e y h a v e to b u il d e tc e t e r a , s o t h e r e ’s q u i t e a s i g n i fi c a n t a m o u n t b u t t h e p r a c ti c e w a s 1 0 % . I n s o m e c a s e s i t w o u l d h a v e g o n e u p t o , m a y b e e v e n 1 5 % b u t t h a t w a s a b o u t t h e c e i li n g t h a t w e w e r e p a y in g . O n t h e 9 5 lo c o m o t iv e s w h ic h w e e n t e r e d i n t o i n 2 0 1 2 w i th C h i n a S o u t h R a i l t h a t w e ju s t d is c u s s e d e a r li e r o n , w e p a i d a 1 0 % d e p o s i t t o C h i n a S o u t h R a il o r a n u p f r o n t fe e o f 1 0 % C h a ir. Page 81 of 154 15 MAY 2019 – DAY 93 D u r i n g th e p o s t - t e n d e r n e g o ti a t io n s o f 1 0 6 4 th e r e w a s a l o t o f r u m b li n g s in th e c o r r i d o r s o f Tr a n s n e t th a t t h e n e g o t ia t io n t e a m w a s c o n te m p l a t i n g a m u c h m o r e s ig n if ic a n t a d v a n c e p a y m e n t t o s o m e o f t h e O E M ’s . C h a ir I – d u r in g t h a t ti m e p e r s o n a lly c a l le d M r A n o j S i n g h , a s k e d h i m f o r a n a p p o i n t m e n t b e c a u s e t h e t e a m t h a t w a s n e g o t ia t in g t h e 1 0 6 4 w a s b a s e d a t th e W e b b e r W e n tz e l o ff ic e s a n d n o t a t Tr a n s n e t a n d s c h e d u l e d a m e e ti n g w i t h h i m t o e n q u ir e o f h i m i f i t w a s tr u e t h a t t h e te a m is c o n t e m p la t in g a h i g h e r d e p o s i t p a y m e n t . H e d i d n o t d e n y t h a t , h e d i d , t o s o m e e x t e n t s a y th a t t h e y w e r e t h i n k i n g a b o u t i t a n d 10 w h a t w a s m y c o n c e r n a n d I s a i d w e l l t h e r e w e r e t w o t h i n g s , t h e fi r s t is t h a t t h is is o u t o f k i l te r w i t h a l l o f t h e n e g o ti a ti o n s t h a t w e ’v e u n d e r t a k e n t o d a te a n d t h e s e c o n d t h i n g i s t h a t th is - i f i t w a s h ig h e r t h a n 1 0 % i t w a s n o t n e c e s s a r i ly b u d g e t e d f o r i n o u r c a s h f lo w s a n d t h e r e b y i t w o u l d i m p a c t s ig n if ic a n tly s o m e o f t h e k e y r a ti o s o f Tr a n s n e t , t h e f i n a n c i a l r a t io s . P a r t ic u l a r ly t h e c a s h t h a t w a s g o i n g t o l e a v e th e b u s i n e s s a n d i t w o u l d i m p a c t o u r – w h a t i s c a l le d a c a s h in t e r e s t c o v e r. A c o v e r th a t is , o r a r a ti o th a t is a f o c u s o f a n u m b e r o f i n s ti t u ti o n s g l o b a ll y a n d lo c a ll y i n c l u d in g f in a n c ia l in s t it u ti o n s b u t a ls o c r e d i t r a ti n g a g e n c ie s . 20 I n h a v i n g th a t d is c u s s i o n w i t h h i m , h e a c k n o w l e d g e d m y d is c o m f o r t a n d h e a d v is e d t h a t h e w o u l d c o n s i d e r m y d is c o m f o r t a n d h e w o u ld c o n s id e r w h a t th e y w o u l d lo o k a t a n d t h a t i s w h e n t h a t c o n v e r s a ti o n e n d e d . D e s p i t e t h e c o n c e r n s w e r a i s e d w e th e n h e a r d t h a t th e y n e g o ti a te d w i th C h in a S o u t h R a i l t o p a y a d e p o s it o n t h e s ig n in g – o n th e d a t e o f s i g n i n g o f 1 0 % a n d w i t h i n s i x m o n t h s t o p a y a Page 82 of 154 15 MAY 2019 – DAY 93 f u r th e r 2 0 % t o C h i n a S o u t h R a il . C h a ir t h e q u a n tu m o f t h e s e p e r c e n t a g e s e q u a t e s t o th e f o l lo w i n g . T h e C h i n a S o u t h R a il c o n tr a c t is 1 8 b il li o n r a n d , a 3 0 % e ffe c tiv e d e p o s i t w i t h i n s ix m o n t h s e q u a t e s to ju s t o v e r 5 .4 b il li o n r a n d . N o w t o p a y 5 . 4 b il li o n r a n d u p fr o n t w h e n n o s in g l e lo c o m o t iv e h a s b e e n d e li v e r e d a n d y o u r f ir s t lo c o m o t iv e is m o n t h s o r m a y b e e v e n a y e a r a w a y d o e s n o t – is n o t w a r r a n t e d in m y h u m b l e opinion. W e w i ll s e e t h a t w i t h o th e r l o c o m o ti v e s u p p l i e r s t h a t i t w a s n o t a n y w h e r e n e a r t h a t , s o w e c a n n o t u n d e r s ta n d t h e d i s p a r i ty i n t h e p a y m e n t in a d v a n c e d p a y m e n ts , i f it w a s c o n s i s te n t , li k e 1 0 % b e c a u s e 10 G e n e r a l E l e c tr ic w e r e p a i d 1 0 % , B o m b a r d i e r w e r e p a i d a 9 % d e p o s i t a n d th e n a fu r t h e r 9 % w i t h i n s ix m o n t h s s o t h a t’s 1 8 % , C h i n a S o u t h R a il w e r e p a id a b o u t 1 5 % , s o t h e r e ’s c l e a r ly a d i s p a r i ty w h e n C h i n a S o u th R a i l r e c e iv e s a 3 0 % d e p o s i t i n a s ix m o n th p e r i o d . ADV PHILLIP MOKOENA SC : Wa s th e r e a n y e x p l a n a ti o n p r e f e r r e d a s to why were they paid such a huge advance payment? MR MOHAMED SULEMAN MAHOMEDY : I’ m n o t a w a r e o f t h a t , w e d i d request that, we were never provided that because we requested to u n d e r s t a n d th e t e c h n i c a li ty b e h i n d t h a t , I d o b e li e v e t h e r e ’s a t e c h n ic a l p a p e r t h a t m a y h a v e b e e n w r i t t e n b u t t h e n a g a i n o n e is th e t e c h n i c a li ty 20 b u t m o r e i m p o r t a n t ly f r o m o u r p e r s p e c ti v e is t o lo o k a t t h e d is p a r i t y in tr e a t m e n t – tr e a t i n g o n e O E M s o s i g n i f ic a n t ly d i ff e r e n tly t o t h e o t h e r OEM. ADV PHILLIP MOKOENA SC : A n d in t e r m s o f t h e 3 5 9 lo c o m o t iv e s ? MR MOHAMED SULEMAN MAHOMEDY : That was for the 359 where w e p a i d a 1 0 % a n d 2 0 % a n d o n t h e h u n d r e d .. .( i n t e r v e n ti o n ) . Page 83 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC : Ye s o n th e h u n d r e d . MR MOHAMED SULEMAN MAHOMEDY : I a ls o b e l ie v e t h a t w e p a i d a 3 0 % d e p o s i t o n t h e h u n d r e d l o c o m o t iv e s a s w e l l. ADV PHILLIP MOKOENA SC : Equating to how much in rands? MR MOHAMED SULEMAN MAHOMEDY : T h a t w a s e q u a ti n g t o a p p r o x i m a te ly ju s t o v e r 1 .2 b i ll i o n r a n d . ADV PHILLIP MOKOENA SC : Even b e fo r e d e l iv e r y of any lo c o m o t iv e s ? MR MOHAMED SULEMAN MAHOMEDY : 10 ADV PHILLIP MOKOENA SC : T h a t ’s r i g h t . Ye s , m a y w e t h e n d e a l w i t h y o u r n e x t t o p ic fr o m p a r a g r a p h 5 . 3 .9 C h a ir, i t’s o n p a g e 11 , t h e p a y m e n t o f th e in t e r e s t p e n a l ti e s t o C S R a n d y o u r e f e r t o t h e p e r i o d o f J u n e 2 0 1 5 . MR MOHAMED SULEMAN MAHOMEDY : C h a ir t h e p e n a l ti e s a n d in t e r e s t t h a t w e r e f e r e n c e h e r e a c tu a l ly r e l a te to th e l a t e p a y m e n t o f the deposit. S o a s I m e n ti o n e d 1 0 % w a s p a id o n t h e s ig n in g a n d a f u r th e r 2 0 % w a s d u e w i th i n s i x m o n th s o r o n t h e s ix th m o n t h , I th i n k i t w a s S e p te m b e r 2 0 1 4 . Th e 2 0 % C h a i r a m o u n t s to j u s t o v e r 3 .6 b il li o n r a n d , t h e n in S e p t e m b e r 2 0 1 4 w h e n th e p a y m e n t w a s d u e t h e r e w a s s o m e a r r a n g e m e n ts b e t w e e n Tr a n s n e t a n d C S R f o r t h e s l ig h t d e la y i n 20 t h e p a y m e n t , s u b s e q u e n t ly t h e r e s e e ms t o h a v e b e e n c o r r e s p o n d e n c e b e t w e e n Tr a n s n e t a n d C h in a S o u t h R a i l t o s a y, w e ll , w e d o n ’ t h a v e th e c a s h Tr a n s n e t a n d w e w i ll n o w r e q u e s t f r o m y o u f o r a d e f e r m e n t i n t h e p a y m e n t o r a d e fe r r a l i n th e p a y m e n t to 2 0 1 5 . lo c o m o t iv e s u p p l y a g r e e m e n t t h e n w o u l d k ic k p e n a l t ie s n o w w o u l d a t tr a c t i n te r e s t . W h a t i s n o t n e c e s s a r il y m a k i n g Page 84 of 154 in Obviously the because these 15 MAY 2019 – DAY 93 s e n s e fr o m o u r p e r s p e c t iv e C h a ir, is th a t Tr a n s n e t a t t h e ti m e , h a d s ig n if ic a n t c r e d it f a c i li t ie s a v a i l a b le t h a t w e c o u ld h a v e u t il is e d a n d t h e in t e r e s t r a t e o n t h o s e f a c i li t ie s w a s a v e r a g i n g b e t w e e n 6 . 4 % a n d 7 % . W h e r e a s t h e L o c o m o ti v e S u p p l y A g r e e m e n t c a ll e d f o r i n t e r e s t t o b e p a i d a t p r i m e r a t e s , th e p r i m e a t th e ti m e w a s i n th e r e g io n o f 9 . 2 5 % . N o w w e t h e n c o n ti n u e d i n J u n e 2 0 1 5 t o p a y C h i n a S o u t h R a i l a n a m o u n t o f 2 2 9 m i ll i o n f o r i n te r e s t a n d a n a m o u n t i n c lu d i n g VAT o f 6 8 m i ll io n r a n d f o r w h a t c a m e a c r o s s a s f u r th e r h e d g i n g c o s ts . I w i ll d e a l w i th e a c h o n e o f th e s e C h a ir i f i t is o k a y a s i t – e a c h o n e o f th e m 10 h a s a d i ff e r e n t n u is a n c e . T h e i n t e r e s t a m o u n t in g t o 2 2 9 m il li o n a s I s a i d , w e c o u ld h a v e u til is e d o u r f a c il it i e s i n t e r n a l ly a t Tr a n s n e t w i th b a n k s t h a t w e a l r e a d y h a d r e l a ti o n s h i p s a n d w e c o u l d h a v e p a i d a n in t e r e s t r a t e o f b e tw e e n 6 . 4 a n d 7 % w h i c h w a s s i g n i fi c a n t ly l o w e r – w o u ld h a v e b e e n s i g n i f ic a n t ly l o w e r th a n t h e 2 2 9 m il li o n , i t c o u l d h a v e b e e n lo w e r b y a p p r o x i m a t e l y 8 0 mi ll i o n w h i c h w o u l d h a v e s a v e d Tr a n s n e t m o n e y b u t b e t h a t a s i t m a y. C h a ir w h a t is a ls o q u i t e in t e r e s ti n g is th a t o n t h e 1 s t o f J u n e 2 0 1 5 t h e r e ’s a n e m a i l fr o m t h e G r o u p Tr e a s u r e r a t Tr a n s n e t , M r P h e t o l o R a m o s e b u d i w h o w r i te s to M r Wa n g P a n o f C h in a S o u t h R a i l o n t h e 1 s t o f J u n e a n d h e s a y s , p l e a s e 20 r e c e i v e t h e a t t a c h e d a n d h e c o p ie s Mr A n o j S i n g h a n d Mr D a n i e S m i t i n t h is m a il a n d . . .( i n t e r v e n t i o n ) . ADV PHILLIP MOKOENA SC : M r C h a ir, m a y I r e f e r y o u t o p a g e 2 7 2 a n d th a t i s M S M 1 4 . MR MOHAMED SULEMAN MAHOMEDY : ADV PHILLIP MOKOENA SC : T h a t is c o r r e c t a d v o c a t e . Ye s , w h il e t h e C h a i r is fi n d i n g h is w a y Page 85 of 154 15 MAY 2019 – DAY 93 t o th a t d o c u m e n t , i f y o u g o t o p a g e 2 7 2 a n d i d e n t if y t h a t d o c u m e n t f o r us. MR MOHAMED SULEMAN MAHOMED Y : C h a ir t h is is a n e m a i l f r o m M r R a m o s e b u d i o f Tr a n s n e t o n M o n d a y t h e 1 s t o f J u n e 2 0 1 5 a t 11 h 2 1 to C h i n a S o u th R a i l , M r Wa n g P a n . ADV PHILLIP MOKOENA SC : Ye s a n d w h a t d o e s h e a t ta c h t o h i s email if you go to page 273? MR MOHAMED SULEMAN MAHOMEDY : C h a i r o n p a g e 2 7 3 is a s p r e a d s h e e t a n d e x c e l s p r e a d s h e e t t h a t w a s a t t a c h e d t o th is m a il w h ic h 10 g o e s o n to d o th e c a lc u l a ti o n s o f t h e i n t e r e s t t h a t s h o u l d b e b i ll e d to Tr a n s n e t. E s s e n t ia ll y t h is is o d d b e c a u s e , w h y w o u ld I a s Tr a n s n e t w r i t e t o a s u p p li e r a n d s a y th is is t h e i n te r e s t y o u n e e d t o b il l m e , t h a t is t h e r o l e a n d r e s p o n s i b ili t y o f th e s u p p li e r t o b i ll m e i n te r e s t i f h e d e e m s i t n e c e s s a r y. S o w e p r e c ip i ta t e a n a c ti o n , w e d o th e c a lc u l a ti o n , w e a c t u a l ly g o a h e a d a n d s e n d t h e c a l c u l a ti o n t o t h e s u p p l ie r a n d s a y t h is is what you need to b il l me and o b v io u s ly a day la t e r. . .( in t e r v e n ti o n ) . ADV PHILLIP MOKOENA SC: G o t o p a g e 2 7 4 a n d id e n ti fy th a t d o c u m e n t f o r u s i n y o u r s e q u e n c e o f e v id e n c e . 20 MR MOHAMED SULEMAN MAHOMEDY : T h is is Mr Wa n g P a n o th e r w i s e k n o w n a s E l t o n a t C S R , e s s e n ti a l ly w r i t e s b a c k to u s o n t h e 3 r d o f J u n e a t n i n e m i n u t e s p a s t m i d n i g h t , h e w r i t e s to M r A n o j S i n g h and copies Mr Phetolo Ramosebudi and a few other people and he s a y s , p l e a s e f in d a t t a c h e d t h e i n v o ic e s a n d t h e la t e s t s ta t e m e n t a s y o u r e q u e s t e d a n d a t t a c h e s a n in v o ic e f o r 2 2 9 m il li o n C h a ir a n d a s e c o n d Page 86 of 154 15 MAY 2019 – DAY 93 in v o ic e t h a t is a tt a c h e d C h a i r u n d e r th e n u m b e r o f 2 7 8 . . .( in t e r v e n ti o n ) . ADV PHILLIP MOKOENA SC : L e t ’s s t a r t w i th t h e o n e o n 2 7 5 a n d o n w a r d s a r e t h o s e t h e i n v o ic e s ? MR MOHAMED SULEMAN MAHOMEDY : Ye s C h a ir t h e s e a r e i n v o ic e s 2 7 5 i s t h e i n v o i c e f o r th e d e p o s i t a m o u n t . CHAIRPERSON : Ye s . ADV PHILLIP M OKOENA SC : Now I need to understand your evidence, y o u s a y t h a t , I m e a n , M r R a m o s e b u d i w a s a n e m p l o y e e o f Tr a n s n e t a t t h e ti m e . 10 MR MOHAMED SULEMAN MAHOMED Y : H e w a s Tr a n s n e t ’s G r o u p Tr e a s u r e r. ADV PHILLIP MOKOENA SC : H e c o m p u te s a n i n te r e s t o n b e h a l f o f t h e s e r v ic e p r o v i d e r. MR MOHAMED SULEMAN MAHOMEDY : Ye s t h a t i s e s s e n ti a l ly w h a t was done. ADV PHILLIP MOKOENA SC : H e t h e n r e q u e s t f o r a n i n v o ic e t h a t w o u ld b e p a i d b y Tr a n s n e t p u r s u a n t t o h is c o m p u ta t io n ? MR MOHAMED SUL EMAN MAHOMEDY: ADV PHILLIP MOKOENA SC : 20 Ye s C h a ir. A n d t h i s i s d o n e , a c c o r d in g t o y o u r e v i d e n c e , a t t h e in s t a n c e w h e r e t h e r e w a s a f a c i li ty a v a il a b l e f o r Tr a n s n e t? MR MOHAMED SULEMAN MAHOMEDY : As far as we have reviewed t h e r e w a s a f a c ili t y a v a il a b l e t h a t Tr a n s n e t c o u l d h a v e p a id t h i s m o n e y o n th e d u e d a t e a n d c i r c u mv e n te d a s i g n if ic a n t i n te r e s t b il l t o a t h ir d p a r t y, i t w o u l d h a v e b e e n o u r i n te r e s t . Page 87 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC : A n d w h a t is y o u r c o m m e n t a r o u n d t h is – t h e s e f a c t s t h a t y o u ’v e a ll u d e d t o t h e C h a ir ? MR MOHAMED SULEMAN MAHOMEDY : C h a i r i f w e lo o k a t t h e p o s i ti o n o f th e in d i v i d u a l b e in g t h e G r o u p Tr e a s u r e r th e o n e c h a l l e n g e t h a t w e h a v e i s I’ m n o t s u r e w h y t h is p a y m e n t w a s n o t m a d e o n ti m e . M r R a m o s e b u d i o n l y jo i n e d Tr a n s n e t i n M a r c h 2 0 1 5 b y th e w a y, o n t h e 1 s t o f M a r c h 2 0 1 5 , th e r e w a s a p r e v i o u s tr e a s u r e r w h o r e s ig n e d h e r p o s i ti o n b u t o n e o f t h e fir s t th i n g s w e w o u ld d o is l o o k a t t h e p a y m e n t , r e g a r d le s s o f w h a t th e a m o u n t is a n d lo o k a t w h e th e r w e h a v e f u n d s 10 a v a i la b le . T h e fi r s t p la c e w e w o u l d l o o k a t is i n to o u r b a n k a c c o u n t w h e t h e r w e h a d t h a t k i n d o f m o n e y a v a i la b le , i t’s u n li k e ly t h a t w e w o u l d s i t w i th c a s h b a l a n c e s o f t h a t a m o u n t b u t Tr a n s n e t is a e n t i ty t h a t is q u i te s ig n if ic a n t i n te r m s o f o u r c a p a b ili ty a n d o u r r e q u ir e m e n ts f o r f u n d i n g . S o w e h a v e d i ff e r e n t c r e d i t li n e s t h a t a r e a v a i la b le w i t h in s t i tu t io n s lo c a ll y a n d g l o b a l ly a n d a t t h e t i m e w h e n w e ’ r e t a l k i n g a b o u t t h e d u e d a t e i n 2 0 1 4 w e s t il l h a d n ’ t s e e n t h e i n c r e a s e s i n in t e r e s t r a te s c o m in g t h r o u g h f o r t h e c o s t o f m o n e y t o e n ti t ie s l ik e Tr a n s n e t i t w o u ld h a v e b e e n m u c h c h e a p e r t o b o r r o w t h e m o n e y, a s I s a id w e h a d f a c i li t ie s t h a t w o u l d h a v e c o s t u s 6 . 4 o r u p t o 7 % y e t w e a t t h a t t i m e 20 m a d e a d e c i s i o n t h a t w e ’r e n o t p a y i n g i t, i t d o e s n ’ t m a k e s e n s e fr o m a fi n a n c e p e r s p e c t iv e . W h y w o u ld y o u w a n t t o p a y s o m e b o d y 9 . 2 5 % in t e r e s t , y o u ’ d d o t h a t c a lc u la t io n r i g h t u p fr o n t a n d m a k e a d e c i s i o n w h e t h e r I’ ll p a y t h e m u s i n g th e a g r e e m e n t a n d d e f e r t h e p a y m e n t a n d p a y t h is 9 . 2 5 o r l o o k a t w h e t h e r I h a v e c a s h o r f a c i li t ie s a v a il a b l e a t t h e ti m e . Page 88 of 154 15 MAY 2019 – DAY 93 CHAIRPERSON : I ’ m s o r r y I w a n t to ta k e y o u b a c k – I ’ m j u s t n o t s u r e w h e t h e r I h e a r d t h e f i g u r e th a t y o u m e n ti o n e d c o r r e c t ly w h e n y o u w e r e lo o k in g a t in v o ic e s s t a r ti n g f r o m p a g e 2 7 2 a n d t h e n y o u w e n t t o th e in v o ic e s , d id y o u m e n ti o n t h e f ig u r e o f 2 7 5 b e c a u s e I’ v e b e e n tr y i n g t o lo o k f o r 2 7 5 b u t I m a y h a v e . . .( i n te r v e n t io n ) . ADV PHILLIP MOKOENA SC : T h a t is a p a g e n u m b e r, I t h i n k C h a ir, i t m a y b e r e f e r e n c e t o th e p a g e n u m b e r. CHAIRPERSON : O h o k a y. ADV PHILLIP MOKOENA SC : 10 P a g e n u m b e r w h e r e th e i n v o i c e appears. C H A I R P E R S O N : O h o k a y b u t t h e i n t e r e s t it s e l f w a s h o w m u c h ? MR MOHAMED SULEMAN MAHOMEDY : CHAIRPERSON : 2 2 9 m il li o n C h a ir. And where do I find that? MR MOHAMED SULEMAN MAHOMEDY : Th a t w o u l d b e o n p a g e 2 7 6 C h a ir. CHAIRPERSON : W e ll o n p a g e 2 7 6 I’v e g o t – t h e fi g u r e s I ’v e g o t t h e r e is 2 2 9 , 2 2 9 , 2 2 9 o h b u t th e r e a r e t w o n u m b e r s a t th e to p t h e r e is M S M 2 7 6 a n d t h e n t h e r e ’s 2 6 1 , w h ic h n u m b e r i s t h e c o r r e c t n u m b e r ? ADV PHILLIP MOKOENA SC : 20 T h e 2 7 6 C h a ir – 2 6 1 s h o u l d – w o u l d b e o b v i o u s l y t h e n u m b e r fr o m th e o r i g in a l a ffi d a v i t i ts e lf . CHAIRPERSON : O h o k a y. ADV PHILLIP MOKOENA SC : B u t t h e p a g i n a t e d w e a r e c o n c e n tr a t i n g on the MSM276. CHAIRPERSON : Ye s s o w h e r e i s th e f ig u r e y o u ’r e ta lk in g a b o u t o n that page? Page 89 of 154 15 MAY 2019 – DAY 93 MR MOHAMED SULEMAN MAHOMEDY: C h a ir i t s h o w s t h e r e i n v o ic e total 229 367 461.00. CHAIRPERSON : O h o k a y 2 2 9 a t t h e b e g in n i n g . MR SULEMAN MOHAMED MAHOMEDY : Ye s so i t ’s a c t u a ll y 2 2 9 m i lli o n . .. ( i n te r v e n ti o n ) . CHAIRPERSON : O k a y I m u s t h a v e b e e n h e a r in g s o m e t h i n g y o u d id n ’ t s a y. MR MOHAMED SULEMAN MAHOMEDY : CHAIRPERSON : 10 My apologies. O h o k a y t h a n k y o u , o k a y a l r i g h t , th a n k y o u . ADV PHILLIP MOKOENA SC: C h a ir, I ’ m n o w, r e li a b l y t o l d th a t i t ’s o n e o ’c l o c k t h e ti m e f o r t h e lu n c h a d jo u r n m e n t . CHAIRPERSON : O k a y w e w i ll t a k e t h e lu n c h a d j o u r n m e n t i t ’s o n e o ’c l o c k w e w il l r e s u m e a t t w o o ’c lo c k , w e a d j o u r n . I N Q U I RY A D J O U R N S I N Q U I RY R E S U M E S C H A I R P E R S O N : Ye s y o u m u s t – y o u m a y p r o c e e d M r M o k o e n a . ADV PHILLIP MOKOENA SC : Thank you. M r M a h o m e d y j u s t b e fo r e t h e l u n c h a d j o u r n m e n t y o u w e r e s t il l t a k in g u s t h r o u g h t h e p a y m e n t o f in t e r e s t a n d p e n a l t ie s . J u s t g iv e u s a h i g h l e v e l s u m m a r y o n t h a t t o p ic 20 a n d p l e a s e a l s o y o u k n o w r e fe r e n c e i t w i th p a g e 2 7 5 s o th a t a t l e a s t w e a r e a b l e t o a p p r e c i a te th e e s s e n c e o f y o u r t e s ti m o n y a r o u n d t h e in t e r e s t is s u e . M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a n k y o u A d v o c a t e . C h a ir I t h i n k t h e fi r s t p o i n t t h a t n e e d s t o b e m a d e is t h a t th e r e w a s a t o t a l o f R 2 9 m il li o n t h a t w a s p a i d t o C h i n a S o u t h R a il a s a r e s u l t o f a d e l a y e d Page 90 of 154 15 MAY 2019 – DAY 93 payment. T h i s is m a d e o f tw o c o m p o n e n ts . T h e fi r s t p a r t i s a R 2 2 9 m il li o n i n t e r e s t a n d t h e s e c o n d p a r t i s w h a t is c a l le d a f o r e i g n e x c h a n g e a d ju s t m e n t . R e l a t i n g t o th e fir s t p a r t a s I s a id it is o f i n te r e s t t h a t th e G r o u p Tr e a s u r e r a t th e t i m e s e n t a n e m a i l t o C h in a S o u t h R a i l g iv i n g t h e m t h e c o m p u t a t i o n o f t h e i n te r e s t . A n d s e c o n d ly h e a ls o p r o v i d e th e m – p r o v i d e d t h e m w i t h th e c o m p u ta t io n o f t h e f o r e ig n exchange adjustment. I t is n o t c o m m o n p r a c ti c e fo r u s to p r o v i d e a s e r v ic e p r o v id e r o r a s u p p l ie r w i th t h e c a lc u la t io n o f th e s e a m o u n t s . C h a ir w h a t i s a l s o q u i te i n t e r e s ti n g is t h e f a c t t h a t t h e c o n tr a c t w i t h 10 C h i n a S o u th R a i l w a s a r a n d b a s e d c o n tr a c t . A n d a ll o f t h e f o r e x w a s m i ti g a te d a n d h e d g e d in th e r a n d b a s e d c o n tr a c t . So one if from a fi n a n c e p o i n t o f v i e w w e a r e c o n f u s e d i f I c a n u s e t h a t t e r m a s to w h y w e w o u l d p a y a f o r e i g n e x c h a n g e a d ju s t m e n t t o a r a n d b a s e d c o n tr a c t w h ic h h a d n o r e fe r e n c e to f o r e x i n th a t c o n tr a c t . CHAIRPERSON : Is t h e s i g n i fi c a n c e o f t h e t e r m r a n d b a s e d c o n tr a c t t h a t th e c r e d i t o r ta k e s t h e r i s k s o f t h e r a n d fl u c t u a t i o n w i t h o u t b e in g a b l e t o s a y b u t lo o k w e s h o u l d ta k e i n t o a c c o u n t f o r e x a m p l e t h e U S d o ll a r r a te , is th a t w h a t t h e s i g n i f ic a n c e is o f t h a t t e r m ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir y o u a r e c o r r e c t . 20 CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : Th e c r e d i to r a s s u m e d a l l o f t h e r is k . C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : the pricing. Page 91 of 154 A n d th a t w a s f a c t o r e d i n t o 15 MAY 2019 – DAY 93 C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMED Y : As i t w a s e n t e r e d i n t o b e t w e e n Tr a n s n e t a n d t h e O E M ’s a t t h e ti m e . C H A I R P E R S O N : A n d i f – i f t h e p a r ti e s a r e n e g o ti a ti n g a c o n tr a c t a n d t h e p a r ty t h a t w i ll b e p a id a n d – s o m e a m o u n ts d o e s n o t w a n t t h e a g r e e m e n t t o b e r a n d b a s e d t h e n th e y p u t f o r w a r d t h e p r o p o s a l t h a t f o r e x a m p l e th e a m o u n ts m u s t b e U S d o ll a r b a s e d . Is t h a t r ig h t? A n d i f t h e y d o n o t p u t t h a t ; t h a t m e a n s t h e y a c c e p t t h a t th e t r a n s a c t io n w il l b e rand based? 10 M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t is c o r r e c t C h a ir. CHAIRPERSON : And… M R M O H A M M E D S U L E M A N M A H O M E D Y : I f th e r is k is – m y a p o l o g i e s . I f th e r is k is a s s u m e d b y Tr a n s n e t t h e n i t w o u ld b e Tr a n s n e t’s r e s p o n s i b i li ty t o t a k e a l l o f th e fo r e x h e d g i n g . C H A I R P E R S O N : Ye s , y e s . MR MOHAMMED SULEMAN MAHOMED Y : In this case it was agreed b e t w e e n th e t w o p a r ti e s . C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t a l l o f th e r is k 20 C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : A n d t h e h e d g i n g w o u ld b e f o r t h e s u p p li e r s a c c o u n t . C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : A n d i t w a s fa c t o r e d in t o t h e pricing. Page 92 of 154 15 MAY 2019 – DAY 93 C H A I R P E R S O N : Ye s . A n d o f c o u r s e I a s s u m e t h a t i f it is r a n d b a s e d d e p e n d in g o n w h a t h a p p e n s y o u k n o w i n t h e m a r k e ts y o u c o u ld b e lu c k y i n t h a t i t c o u l d g o u p o r g o d o w n , t h e r a n d c o u l d g o u p o r g o d o w n a n d s o t h a t is – i f i t g o e s y o u r w a y th e n y o u m i g h t b e n e f i t if i t d o e s n o t t h e n it is j u s t a r i s k th a t y o u a c c e p t i t .? M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t is c o r r e c t C h a ir. C H A I R P E R S O N : O k a y. A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : A n d t h a t is w h y i t is o d d o n 10 t h is p a r t ic u l a r p e n a l ty t h a t w e a c tu a l ly p a i d a n a m o u n t o f R 5 9 . 8 m il li o n as referenced in MSM27.8 to China South Rail for what was marked as t h e c o s t o f r o ll in g fo r w a r d a n F E C b e c a u s e o f t h e d e l a y i n th e p a y m e n t . B u t w h a t i s a ls o s i g n i f ic a n t C h a ir i s t h a t th is is a f i n a n c ia l s e r v ic e s tr a n s a c ti o n . I n a d d i ti o n t o t h e f a c t t h a t w e b e li e v e th e r e is a – i t w a s r a n d b a s e d a n d w e s h o u ld n o t h a v e b e e n l e v i e d t h i s p e n a l t y i n a d d i ti o n t o t h a t w e w e r e a ls o l e v i e d VAT o n t h is tr a n s a c ti o n w h i c h is n o t i n t e r m s o f t h e VAT A c t . S o w e p a i d a t o t a l o f R 6 8 m ill i o n t h a t r e la t e s t o w h a t i s c a ll e d t h e fo r e ig n e x c h a n g e f o r w a r d r o ll i n g o f t h e F E C . C H A I R P E R S O N : A n d a n y o n e w it h in Tr a n s n e t d e a li n g w i t h th is c o n tr a c t 20 w o u ld h a v e k n o w n o r a t l e a s t c h e c k e d th e t e r m s o f t h e c o n tr a c t fir s t b e f o r e p u t ti n g Tr a n s n e t a t s u c h fi n a n c i a l r is k a s a g r e e i n g t o th e s e ty p e s o f c o s ts . One would have thought that they would go through fir s t a n d s e e w h e t h e r i t is a r a n d b a s e d c o n tr a c t o r n o t ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s C h a ir I t h in k i n a d d i ti o n it w o u l d h a v e a ls o r e q u ir e d t h a t i t b e m o r e t h a n j u s t a f i n a n c e Page 93 of 154 15 MAY 2019 – DAY 93 tr a n s a c ti o n t h a t y o u w o u l d h a v e h a d t h e le g a l t e a ms l o o k a t i t , t h e o p e r a ti o n t e a m s l o o k a t it b e f o r e w e a g r e e t o a s i g n i fic a n t p a y m e n t o f t h is n a t u r e o f R 2 9 7 m il li o n . CHAIRPERSON : E s p e c i a l ly w h e n y o u a r e ta lk in g a b o u t v e r y b i g a m o u n ts . M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . C H A I R P E R S O N : J a . O k a y. A D V P H I L L I P M O K O E N A S C : N o w a g a i n s t t h a t b a c k g r o u n d a n d c l a r it y M r M a h o m e d y t u r n to p a g e 2 7 6 s o t h a t w e c a n m o v e o n a n d e x p la in t o 10 t h e C h a i r w h a t w a s t h e – w h a t is t h i s d o c u m e n t a n d it s p u r p o s e a n d w h a t i s t h e a m o u n t i n t h e l ig h t o f w h a t y o u h a v e n o w c l a r if i e d t o t h e C h a ir ? MR MOHAMM ED SULEMAN MAHOMEDY : Chair document number 276 is e s s e n t ia ll y t h e i n v o i c e t h a t w e r e c e iv e d a s y o u w o u l d n o t e i t i s d a te d t h e 2 J u n e 2 0 1 5 . As I p r e s e n te d Mr R a m o s e b u d i s u b m i t t e d t h is c a l c u l a ti o n t o C h i n a S o u t h R a il o n th e 1 J u n e s o l it e r a l ly o n e d a y la t e r they take the amount that was on the spreadsheet of R229 367 461,00 a n d i n c lu d e d o n t o a n i n v o ic e a n d s u b m i t t e d to Tr a n s n e t f o r p a y m e n t a n d th is w a s e ff e c t iv e ly p a i d . 20 ADV PHILLIP MOKOENA SC : And if you turn to page 278. C H A I R P E R S O N : I a m s o r r y b e fo r e y o u d o t h a t . T h e g e n e r a l tr e a s u r e r I t h in k y o u s a i d h is p o s i ti o n w a s – w a s i t – s h e – a s h e w h o g a v e C h i n a S o u th R a il t h e s e c a lc u l a ti o n s ? W o u l d h e o r s h e h a v e b e e n i n v o l v e d i n t h e a u t h o r i s a t io n o f t h e p a y m e n t la t e r o n w h e n t h e i n v o ic e c a m e o r w o u ld h e o r s h e n o t h a v e b e e n i n v o l v e d i n t h a t ? Page 94 of 154 15 MAY 2019 – DAY 93 M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir t h e g r o u p … ADV MAHLAPE SELL O : Mr Ramosebudi. C H A I R P E R S O N : O r is t h a t s o m e t h i n g c o m in g u p ? M R M O H A M M E D S U L E M A N M A H O M E D Y : N o Mr R a m o s e b u d i w a s t h e G r o u p Tr e a s u r e r a t th e ti m e a n d h e p r o v i d e d t h e i n f o r m a t io n b u t h e d id n o t m a k e t h e p h y s ic a l p a y m e n t . N o h e d id n o t a u th o r is e t h e p h y s i c a l p a y m e n t C h a ir. C H A I R P E R S O N : O k a y a lr ig h t . T h a n k y o u . ADV PHILLIP MOKOEN A SC: 10 N o w I w a s r e f e r r i n g y o u t o th e s e c o n d d o c u m e n t i n o r d e r t o t ie u p y o u r e v i d e n c e . A t t h e d o c u m e n t is a t p a g e 2 7 8 a n d i d e n t i fy th a t fo r t h e C h a ir a n d a ls o c o m m e n t o n it s c o n t e n t s ? MR MOHAMMED SULEMAN MAHOMED Y : C h a ir p a g e 2 7 8 r e fe r e n c e s a n in v o ic e a g a i n fr o m C h i n a S o u th R a i l t o Tr a n s n e t f o r th e a m o u n t o f R 5 9 . 8 m il li o n w i t h t h e d e s c r ip t io n b e i n g t h e c o s t o f r o ll in g t h e fo r w a r d e x c h a n g e c o n t r a c t . A n d t h e n VAT b e i n g l e v ie d o n t h a t f o r a n a m o u n t o f R 8 . 3 mi ll i o n s h o w in g a n i n v o i c e to t a l o f R 6 8 . 2 m i ll io n w h ic h w a s s u b s e q u e n t ly p a i d t o C h in a S o u th R a i l . O n c e a g a in C h a ir t h e a m o u n t o f R 5 9 8 5 5 m il li o n is t h e e x a c t a m o u n t t h a t is r e fl e c t e d i n t h e s p r e a d s h e e t t h a t w a s s e n t to C h i n a S o u t h R a il b y M r R a m o s e b u d i a t 20 t h e ti m e . ADV PHILLIP MOKOENA SC : Ye s . Now we c an then move on Mr M a h o m e d y a n d d e a l w i t h t h e a d v a n c e p a y m e n t fr o m p a g e 5 – p a r a g r a p h 5 .3 . 1 0 o f y o u r s ta t e m e n t o n p a g e 1 2 Mr C h a ir. MR MOHAMMED SULEMAN MAHOMEDY : C h a ir s u b s e q u e n t t o th e c o n c l u s i o n o f w h a t w e c a l l t h e l o c o m o tiv e s u p p ly a g r e e m e n t w h i c h w a s Page 95 of 154 15 MAY 2019 – DAY 93 f o r t h e 1 0 6 4 l o c o m o ti v e s t o th e v a r io u s O E M ’s . Tr a n s n e t t h e n u s i n g th e 1 0 6 4 c o n tr a c t a n d a ll u d e d t o t h e p r o c u r e m e n t p r o c e s s b e in g f o l lo w e d t h r o u g h t h a t c o n tr a c t c o m m e n c e d w i th a p r o c e s s w it h C h in a S o u th R a i l f o r a m a in t e n a n c e a g r e e m e n t . A n d t h i s m a in t e n a n c e a g r e e m e n t w a s n o t li m i t e d to t h e 3 5 9 lo c o s th a t w e r e t o b e b u il t in t h e 1 0 6 4 b u t r a t h e r it w a s t o i n c l u d e o t h e r l o c o m o t iv e s t h a t C h i n a S o u t h R a i l w e r e b u i l d i n g o r h a d b u i l t t h a t w a s i n c l u d i n g th e 9 5 a n d t h e 1 0 0 . O n c e a g a in C h a ir a r e c o m m e n d a ti o n b y th e b o a r d o f d ir e c to r s a s u b m i s s i o n w a s m a d e d ir e c t ly t o th e b o a r d o f d i r e c t o r s a t w h i c h p o i n t th e b o a r d o f d ir e c t o r s 10 r e c o m m e n d e d t h a t Tr a n s n e t e n g a g e t h e M i n is t e r o f P u b l ic E n t e r p r is e s f o r a p p r o v a l o f t h is p a r t ic u l a r t r a n s a c t io n . A t t h a t ti m e th e t r a n s a c t i o n w a s v a l u e d a p p r o x i m a t e ly R 6 . 1 b i ll i o n . T h e s u b m is s i o n w a s m a d e t o t h e b o a r d o f d ir e c t o r s i n J u l y 2 0 1 6 a n d s u b s e q u e n t ly r e c o m m e n d e d t h e a p p lic a ti o n w a s m a d e t o t h e M in is t e r a n d a p p r o v e d b y t h e th e n M in is t e r o f P u b lic E n t e r p r i s e s M s Ly n n e B r o w n . W h a t i s a ls o i n te r e s t in g i n th is s u b m is s io n is t h a t C h in a S o u t h R a il r e q u e s t e d w h a t t h e y c a l l e d o r t e r m e d s ta r t - u p c o s ts t o ta ll i n g 1 0 % o f th e v a l u e o f t h e c o n tr a c t w h ic h m e a n s i t e q u a t e s t o R 6 1 8 m il li o n p lu s VAT. In O c t o b e r 2 0 1 6 t h i s p a r t ic u l a r p a y m e n t w a s e ff e c t e d a n d C h in a S o u th R a il w a s p a id a t o t a l 20 t h a t w a s i n t h e r e g i o n o f a p p r o x i m a t e ly R 7 0 0 m i ll io n w h i c h i n c lu d e d VAT. C h a i r in O c t o b e r 2 0 1 7 a g a in I t h i n k th e t i m e l i n e s a r e q u i t e i m p o r t a n t t h e a p p r o v a l o r th e r e c o m m e n d a ti o n f r o m t h e b o a r d i n a r o u n d J u l y 2 0 1 6 . Th e r e i s a p p r o v a l fr o m t h e M i n is t e r a n d th e r e is a p a y m e n t t h a t i s e ff e c t e d in O c t o b e r 2 0 1 6 . A y e a r l a te r in O c t o b e r 2 0 1 7 t h e r e i s a d o c u m e n t w h e r e t h e G r o u p C h ie f E x e c u t iv e in f o r m s C h in a S o u th R a i l Page 96 of 154 15 MAY 2019 – DAY 93 t h a t a s a r e s u l t o f t h e n u m b e r o f a ll e g a t i o n s o f c o r r u p ti o n th is a w a r d w i ll e s s e n t i a l ly b e s u s p e n d e d . T h i s is i n O c t o b e r 2 0 1 7 . T h a t d o c u m e n t I b e li e v e is in t h e p a c k u n d e r M S M 1 6 I t h i n k it is . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : B u t w e w i ll lo o k a t t h a t. A D V P H I L L I P M O K O E N A S C : M S M 1 6 C h a ir. C H A I R P E R S O N : O k a y th a n k y o u . A D V P H I L L I P M O K O E N A S C : W h ic h w i ll b e n o w o n t h e s e c o n d b u n d l e I th in k . 10 C H A I R P E R S O N : O h . N o w th a t is o n B B 3 ADV PHILLIP MOKOENA SC : 2B. 2B. MR MOHAMMED SULEMAN MAHOMEDY : C h a i r m y a p o l o g ie s I t h in k t h e le t t e r I r e f e r to … CHAIRPERSON : Ja. MR MOHAMMED SULEMAN MAHOMEDY : My a p o l o g ie s A d v o c a t e is MSM15. CHAIRPERSON : 15? MR MOHAMMED SULEMAN MAHOMED Y : 1 5 p a g e 3 4 0 o r i t is MSM340. 20 C H A I R P E R S O N : O k a y th a t is t h e la s t A D V P H I L L I P M O K O E N A S C : D o c u m e n t. C H A I R P E R S O N : D o c u m e n t o n t h a t l e v e r a r c h fi l e . M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s C h a ir. C H A I R P E R S O N : O k a y th a n k y o u . MR MOHAMMED SULEMAN MAHOMEDY : Page 97 of 154 C h a ir i n th is le t t e r t o t h e 15 MAY 2019 – DAY 93 C h a ir m a n o f C R R C w h i c h w a s t h e h o ld i n g e n t i ty f o r C h in a S o u t h R a il i t says: “ Ma t e r ia l s a n d r e l ia b ili t y s u p p o r t c o n tr a c t .” Page 340. “ Tr a n s n e t a m o n g s t o t h e r t h i n g s w e r e fe r t o p r e v i o u s c o r r e s p o n d e n c e a n d t h e s i g n i n g o f t h e i r [i n d is t in c t] c o n tr a c t Tr a n s n e t is a s ta t e o w n e d e n t i ty a n d h a s t o c o n d u c t it s b u s i n e s s , i n c u r e x p e n s e s a n d p r o c u r e m a t e r i a ls a n d s e r v ic e s in c o m p li a n c e w i t h b u t n o t 10 li m i te d t o th e c o n s t it u ti o n o f t h e R e p u b li c o f S o u th A fr ic a a n d th e P u b l ic Fi n a n c e M a n a g e m e n t A c t . W e h a d r e a c h e d f in a li ty o n t h e n e g o ti a ti o n o f t h e M R S c o n tr a c t a n d w e a r e r e a d y t o s i g n . However due to t h e c o r r u p ti o n a ll e g a ti o n s t h a t s u r f a c e d t h r o u g h t h e m e d i a o n t h e 1 0 6 4 p r o c u r e m e n t w e h a d t o n e g o ti a t e t h e n e w l y p r o p o s e d r e p r e s e n t a ti o n s a n d w a r r a n t ie s c la u s e s . F u r t h e r to th e a b o v e Tr a n s n e t S O C h a s c o m m i s s io n e d a forensic i n v e s t ig a ti o n on the a l le g a ti o n o f c o r r u p t i o n r e l a ti n g to th e p r o c u r e m e n t 20 o f t h e 1 0 6 4 lo c o m o t iv e s to a s c e r t a i n t h e p a r t i e s ’ in v o lv e m e n t c o r r u p ti o n or non -involvement process. The on forensic the alleged i n v e s t ig a ti o n c o m m i s s io n e d h a s n o t y e t b e e n fi n a l is e d . ” T h e la s t li n e t h e r e s a y s : “ U l t i m a te ly Tr a n s n e t S O C w o u l d p r e f e r t o r e s i g n th e Page 98 of 154 15 MAY 2019 – DAY 93 c o m p le t e MRS c o n tr a c t with the proposed r e p r e s e n t a ti o n s , w a r r a n t ie s , c la u s e s a s o p p o s e d t o s ig n in g t h e a d d e n d u m . Tr a n s n e t w i ll o n ly b e in a p o s i ti o n t o is s u e a l e t te r o f e ff e c ti v e n e s s to C R R C s u b s e q u e n t to t h e c o m p l e t e M R S c o n t r a c t b e i n g s ig n e d b y b o t h p a r ti e s . A s f a r a s w e a r e a w a r e t h a t p r o c e s s w a s n e v e r c o n c lu d e d .” T h e is s u e is t h a t C h a ir th a t l e t t e r w a s is s u e d i n O c t o b e r 2 0 1 7 a c t u a ll y t h e 2 6 O c to b e r 2 0 1 7 . 10 C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : B u t n o e ff o r t w a s m a d e i n r e c o v e r in g o u r R 7 0 0 m i ll io n t h a t w a s l o d g e d w i th C h i n a S o u t h R a il fr o m O c t o b e r 2 0 1 6 . T h a t p r o c e s s o n ly c o m m e n c e d i n J u ly 2 0 1 8 C h a ir. CHAIRPERSON : S o t h e – t h e p r o c e s s w a s s u s p e n d e d a n d n o t h in g h a p p e n e d f o r a n u m b e r o f m o n t h s f o r a b o u t e i g h t m o n th s /n in e m o n th s ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s C h a ir. C H A I R P E R S O N : J a o k a y. M R M O H A M M E D S U L E M A N M A H O M E D Y : A n d o u r f u n d s r e m a i n e d w i th C h i n a S o u th R a i l i n t h a t p e r io d . 20 C h a ir … ADV PHILLIP MOKOENA SC : And what was the purpose of the money – before you proceed why was it – why were they paid such an a d v a n c e d I m e a n s u c h a h u g e s u m o f a d v a n c e d p a y m e n t? M R M O H A M M E D S U L E M A N M A H O M E D Y : W h a t is e s s e n t ia ll y s ta t e d i n t h e c o n tr a c t I t h i n k w e h a v e a ll – o r i n th e s u b m is s io n fr o m C h in a S o u t h R a il . Page 99 of 154 15 MAY 2019 – DAY 93 A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : h a v e te r m e d s t a r t - u p c o s ts . Is w h a t is t h e – w h a t th e y To a c tu a l l y c o m m e n c e w i th p r o d u c in g s o m e o f t h e s e s tr a te g ic s p a r e s l o c a l ly i n S o u t h A fr ic a c r e a t in g t h e c a p a c i ty h e r e . A s fa r a s w e a r e a w a r e J u ly 2 0 1 8 w h e n w e c o m m e n c e d t h e p r o c e s s t o r e c a ll t h e s e f u n d s th e y h a d n o t y e t c o m m e n c e d w i th t h a t – w it h a n y o f th o s e p r o c e s s e s o f s t a r t - u p . T h e y c o n t e n d d i ff e r e n t ly b u t t h a t i s o u r c o n te n ti o n a s Tr a n s n e t . A D V P H I L L I P M O K O E N A S C : Ye s th e n p r o c e e d . 10 C H A I R P E R S O N : B u t i n t e r m s o f th e le t t e r t h a t w e ju s t d e a l t w i t h n o w t h e y w o u ld n o t h a v e b e e n e x p e c t e d to d o a n y th i n g u n ti l t h e i s s u e o f a l le g a ti o n s o f c o r r u p ti o n h a d b e e n – h a d r e a c h e d f i n a li ty ? MR MOHAMMED SULEMAN MAHOMED Y : two provisos. C h a ir y e s C h a ir t h e r e w e r e O n e w a s e x a c tly a s y o u p o i n t o u t a n d t h e s e c o n d w a s t h e s i g n in g o f t h e M R S a g r e e m e n t. C H A I R P E R S O N : Ye s y e s . MR MOHAMMED SULEMAN MAHOMEDY : Which as far as we are a w a r e h a d n o t ta k e n p l a c e . C H A I R P E R S O N : Ye s . O k a y. 20 ADV PHILLIP MOKOENA SC: And what happened to the funds u l ti m a t e ly ? MR MOHAMMED SULEMAN MAHOMEDY : I n J u ly 2 0 1 8 th e r e w a s a p r o c e s s t h a t c o m m e n c e d t h r o u g h Tr a n s n e t E n g i n e e r i n g t o r e c o v e r t h e s e m o n i e s f r o m C h i n a S o u t h R a il . W e d i d h a v e w h a t is c a ll e d a n a d v a n c e p a y m e n t g u a r a n t e e i n p l a c e . A g u a r a n t e e th a t w a s p r o v id e d t o u s b y Page 100 of 154 15 MAY 2019 – DAY 93 C h i n a S o u th R a il a t th e ti m e . A n d u n c o n d i ti o n a l g u a r a n t e e th a t w a s p r o v i d e d b y t h e B a n k o f C h i n a t o Tr a n s n e t f o r th e a m o u n t o f R 6 1 8 m il li o n . I t w a s t h e a m o u n t e x c lu d i n g t h e VAT f o r s o m e r e a s o n a n d w e t h e n p r o c e e d e d t o i n fo r m t h e B a n k o f C h i n a a s w e ll a s C h i n a S o u t h R a il t h a t w e w e r e g o in g t o r e c a l l t h e g u a r a n t e e s e s s e n t ia lly. A l l o f t h e p r o c e s s e s r e l a t e d t o th a t c o m m e n c e d i n a b o u t S e p te m b e r t h e l a tt e r p a r t o f S e p t e m b e r 2 0 1 8 a n d w e r e a c h e d fi n a li ty i n t h e fir s t w e e k o f D e c e m b e r 2 0 1 8 w h e n C h in a S o u t h R a il r e p a i d u s th e R 6 1 8 m i ll io n . To d a t e C h i n a S o u t h R a i l h a v e n o t y e t p a i d u s t h e VAT p o r t io n w h i c h i s t h e 10 R 8 6 m il li o n e q u iv a l e n t fo r t h a t tr a n s a c t i o n . T h a t r e m a i n s o u ts t a n d i n g w e h a v e h a d n u m e r o u s i n t e r v e n ti o n s w i t h C h i n a S o u t h R a il r e q u e s t in g t h e s e fu n d s to b e p a id t o u s . U n f o r t u n a t e l y to d a t e w e – i t s ti ll r e m a in s outstanding. C H A I R P E R S O N : W h a t r e a s o n d o t h e y a d v a n c e f o r n o t p a y i n g i t? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir a t t h is p o in t w e d o n o t get a response or we do not get a reason for non -payment. We had a c o m m i t m e n t – th e C h a ir m a n o f th e b o a r d o f d ir e c t o r s a s w e l l a s m y s e l f m e t w i t h a n e x e c u t iv e fr o m C h in a S o u t h R a il a t t h e b e g i n n i n g o f th is y e a r. 20 W e h a d r e c e iv e d s o m e i n d ic a ti o n t h a t th e y w o u ld b e r e m i tt i n g t h e s e f u n d s b u t u n f o r t u n a t e l y t o d a t e w e h a v e y e t t o r e c e iv e th e fu n d s . C H A I R P E R S O N : Is t h a t o n e o f t h e m a t t e r s in r e s p e c t o f w h ic h t h e r e is e i t h e r p e n d in g l it i g a t io n o r t h e r e is l it i g a t io n c o n t e m p l a t e d o r y o u a r e not sure about that? MR MOHA MM ED SULEMAN MAHOM EDY : No we are not sure about – I d o n o t t h i n k o n t h e 8 6 w e h a v e i s s u e d a n y li ti g a ti o n b u t w h a t w e h a v e Page 101 of 154 15 MAY 2019 – DAY 93 d o n e is w e h a v e w r i t t e n to t h e m a n d p r o v id e d a n d r e q u e s te d p a y m e n t s o th a t w il l fo ll o w d u e p r o c e s s w i th in o u r b u s i n e s s C h a ir. C H A I R P E R S O N : W e ll i t m a y b e o n e o f t h e m a t t e r s i n r e s p e c t o f w h ic h t h e C h a ir p e r s o n o f t h e Tr a n s n e t b o a r d i n d i c a t e d t h a t t h e r e w a s a p r e f e r e n c e t o tr y a n r e a c h a n a m ic a b l e s e t tl e m e n t . M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . C H A I R P E R S O N : B e c a u s e l i ti g a t i o n c a n s o m e t i m e s t a k e t o o lo n g a n d i n t h e m e a n ti m e y o u m ig h t n o t e n d u p g e t ti n g w h a t y o u w a n t s o y e s o k a y. ADV PHILLIP MOKOENA SC : Mr Mahomedy maybe to complete on this 10 is s u e a n d f o r c o m p l e te n e s s m a y I r e f e r y o u t o E x h i b i t B B 3 B t h a t i s n o w t h e s e c o n d fi le a n d g o t o M S M 1 8 , 1 8 . M a y y o u p le a s e i d e n t i fy t h a t d o c u m e n t a n d ta k e u s t h r o u g h t h a t d o c u m e n t? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir t h i s i s a l e t te r th a t is w r i t t e n b y Tr a n s n e t to … C H A I R P E R S O N : I a m s o r r y t h a t is w h a t d i v id e r ? MR MOHAMM ED SULEMAN MAHOMEDY : 351. ADV PHILLIP MOKOENA SC : 18 MR MOHAMM ED SULEMAN MAHOMEDY : 18 CHAIRPERSON : 18 okay thank you. 20 ADV PHILLIP MOKOENA SC : 18. M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : O n p a g e 3 5 1 is a l e t t e r fr o m Tr a n s n e t t o t h e G e n e r a l M a n a g e r a t C R R C d e m a n d fo r p a y m e n t o f a n a m o u n t o f VAT a n d i n t e r e s t r e la t in g t o t h e m a i n te n a n c e a n d r e li a b il i ty Page 102 of 154 15 MAY 2019 – DAY 93 s u p p o r t a g r e e m e n t b e t w e e n Tr a n s n e t a n d C R R C E - L o c o P T Y L i m i t e d . E s s e n t ia ll y w e r a is e d th e i s s u e in p a r a g r a p h 2 w h e r e w e s a y : “ I n t e r m s o f t h e p r o v is io n o f t h e le t t e r o f a w a r d i n a d v a n c e p a y m e n t i n th e a m o u n t o f R 7 0 4 .7 m i ll io n was made in favour of CRRC and such amount was m a d e u p o f R 6 1 8 m i ll io n a n d VAT a t 1 4 % i n t h e a m o u n t o f R 8 6 m i ll i o n . C R R C w a s r e q u ir e d t o u ti li s e the money as start-up costs and also to procure [i n d is t in c t] . 10 As a r e s u l t o f n o n - p e r fo r m a n c e o n th e p a r t o f C R R C Tr a n s n e t E n g i n e e r i n g T E p r o c e e d e d t o c la i m a r e f u n d o f t h e t o t a l a m o u n t p a i d t o C R R C . However CRRC refunded o n ly the amount of R 6 1 8 ,1 6 0 m il li o n a n d h e l d b a c k t h e VAT a m o u n t o f R 8 6 . 5 0 2 m il li o n . T E Tr a n s n e t E n g i n e e r i n g is e n t i tl e d to be r e fu n d e d the VAT amount and in t e r e s ts a m o u n t in g t o R 1 3 6 . 4 mi ll i o n . T E t h e r e f o r e d e m a n d s a p a y m e n t in t o t a l o f R 2 2 3 m il li o n t o b e p a i d i n t o th e f o ll o w i n g b a n k a c c o u n t . W e w il l a p p r e c i a t e i f th e a b o v e p a y m e n t th e b a n k i n g d e ta ils a r e p r o v i d e d a n d 20 w e w i ll a p p r e c i a t e i f t h e a b o v e p a y m e n t is m a d e i n to t h e a b o v e a c c o u n t b y n o la t e r t h a n 7 d a y s u p o n r e c e i p t o f th is l e t te r f a i li n g w h i c h T E w il l b e le f t w i th n o o p t i o n .” A D V P H I L L I P M O K O E N A S C : Ye s . Is t h e l e t te r t h a t n o w ti e s in w it h y o u r e v i d e n c e t h a t y o u a d d u c e b e f o r e t h e C h a i r p e r ta i n i n g t o t h e VAT Page 103 of 154 15 MAY 2019 – DAY 93 c o m p o n e n t th a t w a s s t il l o u ts t a n d in g a n d n o t y e t b e e n p a id ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s C h a ir. ADV PHILLIP MOKOENA SC : Ye s . Now can you turn to your s t a te m e n t w i t h p a r ti c u l a r r e f e r e n c e t o p a g e 1 3 , 1 3 E x h i b i t B B 3 A ? T h e fir s t f il e C h a ir. C H A I R P E R S O N : Ye s a n d w h a t p a g e o n t h a t o n e – a r e w e b a c k t o th e s t a te m e n t ? ADV PHILLIP MOKOENA SC : 13. CHAIRPERSON : 13. 10 ADV PHILLIP MOKOENA SC : 13. CHAIRPERSON: Ja. A D V P H I L L I P M O K O E N A S C : F r o m – a r e y o u t h e r e Mr M a h o m e d y ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . A D V P H I L L I P M O K O E N A S C : Ye s a n d p l e a s e ta k e u s t h r o u g h y o u r n e w t o p ic h i g h l ig h t e d a t t h e u n la w f u l a p p o in t m e n t o f R e g i m e n ts a n d s u b s e q u e n t in c r e a s e i n i ts s c o p e a n d b u d g e t. Ta k e u s t h r o u g h th e r e l e v a n t f a c ts u n d e r t h e t o p ic ? MR MOHAMMED SULEMAN MAHOMED Y : O k a y. C h a ir i n M a y 2 0 1 2 Tr a n s n e t is s u e d a R F P t o t h e m a r k e t f o r s e r v ic e p r o v i d e r s t o p r o v i d e 20 tr a n s a c ti o n a d v is o r y s e r v ic e s a s it r e l a te d t o t h e p r o c u r e m e n t o f t h e 1 0 6 4 l o c o m o t iv e s . A t t h e t e n d e r c l o s i n g d a te t h e r e w e r e a f e w c o n s o r ti u m s t h a t a c t u a l ly b i d o r p r o v i d e d b i d s a n d p r o p o s a l s in r e s p o n s e t o t h a t R F P. KPMG W e lis t t h e m . T h e r e is o n e t h a t w e c a ll t h e C o n s o r ti u m w h ic h c o m p r is e d K P M G N k o n k i , N o r t o n R o s e , [i n d is t in c t] the PWC c o n s o r ti u m w h ic h Page 104 of 154 c o m p r is e d PWC, CIIDB 15 MAY 2019 – DAY 93 E n g i n e e r s , C l i ff D e c k e r, H o f m e y r I n c o r p o r a t e d a n d t h e M c K in s e y c o n s o r ti u m w h ic h c o m p r is e d a t th e ti m e M c Ki n s e y, L e ts e m a , [i n d is t in c t ] C a p it a l, [ i n d is ti n c t ] N e d b a n k , E d w a r d N a t h a n S o n n e n b e r g a n d Ar t . Ar t represented by Mr David Porter and Webber Wenzel a t to r n e y s s u b m i tt e d a p r o p o s a l o n ly f o r p r o c u r e m e n t a n d le g a l s e r v ic e s . C h a ir t h e r e is a p o i n t t h a t o n t h e 6 D e c e m b e r 2 0 1 2 M c K i n s e y w a s a w a r d e d w i t h a l e t te r o f i n te n t f o r t h is p a r t i c u l a r s e r v ic e . H o w e v e r i t is i m p o r t a n t to n o t e t h a t t h a t w a s t h r o u g h a c o n fi n e m e n t p r o c e s s . T h is p r o c e s s o f t h e R F P w a s e s s e n t i a ll y n o n - a w a r d e d a t th e c o n c l u s i o n o f 10 t h is p r o c e s s . C H A I R P E R S O N : S o t h e o p e n te n d e r p r o c e s s w a s c o m m e n c e d b u t w a s a b a n d o n e d a n d t h e n a c o n fi n e m e n t p r o c e s s w a s th e n p u r s u e d . MR MOHAMMED SULEMAN MAHOMED Y : C h a ir t h a t is t o t h e b e s t o f m y k n o w le d g e a t t h e m o m e n t. C H A I R P E R S O N : Ye s . O k a y. M R M O H A M M E D S U L E M A N M A H O M E D Y : Th e r e w a s a l e t t e r i s s u e d o n t h e 6 D e c e m b e r 2 0 1 2 o r s i g n e d o n t h e 6 D e c e m b e r t h e le t t e r is d a t e d t h e 3 0 N o v e m b e r 2 0 1 2 a n d s ig n e d o n t h e 6 D e c e m b e r 2 0 1 2 w h e r e M r A n o j S i n g h r e p r e s e n t in g Tr a n s n e t i n f o r m e d t h e Mc K i n s e y c o n s o r ti u m 20 t h e le t t e r o f i n t e n t f o r th e p r o v is i o n I a m r e f e r e n c i n g it e m M S M 1 9 p a g e ADV PHILLIP MOKOENA SC: 354. MR MOHAMM ED SULEMAN MAHOMEDY : 354 in Exhibit BB3B ADV PHILLIP MOKOENA SC : B ja. C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : C h a ir th is l e t t e r g o e s o n t o Page 105 of 154 15 MAY 2019 – DAY 93 e x p l a i n t h e l e tt e r o f in t e n t a n d s o m e o f t h e k e y d e li v e r a b l e s i n th a t c o n tr a c t. I t a ls o l is ts i n th is c o n tr a c t it l i s ts R e g i m e n ts , M c K i n s e y a n d s o m e o f t h e o t h e r s e r v ic e p r o v id e r s t h a t w il l b e p r o v id i n g s e r v ic e i n t e r m s o f t h e r e q u ir e m e n t fo r th e 1 0 6 4 l o c o m o t iv e a d v is o r y. A t t h e t i m e t h is p a r ti c u l a r l e t te r o f i n te n t u n d e r A n n e x u r e A o n p a g e 3 6 0 r e fe r s to a n a m o u n t i n t e r m s o f t h e d e liv e r a b l e s m u s t b e e x e c u t e d f o r a f e e o f R 3 5 . 2 m il li o n a s t h e f e e n o te b e lo w a n y o v e r r u n in t e r m s o f t h e ti m e w i ll n o t b e f o r t h e a c c o u n t o f Tr a n s n e t a s t h e e n g a g e m e n t is o u t p u t b a s e d a n d n o t t i m e b a s e d . M c K in s e y w i ll t a k e o v e r a ll r e s p o n s i b i li ty f o r 10 t h e d e li v e r a b l e s a n d t h e q u a li ty o f t h e e n d p r o d u c ts . E x p e n s e s w il l b e k e p t a t 1 0 % o f t h e v a l u e o f t h e e n g a g e m e n t f o r t h e s u p p l ie r a n d i ts s u b - c o n t r a c t o r s . I t is i m p o r t a n t t o n o te t h a t a t t h a t ti m e i t w a s o u t p u t b a s e d . I t h a d s o m e v e r y s p e c i fi c o u tp u ts t h a t w e r e in c l u d e d . F i n a n c i a l p r o j e c t m a n a g e m e n t p r o c u r e m e n t le g a l w e c a n g o b a c k t o t h i s b u t i t h a d a ll o f th e k e y d e l iv e r a b l e s t h a t w e r e r e q u ir e d fr o m t h i s p a r tic u l a r tr a n s a c ti o n . C h a ir t h e c o n s t i t u t i o n o f t h e M c K in s e y c o n s o r t iu m a t t h e ti m e h a d n o w c h a n g e d a s w e p o in t e d o u t e a r l i e r o n a n d … C H A I R P E R S O N : W e l l b e fo r e y o u t a lk a b o u t t h a t . Mr M o k o e n a w il l y o u in v e s t i g a t e w h e th e r w e c a n n o t g e t a b e t te r c o p y ? 20 A D V P H I L L I P M O K O E N A S C : A b e t t e r c o p y C h a ir, y e s ( i n te r v e n e s ) . CHAIRPERSON : N o t o n l y o f th is o n e . T h e r e a r e a n u m b e r o f c o p i e s w h ic h a r e q u i t e p o o r a n d … A D V P H I L L I P M O K O E N A S C : Ye s . C H A I R P E R S O N : D i ffi c u l t t o r e a d . A D V P H I L L I P M O K O E N A S C : W il l d o t h a t C h a ir. Page 106 of 154 15 MAY 2019 – DAY 93 C H A I R P E R S O N : J a a n d m a y b e t h a t c o u l d b e p a s s e d o n t o a ll m e m b e r s o f t h e l e g a l t e a m fo r – f o r t h e f u t u r e t h a t w h e r e t h e r e is a c o p y t h a t … ADV PHILLIP MOKOENA SC : It is not legible. CHAIRPERSON : I s n o t l e g ib l e o r it is q u i te p o o r i f t h e y c a n m a k e a tt e m p ts t o t r y a n d g e t a c l e a n e r c o p y. O k a y, a lr i g h t. A D V P H I L L I P M O K O E N A S C : W e w ill d o t h a t C h a ir. C H A I R P E R S O N : O k a y. Ye s M r M a h o m e d y. MR MOHAMMED SULEMAN MAHOMEDY: C h a ir t h is l e t t e r o f i n t e n t a ls o e x c l u d e d - j u s t b y t h e w a y C h a ir – e x c l u d e d t h e l e g a l s e r v i c e s o n 10 p a g e 3 3 5 . I t s p e c i f ic a l ly s t a t e d t h a t : “ T h e s u p p li e r a g r e e s t o r e li n q u is h a ll l e g a l s e r v ic e s t o W e b b e r W e n t z e l .” A n d g o e s o n t o – t o s ta t e th a t : “Further more clearly the key o b je c t i v e s that o u t li n e d in t h is p a r tic u la r d o c u m e n t … ” C H A I R P E R S O N : I a m s o r r y. J u s t a b o u t t h a t th a t s o u n d s q u i t e s t r a n g e . D o e s i t n o t ? F o r Tr a n s n e t t o s a y w h e n th e y h a v e g o t a tr a n s a c t io n t h e y o b v i o u s l y n e e d a l o t o f l e g a l a d v i c e a n d g u id a n c e t o s a y th e y r e li n q u is h a l l le g a l s e r v ic e s fr o m w i th in Tr a n s n e t . 20 N o w n o r m a lly Tr a n s n e t w il l in s t r u c t o u ts id e a t t o r n e y s – w i ll i n s tr u c t la w y e r s fr o m o u ts i d e if th e y w a n t t o i n s tr u c t l a w y e r s . I a m s u r e t h e y d o s o e v e r y d a y w i th o u t h a v i n g a c l a u s e s u c h a s t h is o r i s i t – is i t a u s u a l k in d o f t h i n g t o i n c lu d e s o m e t h i n g a lo n g t h o s e l in e s ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir i n t h i s c a s e I th i n k t h e o r i g in a l c o n s o r t iu m - if I r e m e m b e r – in c l u d e d a f ir m o f a t to r n e y s fr o m Page 107 of 154 15 MAY 2019 – DAY 93 M c K in s e y a s w e l l . CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : E s s e n t ia ll y I t h i n k i t i n c lu d e d E d w a r d N a th a n S o n n e n b e r g s . CHAIRPERSON : O h , i t w a s n o t – i t w a s n o t Tr a n s n e t s a y i n g t h e y w o u ld r e li n q u is h Tr a n s n e t l e g a l s e r v ic e s o r le g a l s e r v i c e s fr o m w i th in Tr a n s n e t? M R M O H A M M E D S U L E M A N M A H O M E D Y : N o C h a ir. W h a t i t – w h a t i t s a i d w a s t h e s u p p li e r b e in g M c K in s e y … 10 C H A I R P E R S O N : O h , o k a y. M R M O H A M M E D S U L E M A N M A H O M E D Y : T h e c o n s o r ti u m … C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: W i ll n o t c o n d u c t a n y l e g a l s e r v ic e s . T h e y r e li n q u is h a l l o f th e l e g a l s e r v ic e s … CHAIRPERSON : They would … M R M O H A M M E D S U L E M A N M A H O M E D Y : To W e b b e r W e n tz e l . CHAIRPERSON : O h in o th e r w o r d s t h e y w o u l d n o t i n s tr u c t o t h e r a tt o r n e y s ? MR MOHAMMED SULEMAN MAHOMEDY: 20 Ye s . Ye s C h a ir t h a t is la r g e l y w h a t it m e a n s . CHAIRPERSON : Ja. M R M O H A M M E D S U L E M A N M A H O M E D Y : A ls o w h a t i t s a y s is th a t : “ N o t w it h s t a n d i n g the appointment of Webber W e n tz e l b y Tr a n s n e t t h e s u p p li e r w il l o v e r s e e a ll w o r k a n d d e l iv e r t h e w o r k s u p p li e d b y W e b b e r Page 108 of 154 15 MAY 2019 – DAY 93 W e n tz e l a n d m a n a g e t h e d e l iv e r a b le s o f t h e e n t ir e a d v is o r y s e r v i c e . ” CHAIRPERSON : Hm. MR MOHAMM ED SULEMAN MAHOMEDY: So I assume three was some in t e g r a t io n … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: But it was an – it was an e x c lu s i o n … CHAIRPERSON : Ja. 10 MR MOHAMMED SULEMAN MAHOMEDY: Because i n i t ia ll y it was in c l u d e d a n d t h e n i t b e c a m e a n e x c l u s i o n . C H A I R P E R S O N : O k a y, a lr ig h t . MR MOHAMMED SULEMAN MAHOMEDY: C h a ir I t h in k I j u s t w a n t t o t o u c h o n t h e k e y d e l iv e r a b l e s i n c lu d e d i n t h e o r ig in a l l e t t e r o f i n t e n t . “ A r o b u s t a n d d e - r is k b u s in e s s c a s e t h a t is f u l ly s u p p o r t e d a n d a p p r o v e d b y th e B o a r d a n d t h e s h a r e h o l d e r.” T h a t w a s o n o f – i t i s o n p a g e 3 3 6 t o w a r d s th e b o t t o m . “ D e v e l o p i n g a n d a u g m e n ti n g t h e b u s i n e s s c a s e f o r 20 t h e a p p r o v a l o f th e l o c o m o ti v e s b y t h e Tr a n s n e t B o a r d o f D ir e c t o r s a n d D e p a r t m e n t o f E n t e r p r is e s . Procurement …” I a m n o t g o in g th r o u g h a ll o f t h e m b u t p r o c u r e m e n t a n d l e g a l t a lk s t o a l l o f t h e d i ffe r e n t a s p e c ts o f t h e a d v i s o r y t e c h n ic a l a n d o p e r a ti o n s . Fi n a n c i a l – i t w a s t a l k i n g to d e v e lo p i n g fi n a n c i n g a n d fu n d i n g o p t io n s Page 109 of 154 15 MAY 2019 – DAY 93 a n d th e n t o d e v e l o p d e a l s tr u c tu r e s , fi n a n c in g , h e d g i n g a n d d e - r is k i n g o p t io n s . P r o je c t Management O ff ic e p r o v id e the s t a k e h o ld e r e n g a g e m e n t e tc e t e r a . T h e r e a s o n t h a t w e a r e d o in g t h a t is b e c a u s e i t w i ll b e c o m e r e l e v a n t w h e n w e t a lk a b o u t th e r o le th a t t h e n w a s p e r c e iv e d b y R e g i m e n ts - f o r e x a m p l e . A D V P H I L L I P M O K O E N A S C : W e r e y o u r e a d i n g fr o m p a g e 3 5 6 3 5 6 ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMM ED SULEMAN MAHOMEDY: 356 of the pack. 10 ADV PHILLIP MOKOENA SC: A n y o t h e r is s u e t h a t y o u w a n t t o h i g h l ig h t t h e r e f o r t h e C h a ir ? M R M O H A M M E D S U L E M A N M A H O M E D Y : A s I s a id C h a i r o n p a g e 3 6 0 - a g a in I t h i n k i t m a y n o t b e e n ti r e ly l e g i b le a s y o u p o in t e d o u t C h a i r b u t w h a t i t d o e s t a l k t o o n p a g e 3 6 0 – I h a v e a s l i g h t ly c le a r e r c o p y w i t h m e . A s I s a id C h a ir i t s a y s : “ D e l iv e r a b le s m u s t b e e x e c u t e d f o r a fe e o f R 3 5 .2 m il li o n a s p e r th e f e e n o t e b e l o w. Any overrun in t e r m s o f t i m e w il l n o t b e fo r t h e a c c o u n t o f Tr a n s n e t a s t h e e n g a g e m e n t is o u tp u t b a s e d a n d n o t t i m e 20 b a s e d . M c K in s e y w il l ta k e o v e r a ll r e s p o n s ib il i ty f o r t h e d e l iv e r a b l e s a n d q u a l i ty o f t h e p r o d u c t s – e x p e n s e s a t 1 0 p e r c e n t .” I t th e n g o e s in a n d e x p la in s th a t th e c o n s o r ti u m f o r t h e v a r i o u s a s p e c ts t o t a l w a s R 3 5 . 2 m i ll i o n . ADV PHILLIP MOKOENA SC: And then if you go to page 358 whose Page 110 of 154 15 MAY 2019 – DAY 93 s ig n s ? MR MOHAMMED SULEMAN MAHOMEDY: The signature fr o m Tr a n s n e t’s s i d e is M r A n o j S i n g h . A D V P H I L L I P M O K O E N A S C : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : O n 4 D e c e m b e r. A D V P H I L L I P M O K O E N A S C : N o w – n o w t a k e u s t h r o u g h t h e c o n te n ts o f p a r a g r a p h 5 . 4 .4 – C h a ir o n p a g e 1 4 o f t h e s t a t e m e n t . CHAIRPERSON : I s e e t h a t i n t h e p a g e in w h ic h M c K in s e y – M c K in s e y ’s p e o p l e s ig n e d o r p e r s o n s ig n s t h e D ir e c t o r th e r e – th e r e 10 a r e w it n e s s e s w h o w it n e s s h i s s i g n a t u r e b u t … A D V P H I L L I P M O K O E N A S C : N o w i tn e s s e s . CHAIRPERSON : O n p a g e 3 5 8 w h e r e M r A n o j S i n g h ’s s i g n s o n b e h a l f of … A D V P H I L L I P M O K O E N A S C : T h e r e a r e n o w i tn e s s e s . CHAIRPERSON : Nobody signs as a witness. MR MOHAMMED SULEMAN MAHOMEDY: Th a t is tr u e C h a ir. Th e d o c u m e n ts t h a t w e h a v e g o t … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: 20 And we have seen do not in c l u d e a w it n e s s t o th e s ig n a tu r e . C H A I R P E R S O N : H m . O k a y, t h a n k y o u . ADV PHILLIP MOKOENA SC: Mr Mahomedy paragraph 5.4.4 and onwards. M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir th e c o n s ti t u ti o n o f t h e M c K in s e y Consortium now e ff e c ti v e ly from Page 111 of 154 what was o r ig i n a ll y 15 MAY 2019 – DAY 93 s u b m i tt e d is n o w i n c lu d i n g R e g i m e n t s a n d i t c o m e s i n u n d e r t h e p e r s p e c t iv e o f a s u p p li e r d e v e l o p m e n t p a r t n e r a n d I t h i n k t h e y w e r e n o t p a r t o f t h e i n it i a l p r o c u r e m e n t p r o c e s s a n y w a y. T h is is p o s s i b l y a b r e a c h o f t h e Tr a n s n e t P r o c u r e m e n t M a n u a l a n d Tr a n s n e t S u p p ly C h a i n P o lic y a s i t i s a c h a n g e – f u n d a m e n t a l c h a n g e in th e c o n s o r ti u m th a t w a s o r i g i n a l ly b id d i n g f o r t h e w o r k . I t h in k f u r t h e r d o w n C h a ir o n p a g e 1 4 o f m y t e s t i m o n y w e p r o v i d e - u n d e r 5 . 4 . 6 – w e p r o v i d e a p e r s p e c ti v e o n a l l o f t h e d i ffe r e n t d a te s in w h ic h Tr a n s n e t e i t h e r c o n c l u d e d e x t e n s i o n s o r c o n tr a c ts w i t h Mc K i n s e y . 10 ADV PHILLIP MOKOENA M r M a h o m e d y. SC: Th a t is – that is q u i te crucial C o u l d y o u p l e a s e t a k e u s th r o u g h t h a t fo r e s h a d o w in g t h e e v id e n c e o f o t h e r w i t n e s s e s to c o m e ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir t h e f ir s t d o c u m e n t th a t c o m m e n c e s t h i s p r o c e s s is a d o c u m e n t t h a t i s i s s u e d w h a t w e c a ll a le t t e r o f in t e n t a s w e h a v e ju s t g o n e t h r o u g h d a te d 6 D e c e m b e r a n d t h a t is th e d a t e t h a t i t is s i g n e d b y t h e M c Ki n s e y p r in c i p a l . T h e r e is a fir s t a d d e n d u m t o t h i s d o c u m e n t w h ic h is e s s e n ti a lly to a s k fo r a n e x t e n s i o n i n t h e v a l i d i ty p e r io d o f t h e L O I . T h e L O I h a d a s p e c if ic v a l i d i ty p e r i o d . I t h in k i t w a s th r e e m o n th s – if I r e m e m b e r c o r r e c tl y – 20 b u t t h e r e i s a s p e c if ic v a li d i ty p e r i o d a n d i t n e e d e d to b e a m e n d e d a s i t s a y s in th e L O I – m a y b e a m e n d e d o r m o d i fi e d i n w r i ti n g b y t h e authorised signatories. document out. October 2013 Th e r e w a s a n a m e n d m e n t t h a t t o o k t h e T h e r e w a s a s e c o n d a m e n d m e n t to t h e L O I in w h ic h 30 November 2013. e x te n d s th e v a l id i ty period f u r th e r to T h e r e is a n a g r e e m e n t f o r t h e p r o v is i o n o f t h e Page 112 of 154 15 MAY 2019 – DAY 93 tr a n s a c ti o n a d v is o r y s e r v ic e s t o Tr a n s n e t in J a n u a r y 2 0 1 4 . T h a t i s th e d o c u m e n t C h a ir I r e f e r e n c e d e a r li e r o n s a y in g t h a t t h e r e w a s t h is s i d e d e a l – i f y o u w o u ld lik e to c a ll i t . because M c K in s e y tr a n s a c ti o n . was s t il l the Th a t w a s l o n g b e f o r e a n y s e s s i o n heads of a greement w i th the S o o n 2 0 J a n u a r y t h e r e i s t h is tr a n s a c t i o n o r a n a g r e e m e n t b e t w e e n Tr a n s n e t a n d R e g i m e n ts . Th e r e is t h e p u r p o r te d s e s s i o n t h a t a l s o t o o k p l a c e o n th e 5 t h – s o r r y m y a p o l o g i e s . T h e r e is a t h ir d a d d e n d u m to t h e L O I a n d t h is i s t o tr a n s f e r t h e s c o p e t o R e g i m e n t s . O n 5 F e b r u a r y w e p r o v i d e d t h a t l e t te r f o r t h e a g r e e m e n t o r 10 t h e s e s s i o n in w h ic h M c K i n s e y i n f o r m s Tr a n s n e t o f t h e ir i n te n ti o n t o m o v e a l l r i g h t s a n d o b l i g a t io n s t h r o u g h t o R e g i m e n t s . ADV PHILLIP MOKOENA SC: Hm. MR MOHAMMED SULEMAN MAHOMEDY: agreement for 21 February 2014. t h is p a r tic u la r C h a ir th e r e The tr a n s a c ti o n are m a s te r is s u b s e q u e n t ly s e r v ic e s signed two on f u r th e r a m e n d m e n ts . S o u p t o 2 1 F e b r u a r y o r 5 F e b r u a r y t h a t is t h e e x te n t t o w h ic h M c Ki n s e y w e r e i n v o l v e d . N o w o n 2 8 F e b r u a r y 2 0 1 4 w e n o tic e t h a t t h e f e e s o f 3 5 . 2 m il li o n a r e n o w i n c r e a s e d t o 7 8 . 4 m i ll io n a n d t h i s is l a r g e ly w i th R e g i m e n ts a s t h e s e r v i c e p r o v i d e r o r t h e l e a d c o n s o r ti u m 20 p a r t n e r. A D V P H I L L I P M O K O E N A S C : A n d t h is i s d o n e b y w a y o f … ? MR MOHAMM ED SULEMAN MAHOMEDY: A memorandum. A D V P H I L L I P M O K O E N A S C : A m e m o r a n d u m . N o t h i n g e ls e ? MR MOHAMMED SULEMAN MAHOMEDY: N o i t is a m e m o r a n d u m . C h a ir t h e n o n 1 6 J u l y 2 0 1 5 t h e r e i s a f u r th e r m e m o r a n d u m . Page 113 of 154 Again 15 MAY 2019 – DAY 93 C h a ir i t is a m e m o r a n d u m t h a t is s u b m i t t e d t o t h e – I th i n k I r e c a l l i t w a s s u b m i t t e d to t h e A c q u i s i t io n s a n d D is p o s a ls C o m m i t t e e – t o m o v e t h e to t a l fe e s o n t h e lo c o 1 0 6 4 a d v is o r y t o c l o s e t o 2 8 9 m il li o n i n t o t a l . C h a ir t h a t is – t h e r e – th e r e a r e o th e r a m e n d m e n ts a s w e ll b u t I t h i n k la r g e l y w h a t w e s a y in g i s t h a t it m o v e d fr o m 3 5 . 2 m i ll io n to a t o ta l s o m e w h e r e in t h e r e g i o n o f R 2 8 9 . 5 m il li o n in t o t a l. C H A I R P E R S O N : I a m tr y i n g t o – s o w h e r e d o y o u f i n d 2 8 9 ? MR MOHAMMED SULEMAN MAHOMEDY: C h a ir o n – a c t u a l ly I a m g o i n g a h e a d o f m y s e l f b u t o n 5 .4 . 8 2 w e e x p l a i n t h a t it m o v e d t o 8 1 – 10 s o r r y. O n p a g e 1 6 o f m y s t a t e m e n t . C H A I R P E R S O N : O h , o k a y. MR MOHAMMED SULEMAN MAHOMEDY: I t s a y s t h a t i t m o v e d - t h is a m o u n t i n c r e a s e d t o 2 8 9 . 5 m i ll i o n in t o t a l. A D V P H I L L I P M O K O E N A S C : S o w h a t y o u d id M r M a h o m e d y y o u t o o k in t o a c c o u n t t h i s e n t ir e c o n tr a c t . Yo u l o o k e d a t t h e d i ff e r e n t v a r i a t i o n s t h r o u g h th e a d d e n d u m s a n d y o u m a d e c e r t a i n o b s e r v a ti o n s a n d t h o s e o b s e r v a t i o n s a r e fr o m p a r a g r a p h 5 .4 . 8 a n d i f y o u c a n t a k e t h e C h a ir t h r o u g h th e o b s e r v a ti o n s o f th e r e v i e w th a t y o u h a v e n o w d o n e i n t h e li g h t o f a ll th e s e c o n tr a c ts . 20 C H A I R P E R S O N : J a , b e c a u s e I a s k e d y o u a b o u t th a t fi g u r e b e c a u s e I w a s l o o k i n g a t th e fi g u r e . A D V P H I L L I P M O K O E N A S C : Ye s . CHAIRPERSON : Of 16 (intervenes). MR MOHAMM ED SULEMAN MAHOMEDY: 166. C H A I R P E R S O N : Ye s . Page 114 of 154 15 MAY 2019 – DAY 93 MR MOHAMMED SULEMAN MAHOMEDY: C h a i r w e w il l e x p la i n t h a t h o p e fu lly. CHAIRPERSON : Ja, go ahead ja. ADV PHILLIP MOKOENA SC: N o w e x p l a i n t o th e C h a i r a n d g i v e a c o n te x t s t o th e a m o u n t . MR MOHAMMED SULEMAN MAHOMEDY: Chair th e a m o u n ts that fi n a l ly w e r e p a i d t o th e d i ffe r e n t c o n s o r ti u m p a r t n e r s i n c l u d i n g a n u m b e r o f th i n g s t h a t w e n t i n t o w h a t w a s t h e n c a l le d l o c o a d v i s o r y s e r v ic e s . 10 T h e r e w a s a n a m o u n t o f 1 6 6 m il li o n t h a t w a s p a i d t o R e g i m e n t s u n d e r th e a u s p i c e s o f l o c o a d v i s o r y. H o w e v e r it w a s a c t u a ll y f o r e x e c u ti n g a f u n d in g tr a n s a c ti o n . C h a ir I t h i n k a t t h i s p o in t it is a ls o i m p o r t a n t to n o t e th a t R e g i m e n t s – a s I r e a d o u t p a r t o f t h e s c o p e – i t w a s t o d e te r mi n e a n d f o r m u l a t e f u n d i n g p l a n s a n d f u n d i n g s tr a t e g y. I t w o u l d n o t b e t o e x e c u t e th o s e s t r a t e g i e s b e c a u s e t h e r e w o u ld b e a c o n fl ic t a n d i n t h e lo c o a d v is o r y i n c l u d e d i n t h is 2 8 9 m il li o n is a n a m o u n t o f 1 6 6 m i ll i o n w h ic h w a s p a i d t o R e g i m e n ts w h i c h w a s t h e n c a ll e d a s u c c e s s f e e fo r th e C h i n a D e v e l o p m e n t B a n k L o a n . T h is a ls o b e c o m e s r e l e v a n t a s w e g o f u r t h e r i n to th e d o c u m e n t C h a ir w h e n w e t a l k a b o u t t h e tr a n s a c t i o n s – f u n d i n g tr a n s a c ti o n s th a t Tr a n s n e t w a s 20 in v o lv e d i n f o r 1 0 6 4 . S o i n c lu d e d i n t h e 2 8 9 is 1 6 6 m i ll io n t h a t w a s p a i d t o R e g i m e n t s fo r t h is p a r t ic u l a r e x e c u ti o n o f th is f u n d i n g . O f t h e t o t a l 2 8 9 m i ll i o n C h a ir R e g i m e n ts w a s p a i d R 2 6 7 . 7 m i ll io n w h i c h e q u a te s t o 9 2 p e r c e n t o f t h a t fe e w h ic h la r g e l y m e a n s t h a t th e y h a d b e c o m e t h e l e a d i n t h e c o n s o r ti u m . A ls o q u i t e r e l e v a n t w h e n w e lo o k a t t h e c o n f li c t o f in t e r e s t th a t a r o s e l a te r o n in – in o u r r e v i e w. Page 115 of 154 The 15 MAY 2019 – DAY 93 v a r ia t io n again we ta lk about the process C h a ir and I think A d v o c a t e M o k o e n a a s k s a b o u t t h e i n i t ia l p r o c e s s – t h e p r o c u r e m e n t b u t t h e v a r ia t io n i n t h is p r o c e s s w o u ld h a v e r e q u ir e d i n m y v i e w a n e w p r o c u r e m e n t e v e n t p a r tic u l a r l y w h e n w e lo o k a t t h e 1 6 6 m i ll io n t h a t w a s n o w in c l u d e d b e c a u s e t h a t w a s f o r a fu n d a m e n t a lly d i ffe r e n t e v e n t a n d w e s h o u ld h a v e e x e c u te d a n e v e n t f o r t h a t. H o w e v e r I s a y th a t w i t h c a u ti o n b e c a u s e I g iv e d u e c r e d i t t o o u r Tr a n s n e t Tr e a s u r y Te a m w h o h a d t h e c a p a b il i ty t o e x e c u t e t h is tr a n s a c ti o n w i t h C h i n a D e v e l o p m e n t B a n k w i t h o u t t h e a s s is t a n c e o f R e g i m e n ts . S o if I m a y p h r a s e c o r r e c tl y 10 if t h e r e w a s a n e e d fo r i t t h e n i t w o u l d h a v e b e e n a s e p a r a t e procurement event. It should not have been included as one bundled e v e n t t h a t th e n c o s t u s a t o ta l o f 2 8 9 m il li o n . I hope I am making m y s e l f c le a r. C H A I R P E R S O N : Ye s . S o – b u t y o u r – y o u r e v i d e n c e i s t h a t Tr a n s n e t h a d e n o u g h p e o p l e w h o c o u l d d o th is a n d t h e r e w a s n o r e a s o n w h y o u t s i d e – a n o u t s i d e f ir m w a s r e q u i r e d to – to b e i n v o lv e d ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s C h a ir. C H A I R P E R S O N : Ye s , o k a y t h a n k y o u a n d o n c e a g a i n i n r e g a r d to t h is a s w a s th e c a s e w it h a n o th e r i s s u e t h a t y o u d e a l t w it h y o u h a v e n o t 20 b e e n a b l e to fi n d a n y d o c u m e n t i n w h ic h c o n t a i n s a n e x p l a n a ti o n o r ju s t i fic a ti o n f o r n o t u s in g Tr a n s n e t ’s o w n e x p e r ti s e a n d c a p a c i ty ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir w e a r e n o t a b le t o f in d a d o c u m e n t t h a t s u g g e s ts … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: Page 116 of 154 T h a t w e d id n o t h a v e t h e 15 MAY 2019 – DAY 93 c a p a c i ty. C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: We … C H A I R P E R S O N : T h a t g iv e s w h a t e v e r e x p la n a t i o n . Yo u h a v e n o t b e e n a b l e t o fi n d a n y s u c h d o c u m e n t ? MR MOHAMMED SULEMAN MAHOMEDY: N o C h a ir. I n f a c t w e w ill p r e s e n t e v i d e n c e t o th e c o n t r a r y. C H A I R P E R S O N : Ye s , o k a y. ADV PHILLIP MOKOENA SC: 10 W h a t d id – w h a t d id y o u u n d e r s t a n d b y t h is s u c c e s s f e e o f 1 6 6 m il li o n ? W h a t d i d R e g i m e n ts d o t o b e e n ti t le d t o s u c h a n a m o u n t? MR MOHAMMED SULEMAN MAHOMEDY: W e ll the e x p l a n a t io n is c o m p le x i n t e r ms o f t h e m e m o r a n d u m t h a t h a s b e e n i n c lu d e d . H o w e v e r s i m p l y p u t w h a t i t s a y s is th a t R e g i m e n t s w e r e t h e a r r a n g e r o f t h is p a r t ic u l a r tr a n s a c ti o n Development Bank. with the – with the p a r ty b e in g C h in a T h is is p a i d o u t i n 2 0 1 5 - I t h i n k i t is J u ly 2 0 1 5 . W h a t is a ls o q u i t e i n te r e s t in g i s t h a t Tr a n s n e t h a d a lr e a d y a p p r o a c h e d China Development Bank way back in 2014. So when Regiments was p a i d t h is i n fa c t t h e th e n Tr e a s u r e r o f Tr a n s n e t / G r o u p Tr e a s u r e r r a is e d 20 a n a la r m b e ll t h e n t o s a y t h a t t h e r e is n o t a n e e d f o r R e g i m e n t s to b e in v o lv e d i n th is a t a ll b e c a u s e t h e Tr a n s n e t Te a m h a d t h e c a p a b il it y a n d t h e y h a d e x e c u te d tr a n s a c ti o n s t h a t w e r e o f s i m il a r s iz e i f n o t b i g g e r w i t h f u n d i n g in s ti t u t i o n s l o c a l ly. A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: S o I t h in k t h e k e y p r o b l e m Page 117 of 154 15 MAY 2019 – DAY 93 t h e r e w a s t h a t t h a t – y o u k n o w – R e g i m e n ts is p u r p o r t e d to h a v e d o n e t h e t r a n s a c t io n b u t i t h a d c o m m e n c e d a w h il e a g o a n d s o m e o f t h e s e tr a n s a c ti o n s t o g iv e y o u a p e r s p e c t iv e i n – i n t h e Tr e a s u r y s p a c e . A tr a n s a c ti o n o f t h i s s iz e w o u l d ta k e a w h i le . I t is n o t s o m e t h i n g t h a t y o u c o n c l u d e o n v e r y q u ic k ly b e c a u s e t h e r e a r e s i g n i fi c a n t n u m b e r s e v e n i n g l o b a l te r ms . Th is p a r ti c u la r tr a n s a c t io n w i t h C h in a D e v e l o p m e n t B a n k w a s o r i g i n a ll y b e i n g c o n s i d e r e d a t $ 2 .5 b i ll io n . CHAIRPERSON : Yo u k n o w i t is d i ff ic u l t t o l is te n t o y o u r e v i d e n c e a s w e ll a s t h e e v i d e n c e o f t h e o t h e r Tr a n s n e t w i tn e s s e s w h o h a v e c o m e 10 b e f o r e m e a n d h e a r a ll t h e s e l a r g e a m o u n t s th a t w e r e b e i n g p a i d o u t i n – to s a y t h e l e a s t - v e r y q u e s ti o n a b l e c ir c u m s ta n c e s a n d n o t a s k o u r s e lv e s t h e q u e s ti o n b u t h o w d o e s i t c o m e a b o u t t h a t s u c h l a r g e a m o u n ts g e t p a i d o u t a n d s o m e b o d y d o e s n o t p i c k u p t h e p r o b le m b e f o r e t h e y a r e a c t u a l ly p a i d o u t e x c e p t t h a t t h e a n s w e r m u s t b e t h a t i f t h e a u t h o r i s a t io n w a s m a d e b y p e o p l e n o t a s s e n i o r a s t h e p e o p l e w h o a u t h o r i s e d t h e n o n e w o u l d l o o k a t t h e s e n i o r p e o p le a n d s a y w h e r e were you when such large amounts were – when lower level people in t h e c o m p a n y w e r e a u t h o r i s i n g th e s e ty p e s o f p a y m e n ts b u t w h e n i t is p e o p l e r ig h t a t t h e t o p t h e r e is a p r o b l e m a b o u t w h o i s t h e o n e w h o 20 w o u ld p i c k a n d s t o p a n d s to p th e s e t h in g s b e c a u s e s o m e o f th e m w e r e a p p r o v e d b y t h e B o a r d i ts e l f a n d th e n y o u w e r e e i th e r t a lk i n g o f t h e G C E O o r a C E o f l ik e a n o p e r a t io n a l d iv i s i o n o r a G r o u p C h ie f F in a n c ia l O ff ic e r. S o i t w a s t o p p e o p le . S o - s o m a y b e th a t is b a s ic a l ly t h e e x p l a n a t io n . MR MOHAMMED SULEMAN MAHOMEDY: Page 118 of 154 C h a ir I t h in k y o u – y o u 15 MAY 2019 – DAY 93 c a p tu r e i t v e r y s u c c in c t ly a n d c o r r e c t ly. CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: In t h is p a r tic u la r c a s e if w e lo o k a t t h e p a y m e n t o f 1 6 6 m i l li o n t h e a u t h o r i s a t io n w a s fr o m t h e G r o u p Tr e a s u r e r o f Tr a n s n e t … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: W h ic h i s a v e r y senior p o s i ti o n / CHAIRPERSON : Hm. 10 MR MOHAMM ED SULEMAN MAHOMEDY: Mr Ramosebudi. CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: T h e G r o u p S u p p ly C h a in O ff ic e r m e a n in g th e H e a d o f P r o c u r e m e n t … CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : M r G a r r y P i ta . CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: Th e G r o u p C h ie f F i n a n c i a l O ff ic e r … CHAIRPERSON : Hm. 20 MR MOHAMM ED SULEMAN MAHOMEDY: Mr Anoj Singh … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: A n d t h e A c ti n g G r o u p C h ie f E x e c u t iv e a t t h e ti m e – M r G a m a . CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: Page 119 of 154 S o w h e n w e a r e t a lk i n g 15 MAY 2019 – DAY 93 a b o u t t h e f o u r – i t is a b o u t t h e m o s t f o u r – a b o u t t h e m o s t s e n io r f o u r people … CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : I n a n o r g a n is a ti o n … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: W i th the Even if s tr u c t u r e s of Tr a n s n e t. CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: 10 a lower level e m p l o y e e w e r e to q u e s t i o n … CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : T h e a u th o r it y f o r p a y m e n t … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: T h e y w o u ld b e g iv e n t h i s document … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: A n d s a y w e ll i n f a c t t h is p a r t ic u l a r d o c u m e n t … CHAIRPERSON : Hm. 20 MR MOHAMMED SULEMAN MAHOMEDY: Wa s t h e n p r e s e n t e d t o t h e B o a r d A c q u i s i t io n s a n d D is p o s a ls C o m m i t te e a n d a u t h o r is e d b y t h a t Board … CHAIRPERSON : Hm. MR MOHAMM ED SULEMAN MAHOMEDY: Sub Committee. CHAIRPERSON : Hm. Page 120 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC: M R M O H A M M E D S U L E M A N M A H O M E D Y : A n d I t h i n k y o u c o r r e c t ly p u t it C h a ir … CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t it is th e m o s t s e n i o r … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: E x e c u t iv e s i n t h e b u s i n e s s … CHAIRPERSON : Hm. 10 M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t a r e i n s tr u c ti n g . CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: the memorandum. I t is a p p r o v e d . Th a t s ig n a tu r e a p p e a r s o n T h e r e w ill b e a n e x t r a c t o f th e minute … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: B e c a u s e th e p e r s o n w h o is m a k i n g p a y m e n t w il l a s k w h a t a u th o r i ty th i s p a y m e n t is m a d e … CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : A n d h e o r s h e w il l r e c e iv e a l l 20 o f t h e s e s u p p o r ti n g d o c u m e n t s … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: That give r is e to t h is a c c o r d in g ly the payment … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: Page 121 of 154 And 15 MAY 2019 – DAY 93 in d i v i d u a l w h o e v e r a t w h a te v e r l e v e l w i ll m a k e t h e p a y m e n t b a s e d o n the signatures … CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t a r e o n th e d o c u m e n t … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: A s w e ll a s t h e a p p r o v a l o f the minutes. C H A I R P E R S O N : A n d – a n d s o m e o f t h e s e tr a n s a c t io n s is – i t m a y b e a r g u e d th a t i t i s n o t a s i f – i t is n o t a s i f Tr a n s n e t d i d n o t h a v e 10 p r o c e d u r e s w h ic h w o u ld h a v e a ll o w e d th e s e tr a n s a c ti o n s t o r e f le c t – h a d to b e p ic k e d u p b y s o m e b o d y a s n o t a p p r o p r i a t e i f t h e y h a d g o n e through those procedures. Th e p r o c e d u r e s w e r e t h e r e in r e g a r d t o – b u t th e y w e r e s i m p ly b y p a s s e d o r i t w a s c o n f in e m e n t o r c o n fi d e n t ia l c o n fi n e m e n t b u t e v e n i f i t w a s n o t t h a t . t h e y w e r e d e a l t w i t h a t a v e r y h i g h le v e l a n d – a n d a n y b o d y b e l o w t h a t h a d n o c h a n c e t o m a k e a n y c o n tr i b u t i o n a n d – y o u k n o w – h a d n o c h a n c e t o p ic k u p th e p r o b le m a n d tr y a n d s t o p i t . MR MOHAMMED SULEMAN MAHOMEDY: p o i n t y o u a r e m a k i n g C h a ir. 20 C h a ir ju s t t o il lu s t r a t e t h e T h i s p a r ti c u l a r d o c u m e n t o n c e a g a in s ig n e d b y t h e f o u r i n d iv id u a l s … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: Wa s s u b m i tt e d d ir e c tly t o t h e Ac q u i s i ti o n s a n d D is p o s a l s C o m m i t t e e . CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: Page 122 of 154 A Sub Committee of the 15 MAY 2019 – DAY 93 Board. CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: As far as – again as far as o u r r e v i e w s h a v e b r o u g h t o u t t h a t t h is o n c e a g a i n is n o t a d o c u m e n t that served … CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY: At any Management Committee… CHAIRPERSON : Hm. 10 MR MOHAMM ED SULEMAN MAHOMEDY: Because in the Management C o m m i t t e e y o u w o u l d h a v e to o m a n y p e o p l e t o th e n c o n v i n c e … CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : D i ff e r e n t ly. CHAIRPERSON: Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : T h a t is m y v i e w. C H A I R P E R S O N : B u t w h a t t h is d o e s d e m o n s tr a t e i s p r o b a b ly Tr a n s n e t n o w h a s a d d i ti o n a l m e c h a n is m s b u t w h a t i t d o e s d e m o n s t r a t e is t h a t t h e C o m m i s s io n m a y h a v e to l o o k a t w h a t m e c h a n is m s s h o u ld b e p u t i n p l a c e f o r a s i t u a t io n w h e r e i t is t h e v e r y s e n i o r h ig h p e o p le w h o s e e k t o 20 a u t h o r i s e i ll e g i ti m a t e p a y m e n ts . t h a t th e y c a n b e p ic k e d u p ? W h a t s h o u ld b e d o n e to m a k e s u r e M a y b e – m a y b e it is d i ffi c u l t t o p r o v i d e b e c a u s e n o r m a l ly f o r p e o p l e a t th a t l e v e l y o u e x p e c t t h a t t h e y w o u l d lo o k a f t e r th e i n te r e s t o f t h e o r g a n i s a t io n b u t i t m a y b e t h a t o n e s h o u l d lo o k a t w h a t r e a l ly s h o u l d b e d o n e b e c a u s e y o u c a n n o t a ffo r d a r e p e a t . O b v io u s ly o n e o f t h e – o n e o f t h e i m p o r t a n t t h i n g s is t o o n l y a p p o i n t Page 123 of 154 15 MAY 2019 – DAY 93 p e o p l e o f a c e r t a in l e g a l o f i n t e g r i ty a t - a t th o s e h ig h p o s it i o n s b u t i t m a y b e t h a t s o m e t h i n g m u s t b e lo o k e d a t t o s a y i f s o m e th i n g l ik e t h is w e r e t o h a p p e n a g a in w o u l d Tr a n s n e t b e s u b j e c te d t o t h e s a m e k i n d s o f lo s s e s . M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir I d o n o t k n o w i f I w a n t t o r e s p o n d t o th a t b u t I t h in k i t is s a f e t o s a y t h a t t h e c u r r e n t B o a r d h a s r e v ie w e d t h e d e l e g a t io n o f a u th o r it y. C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: 10 In t e r ms o f t h a t ju s t la s t w e e k I b u m p e d i n to t h e C h a ir m a n i n t h e c o r r i d o r s o f Tr a n s n e t a n d h e s a i d t o m e t h a t w e s h o u ld n e v e r a l l o w y o u – r e f e r e n c i n g m e – t o b e c o m e a o n e m a n p a r ty i n t h is o r g a n i s a ti o n a n d w e s h o u ld n o t g iv e y o u a n y a u t h o r i ty t h a t c a n c r e a t e t h is p r o b le m a g a i n a n d I th i n k i t i s a it is a f a ir c o m m e n t i n t h e s e n s e t h a t a d e l e g a t io n o f a u t h o r i ty a ll o w e d f o r p e o p l e i n d iv id u a l ly t o s i g n c e r t a i n t r a n s a c ti o n s . T h a t l a r g e ly h a s b e e n w i th d r a w n in th e c u r r e n t d e l e g a t io n o f a u t h o r i ty th a t e x i s t s i n Tr a n s n e t o n t h e B o a r d ’s i n s tr u c t i o n a n d w e h a v e n o w w h a t w e c a l l in d i v i d u a ls a r e a u t h o r is e d t o s i g n o n ly i f c r o s s f u n c ti o n a l c o m m i t t e e s r e v ie w t h e d o c u m e n t a n d a p p r o v e c e r t a in t h i n g s . S o – y e s I a g r e e w i t h 20 y o u r s e n t i m e n t s e n ti r e ly. CHAIRPERSON : W e ll i t i s s a i d th a t w h e n a n y c o u n tr y d r a w s a C o n s t i tu t io n th e y s h o u l d h a v e i n m i n d t h e w o r s t p o s s i b le s c e n a r i o i n terms of President or Government and make provision for that and not h a v e i n m i n d a v e r y g o o d G o v e r n m e n t a n d g o o d Pr e s i d e n t . S o m a y b e w h a t t h is m e a n s i s t h a t w i t h S O E s t o s i m p ly s a y i n g w e w i ll tr y a n d Page 124 of 154 15 MAY 2019 – DAY 93 a p p o i n t p e o p l e o f i n t e g r i ty a t t h e s e h i g h p o s i t io n s m i g h t n o t b e e n o u g h . I t m i g h t b e n e c e s s a r y t o s a y l e t u s a s s u m e w e h a v e d o n e e v e r y th i n g w e c a n t o m a k e s u r e t h e p e r s o n is o n e o f t h e r ig h t l e v e l o f i n t e g r it y. W h a t h a p p e n s i f d e s p i t e th a t s o m e th i n g h a p p e n s ? O k a y, t h a n k y o u . ADV PHILLIP MOKOENA SC: M r C h a i r y o u w il l r e c a l l th a t M r Vo l m i n k d i d a t te n d t o g iv e s o m e o f th e r e c o m m e n d a t io n s . He took us through d i ff e r e n t s tr u c t u r e s … C H A I R P E R S O N : Ye s . ADV PHILLIP MOKOENA SC : Of the current Board … 10 C H A I R P E R S O N : Ye s . A D V P H I L L I P M O K O E N A S C : A ls o i d e n t if i e d … C H A I R P E R S O N : Ye s . ADV PHILLIP MOKOENA SC: T h o s e c o n c e r n s a n d a n o m a l i e s in o r d e r to address … CHAIRPERSON : Hm. A D V P H I L L I P M O K O E N A S C : Yo u k n o w – w h a t a c tu a lly o c c u r r i n g … C H A I R P E R S O N : Ye s . A D V P H I L L I P M O K O E N A S C : D u r i n g t h e t i m e i n Tr a n s n e t . C H A I R P E R S O N : Ye s . 20 A D V P H I L L I P M O K O E N A S C : M a y b e t h a t w i ll g o a l o n g w a y … CHAIRPERSON : Ja. A D V P H I L L I P M O K O E N A S C : C o u p l e d o b v io u s ly w i t h o t h e r t h i n g s th a t m i g h t b e s a id t o s tr e n g t h e n … CHAIRPERSON : Hm. A D V P H I L L I P M O K O E N A S C : T h is S O E ( i n d is ti n c t ) s tr u c tu r e s . Page 125 of 154 15 MAY 2019 – DAY 93 CHAIRPERSON : Hm. ADV PHILLIP MOKOENA SC: B u t t h e r e is a ls o a f a r – m u c h m o r e f u n d a m e n t a l c o n c e r n M r M a h o m e d y h a v e n t a k e n t h e C h a ir th r o u g h th e a m o u n ts t h a t w e r e u s e d o r t h e a m o u n t th a t w a s p a id – y o u k n o w – to R e g i m e n t s . I f I m a y t a k e y o u b a c k t o p a g e 1 3 – 1 - 3 - w it h r e f e r e n c e to p a r a g r a p h 5 . 4 a n d I t h in k th a t is w h e r e y o u c o m m e n c e d w i th y o u r e v i d e n c e b u t i t o n ly m a k e s s e n s e n o w w h e n w e n o w s e e t h e s e h u g e a m o u n ts b e in g p a i d t o R e g i m e n t s . Only now that we see the i m p o r t a n c e o f y o u r e v i d e n c e . I n t h is p a r a g r a p h y o u i d e n t i fy t h e p a r ti e s 10 a n d y o u t a k e u s th r o u g h t h e d i ff e r e n t c o n s o r ti u m s . A m I c o r r e c t? MR MOHAMED SULEMAN MAHOMEDY : ADV PHILLIP MOKOENA SC : Ye s . A n d if y o u g o th r o u g h t h o s e c o n s o r ti u m s y o u s a y th a t o n t h e t e n d e r c l o s i n g d a te t h a t y o u g a v e u s t h e n a m e s o f th e d i ff e r e n t c o n s o r ti u m s , I m e a n , d o e s – c a n y o u c o m e a c r o s s t h e n a m e o f R e g i m e n ts i n a n y o f t h o s e c o n s o r t iu m s ? MR MOHAMED SULEMAN MAHOMEDY : N o t h e y w e r e n o t in c l u d e d i n a n y c o n s o r t iu m . ADV PHILLIP MOKOEN A SC: B u t y e t w h e n y o u t a k e th e C h a ir t o p a g e 1 6 , p a r a g r a p h 5 . 4 . 8 1 th e y a p p e a r to h a v e b e e n p a i d a n a m o u n t i n 20 e x c e s s o f – a n a m o u n t o f 1 .6 6 m il li o n . MR MOHAMED SULEMAN MAHOMEDY : ADV PHILLIP MOKOENA SC : 1 6 6 m i lli o n C h a ir. Ye s . MR MOHAMED SULEMAN MAH OMEDY: Ye s a n d R e g i m e n ts w e r e r e p l a c e d t h r o u g h a v a r ie t y o f o t h e r c o n f li c t s t h a t w e r e n o t e d a t th e ti m e a s I m e n t io n e d e a r l i e r t h e r e w a s a s u p p o s e d c o n f lic t w i t h L e ts e m a i n Page 126 of 154 15 MAY 2019 – DAY 93 t h e a d v i s o r y t e a m a s w e ll a s N e d b a n k . ADV PHILLIP MOKOENA SC : CHAIRPERSON: Ye s . T h e r e w a s a p o i n t w h ic h I th o u g h t y o u w e r e a b o u t to make at some stage and I don’t know if you made it with regard to w h a t R e g i m e n ts w a s p a i d w h e n y o u l o o k a t t h e a m o u n t t h a t t h e y w e r e p a i d , y o u m a d e – y o u r e f e r r e d to t h e fa c t t h a t in f a c t , I t h i n k , w h a t t h e y d i d o r w h a t th e y w e r e s u p p o s e d t o d o r e l a te d to f u n d i n g a n d I th i n k f u n d i n g o n ly a n d n o t o th e r t h in g s . S o I w o n d e r w h e th e r p a r t o f t h e p o i n t y o u w a n te d to m a k e w a s t h a t i n e ff e c t , th e a m o u n t t h a t t h e y w e r e 10 paid was for much more than that and whatever much more wasn’t what t h e y h a d d o n e , is t h a t p a r t o f t h e p o in t y o u w e r e m a k i n g o r s o u g h t t o make? In o th e r w o r d s e v e n i f y o u w e r e t o s a y a s f a r a s t h e f u n d in g a s p e c t is c o n c e r n e d th e y w e r e e n t i tl e d t o c h a r g e a n d b e p a i d , c e r t a in ly t h a t is a l o t o f m o n e y t h a t t h e y w e r e p a i d f o r w h ic h w o u l d f a l l o u ts i d e t h e f u n d i n g w o r k t h a t th e y m a y h a v e d o n e a n d fo r th a t p a r t o f t h e m o n e y th e y d i d n o t d o a n y th i n g . MR MOHAMED SULEMAN MAHOMEDY : C h a ir t h a t is c o r r e c t t h e q u e s t io n t h a t g o e s b a c k t o th e lo c a l a d v i s o r y l e tt e r o f in t e n t i t s a y s , “ d e v e l o p i n g f i n a n c e a n d f u n d i n g o p ti o n s , d e v e l o p i n g d e a l s tr u c tu r e s ’ , i t 20 d o e s n ’t t a l k a b o u t e x e c u t i o n it t a l k s a b o u t d e v e l o p in g t h e m . CHAIRPERSON : Ye s , y e s . MR MOHAMED SULEMAN MAHOMEDY : Ye t in th e s a m e c o n tr a c t w h ic h R e g i m e n ts t o o k o v e r fr o m M c K i n s e y, i f I c a n u s e th o s e w o r d s , Regiments is th e n p a id 1 6 6 m il li o n rand for f a c il it a t in g a loan tr a n s a c ti o n w i th C h i n a D e v e l o p m e n t B a n k b y Tr a n s n e t , t h e 1 6 6 m ill i o n is Page 127 of 154 15 MAY 2019 – DAY 93 w h a t Tr a n s n e t p a y s R e g i m e n t s . T h e q u e s t i o n i s , w h a t w o r k d id t h e y f o r 1 6 6 m i lli o n in v a l u e fo r t h a t p a y m e n t t o b e m a d e , w h e n p a r t ic u l a r ly a y e a r b e f o r e t h a t – a l m o s t a y e a r b e f o r e t h a t Tr a n s n e t h a d a lr e a d y c o m m e n c e d c o n v e r s a t io n s w i th C h i n a D e v e l o p m e n t B a n k a n d w e w i ll p r o v i d e t h a t e v i d e n c e a li t t le la t e r o n . CHAIRPERSON: Th a n k y o u . ADV PHILLIP MOKOENA SC : Ye s w e c a n n o w m o v e o n M r M a h o m e d y t o d e a l w i t h y o u r to p ic o n p a r a g r a p h 5 . 5 p a g e 1 6 , e x o r b it a n t t r a n s a c t io n a d v is o r y fe e s o n th e C D B a n d t h e c l u b l o a n , b u t b e f o r e y o u d o th a t , c a n 10 y o u p le a s e e d u c a t e u s a s t o w h a t a r e th e s e c l u b l o a n s . MR MOHAMED SULEMAN MAHOMEDY : C h a ir I t h in k b e f o r e w e t a l k a b o u t t h e c lu b l o a n i t w o u l d b e n e c e s s a r y t o g iv e s o m e c o n te x t a s t o t h e , y o u k n o w, th e s o u r c e a n d th e c r e a ti o n a n d t h e r e a s o n w h y s o m e o f t h e s e l o a n s a c t u a l ly c a m e in t o b e i n g . O b v io u s ly w e h a d t h e 1 0 6 4 p r o g r a m m e n o , i f y o u w a n t t o c a ll i t , i n p l a y, t h e c o n t r a c t s w e r e s i g n e d w e n e e d e d t o f u n d t h e s e tr a n s a c t io n s . S o Tr a n s n e t a n d t h e tr e a s u r y t e a m a t t h e ti m e w o u l d h a v e t o s i t d o w n a n d th i n k a b o u t h o w w e w o u ld f u n d th is 4 9 b ill i o n r a n d – th e s e c o n t r a c t s .. . ( in t e r v e n ti o n ) . CHAIRPERSON : 20 A n d t h e t r e a s u r y t e a m , y o u ’r e ta lk in g a b o u t, is i t th e tr e a s u r y te a m fr o m N a ti o n a l Tr e a s u r y o r fr o m w i t h i n Tr a n s n e t? MR MOHAMED SULEMAN MAHOMEDY : O r d i n a r il y i t w o u ld b e th e Tr a n s n e t tr e a s u r y te a m w i t h i n o u r o ffi c e – w i t h i n o u r s tr u c t u r e s , h o w e v e r, in a n u m b e r o f i n s t a n c e s t h e y h a v e n o t b e e n p a r ty t o b e i n g in v o lv e d a t a l l , i t r e m a i n s k e y t h r o u g h o u t t h e d o c u m e n t th r o u g h o u t m y t e s ti m o n y f r o m h e r e o n . S o i n – a r o u n d A u g u s t 2 0 1 4 a s I s a id t h e Page 128 of 154 15 MAY 2019 – DAY 93 p r e v i o u s G r o u p Tr e a s u r e r M s M a th a n e M a k g a t h o , a c t u a ll y v i s i t e d a n d h a d c o n v e r s a ti o n s w i th C h i n a D e v e l o p m e n t B a n k to p r o v i d e u s w it h f u n d i n g t o t h e v a lu e o f a p p r o x i m a t e ly, a t t h e ti m e th e d is c u s s i o n s w e r e a t t w o a n d a h a lf b i lli o n d o l la r s . A t t h a t ti m e th e F o r e x r a te w a s a b o u t R 1 2 . 0 0 t h a t w o u l d th e n g iv e y o u f u n d i n g o f 3 0 b il li o n r a n d . The d is c u s s io n s b e t w e e n C h i n a D e v e l o p m e n t B a n k a n d Tr a n s n e t p r o g r e s s e d t o th e p o i n t w h e r e t h e y w o u l d g iv e y o u w h a t i s c a l le d in d ic a tiv e p r ic i n g e tc e t e r a . A t s o m e p o i n t in 2 0 1 5 , s t e p s in R e g i m e n ts , M s M a k g a t h o w r i t e s a n e m a il b e f o r e t h a t , a ls o i n t h e d o c u m e n t s , w h e r e w e ’ ll g e t t o 10 t h a t , w h e r e s h e r e g is t e r s h e r d is c o m f o r t w it h t h e in v o lv e m e n t o f R e g i m e n t s . C h a i r a s w e ’l l p r o g r e s s t h r o u g h e a c h e v e n t b u t w h a t th e n h a p p e n s is , C h i n a D e v e l o p m e n t B a n k a n d R e g i m e n ts a g r e e t h a t t h e a m o u n t w i ll b e o n e a n d a h a l f b i ll io n d o l la r s , t h a t’s w h a t t h e y a r e p r e p a r e d n o w t o p u t o n t h e t a b l e a s a g u a r a n t e e d f u n d i n g o p ti o n a n d t h a t ’s w h a t R e g i m e n ts p r e s e n t s o t h e o th e r b ill i o n d o l l a r s w i t h t h e r a t e s t il l a t a r o u n d R 1 2 . 0 0 t h e r e ’s a s tr a t e g y t o n o w g e t w h a t is c a ll e d t h e d o m e s ti c m a r k e t i n v o l v e d a n d s e e w h a t w e c a n c o m e u p w i t h a n d t h a t is t h e n te r m e d th e Z A R C lu b L o a n . T h e Z A R C l u b L o a n is s i m p l y a S o u th A f r i c a n R a n d l o a n t h a t is p u t t o g e t h e r w it h m o r e t h a n o n e 20 fi n a n c i a l in s ti t u t i o n . I n t h is p a r t ic u l a r c a s e t h e 1 2 b il li o n r a n d w a s t a k e n u p b y th e B a n k o f C h i n a l o c a lly 3 b i ll i o n r a n d a n d a g a in t h i s i s i n r a n d , t h is i s in S o u t h A f r ic a n r a n d s o th a t’s w h y i t ’s c a ll e d a Z A R C l u b L o a n . A B S A t a k e s 3 b il li o n , N e d b a n k .. .( i n t e r v e n ti o n ) . ADV PHILLIP MOKOENA SC : C a n I t a k e u s s l ig h tl y b a c k s o t h a t t h e C h a ir c a n f o ll o w, a r e y o u n o w ta k i n g u s t h r o u g h th e c o n t e n t s o f Page 129 of 154 15 MAY 2019 – DAY 93 p a r a g r a p h 5 .5 . 2 ? MR MOHAMED SULEMAN MAHOMEDY : ADV PHILLIP MOKOENA SC : Ye s C h a ir. Ye s a n d t h e n p le a s e ta k e u s – i t ’s o n p a g e 1 6 C h a ir. CHAIRPERSON : I ’v e g o t i t th a n k y o u . MR MOHAMED SULEMAN MAHOMED Y : S o I ’ m a t th e s e c o n d p a r t o f it w e ’ ll t a lk a b o u t t h e f ir s t p a r t , C h i n a D e v e l o p m e n t B a n k , w e s p o k e n o f o n e a n d a h a l f b il li o n , t h e Z A R C l u b L o a n a g a in C h a ir i s 3 b il li o n r a n d f o r A b s a , 3 b il li o n r a n d fr o m t h e B a n k o f C h in a , 3 b i ll io n r a n d f r o m 10 N e d b a n k , o n e a n d a h a l f b i ll io n r a n d fr o m F u tu r e G r o w th a n d o n e a n d a h a l f b il li o n fr o m O M S F I N w h i c h is a n O ld M u t u a l e n t i ty, th a t ’s th e c r e a ti o n o f t h e Z A R C l u b L o a n . W h a t is a l s o i m p o r t a n t is t h a t , t h a t w a s n o t t h e s u m t o t a l o f a ll o f t h e f u n d i n g f o r 1 0 6 4 s o w e to u c h e d o n t h e C h i n a D e v e l o p m e n t B a n k o f o n e a n d a h a l f b i lli o n d o ll a r s , t h a t w a s b a s e d o n a d r a w - d o w n f a c il i ty w h ic h m e a n s t h e y g a v e y o u t h e fa c i l i ty a n d a s y o u n e e d i t y o u w il l d r a w t h a t d o w n a n d t h e n p a y t h e i n t e r e s t . T h e n i n a d d i t io n t o t h a t – s o r r y C h a ir, m y a p o l o g i e s f o r g o i n g a b i t – t h e C h i n a D e v e l o p m e n t B a n k l o a n w a s s p e c i f ic a l ly w h e n th e o n e a n d a h a l f b i ll i o n w a s a g r e e d , i t w a s s p e c if ic a l ly f o r th e C S R a n d C N R 20 lo c o m o t iv e s . Th e Z A R C lu b L o a n , t h e 3 b ill i o n t h a t th e B a n k o f C h in a g a v e fr o m th e 1 2 w a s a l s o s p e c if ic a l ly f o r t h e C h i n e s e l o c o m o tiv e s . T h e b a la n c e o f 9 b i ll io n w a s s e c u r e d u n d e r w h a t w e c a l l, g e n e r a l f u n d i n g p r i n c ip l e s . I n a d d i t io n t o th a t w e a ls o w e r e a b le t o g e t i n to a tr a n s a c ti o n w i th t h e U n i t e d S t a t e s E X I M f a c i li t y o f 5 . 7 b i lli o n r a n d a n d t h a t w a s d o n e fo r t h e G e n e r a l E le c t r ic l o c o m o ti v e s b e c a u s e G E is Page 130 of 154 15 MAY 2019 – DAY 93 la r g e l y a n A m e r ic a n c o m p a n y s o th e A m e r ic a n E X I M w a s p r e p a r e d t o f u n d th is t r a n s a c ti o n a n d t h e n t h e r e w e r e t w o m o r e f u n d in g tr a n s a c ti o n s o n p a g e 1 7 , C h a ir w h e r e i t is c a l le d a n Ex p o r t D e v e l o p m e n t o f C a n a d a , t h e E D C t o g e t h e r w i t h I n v e s t e c l o c a l ly a n d K F W D e v e lo p m e n t B a n k w h ic h is o u t o f G e r m a n y f o r a m o u n ts o f 6 . 9 9 2 b i ll i o n a n d 2 . 7 6 b il li o n r e s p e c ti v e ly th a t r e l a te d to t h e B o m b a r d ie r l o c o m o t iv e s . T h i s is , e s s e n t i a ll y t h e – a l l o f t h e d i ff e r e n t l o a n s th a t w e u n d e r t o o k d u r i n g th e ti m e o f t h e 1 0 6 4 lo c o m o t iv e s .. . ( i n te r v e n ti o n ) . ADV PHILLIP MOKOENA SC : 10 N o w t h e s e t r a n s a c t io n , I m e a n y o u h a v e r e fe r r e d t o th e tr e a s u r y d e p a r t m e n t w i t h i n Tr a n s n e t w e r e t h e y n o t c a p a b le of sourcing or s e c u r in g t h is loans from these various in s t i tu t io n s w i t h o u t h a v i n g t o i n v o l v e a n y o t h e r e x t e r n a l e n ti t y ? MR MOHAMED SULEMAN MAHOMED Y : T h e Tr a n s n e t Tr e a s u r y te a m h a d t h e c a p a c i t y a n d c a p a b i li ty to e x e c u t e t h e s e tr a n s a c ti o n s a s fa r a s we are concerned. ADV PHILLIP MOKOENA SC : Ye s n o w y o u a l s o d r a w t h e a t te n ti o n o f t h e C h a ir to s o m e o f t h e p r e ju d ic i a l c o n d u c t fr o m p a r a g r a p h 5 . 5 . 3 t o th e d e tr i m e n t o f Tr a n s n e t , c a n y o u p le a s e ta k e u s th r o u g h t h e m ? MR MOHAMED SULEMAN MAHOMEDY : 20 C h a ir a s I to u c h e d o n e a r l ie r o n , i n te r m s o f p a r a g r a p h 5 .5 . 4 th e C h i n a D e v e l o p m e n t lo a n h a d a lr e a d y c o m m e n c e d d is c u s s i o n s o r o u r t e a m h a d a lr e a d y c o m m e n c e d d is c u s s io n s for the C h in a Deve lopment Bank lo a n with C h in a D e v e l o p m e n t B a n k a n d t h e n w e h a d t h e a d v e n t o f R e g i m e n t s i n t o th e tr a n s a c ti o n a n d a s I e x p l a i n e d e a r l ie r o n C h a ir 1 6 6 m il li o n w a s p a i d t o R e g i m e n t s fo r t h is p a r t ic u l a r p i e c e o f w o r k w h ic h c o u l d v e r y e a s il y h a v e Page 131 of 154 15 MAY 2019 – DAY 93 b e e n e x e c u te d b y t h e Tr a n s n e t Tr e a s u r y t e a m . U n d e r 5 .5 . 6 , w h e n i t c a m e t o th e Z A R C l u b L o a n w e h a v e s u b s e q u e n t ly o r s in c e t h e tr a n s a c ti o n , w e h a v e id e n ti f ie d a n in v o i c e t h a t w a s p a i d t o Tr i ll ia n A s s e t M a n a g e r s f o r a n a m o u n t o f 8 2 m il li o n r a n d e x c lu d in g VAT C h a ir a n d th e r e a r e s u b s e q u e n t m e m o r a n d a th a t t a l k t o t h e p r o v is i o n o f a L e a d R a n g e r S e r v ic e fr o m Tr i ll i a n A s s e t M a n a g e m e n t . O n c e a g a i n t h i s d o c u m e n t i s s i g n e d b y a f e w k e y i n d i v i d u a ls a n d a p p r o v e d b y th e v e r y s a m e A D C , a t t h e ti m e , th is w a s i n – a r o u n d N o v e m b e r 2 0 1 5 . S o o n c e a g a i n C h a ir, th e s y n d i c a t io n o f a lo a n is n o t a 10 c o m p le x s tr u c tu r e f o r o u r Tr a n s n e t Tr e a s u r y t e a m , t h e s e a r e t h i n g s t h a t we would do on a regular basis and we would call relevant banks t o g e th e r, w e w o u l d s i t w i t h t h e m , e x p la i n t o t h e m w h a t th e r e q u i r e m e n t is , p r e s e n t to t h e m a n d s a y w h a t f u n d i n g w e r e q u i r e a n d t h e n in s t i tu t io n s w o u l d n o r m a ll y c o m e b a c k to u s a n d s a y, w e a r e p r e p a r e d t o i n v e s t i n Tr a n s n e t a t t h e s e v a l u e s , th e s e a r e o u r te r m s a n d c o n d i ti o n s , t h a t w il l b e a s s e s s e d a n d th e n a fi n a l d e c is i o n w o u l d b e m a d e y e t a g a in . . .( in t e r v e n ti o n ) . ADV PHILLIP MOKOENA SC : D o y o u k n o w w h y Tr i ll i a n w a s p a i d t h a t a m o u n t , w h a t w a s – w h a t d id t h e y d o to b e p a id t h a t a m o u n t ? 20 MR MOHAMED SULEMAN MAHOMEDY : W e ll it ’s a ll e g e d th a t th e y w e r e a s u p p ly d e v e l o p m e n t p a r t n e r t o R e g i m e n t s , t h a t ’s t h e i n f o r m a ti o n t h a t h a s b e e n p r e s e n t e d b u t i n th e d i s c u s s io n s t h a t w e ’v e h a d w e a r e u n a b l e t o fi n d a n y d o c u m e n t a ti o n o r a n y e v id e n c e th a t Tr i ll ia n d i d in f a c t d o a n y w o r k o n th e Z A R C lu b L o a d , w e d o n ’ t b e l ie v e a n d w e a r e n o t a b l e to – w e h a d d is c u s s e d t h i s w i t h th e p r e v i o u s tr e a s u r e r w e Page 132 of 154 15 MAY 2019 – DAY 93 a s k e d f o r s i m p le d o c u m e n t a t i o n a r o u n d m e e ti n g s t h a t w e r e h e l d , t h a t were scheduled that w o u ld have shown Tr i ll ia n , members of m a n a g e m e n t o r E x e c u t iv e s o r m e m b e r s o f th e ir s t a ff th a t a t te n d e d t h e s e c o n v e r s a ti o n s o r m e e t i n g s , b e c a u s e C h a ir t h is is i n – a r o u n d N o v e m b e r / D e c e m b e r 2 0 1 5 e a r ly – w e l l b e tw e e n N o v e m b e r a n d e a r l y D e c e m b e r 2 0 1 5 a n d t h e p a y m e n t i s m a d e a t t h a t ti m e b u t w e a r e n o t a b l e t o a c t u a l ly fi n d a n y e v i d e n c e t h a t a n y w o r k w a s a c tu a l ly p e r fo r m e d b y Tr i ll ia n . ADV PHILLIP MOKOENA SC : 10 Ye s y o u m a y p r o c e e d w i t h y o u r – t h e c o n te n ts o n p a g e – o n p a r a g r a p h 5 . 5 .8 u n l e s s t h e r e a r e a n y o t h e r s p e c i f ic a m o u n ts w h i c h y o u w is h t o h ig h l i g h t fo r t h e C h a i r i n r e l a t i o n to t h o s e a m o u n t s s ta t e d a b o v e . MR MOHAMED SULEMAN MAHOMEDY : I th i n k C h a i r i f – w e n e e d to g o t o 5 .5 . 11 a n d t h e e m a i l o r th e – my s u g g e s t i o n e a r li e r o n t h a t . . .( i n te r v e n t io n ) . CHAIRPERSON : I ’ m s o r r y t h a t is 5 ? M R M O H A M E D S U L E M A N M A H O M E D Y : 5 . 5 .11 o n p a g e 1 9 C h a ir. CHAIRPERSON : O h o k a y, th a n k y o u . MR MOHAMED SULEMAN MAHOMEDY : 20 C h a ir u n d e r a d o c u m e n t t h a t is – s o r r y th e d o c u m e n t is u n d e r M S M 2 2 p a g e n u m b e r 4 5 0 – M S M 4 5 0 I w o u ld l ik e to , i f it i s a l lo w e d t h a t w e r e a d s o m e o f t h e c o n te n ts o f t h i s p a r t ic u l a r e m a i l . CHAIRPERSON : Ye s . ADV PHILLIP MOKOENA SC : Fi r s tl y i d e n ti fy t h e e m a i l a n d te ll u s . MR MOHAMED SULEMAN MAHOMEDY : Page 133 of 154 T h e e m a i l is fr o m M a t h a n e 15 MAY 2019 – DAY 93 M a k g a th o s e n t o n t h e 2 1 s t o f A u g u s t 2 0 1 4 a t 1 2 h 5 4 p m . . .( i n te r v e n t io n ) . ADV PHILLIP MOKOENA SC : W h o is s h e , b e fo r e y o u r p r o c e e d ? MR MOHAMED SULEMAN MAHOMEDY : She was, at the time, the G r o u p Tr e a s u r e r o f Tr a n s n e t . ADV PHILLIP MOKOENA SC : A n d s h e ’s a d d r e s s in g th is l e t te r t o who? MR MOHAMED SULEMAN MAHOMED Y : S h e ’s a d d r e s s in g th is to t h e C h i e f E x e c u ti v e , M r B r ia n M o l e f e a s w e l l a s t h e G r o u p C h i e f F in a n c i a l O ff ic e r Mr A n o j S in g h . .. ( i n te r v e n ti o n ) . 10 ADV PHILLIP MOKOENA SC: A n d d o y o u k n o w w h a t w a s th e p u r p o s e o f t h i s l e tt e r ? MR MOHAMED SULEMAN MAHOMEDY : The purpose was talking a r o u n d t h e m a tt e r o f R e g i m e n ts a n d C h i n a D e v e l o p m e n t B a n k . ADV PHILLIP MOKOENA SC : Ye s , y o u c a n t a k e th e C h a ir th r o u g h t h e r e l e v a n t p o r ti o n s o f t h e l e t t e r w h ic h y o u w i s h to h i g h l ig h t . MR MOHAMED SULEMAN MAHOMEDY : C h a ir i n t h e fi r s t p a r a g r a p h s h e s ta t e s , “ T h i s e m a il is a f o l lo w - u p o f v a r i o u s d is c u s s i o n s I h a d w i t h y o u r s e l v e s a n d i n s o m e in s ta n c e s w i th R e g i m e n t s i n c l u d e d 20 w h e r e I h a d i n d i c a t e d m y d is a g r e e m e n t – s o r r y m y d is c o m f o r t a n d d is a g r e e m e n t o n h o w t h e C h i n a D e v e l o p m e n t B a n k fa c i li ty n e g o ti a ti o n s are being handled. R e g i m e n ts p r ic i n g m e t h o d o l o g y a s w e l l a s m y d is a g r e e m e n t o f t h e a p p o in t m e n t o f R e g i m e n t s a s t h e tr a n s a c ti o n a d v is o r fo r t h e f a c ili t y ” . U n d e r t h e o v e r a l l g o v e r n a n c e m id w a y t h r o u g h th a t p a r t ic u l a r Page 134 of 154 15 MAY 2019 – DAY 93 s e c t io n C h a i r s h e s a y s , “ I d o n o t s u p p o r t th a t a 2 6 b i ll io n r a n d f a c i li t y b e n e g o ti a te d a n d le d b y a tr a n s a c t io n a d v is o r a s w e c a n n o t a n d s h o u l d n o t n e g o ti a te a l o a n f a c ili t y i n is o l a ti o n o f Tr a n s n e t ’s c u r r e n t 9 0 b il li o n r a n d d e b t p o r t fo li o ” , s h e g o e s o n t o s a y, “ w h e n w e n e g o ti a te a f a c il i ty o f t h i s m a g n i t u d e w e a s s e m b l e a m u l ti d is c i p l i n a r y team that includes le g a l , tax, accounting, s tr u c t u r e d f in a n c e a n d r is k m a n a g e m e n t t e a m m e m b e r s . T h is is t o e n s u r e t h a t a l l p o s s i b l e r i s k s r e la t in g t o th e f a c i li ty a r e 10 id e n t i fi e d a n d m i t ig a t e d t o t h e e x t e n t p o s s i b l e ” . CHAIRPERSON : J u s t b e f o r e y o u p r o c e e d I t h i n k i t’s i m p o r t a n t t o h i g h l ig h t t h a t l a s t s e n t e n c e o f h e r f ir s t p a r a g r a p h w h e r e s h e s a y s , “ f o r t h e a v o i d a n c e o f d o u b t , I ’ d li k e t o b r in g th e f o l l o w i n g t o y o u r a t t e n ti o n ” . S o i t l o o k s l ik e t h is is s o m e b o d y w h o w a n ts to m a k e s u r e t h a t h e r p o s i ti o n is c l e a r a n d th a t n o b o d y a m o n g t h o s e o r b e tw e e n th o s e t o w h o m s h e ’s a d d r e s s in g t h e e m a i l c a n l a t e r o n s a y, I d i d n o t k n o w, o k a y. .. ( i n te r v e n t io n ) . MR MOHAMED SULEMAN MAHOMED Y : C h a ir y o u c o r r e c tl y p o i n t t h a t o u t , i n a d d i ti o n C h a ir I o mi t t e d t o m e n ti o n a s ta t e m e n t t h a t s h e 20 m a d e s h e s a y s u n d e r 1 ) , o v e r a ll g o v e r n a n c e i n th e s e c o n d s e n t e n c e she says, “ As I i n d i c a t e d I w a s n o t c o n s u l t e d n o r w a s I a w a r e t h a t R e g i m e n t s w a s a p p o i n te d a s t h e tr a n s a c ti o n a d v is o r a n d l e a d n e g o ti a to r f o r th e fa c i li ty a s I b e l i e v e t h e r e w a s n o n e e d fo r them to be appointed given progress that we had made”. Page 135 of 154 15 MAY 2019 – DAY 93 C l e a r l y i n d ic a ti n g t h a t Tr a n s n e t Tr e a s u r y h a d a lr e a d y e n g a g e d w i t h C h i n a D e v e lo p m e n t B a n k a n d t h e y h a d m a d e p r o g r e s s . CHAIRPERSON : A ls o m a k i n g t h e p o in t t h a t y o u y o u r s e l f h a v e m a d e t h a t o n s o m e o f th e i n s t a n c e s w e a r e d e a li n g w i t h s i t u a t io n s w h e r e , a t le a s t a s fa r a s Tr a n s n e t i s c o n c e r n e d , t h e r e w a s n o n e e d fo r c e r t a in external services to be brought in. MR MOHAMED SULEMAN MAHOMEDY : CHAIRPERSON: Ye s C h a ir. Okay you can proceed. MR MOHAMED SULEMAN MAHOMEDY : 10 C h a ir u n d e r p o i n t 2 ) , f e e s a n d i n t e r e s t e x p e n s e , s h e s t a te s , “ T h e c u r r e n t p r ic i n g i n d ic a ti o n i s n o t i n l in e w i t h o t h e r D F I’s , a D F I is a D e v e l o p m e n t a l F u n d in g In s t i tu t i o n , a s s e t b a c k e d o r e v e n t ie d fa c i li t ie s ” I ’ m s k i p p i n g a s e n te n c e a n d r e a d in g , “ a s C h i n a D e v e lo p m e n t B a n k F a c il i ty is t i e d t o p r o c u r e m e n t fr o m C h i n a , a s i t i s s u p p o s e d to s u p p o r t C N R a n d C S R lo c o m o t iv e c o n tr a c ts th e t e r m s a n d c o n d i t io n s s h o u l d m ir r o r t h a t o f th a t o f ti e d fa c i li ti e s a s w e l l a s a s s e t b a c k e d f a c i li t ie s . T h e s e t w o e l e m e n ts , t ie d a n d s e c u r i ty s h o u l d tr a n s la t e in t o c o s t e ffe c t iv e f u n d s w h ic h s h o u l d b e c l o s e t o l o c a l fu n d s a s w e l l a s s i m p l e r 20 t e r m s a n d c o n d i ti o n s ” . C h a ir t h e r e a s o n t h a t i s q u i t e c r i ti c a l is b e c a u s e t h e f u n d in g w i t h C h i n a D e v e lo p m e n t B a n k is w h a t i s c a l l e d a s e c u r i t is e d l o a n a n d m e a n i n g t h a t t h e l o c o m o ti v e s t h a t a r e p r o c u r e d f r o m C N R a n d C S R a r e t a k e n a s a b o n d . . .( i n t e r v e n t i o n ) CHAIRPERSON : A s a s u r e ty o r a u t h o r i ty. Page 136 of 154 15 MAY 2019 – DAY 93 MR MOHAMED SULEMAN MAHOMEDY : CHAIRPERSON : As a s u r e t y. Surety ja. MR MOHAMED SULEMAN MAHOMEDY : As a surety over that loan a n d th a t ’s th e p o i n t . . .( in t e r v e n ti o n ) . CHAIRPERSON : J a s o th a t i f t h e lo a n is n o t r e p a i d t h e y c a n a c t u a ll y t a k e t h o s e l o c o m o tiv e s a n d a t ta c h t h e m o r s o m e t h i n g t o th a t e ff e c t . MR MOHAMED SULEMAN MAHOMED Y : Th a t is c o r r e c t C h a ir, i t is a , y o u k n o w, a s i m p l e – lik e a le a s e H P, h i g h e r p u r c h a s e a g r e e m e n t w h e r e t h e v e h ic l e is a l w a y s o w n e d b y th e le n d e r u n til i t ’s f u ll y p a id o ff a n d 10 t h a t ’s t h e c u r r e n t s i t u a t i o n w i t h t h e C D B l o a n . CHAIRPERSON : W h ic h w a s a n a d v e r s e c o n d i ti o n a s f a r a s Tr a n s n e t w a s c o n c e r n e d is t h a t r ig h t ? MR MOHAMED SULEMAN MAHOMED Y : T h a t ’s c o r r e c t C h a ir a n d w h a t t h e p o i n t th a t is b e i n g m a d e h e r e i f w i t h t h a t y o u s h o u l d h a v e lo w e r o v e r a ll – t h e r i s k i s l o w e r b e c a u s e th e y ’ v e n o w g o t a c o l l a t e r a l . CHAIRPERSON : Ye s . MR MOHAMED SULEMAN MAHOMEDY : C h a ir f u r t h e r o n t h e n e x t p a g e s h e g o e s o n , o n p a g e 4 5 1 t o p r o v i d e a v e r y d e t a i le d lo o k a t th e C h i n a D e v e lo p m e n t B a n k p r o p o s a l a n d t h e a m o u n t s a n d th e r a t e s th a t 20 a r e q u o t e d h e r e r e l a te t o t h e tw o a n d a h a lf b i ll io n d o ll a r s . S o I’ m j u s t p r o v i d in g c l a r i t y t h a t i t w a s c h a n g e d s u b s e q u e n t ly – a t t h a t ti m e i t w a s r e l a ti n g t o th e t w o a n d a h a l f b i ll io n d o l l a r p r o p o s a l th a t w a s o n th e t a b le . I n h e r v i e w s h e s a y s t h a t a f a ir p r ic e w o u l d b e J I B R p lu s 2 1 0 b a s is p o i n ts a n d th a t ’s th e J o h a n n e s b u r g I n t e r B a n k R a t e a n d I ’v e t a k e n in t o c o n s i d e r a t io n th e s iz e o f th e f a c i li ty. In t h e c u r r e n t m a r k e t Page 137 of 154 15 MAY 2019 – DAY 93 t h e p r o p o s e d C B D s tr u c tu r e w il l c o s t t h r e e a n d a h a l f b il l i o n r a n d m o r e in i n te r e s t e x p e n s e s a n d t h a t is b a s e d o n t h e tw o a n d a h a l f b i ll io n d o ll a r d e b t . B a s e d o n t h e s e n u m b e r s w e h a v e l o o k e d a t i t o n t h e o n e a n d a h a l f b il li o n d o ll a r s i t e q u a te s to ju s t a b o u t 2 b i ll io n r a n d i n a d d it i o n a l o r h i g h e r i n te r e s t b il ls t h a t w a s h e r c a lc u l a ti o n i n A u g u s t 2014. C h a ir u n d e r c o n c l u s i o n s h e t a l k s a s f o ll o w s , “ I t is m y b e li e f t h a t t h e C D B fa c i li ty i n i ts c u r r e n t f o r m is n o t i n t h e b e s t in t e r e s t o f th e c o m p a n y o r t h e c o u n tr y. G iv e n p o t e n t i a l c a p i t a l l e a k a g e o f u p to 3 .7 b i l l io n i n e x c e s s iv e 10 in t e r e s t e x p e n s e a n d e x c e s s i v e a r r a n g e m e n t f e e s w h i c h m a y b e c la s s i f ie d a s a P F M A v i o l a ti o n g i v e n i n f o r m a t i o n a t o u r d is p o s a l . T h e a d d i t io n a l in t e r e s t e x p e n s e w i ll h a v e a n e g a ti v e i m p a c t o n th e a lr e a d y f r a g i l e c a s h i n t e r e s t c o v e r r a t i o . I t h e r e f o r e r e c o m m e n d th a t w e t e r m i n a t e d i s c u s s i o n s w i th C h i n a Development Bank and explore other sources of funds. Tr a n s n e t h a s p r o v e d i ts a b i li ty t o r a i s e f u n d s fr o m d iv e r s e f u n d i n g s o u r c e s e v e n u n d e r tr y in g c ir c u m s t a n c e s . I n 2 0 0 8 a n d 2 0 0 9 w e w e r e a b le t o r a is e o v e r 2 2 b il li o n r a n d e v e n w h e n t h e m a r k e t w a s c l o s e d f o r o th e r is s u e s . T h e l a te s t e x a m p l e is o u r 20 a b il i ty t o r a is e 8 b ill i o n r a n d fo r t h e l o c o m o ti v e d e p o s it a t s h o r t n o t ic e ” , A n d s h e g o e s o n to e x p l a i n h e r p o s it i o n . ADV PHILLIP MOKOENA SC: N o w s h e g iv e s t h i s d e t a i le d l e t te r o r m e m o to t h e tw o s e n i o r o ffi c i a l s id e n ti fi e d b y i ts e l f i n t h a t le t t e r, d o y o u k n o w w h e t h e r – d i d th e y f o l lo w h e r a d v ic e ? Page 138 of 154 15 MAY 2019 – DAY 93 MR MOHAMED SULEMAN MAHOMEDY : t h e a d v i c e a s n o t fo ll o w e d b e c a u s e w e c o n t in u e d w it h t h e C h i n a D e v e l o p m e n t B a n k lo a n , w e c o n ti n u e d t o u s e R e g i m e n ts a s t h e a d v is o r s , w e p a i d R e g i m e n ts th e 1 6 6 m i lli o n s o c le a r ly t h a t w a s n o t n e c e s s a r ily – t h a t a d v ic e w a s n o t t a k e n . . .( i n t e r v e n t i o n ) . CHAIRPEROSN : D o y o u k n o w w h e th e r t h e y r e s p o n d e d t o – t h a t is M r B r i a n M o le f e a n d M r A n o j S i n g h w h e th e r t h e y r e s p o n d e d t o h e r m e m o o r e m a i l? MR MOHAMED SULEMAN MAHOMEDY : 10 C h a i r I ’ m n o t a w a r e o f th a t , I’ m n o t a w a r e o f a r e s p o n s e . C H A I R P E R S O N : O k a y. ADV PHILLIP MOKOENA SC : If they’d responded – I mean in your r e v ie w o f t h e s e d o c u m e n ts y o u w o u ld h a v e a c t u a l ly c o m e a c r o s s s u c h a d o c u m e n t a n d c le a r ly, y o u k n o w, r e fe r t h e C h a ir t o s u c h a d o c u m e n t. MR MOHAMED SULEMAN MAHOMEDY : ADV PHILLIP MOKOENA SC : Ye s . But throughout your review you never found any response ? MR MOHAMED SULEMAN MAHOMEDY : We haven’t found any r e s p o n s e t o t h i s . C h a ir th e r e a r e c e r t a i n p e r t in e n t f a c ts t h a t w e m u s t 20 a ls o d i s c l o s e a r o u n d t h e C h i n a D e v e l o p m e n t B a n k l o a n . ADV PHILLIP MOKOENA SC : Ye s . MR MOHAMED SULEMAN MAHOMEDY : Tr a n s n e t h a d p a i d w h a t is c o m m o n p r a c ti c e i n th e b a n k i n g e n v ir o n m e n t, w e p a y a n u p fr o n t fe e fo r c e r t a i n fa c i li ti e s , n o t n e c e s s a r il y a lw a y s t h e c a s e b u t i n s o m e c a s e s w e p a y a n u p fr o n t fe e . To C h i n a D e v e l o p m e n t B a n k w e p a i d a n u p fr o n t f e e Page 139 of 154 15 MAY 2019 – DAY 93 w h ic h e q u a t e d to 1 7 . 7 m il li o n U S D o l l a r s . A t th e t i m e o f t h e tr a n s a c ti o n w e b e li e v e th e r a t e a s c l o s e r to , a b o u t a g a i n , R 1 2 . 0 0 w h ic h w il l m e a n t h a t w e p a id 2 1 2 m i ll io n r a n d . T h e r e a s o n I s t a t e t h i s C h a ir is b e c a u s e it w a s o u t o f k i l te r w it h w h a t w a s p a i d t o o th e r i n s t it u ti o n s a t t h e s a m e ti m e . I f i t p le a s e s th e C o m m i s s io n u n d e r M S M 2 0 p a g e 3 6 7 w e tr y to p r o v i d e a s u m m a r y t o c e r ta i n tr a n s a c ti o n s f o c u s e d o n t h e f u n d i n g o f t h e 1 0 6 4 l o c o m o ti v e s . CHAIRPERSON : B e f o r e w e t a l k a b o u t M S M 2 0 , M r M o k o e n a I t h in k M S M 2 2 t h e o n e w e h a v e ju s t d e a l t w i th . 10 ADV PHILLIP MOKOENA SC : CHAIRPERSON : Ye s . Is v e r y i m p o r t a n t , i t w o u l d b e v e r y h e lp f u l fo r s t e p s t o b e t a k e n i f th e y h a v e n ’ t b e e n ta k e n t o p r o v id e – to g e t p r o o f t h a t t h e e m a i l w a s r e c e iv e d b y t h e t w o p e r s o n s t o w h o m i t w a s a d d r e s s e d . ADV PHILLIP MOKOENA SC : W e h a v e g o n e f a r m u c h m o r e f u r th e r t h a n t h a t C h a ir, w e w ill b e c a ll in g Ms M a t h a n e M a k g a t h o t o t e s ti f y o n t h is s p e c if ic is s u e s . CHAIRPERSON : O k a y. ADV PHILLIP MOKOENA SC : CHAIRPERSON : 20 A n d o t h e r r e l a t e d is s u e s . O k a y n o t h a t is fi n e th a n k y o u . Ye s w e a r e b a c k a t MSM20? MR MOHAMMED SULEMAN MAHOMED Y : C h a ir u n d e r th e p a g e number MSM367 . C H A I R P E R S O N : H m . Ye s . MR MOHAMMED SULEMAN MAHOMED Y : C h a ir w e e n d e a v o u r t o p r o v i d e t h e c o m m i s s io n w i th a n o v e r a l l p e r s p e c t iv e o f s o m e o f t h e k e y Page 140 of 154 15 MAY 2019 – DAY 93 tr a n s a c ti o n s a n d f u n d in g a r r a n g e m e n t s t h a t w e r e p u t in p l a c e i n a n d around 2015. T h is b e c o m e s r e le v a n t f u r t h e r w h e n w e t a l k a b o u t th e in t e r e s t r a t e s w o p s . A n d C h a ir i f w e l o o k a t t h e u p fr o n t f e e s i n c o l u m n C C h a ir C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : I n C o lu m n C o f p a g e 3 6 7 w e p r o v i d e t h e u p fr o n t f e e s t h a t w e r e p a id t o t h e v a r i o u s i n s ti t u ti o n s . C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : 10 O n e w i ll n o t e t h a t t h e u p fr o n t f e e s e q u a te d to b e t w e e n . 3 a n d . 4 5 % . CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : T h e u p p e r li m i t b e in g .4 5 % . H o w e v e r a s i t r e l a te s to t h e C h in a D e v e l o p m e n t B a n k f a c il i ty w h ic h i s a t th e b o t to m o f t h e p a g e w e w il l n o te t h a t w e p a i d 1 7 . 7 m i ll io n d o l l a r s w h ic h i s b a s e d o n w h a t w e h a v e d r a w n u p t o to d a y e q u a te s t o 1 . 1 8 % w h ic h is a p p r o x i m a t e ly t w ic e e v e n m o r e t h a n tw ic e w h a t w a s p a i d o n a l l o f t h e o th e r fa c i li ti e s t h a t w e h a d t a k e n . And again for purposes of tr a n s p a r e n c y. C H A I R P E R S O N : I a m tr y i n g t o l o o k f o r t h e f i g u r e t h a t y o u g a v e . 20 MR MOHAMMED SULEMAN MAHOMED Y : C h a ir i f w e l o o k a t t h e b o t t o m o f t h e p a g e i t s a y s C h in a D e v e l o p m e n t B a n k C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMED Y : U S D o ll a r t h e n th e r e i s a n a m o u n t o f 1 0 4 4 t h a t i s t h e t o t a l a m o u n t w e h a v e d r a w n u p t o n o w. C H A I R P E R S O N : T h a t is t h e f i g u r e I w a s lo o k i n g a t b u t I t h o u g h t y o u Page 141 of 154 15 MAY 2019 – DAY 93 said 17? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s t h e n n e x t t o t h a t o n t h e r ig h t C h a i r is a – t w o c o lu m n s d o w n is 1 7 . 7 m ill i o n d o ll a r s . C H A I R P E R S O N : O h y e s . O k a y. J a . I t h i n k … MR MOHAMMED SULEMAN MAHOMEDY : As a percentage of what we h a v e d r a w n it e q u a t e s to 1 .1 8 % . C H A I R P E R S O N : O k a y. MR MOHAMMED SULEMAN MAHOMEDY : As c o m p a r e d to t h e . 3 th a t w e p a i d a n d . 4 5 % i t is a b o u t – j u s t a b o u t m o r e th a n d o u b l e . 10 C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : C l o s e to 3 ti m e s C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: What we would have paid lo c a lly. C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : I t is a ls o a ll o f th e s e fa c ts g iv e c o r r o b o r a ti o n t o M s M a g o to ’s m a i l w h e r e s h e s a y s th e r e w a s a n a b il i ty f o r u s to a c t u a l ly b o r r o w t h is m o n e y c h e a p e r o n t h e l o c a l m a r k e t. T h e r e is o n e v e r y f u n d a m e n t a l is s u e C h a i r t h a t w e h a v e t o p u t o n t h e 20 t a b le a t t h is p o in t . B y s e c u r i n g t h e fu n d i n g i n U S d o l la r I g o b a c k t o t e s ti m o n y t h a t w e g a v e e a r l i e r o n a r o u n d t h e h e d g i n g c o s ts o f t h e 1 0 6 4 in c r e a s i n g E T C . I w o u l d l ik e t o tr y to s i m p l if y t h i s b u t s i m p ly p u t C h a i r w e s p e n t b il li o n s l i te r a ll y t o h e d g e t h e 1 0 6 4 l o c o m o tiv e c o n tr a c t fr o m – b e c a u s e a ll o f t h e O E M ’s th e r e w e r e i n t e r n a t io n a l s e r v ic e p r o v i d e r s o r O E M ’s a n d t h e y w o u l d h a v e q u o t e d y o u t h e ir u n d e r ly in g c u r r e n c y w o u ld Page 142 of 154 15 MAY 2019 – DAY 93 h a v e b e e n a f o r e i g n c u r r e n c y. A n d w e s p e n t a l l t h a t m o n e y to h e d g e i t in t o r a n d . T h e p r o b l e m is t h e n w e g o a n d b o r r o w in d o l la r s to h e d g e i t a g a in i n t o r a n d . S o fr o m a b e n e f it t o t h e c o u n tr y p e r s p e c t iv e a n d t h e b e n e fi t t o Tr a n s n e t o r s h a ll I s a y t h e e r o s i o n o f v a l u e t o Tr a n s n e t i t n o t o n o n e fr o n t. I t i s r u n n i n g i n to m u l ti p l e b i lli o n s b e c a u s e w e s p e n t t h a t m o n e y a n d i f i t m a y p l e a s e t h e c o m m is s i o n f o r a v e r y s i m p le e x p l a n a t io n is – I b u y a c a r a n d t h e y t e l l m e i t i s 1 0 0 0 0 0 d o ll a r s . B u t t o d a y ’s r a t e is R 1 4 w h a t e v e r a n d t h e b a n k s a y s w e l l i f y o u w a n t to p a y it i n tw o y e a r s y o u w i ll – w e w i ll c h a r g e y o u R 1 6 . S o t h a t c a r w i ll w o r k 10 o u t to R 1 . 6 m i ll io n f o r m e . B u t t h e n I g o b a c k a n d I s a y n o , n o I c a n n o t g e t f u n d i n g l o c a lly I w i ll g o a n d b o r r o w 1 0 0 0 0 0 d o ll a r s fr o m a f o r e i g n b a n k a n d t h e n c o n v e r t th a t lo a n in t o r a n d s a g a in a n d p a y f o r t h a t c o n v e r s io n a g a i n . A n d b e c a u s e t h is is a lo n g te r m l o a n b e c a u s e i t is f o r fi f t e e n y e a r s t h e c o s t o f t h is w h a t i s n o w in t h e tr e a s u r y t e r m c a l l e d a c r o s s c u r r e n c y s w o p is w h a t w e p a y f o r a g a in . S o w e h a v e h e d g e d t h e 1 0 6 4 l o c o m o ti v e p r o g r a m m e . I t h a s c o s t u s b il li o n s a n d t h e n w e h e d g e – w e b o r r o w in b il li o n s a n d t h e n w e h e d g e a g a in . S o i t is a d o u b l e w h a m m y a s f a r a s t h e t o t a l c o s t b a s e o f Tr a n s n e t is c o n c e r n e d . A n d i t i s q u i t e a n i m p o r t a n t p o i n t C h a ir. 20 C H A I R P E R S O N : Ye s , y e s . S o i n a w a y it is d i ffi c u l t t o fi n d s e n s e i s t h a t th e p o i n t y o u m a k e th a t i t i s d i ffic u lt t o f i n d it is n o t s e n s i b le ? MR MOHAMMED SULEMAN MAHOMEDY : s u b m is s io n o f Ms M o k g a t le . I a c t u a l ly s u p p o r t t h e S h e s a y s w e s h o u ld n o t b e p r o g r e s s i n g w i t h t h is tr a n s a c t io n w i t h C h in a D e v e lo p m e n t B a n k . CHAIRPERSON : Ja. Page 143 of 154 15 MAY 2019 – DAY 93 M R M O H A M M E D S U L E M A N M A H O M E D Y : W e h a d t o h a v e e x p lo r e d a ll o f t h e o p p o r t u n i ti e s lo c a ll y. C H A I R P E R S O N : J a , ja , y e s . MR MOHAMMED SULEMA N MAHOMEDY: W i t h o u r d o m e s t ic f in a n c i a l in s t i tu t io n s t o d e c id e . C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMED Y : A n d b y t h e w a y C h a ir a ls o fi n a n c i a l i n s t it u ti o n s f r o m o v e r s e a s a r e p r e p a r e d t o l e n d u s i n r a n d a s w e ll . 10 CHAIRPERSON : Hm. M R M O H A M M E D S U L E M A N M A H O M E D Y : Tr a n s n e t is l a r g e ly a n e n ti ty t h a t c o n d u c ts i ts b u s in e s s w i t h i n t h e b o r d e r s o f t h is c o u n tr y. I ts r e v e n u e a n d c o s t b a s e is l a r g e l y i n S o u t h A f r ic a n r a n d s o i t d o e s n o t n e c e s s a r i ly m a k e g o o d fi n a n c i a l s e n s e t o b o r r o w i n d o l l a r s p a r t ic u l a r l y w h e n y o u p o t e n ti a l ly h a v e le n d e r s w h o a r e w il li n g t o l e n d y o u i n S o u t h A fr ic a n r a n d . CHAIRPERSON : Hm. Thank you. ADV PHILLIP MOKOENA SC : B u t is t h e s e tr a n s a c t io n s w e r e n o p r e j u d ic ia l t o Tr a n s n e t w h y w o u l d th e y s t il l b e p r o c e e d e d w i t h h a v in g t o 20 t a k e in t o a c c o u n t w h a t y o u s a y a s s e r i o u s l o s s e s t h a t c o u l d h a v e b e e n in c u r r e d b y Tr a n s n e t? A n d I a m a s k in g t h is q u e s t io n a g a in s t t h e b a c k g r o u n d o f a ls o a t h o r o u g h a d v ic e t h a t i t i s n o w b e i n g p r e f e r r e d b y o n e o f t h e e x p e r ie n c e d i n te r n a l m e m b e r s o f Tr a n s n e t d e a li n g w it h t h e s a m e is s u e s w h y w o u l d a n y o n e p r o c e e d w i t h s u c h a tr a n s a c t i o n ? MR MOHAMMED SULEMAN MAHOMED Y : Page 144 of 154 The only possible and 15 MAY 2019 – DAY 93 p l a u s i b le e x p la n a ti o n f r o m m y p e r s p e c t iv e w o u ld b e t h a t t h e r e w a s a n a g e n d a f o r a p a y m e n t to b e m a d e t o R e g i m e n ts u l ti m a t e ly o r s o m e e n t i ty th a t e x is te d o u t s i d e o f t h e s y s t e m . W h y w o u l d Tr a n s n e t i n g o o d c o n s c i e n c e e n g a g e i n a l o a n a g r e e m e n t t h a t h a s g o t a s ig n i f ic a n t ly o r a p o s s i b ly p r e j u d ic ia l i n te r e s t r a t e i n th e fir s t p la c e t h a t c o m e s a t a h i g h e r c o s t? A ls o o n p a g e 3 6 7 C h a i r a c r o s s t h e li n e y o u w il l n o t e u n d e r c o l u m n F. A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMEDY : 10 A n a m o u n t o f 3 3 0 m i ll i o n t h a t w a s p a id t o C h i n a D e v e l o p m e n t B a n k f o r w h a t is c a l le d a c o m m i t m e n t f e e . T h a t is w h e n y o u d o n o t u s e t h e f u l l f a c il it y t h a t y o u a s k f o r. S o e v e r y t i m e y o u d r a w d o w n y o u p a y a c o m m i t m e n t f e e o n t h e d i ff e r e n c e . S o w h e n y o u c o n s i d e r a ll o f t h e s e f a c t o r s th is w o u l d h a v e b e e n m o r e e x p e n s iv e p a r t ic u l a r ly i f y o u c o n s i d e r t h e c o s t a n d I a m u s i n g t h e t e r m l o o s e l y th e c o s t o f h e d g in g t h e l o a n . Because the b a n k i n g i n s ti t u ti o n s m a y g e t o ffe n d e d i t is a c t u a l ly c a ll e d a c r o s s c u r r e n c y s w o p b u t t h e c o s t o f a ll o f th e s e t h i n g s w h e n y o u a d d th e m i n t h e y h a v e b r o u g h t a d d i t io n a l c o s t to Tr a n s n e t ’s fi n a n c i a l p o s i t io n a n d i t h a s a ff e c t e d u s a d v e r s e l y. 20 A D V P H I L L I P M O K O E N A S C : Ye s . W h il e y o u a r e s t il l o n t h a t a l s o if y o u c a n c o m m e n t o n th e C o l u m n H o n th e v e r y s a m e p a g e a s to w h o t h e b e n e fi c i a r y a n d w h a t d o e s i t r e p r e s e n t ? MR MOHAMM ED SULEMAN MAHOMEDY : We put that for purposes of c la r i ty a n d c o n fir m a t io n a s I s a i d o n th e Z A R C l u b L o a n R 8 2 m il li o n p l u s VAT w a s p a i d t o Tr il li a n . F o r – a t t h i s p o i n t i n t i m e w e d o – h a v e Page 145 of 154 15 MAY 2019 – DAY 93 n o t s e e n a n y e v i d e n c e o f w o r k p e r f o r m e d b y Tr i ll ia n o n t h e Z A R C lu b L o a n . A n d th e n o n t h e C h i n a D e v e l o p m e n t B a n k L o a n t h e R 1 6 6 m i ll i o n t h a t I r e f e r r e d t o e a r li e r o n w a s p a id t o R e g i m e n ts . S o ju s t b a s e d o n t h e f u n d i n g y o u s e e j u s t a b o u t a q u a r t e r b i lli o n r a n d . A D V P H I L L I P M O K O E N A S C : Ye s . MR MOHAMMED SULEMAN MAHOMED Y : B e in g p a i d o u t w h e n e x p e r t is e e x is t e d in Tr a n s n e t to e x e c u te t h e s e tr a n s a c ti o n s . W h i c h b y t h e w a y w e c u r r e n tl y a r e e x e c u t in g tr a n s a c t io n s m a y b e n o t t h e s i z e o f t h is tr a n s a c ti o n b u t w e d o e x e c u te w i t h l o c a l a n d f o r e i g n i n s ti t u ti o n s 10 t h e s e t y p e o f t r a n s a c t io n s w i th th e p e o p le t h a t a r e c u r r e n t ly e m p l o y e d in t h e Tr e a s u r y te a m w h o la r g e ly a r e t h e r e fo r a n u m b e r o f y e a r s . CHAIRPERSON : Yo u – y o u w o r k e d w i th b o t h M r A n o j S i n g h a n d Mr B r i a n M o l e fe f o r q u i t e s o m e ti m e a t Tr a n s n e t o r n o t r e a l ly ? MR MOHAMM ED SULEMAN MAHOM EDY : I worked with Mr Anoj Singh f o r q u i t e s o m e ti m e C h a ir. C H A I R P E R S O N : Ye s a n d B r i a n – Mr B r i a n M o le f e a s w e l l ? MR MOHAMMED SULEMAN MAHOMEDY : Mr M o le f e fo r a p e r io d o f a b o u t p r o b a b ly j u s t – h e w a s t h e C h i e f E x e c u t iv e f o r a w h i l e b u t I worked with him. 20 C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : F o r a b ig p e r i o d o f a b o u t tw o years. C H A I R P E R S O N : Ye s . W h e n y o u l o o k a t t h a t e m a il o r m e m o t h a t w a s w r i t t e n t o th e m b y it is M s M o k g a t le ? M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s . Page 146 of 154 15 MAY 2019 – DAY 93 C H A I R P E R S O N : Yo u a r e s a t is fi e d t h a t a ll t h e p o i n ts s h e m a k e s i n t h a t m e m o t o t h e m p o i n ts th a t t h e y w o u ld b o t h h a v e e a s i ly u n d e r s t o o d ? M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a ir Mr S i n g h … C H A I R P E R S O N : I n t e r m s o f t h e ir k n o w l e d g e a n d e x p e r i e n c e a n d t h e ir q u a li fi c a t io n s M R M O H A M M E D S U L E M A N M A H O M E D Y : Ye s Mr S i n g h o n a n u m b e r o f o c c a s i o n s a c te d a s t h e G r o u p Tr e a s u r e r o f Tr a n s n e t in t h e a b s e n c e o f Tr e a s u r e r s a t t h e p o i n t. S o w h e n I s a y t h a t m e a n i n g a t p o in t s w h e n t h e p o s i ti o n o f G r o u p Tr e a s u r e r w a s v a c a t e d a n d t h e r e w a s a n a b s e n c e o f 10 a n a p p o i n te d p e r s o n h e w o u l d a c t a s th e G r o u p Tr e a s u r e r. And Mr M o le f e I th in k w e a l l a r e a w a r e o f h i s e x p e r i e n c e a t t h e p u b l ic in v e s t m e n t c o r p o r a ti o n a t t h e P I C a n d t h a t is a n i n s t it u ti o n t h a t is v e r y h e a v il y d r iv e n b y Tr e a s u r y r e la t e d tr a n s a c t io n s a n d i n v e s t m e n ts . So w h a t th e p o i n ts th a t a r e m a d e h e r e w o u l d b e e a s i ly u n d e r s t o o d b y people C H A I R P E R S O N : Ye s . M R M O H A M M E D S U L E M A N M A H O M E D Y : W i th t h e ir e x tr e m e e x p e r ti s e and experience. CHAIRPERSON : 20 Ye s . S o s o m e o f th e s e th in g s t h a t – s o m e o f t h e p o i n t s t h a t Mr M o k g a t l e m a k e s a n d s o m e o f t h e m y o u h a v e m a d e y o u r s e l f to th e e x t e n t t h a t th e y m a k e i t – t h e y m a k e w h a t Mr A n o j S i n g h and Mr Brian Molefe may have been doing not to make sense. Maybe t h e y w o u ld b e t h e o n e s w h o c o u l d e x p l a in w h y th e y d i d n o t f o l l o w – g o a l o n g w i t h th e s e p o in t s m a d e b y Mr M o k g a tl e . M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a i r I th i n k i n r e a d i n g t h is Page 147 of 154 15 MAY 2019 – DAY 93 t o d a y a n d i n p r e p a r a t i o n f o r t h e c o m m i s s i o n o n e l o o k s a t t h e v e r y c le a r p e r s p e c t iv e t h a t M r M o k g a tl e p r o v id e s . A n d a ls o C h a ir I w o u ld l ik e t o a d d i n d i s c u s s i o n w i th t h e o ff ic ia ls t h a t w e r e i n Tr a n s n e t Tr e a s u r y a t t h e ti m e w h o h a v e b e e n – s o m e o f w h o m h a v e b e e n a t Tr a n s n e t fo r d e c a d e s l i te r a lly t h e y w e r e p e r p l e x e d b y t h e c h o i c e o f lo a n s , b y s o m e o f th e t r a n s a c t io n s t h a t Tr a n s n e t p e r s e v e r e d w i t h i f I c a n c a l l i t th a t a n d in s o m e c a s e s t h e y w e r e a l s o d e e p i n th e d a r k w h e n th e s e tr a n s a c ti o n s w e r e b e i n g n e g o t i a t e d . As y o u k n o w M s M o k g a t le s a y s t h e in v o lv e m e n t o f R e g i m e n ts a s a l e a d a r r a n g e r o r a d v is o r d i d n o t m a k e 10 s e n s e t o h e r. CHAIRPERSON : Hm. MR MOHAMMED SULEMAN MAHOMEDY : p r o v i d e a n o p i n i o n fr o m m y s e lf . B u t it a l s o C h a ir i f I m a y It does not make sense from a PO b u s i n e s s p o in t o f v i e w in te r ms o f th e c o n f lic t o f R e g i m e n ts . T h e y w e r e in t e r m s o f t h e L O I t a s k e d w i th d e f i n i n g t h e f u n d in g p r i n c ip l e s a n d t h e f u n d i n g m e c h a n is m s a n d m e t h o d o l o g i e s a n d t h e n b e c o m e t h e e x e c u to r s o f th a t f u n d i n g tr a n s a c ti o n . ju s t s to p there they T h e n la t e r o n w e w il l s e e th a t i t d id n o t th e n became the executors of the swop tr a n s a c ti o n s w h i c h a g a in ta lk e d t o a v e r y d e e p r o o t e d c o n fli c t t h a t w a s 20 n o t d e c l a r e d . N e i t h e r w a s i t a c t e d o n w h e n t h e p e o p l e w h o s i g n e d o ff t h e s e p a y m e n ts w e r e v e r y w e l l a w a r e t h a t R e g i m e n t s w e r e c o n fl ic t e d i n a l l o f t h e s e t h i n g s th a t t h e y p r e s e n t e d t o Tr a n s n e t. T h e y w e r e – th e y f o r m u l a t o r s o f t h e f u n d i n g p l a n . T h e y w e r e t h e e x e c u t o r s o f th e f u n d i n g p l a n . T h e y b e c a m e th e e x e c u t o r s o f t h e i n t e r e s t r a t e s w o p s a n d c o l l e c t e d s ig n if ic a n t a m o u n t o f m o n e y a n d t h e n t h e y w e r e a ls o b y t h e Page 148 of 154 15 MAY 2019 – DAY 93 w a y y o u w il l s e e l a te r o n C h a ir w h e r e th e c o u n t e r p a r ty o f s o m e o f t h e s e s w o p s w e r e t h e Tr a n s n e t P e n s io n F u n d a n d t h e y b e c a m e – a n d t h e y were the Pension Fund Asset Managers and then became the recipients o f t h e P e n s i o n F u n d p a y i n g t h e m l i te r a ll y a c o u p l e o f 1 0 0 m il li o n . S o we have to look u n d e r s t a n d in g that a t it h o lis t ic a l ly Regiments to g e t t h a t p e r s p e c t iv e involvement and I and think Advocate M o k o e n a s t a r te d o u t w i th th a t c o n v e r s a t io n . T h e y a r e d r o p p i n g i n t o t h e lo c a l a d v is o r y a s a s u p p ly d e v e l o p m e n t p a r t n e r s u d d e n ly w h e n t h e r e w e r e o t h e r c o n fl ic ts h a s t o q u e s t io n o n e h a s t o q u e s t i o n th e i n te n ti o n 10 o f t h a t p a r tic u la r d e c is i o n b y t h e p o w e r s th a t b e a t t h e ti m e . A D V P H I L L I P M O K O E N A S C : Ye s . I m e a n … CHAIRPERSON : Thank you. ADV PHILLIP MOKOENA SC : F o l l o w i n g u p fr o m t h e s e p e r ti n e n t q u e s t io n s r a i s e d b y th e C h a ir a n d I th i n k t h is i t i s i m p o r t a n t in th e li g h t o f t h e t e s t i m o n y o f M r – o f t h e C h a ir o f Tr a n s n e t M r P o p o M o l e f e a n d M r Vo l m i n k w h o th r o u g h o u t th e i r e v i d e n c e e m p h a s is e d t h e i m p o r t a n c e o f th is t r e a s u r y d e p a r t m e n t a n d i ts e ffi c ie n c y. M a y b e le t u s s p e n d s o m e ti m e o n i t a n d ju s t t e l l u s f o r u s t o b e a b l e to u n d e r s t a n d t h e c o m p o s i ti o n o f th is u n i t a n d th e c a l i b r e o f p e o p l e th a t w e r e e m p l o y e d 20 w i t h i n i t a n d th e q u a l i fic a ti o n s th a t th e y p o s s e s s e d fo r t h e m to b e a b l e t o u n d e r t a k e th is tr a n s a c ti o n . I t h i n k it is q u i te i m p o r ta n t i n t h e li g h t o f t h e s e is s u e s th a t y o u h a v e n o w r a is e d ? MR MOHAMMED SULEMAN MAHOMEDY: C h a ir I t h in k i f w e lo o k a t t h e Tr a n s n e t Tr e a s u r y e n v ir o n m e n t i n 2 0 1 4 a n d I a m g o i n g t o tr y t o g i v e a p e r s p e c ti v e in t e r m s o f t h e y e a r s . Page 149 of 154 15 MAY 2019 – DAY 93 A D V P H I L L I P M O K O E N A S C : Ye s , y e s . M R M O H A M M E D S U L E M A N M A H O M E D Y : M r M o k g a t le w a s t h e G r o u p Tr e a s u r e r. P r io r to h e r w a s M s D is e b o M o e p h u l i w h o w a s t h e tr e a s u r e r f o r a w h il e – a lo n g p e r io d o f ti m e a s I r e m e m b e r a n d s h e w a s w i d e l y r e g a r d e d a s a v e r y s ig n i f ic a n t tr e a s u r e r i n t h e lo c a l a n d g l o b a l b a n k in g c ir c le s . M s M o k g a t le h a d b e e n in t h e t r e a s u r y t e a m a s a D e p u t y Tr e a s u r e r f o r a lo n g p e r io d o f t i m e a s w e l l. W e h a d a g e n tl e m a n Mr D a n n y S m i t h w h o w a s a ls o a D e p u ty Tr e a s u r e r a n d i f m y m e m o r y s e r v e s m e c o r r e c t ly M r D a n n y S m i t h s p e n t m o r e t h a n 3 0 y e a r s a t 10 Tr a n s n e t a n d r e t ir e d a t Tr a n s n e t. W e a ls o h a v e a n a r e a c a ll e d t h e d e a li n g r o o m a n d t h e d e a l e r s th a t a r e i n t h a t d e a li n g r o o m o r d i n a r i ly w i ll g e t i n v o l v e d i n a s s e s s i n g l o a n s , a r r a n g e m e n ts fo r c e r t a i n v a n il la tr a n s a c ti o n s , s w o p s , t h e y w il l b e t h e o n e s w h o w ill a c t u a ll y lo o k a t w h e t h e r t h i s is p la u s i b l e f o r Tr a n s n e t t o c o n t in u e . T h e y w il l a s s e s s i t in li n e w i th g l o b a l tr e n d s . W h a t fa c i li ti e s w e a r e a b l e t o s e c u r e a t w h a t r a te s , w h e t h e r th e s e th in g s m a k e s e n s e . T h e t e r m s . L o o k i n g a t h o w a lo a n m a y i m p a c t o u r a b il it y t o r e p a y t h e l o a n i n y e a r s to c o m e . B e c a u s e t h e s e a r e t e r m e d lo a n s s o m e o f t h e m y o u k n o w u p t o f if t e e n years. 20 S o t h e Tr a n s n e t Tr e a s u r y t e a m a r e a v e r y c o m p e t e n t g r o u p o f p e o p l e . T h e y h a v e d i ff e r e n t r o l e s . S o m e o f t h e m a r e c l ie n t fa c i n g o r f a c i n g th e b a n k s , t a lk i n g t o t h e b a n k s o n a r e g u la r b a s is . Others are s i tt i n g i n t h e b a c k o ffic e a n d a c tu a l ly c r u n c h i n g o u t t h e n u m b e r s a n d m a k i n g s u r e t h a t t h e tr a n s a c ti o n s a r e p r o c e s s e d c o r r e c tl y a n d a s s e s s e d c o r r e c t ly. T h e y d e a l w i t h v e r y c o m p le x f i n a n c i a l m o d e l s . Tr u th b e t o ld C h a ir s o m e o f t h e m I b a t tl e t o g r a s p a t t h e fir s t s e n s e a n d s o m e ti m e Page 150 of 154 15 MAY 2019 – DAY 93 n o t e v e n t h e t h ir d t i m e b u t th a t is t h e ir jo b . A n d t h e s e a r e p e o p l e t h e y a r e l o o k in g a t c o m p l e x f in a n c e s tr u c t u r e s , d e a l s t r u c t u r i n g e tc e t e r a s o t h e r e is a h i g h l e v e l o f c o m p e te n c e i n t h i s p a r ti c u l a r e n v i r o n m e n t. I t is n o t y o u k n o w i t i s u m – t h e r e w i ll b e o r d i n a r i ly p e o p l e th a t a r e q u a li fi e d in d e g r e e s i n fi n a n c e a n d y o u k n o w i n th e fi e l d o f c o r p o r a t e f in a n c e . S o th a t i s o r d in a r ily w h a t w e lo o k a t . CHAIRPERSON : I t h i n k i t w o u ld b e h e lp f u l i f i n d u e c o u r s e w e c o u l d ju s t g e t a p r o f il e o f th a t u n i t d u r i n g th a t ti m e w h e n i t w a s d e c i d e d t h a t it w a s n e c e s s a r y t o g e t a n o u t s i d e f ir m to d o w h a t th e y c o u l d d o t o s a y 10 it c o n s is t e d m a y b e I d o n o t k n o w w h a t t h e n u m b e r s a r e b u t y o u m ig h t n o t n e e d to i n c l u d e e v e r y b o d y b u t t h e i m p o r ta n t y o u k n o w p e o p l e w h a t t h e ir q u a l i fic a ti o n s w e r e , w h a t e x p e r i e n c e t h e y h a d a t t h e ti m e , h o w lo n g th e y h a d b e e n a t Tr a n s n e t a n d m a y b e e v e n s o m e o f t h e b i g tr a n s a c ti o n s in w h i c h t h e y h a d b e e n i n v o l v e d i f p o s s ib le . Just to c o m p a r e w h a t Tr a n s n e t h a d in t e r m s o f e x p e r t is e a n d e x p e r i e n c e c o m p a r e d – th a t c o u l d h a v e b e e n u s e d . A D V P H I L L I P M O K O E N A S C : Ye s . C H A I R P E R S O N : O k a y th a n k y o u . M R M O H A M M E D S U L E M A N M A H O M E D Y : C h a i r I t h i n k t o s u m m a r is e I 20 w i ll p r o v i d e t h a t i n d u e c o u r s e C h a ir. C H A I R P E R S O N : Ye s . MR MOHAMMED SULEMAN MAHOMEDY: B u t t o g iv e y o u a s u m m a r y o f s o m e o f t h e – t h e s e a s o n e d p r o f e s s i o n a ls th a t a r e i n t h e Tr a n s n e t Tr e a s u r y w h e n w e c o m m e n c e d t h i s p r o c e s s t o u n r a v e l w h a t a c tu a lly tr a n s p ir e d a s I s a i d in o n e m e e ti n g t h e b o a r d C h a ir p e r s o n m a d e a Page 151 of 154 15 MAY 2019 – DAY 93 s t a te m e n t t o s a y t h a t i n f o r m a ti o n a t h is d is p o s a l w a s th a t t h e R e g i m e n t s p e o p le h a d in f il tr a te d o u r d e a li n g r o o m . O u r d e a li n g r o o m is a v e r y s a c r is t a n e n v ir o n m e n t . A n d w h a t w e th e n l a t e r f o u n d o u t a n d t h e p e o p l e s a t w it h u s a n d s a i d n o , n o , t h e R e g i m e n ts t e a m n e v e r c a m e in t o t h e d e a li n g r o o m . o ffic e s . T h e d e a li n g r o o m j u s t le f t w e n t t o R e g i m e n ts T h a t i s t h e – th a t is e s s e n ti a l ly t h e s u m m a r y th a t o n e o f th e tr a d e r s p u t o n th e t a b l e w h ic h i s – w h ic h is q u i t e a t e ll in g s t a t e m e n t t h a t t h e tr a n s a c ti o n s w e r e n o w n o t b e i n g e x e c u t e d b y Tr a n s n e t t h e y w e r e b e in g e x e c u t e d b y a t h i r d p a r t y w h o h a d a v e r y s i g n i f ic a n t i n te r e s t 10 b e c a u s e t h e y w e r e g e t ti n g p a i d l it e r a lly h u n d r e d s o f mi ll i o n s o f r a n d s . C H A I R P E R S O N : Ye s t h a n k y o u . A D V P H I L L I P M O K O E N A S C : C h a i r I s e e n o w it i s a l m o s t f iv e t o f o u r w e a r e j u s t a b o u t to d e a l w i t h a n e w t o p i c t h a t is q u i te l o n g . W e w il l n o t b e a b l e t o f i n a li s e i t e v e n i f w e tr y. W o u l d t h is b e a p p r o p r ia t e t o a d j o u r n a t t h i s s ta g e ? C H A I R P E R S O N : I a m je a l o u s o f t h e f a c t t h a t it is … A D V P H I L L I P M O K O E N A S C : I k n o w C h a ir b u t w h e n y o u c o m e t o t h is r a i d s w o p s a n d e v e r y t h in g i t n e e d s a f a r m o r e fr e s h e r m i n d C H A I R P E R S O N : J a . O k a y n o t h a t is f in e . B u t w e m a y h a v e to s ta r t 20 e a r l ie r t o m o r r o w. N o w w e d o n e e d t o I k n o w w e t a l k e d a b o u t s ta r t in g e a r l ie r. W e n e e d t o r e a l ly g o b a c k t o t h a t t o tr y a n d c o v e r a s m a n y w i t n e s s e s a s w e c a n . B e c a u s e i f w e s ta r t f o r e x a m p l e a t n i n e o ’ c l o c k e v e r y d a y a n d f in is h n i n e o ’c l o c k in s te a d o f t e n a n d fi n i s h a t f iv e o ’c l o c k in s te a d o f f o u r t h a t m e a n s w e a d d t w o h o u r s to t h e d a y. A f t e r fi v e d a y s t h a t i s t e n h o u r s . Page 152 of 154 15 MAY 2019 – DAY 93 A D V P H I L L I P M O K O E N A S C : Te n h o u r s . CHAIRPERSON : witnesses. A n d t h a t m e a n s y o u k n o w a n o t h e r w i tn e s s o r t w o B u t h a v i n g s a i d t h a t I a m a w a r e o f o t h e r c o n s id e r a ti o n s . S o b u t I j u s t w a n t t o m e n t i o n t h a t w e d o n e e d to s e e w h a t w e c a n d o b e a r in g in m i n d t h a t I a p p r e c i a te o t h e r c o n s i d e r a ti o n s . W i t h r e g a r d to t o m o r r o w I w o u l d n o t li k e a s i t u a t io n w h e r e w e fi n is h w i t h M r M a h o m e d y a n d m a y b e a n h o u r e a r l ie r a n d th e n w e h a v e t o lo s e a n h o u r o r t w o e a r l ie r. I d o n o t k n o w h o w l o n g w e w i ll b e w i t h h i m s o i f th e r e is a n y c h a n c e t h a t if w e f i n is h 10 ADV PHILLIP MOKOENA SC : With him. CHAIRPERSON : W i t h [ i n d is ti n c t ] n o r m a l w i t h h i m t h e r e w o u l d b e a w i t n e s s r e a d y t h a t w o u l d b e h e lp f u l . A D V P H I L L I P M O K O E N A S C : W e w ill lo o k i n t o t h a t C h a ir. CHAIRPERSON : Ja. A D V P H I L L I P M O K O E N A S C : Ye s . CHAIRPERSON : S o w h a t d o y o u t h i n k a b o u t s t a r t in g a t l e a s t m a y b e h a l f p a s t n i n e t o m o r r o w o r y o u – Mr M a h o m e d y y o u … A D V P H I L L I P M O K O E N A S C : I t is i n o r d e r C h a ir w e c a n s t a r t a t h a l f p a s t n in e . 20 C H A I R P E R S O N : O k a y. I d o h a v e – t h e r e is a n u n li k e ly p o s s i b i li ty th a t I m i g h t h a v e t o c h a n g e t h a t s o I j u s t w a n t t o m e n ti o n s o l e t u s le a v e i t a t h a lf p a s t n in e b u t i f t h e s i t u a ti o n t h a t m i g h t d e m a n d m y p r e s e n c e s o m e w h e r e p r e v a i ls t h e n M r M a h o m e d y w e y o u w il l – w o u ld b e a d v is e d a n d I w il l l e t y o u k n o w a n d t h e n w e c o u l d s t a r t e i t h e r a t te n o ’ c l o c k o r a li t tl e l a te r t h a n t h a t . Page 153 of 154 15 MAY 2019 – DAY 93 ADV PHILLIP MOKOENA SC: J u s t a l it t l e l a te r y e s . C H A I R P E R S O N : Ye s . A D V P H I L L I P M O K O E N A S C : T h a n k y o u C h a ir. C H A I R P E R S O N : T h a n k y o u . O k a y w e w i ll a d j o u r n n o w fo r t h e d a y a n d t h e n t o m o r r o w s u b j e c t t o a d v ic e t o th e c o n tr a r y o r f o r a n o t h e r t i m e w e w i ll s t a r t a t h a l f p a s t n i n e . W e a d j o u r n . REGISTRAR: All rise. I N Q U I RY A D J O U R N S TO 1 6 M AY 2 0 1 9 Page 154 of 154