Prasa is pushing ahead with a R3.5bn deal to buy locomotives that were found to be "too tall" for SA's rail network — even though a court ruled the deal corrupt and the Zondo probe heard how it led to big donations to the Jacob Zuma Foundation.
Citing the risk of large legal costs, the passenger rail agency has quietly given up on recovering the more than R2bn it is owed by the now-liquidated Swifambo Rail, as part of a R3.5bn contract set aside in a scathing court finding of a "corrupt tender process". The court also found Swifambo was little more than a front for its subcontractor, Spanish company Vossloh Espana.
The Zondo commission of inquiry into state capture has heard that millions of rands that Prasa paid to Swifambo - which was established solely for the corrupt deal - were channelled to the Jacob Zuma Foundation and former president Jacob Zuma's friend, Maria Gomes, among other entities.
The Sunday Times has established that instead of trying to get its money back from a deal that the court said should be ''set aside", Prasa and Swifambo's liquidators are now mulling a commercial settlement agreement with Swiss rail company Stadler, the company that bought Vossloh.
Prasa and the liquidators insist they have no choice and must accept that, because SA needs locomotives, they need to deal with the rail company; taking it to court overseas, they say, would be too expensive.
The deal to buy the 70 Afro4000 locomotives was signed in 2013 as part of Prasa's plan to modernise its fleet. But the locomotives were soon found to be unsuitable for SA's rail network as they were much too tall, at 4.5m above the tracks, to fit under many of the country's bridges.
This led to public revelations about the dodgy deal and how even its specifications had been tailor-made for Vossloh. The contract specifications were drawn up by a lieutenant of former Prasa CEO Lucky Montana, fraud accused Daniel Mtimkulu, who passed himself off as an engineer.
Vossloh might owe us money … but this will be the most solid way to unlock the best value
— Hannes Muller, Swifambo Rail liquidator
In 2017, the high court in Johannesburg set aside the contract, leading then Prasa chair Popo Molefe to file summons against Swifambo demanding it repay the R2.6bn.
But now Prasa claims that it is in dire need of reliable locomotives for its long-distance business.
Prasa spokesperson Bane Ndlovu said Stadler has agreed to modify the locomotives that are in Spain, as well as those already delivered to SA, at no further cost.
"In getting to this commercial deal, Prasa will receive value far outweighing any litigation recovery from Swifambo," Ndlovu said.
"Currently, Prasa leases locos at a huge cost to the business and they are not reliable. The need and use of the locos still remains," said Ndlovu.
Swifambo's liquidator, Hannes Muller, said taking delivery of the remaining passenger locomotives that have already been ordered is cheaper than litigating overseas.
"Our claim might have prescribed. Because it is eight years later, it is difficult to litigate. It takes forever and costs an arm and a leg," said Muller.
In a bid to recover Prasa's money from Swifambo, Muller auctioned seven of the 13 too-tall locomotives that were delivered to SA, but got only a fraction of their value.
"I sold the first seven [of the 13] and I got nothing for [them]. It was about R15m each, and to replace those now it would be about R60m. It would be much better to do a commercial settlement to unlock four times the value," Muller said. "In terms of this new settlement, [locomotives] will be manufactured for the money they have already received. Then there will be service agreements for support backup [and] training to convert the local ones to be fit for purpose.
"Vossloh might owe us money … but this [settlement] will be the most solid way to unlock the best value. However, it is subject to Treasury [approval] ... that is why it is a discussion document."
But insiders at Prasa, who spoke to the Sunday Times on condition of anonymity, said there are serious concerns that the agency is going ahead with the corrupt deal, with no-one being held accountable.
"It is shocking that they say they are in dire need of locomotives when our long-distance business has been losing revenue. I mean, Shosholoza Meyl is literally dying a natural death and its death came long before we even experienced Covid, because people have found faster and quicker ways to travel around the country. It seems we allow corruption to just continue with no consequences," said one.
In a scathing 2017 judgment, Johannesburg high court judge J Francis said: "This case concerns the issue of an appropriate remedy where a contract that was concluded as a result of a corrupt tender process has already been partly implemented and whether a mere declaration of unlawfulness is sufficient in order to hold the relevant decision makers accountable and to discourage public administrators from engaging in similar conduct. The importance of this deterrent role of review proceedings should be viewed through the prism set out by the Constitutional Court, that corruption, if allowed to go unchecked and unpunished, will pose a serious threat to our democratic state."
To date, no-one has been brought to book for their role in the deal, which the Hawks have been investigating since 2017. Hawks spokesperson Katlego Mogale did not respond to questions from the Sunday Times, asking first to be provided with a case number.
DA transport spokesperson Chris Hunsinger said the settlement discussions are "disappointing" because they fly in the face of court judgments and leave corruption "uninterrupted".
"It was a grand opportunity in line with the courts to re-establish trust and accountability. In a more practical sense, there is a lot of money going around somewhere from that contract and now they are going along with the perpetrators and smoothing it out. There should be an involvement by National Treasury on this and we demand that it must be interrupted," said Hunsinger.
Prasa is not following the strategy of other state-owned entities, such as Eskom and Transnet, which pursued companies that scored from irregular contracts from them. US-based consultancy McKinsey agreed to repay about R1bn it earned from Eskom and R870m it earned from Transnet in contracts associated with the Gupta family.
The Prasa locomotives contract took centre stage at the Zondo commission, where Montana, who oversaw the contract, attempted to distance himself from it.
The courts and the Zondo commission also heard how millions of rands flowed from Swifambo's bank accounts to buy properties worth about R50m for Swifambo's owner, Auswell Mashaba. About R80m made its way to Angolan businesswoman Gomes.
Montana recently claimed former ANC treasurer-general Zweli Mkhize visited Gomes at her home in Atholl, Johannesburg, several times asking for funds for the party's 2014 election campaign. Mkhize denies this.
Forensic accountant Ryan Sacks testified that Swifambo was supposed to get about R118m from the deal but pocketed about R600m, while Vossloh received R1.8bn.
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