TRANSNET OVER BUDGET

Posted on 21 September 2009

According to Moipone Malefane, writing in the Sunday Times,
“Transnet authorised payments totalling R483 million more than it should have to contractors over the past four years, as part of its R80 billion capital expenditure programme. The payments were made during former chief executive Maria Ramos’ term of office, and have been repeatedly questioned by senior executives at the state-owned logistics giant – to no avail.

  “It has been revealed that 34 contracts, ranging from office refurbishments to construction engineering, were financed beyond the original tender amounts of R260 million. The company dished out R800 million to contractors. This is in direct contravention of Transnet’s governance and procurement rules. The rules stipulate that, should a contract value exceed the agreed amount, the project is required to be re-opened to tender.  

“But Moira Moses, Transnet capital projects group executive, approved the projects despite them soaring over the limits. Moses was brought to Transnet by Ramos and is overseeing the R80 billion capital expenditure programme. In one project, the iron ore line expansion programme, auditing firm Ernst & Young ruled that Transnet’s management was unsatisfactory. The project is one of several managed by consulting firm Hatch, Mott McDonald, Goba (HMG). The Ernst & Young report revealed that in the procurement and contract management process, not all tender awards and confinement decisions could be supported by documents. It said the project’s change management was ‘not managed adequately as compensation events were not monitored and approved in accordance’. It showed that financial management and accounting critical controls were ineffective.  

“On HMG, the report states that the firm did not perform any compliance audits and that its expenditure ‘may be in excess of approved funding’. A flurry of e-mails exchanged between Transnet managers querying the bills by HMG amounted to nothing. In February, one manager complained about inflated invoices from HMG. The manager questioned which services and projects HMG was managing at one of Transnet’s Durban projects in return for claiming R630,000 per month while Transnet had budgeted R110,000 for the year. Another e-mail from a manager questioned invoices submitted by HMG regarding what appeared to be inflated rental amounts for five houses in Port Elizabeth.  ‘”

It must be noted that I am not the last signatory on these invoices before they are paid. They appear to have already been signed off by at least five management layers inside of Transnet Capital Projects (TCP) so I expect that my queries may not be viewed favourably within TCP but then all I need is clarity,’ one manager wrote in an e-mail. ‘I have just chosen a few examples from the pack of invoices I signed off today – without tallying all charges of this nature, my feeling is that this could be in the region of R350,000 to R450,000 each month. So you must agree with me that it is worth a look.

’  “HGM enjoys a R1.2 billion-a-year contract with Transnet. The company’s contract ends in December 2010. Asked to comment, Transnet spokesman John Dludlu said the company’s ‘internal audit function identifies weaknesses in controls and reports these to management for appropriate corrective action. It is a routine internal process that we’ll not comment on.’