Locorruption reloaded: We reveal Gupta kickback contracts worth R9bn
02 Jun 2020

It is a sheaf of paper just 15mm thick. But the ink on its pages records kickbacks totalling R9-billion paid or pledged to the Guptas and their associates.

These pages and offshore banking data tell the story of how Transnet’s ambitious plan a decade ago to renew its locomotive fleet was repurposed to extract loot systematically and on an unprecedented scale.

On 1 June, amaBhungane published those pages – eight kickback agreements, most of them made public for the first time – and an analysis of the bank data to show that by late 2016, Gupta front companies had received at least R3.7-billion, two fifths of the promised R9-billion.

After 2016 the bank data goes dark but the pillage likely continued.

The kickbacks were paid by two locomotive manufacturers now merged to form CRRC Corporation, the Beijing-based conglomerate that boasts of being the world’s largest supplier of rail equipment.

But the money came from ordinary South Africans via Transnet, a state-owned company. It followed a simple formula: whatever Transnet paid the CRRC companies, they paid the Guptas a cut of, usually 21%.

The Gupta-CRRC heist spans distinct Transnet orders for 95, 100, 359 and 232 locomotives, plus relocation and maintenance add-ons, with an aggregate value of about R42-billion – a twisted monument to the extent of their capture of the rail utility and the collusion of its executives, board members and politicians.

The kickback agreements reveal the complicity of CRRC officials at the highest level; not surprising considering that more than a fifth of their Transnet revenue was pledged to the Guptas. This does China no favours as it battles to establish itself as a champion of the developing world and to overcome the perception its firms bribe more readily than their Western counterparts.

Attempts over the course of weeks to reach CRRC for comment by email, phone and via the Chinese embassy have drawn no substantive response. CRRC is listed in Hong Kong and Shanghai but the Chinese state is its controlling shareholder.

In June 2017, after amaBhungane and its GuptaLeaks partners published the first evidence of kickbacks having been paid on the locomotive contracts, Transnet wrote to a local CRRC subsidiary seeking “clarification”.

It wrote back, stating categorically: “We have never had any engagement and/or dealings with the Gupta Family and/or its associates in relation to the agreement Project 359.”

The Guptas, whose whereabouts are not clear, did not respond to emails sent to known addresses for a member of the family and their lieutenant Salim Essa.

Conglomerate corruption

“The 1st batch of Chinese E-loco landed at Africa!” shouts a November 2013 news item on CRRC’s website.

Accompanying photographs show Zhou Qhinghe, then chief executive of CSR Zhuzhou Electric Locomotive Co, celebrating the delivery in Tshwane of the first locomotives from an order of 95 that Transnet had placed with his company’s South African subsidiary.

Zhou now straddles corporate, party and parliamentary politics. He is board chair-cum-Communist Party secretary of the now-renamed CRRC Zhuzhou and a member of the National People’s Congress, China’s highest organ of state power.

In March 2014 Zhou, who is wont to expound on his company and country’s “go out” or “go global” strategy, was in South Africa again.

This time he had come for the signing ceremony of new Transnet orders for 100 and 359 electric locomotives from his company and 232 diesel locomotives from a subsidiary of a second Chinese rail group, CNR.

This was reportedly the single biggest order of Chinese high-end rail equipment globally, making a not-insignificant contribution to the soaring fortunes of CRRC Corporation (2019 revenue: R567-billion), which arose from the subsequent merger of the CSR and CNR groups.

A news report reproduced on CRRC’s website recounts a “very interesting moment” when Transnet wanted a representative of the local CSR Zhuzhou subsidiary to sign their contract, while “Chinese regulation” dictated that Zhou as head of the parent company should sign.

The impasse was broken, according to the report, when a lawyer suggested the local representative issue a power-of-attorney delegating Zhou to sign for him. “The story of ‘the employee authorised his boss to sign contract’ is still a joke between colleagues.”

But Zhou was not done going global or signing.

Think of a car salesman offering the proud owner of a new vehicle a service plan for “guaranteed peace of mind”. In this case the salesman brought in help to convince the customer.

Zhou’s signature appears alongside that of Essa, the Gupta lieutenant, on a “business development services” agreement dated 10 June 2015, Sandton. It provided that CSR Zhuzhou would kick back 21% to a Gupta front in Hong Kong should the latter convince Transnet to agree to a 12-year maintenance plan.

Transnet awarded the R6.2-billion deal to CRRC Zhuzhou, as it was by then called, the following year. Transnet eventually pulled out, but not before paying CRRC a 10%, R618-million advance. Of this, according to our analysis, 21% went to the Guptas.

Other senior CRRC executives’ names also litter the kickback contracts with the Guptas. They include Zhou’s colleagues Guo Bingqiang and Hu Yuewen from CSR, and Ma Zhan and Zhu Zhiyong from CNR.

By Stefaans Brümmer, amaBhungne, 1 June 2020

Read more at amaBhungne

Photo: Col André Kritzinger / CC-BY-SA-3.0

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet

FREE CPD Wallet