Johannesburg — A judgment by the Pretoria High Court on Monday has laid bare the disdain with which some foreign companies treat their local Black Economic Empowerment (BEE) “partners” in lucrative state tenders.
A consortium led by Chinese manufacturer China South Rail (CSR) was in 2012 named as the winning bidder to supply Transnet with 95 electric locomotives. At the time, Transnet said it would pay R2.6-billion for the locomotives.
CSR owned 70% of the winning joint venture consortium – to be known as CSR E-loco Supply – with local partner Matsete Basadi Consotium (MBC) owning the remainder. MBC comprises Matsete Industrial Services, a company owned by qualified black professionals, and Matsete Dirang, a wholly owned woman’s group.
However, the court has now confirmed a finding by the Broad-Based Economic Empowerment Commission that the deal was nothing but a smokescreen and that the Chinese disregarded their local “partners” from the word go. CRC had approached the court to set aside findings of the commission and interdict the publishing and implementation of its findings and recommendations.
“I have no doubt in my mind that MBC did not acquire requisite skills and experience to manufacture and assemble locomotives as the applicant wants this court to believe. No facts were placed before this court to support this assertion,” acting judge MB Mokoena wrote.
The judgment further illustrates the fraught relationship between MBC and CRC.
“Their relationship was nothing else but a window-dressing type relationship in terms of which MBC was used for the benefit of the Chinese shareholder to secure the awarded contracts from Transnet.” The only benefit derived by MBC from the deal was R26.7-million.
The commission was dragged into the matter in June 2016 when Lietsiso Mohapeloa, who was the chairperson of MBC at the time, and other directors, filed a written complaint with the watchdog. Mohapeloa’s complaint centred on how MBC members who served on the board of CSR were treated by the Chinese shareholder.
The commission, in a report yet to be made public, found there was merit in the complaint by MBC.
The deal has also been mired by corruption allegations. Transnet officials went out of their way to assist CSR in its bid to be appointed for the supply of 95 locomotives, according to a Fundudzi Forensic Services report.
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