A logo of jet manufacturer Bombardier on their booth during the European Business Aviation Convention & Exhibition in Geneva, Switzerland, May 22, 2017.DENIS BALIBOUSE/Reuters
Anti-corruption investigators in South Africa have filed a court action seeking to overturn a controversial US$1.2-billion locomotive contract that was awarded to Bombardier Inc . in 2014.
The contract was part of a US$5-billion deal given to Bombardier and three other manufacturers, including two Chinese companies, to supply more than 1,000 locomotives to South Africa. The deal, one of the biggest in South African history, has been the subject of multiple corruption investigations over the past several years.
Bombardier and the other suppliers should have known that the locomotive procurement process and the subsequent contracts were “irregular and unlawful,” according to the court application filed on Tuesday by South Africa’s Special Investigating Unit (SIU) – an official anti-corruption agency – and by Transnet, the state-owned freight rail company that awarded the contracts.
“The laws, government instructions and Transnet policy were deliberately ignored to make the tender awards, conclude the contracts and effect payment,” the SIU and Transnet said in a media statement on Tuesday.
In their application, they are asking the High Court of South Africa to set aside the contract and impose a “just and equitable remedy.”
Bombardier has repeatedly denied any misconduct in connection with the locomotive contract. Bombardier spokesman Mark Masluch said on Tuesday it would be “inappropriate” for the company to comment on the South African court application because it relates to Bombardier’s rail business, which the company recently sold to Alstom SA .
Investigations have found that Transnet, at the time of the locomotive deal, was effectively controlled by close allies of the Gupta brothers, who were business partners of the son of then-president Jacob Zuma.
The total cost of the locomotive deal was artificially inflated by nearly 40 per cent, and one of the Chinese rail suppliers allegedly paid kickbacks to a company controlled by a Gupta lieutenant, according to evidence from several investigations.
The Bombardier contract for 240 locomotives was partly financed by a US$450-million loan to Transnet from Export Development Canada. The federal agency has been conducting a review of the loan since 2018 in response to questions about the contract.
Anil Handa, a spokesperson for EDC, said the federal agency has noted the legal action by Transnet and the SIU. “We will continue to follow developments closely as part of our ongoing review of the transaction,” he told The Globe and Mail on Tuesday. “We take allegations of corruption very seriously.”
Transnet, in its media statement, said it has been trying to negotiate an agreement with Bombardier and the other suppliers since December, 2018, to adjust the locomotive contracts. When it was unable to reach a deal with three of the four companies, including Bombardier, it was obliged to go to court, it said.
The locomotive deal has been under scrutiny for many years, with lengthy investigations conducted by police units, anti-corruption agencies and several law firms hired by Transnet. This week, the deal was again in the spotlight during testimony at South Africa’s official inquiry into state corruption.
In a sign of the case’s complexity, the founding affidavit in the court application is more than 800 pages long, accompanied by file folders filled with annexures. The application is based on an analysis of more than 29 million documents, Transnet and the SIU said in their statement Tuesday.
The close links between the Guptas and Transnet executives were first established by local media reports and then by the Public Protector, an independent anti-corruption watchdog, in 2016.
The case gained momentum after Mr. Zuma was forced to resign under political pressure in 2018. Within months, the new government was threatening to imprison Transnet officials for the unexplained 40-per-cent increase in the cost of the locomotive deal.
In testimony to the state corruption inquiry in 2019, Transnet chairman Popo Molefe said Bombardier and a Chinese locomotive supplier had “inflated intentionally” the cost of relocating manufacturing plants. This led to unjustified payments of about US$60-million to each of the two companies, he said.
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