South Africa Report Urges Eskom, Transnet Criminal Probes

(Bloomberg) -- A forensic report into South Africa’s state-owned electricity utility and ports and rail operator found some executives and board members failed to act in the companies’ best interests and recommended criminal investigations against them.

The findings are contained in a report by Fundudzi Forensic Services, which the National Treasury contracted to investigate the following:

  • The acquisition of locomotives at Transnet SOC Ltd.
  • The appointment of U.S. consultancy McKinsey & Co. and others to advise Transnet and Eskom Holdings SOC Ltd.
  • Coal procurement from Tegeta Exploration and Resources Ltd., a company controlled by the Gupta family.

The probe examined the extent of so-called state capture, where private individuals used influence over government officials to win contracts from state companies. At the center of these allegations is the Guptas, who are friends with former President Jacob Zuma, and who all deny wrongdoing. The Pretoria-based Treasury published some chapters of the report on its website Friday.

Transnet, the state logistics company, paid 509 million rand ($36 million) more for 100 locomotives after switching a supply contract to a Chinese rail company from Mitsui & Co. of Japan, Fundudzi said.

Fundudzi recommended that its report be sent to the Directorate of Priority Crime Investigations and that criminal probes be instituted against officials and board members including Brian Molefe and Siyabonga Gama, who are both former chief executive officers of Transnet.

It recommended the same for former executives at Eskom including ex-Chief Financial Officer Anoj Singh and previous generation head Matshela Koko for contravening the Public Finance Management Act in their handling of purchasing coal from the Guptas’ Tegeta.

President Cyril Ramaphosa has pledged to stamp out corruption since taking over from Zuma in February. That has included replacing directors at a number of state companies including Eskom, which ratings companies have identified as a key risk to Africa’s most-industrialized economy.

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