High Court decision welcomed to set aside R8 billion locomotive contract

A contract, valued at approximately R8 billion, between Transnet and Wabtec South Africa Technologies (formerly GE South Africa Technologies), was set aside by the High Court of South Africa, Gauteng Division. This contract dated from 2014 was for the procurement of 233 diesel locomotives.

This judgment delivered was announced by the Special Investigating Unit (SIU) and Transnet SOC Ltd on Tuesday, 16 April.

The High Court ruling, issued on 14 April, marks the first of four locomotive contracts to be annulled by the courts. It is a pivotal advancement in ongoing efforts to combat state capture. Furthermore, it aims to restore integrity in South Africa’s state-owned enterprises. This is according to Kaizer Kganyago,SIU spokesperson, and Ayanda Shezi, Transnet spokesperson, in a joint statement.

It follows on the High Court declaring the 2014 Locomotive Supply Agreement (LSA) and its associated subcontracts invalid. In pursuit of a fair and equitable resolution, the court endorsed a settlement agreement facilitated by the SIU. It is aimed at recovering lost funds between Transnet and Wabtec.

According to the statement, Transnet embarked in 2012 on a procurement initiative for 1 064 locomotives to enhance its general freight business.

‘Ensuring that justice prevails’

The contracts were awarded to four original equipment manufacturers (OEMs). These are:

• Bombardier Transportation South Africa (Pty) Ltd for 232 electric locomotives;
• CNR Rolling Stock South Africa (Pty) Ltd (now CRRC SA Rolling Stock) for 240 diesel locomotives;
• CSR E-Loco Supply (Pty) Ltd (now CRRC E-Loco Supply) for 359 electric locomotives; and
• GE South Africa Technologies (now Wabtec South Africa Technologies) for 233 diesel locomotives.

As part of the settlement agreement, Transnet will retain the 233 diesel locomotives delivered by Wabtec. Financially, Wabtec will retain all payments received under the contract, while Transnet will receive R70 350 574. Furthermore, Wabtec will provide Transnet with a credit of R70,35 million to fulfil outstanding supplier development obligations.

The SIU was authorised through Proclamation No. R11 of 2028 to investigate the affairs of Transnet and to recover losses incurred by Transnet and the state.

The SIU and Transnet are committed to ensuring that justice prevails and that public resources are safeguarded for the benefit of the nation, the statement concluded.