Transnet acting CE Mohammed Mahomedy continued his testimony at the Zondo commission of inquiry into State capture on Thursday, further detailing how the State-owned entity was bleeding billions of rands as a result of irregular contracts and interest rate swaps.

Mahomedy told the commission about three contracts with China South Rail (CSR) that were entered into over various periods to supply locomotives to the State-owned freight operator.

He said that over a two-year period, the price for locomotives from CSR had risen from about R28-million per locomotive to R50-million per locomotive. There were “specification differences” between the locomotives, he said.

Mahomedy also testified that Transnet had and would continue to lose billions of rands because of interest rate swaps on loans it made to secure contracts that were set to run until 2030.

Additionally, authorisation for the interest rate swaps appeared to have been done without following procedure.

He said the interest rates on loans made to purchase the locomotives was swapped from floating to fixed.

The fixed rate could mean Transnet would be paying additional money in interest each year on massive loans.

He said that according to an email he had read while reviewing the contracts, the swap in one case would have led to an additional interest payment of R200-million on a R12-billion loan for locomotive purchases.

The swap was, however, approved by Transnet. Mahomedy said he could find no evidence that procurement processes were followed.

Mahomedy was the company’s acting chief financial officer until he was moved to his current position in May last year. This was done after the entire board was replaced.

The new board has been reviewing all of the contracts entered into by Transnet, which has formed the basis of Mahomedy’s testimony at the commission.  

His testimony continues.