Contract between Transnet and Gupta-linked T-Systems under the spotlight

The City Press has published snippets from a Transnet tender subcommittee meeting’s audio recording which it said shows bias towards the German company T-Systems.

T-Systems was awarded a five-year Transnet ICT contract on 22 February 2017 after a six-stage open tender process with nine bidders.

T-Systems South Africa is 70% owned by T-Systems International and 30% owned by B-BBEE shareholders.

T-Systems has done business with several third-party suppliers, including Sechaba, Zestilor, and GSS, which media reports allege had links with the controversial Gupta family.

According to the City Press, Zestilor was owned by Zeenat Osmany, the wife of Gupta associate Salim Essa.

Sechaba was one of the companies which amaBhungane said paid money to the Gupta-linked Homix and Zestilor.

Controversy

The controversy over the Transnet tender saw Transnet CEO Siyabonga Gama launch a court application in November 2017 to set it aside.

According to Gama, Transnet’s acquisition and disposal committee went against Transnet’s management and National Treasury advice by awarding the tender to T-Systems.

Media reportes suggested that Gijima scored the highest points in the Transnet tender process related to both technical and pricing requiremenets.

Gijima subsequently called for a criminal probe into the T-Systems contract with Transnet, and launched a court application to set it aside.

National Treasury also got involved in the matter, and in September 2017 gave Transnet permission to only extend the T-Systems contract on a month-to-month basis for a maximum of eight months.

When Transnet requested an extension of the contract by 12 months in April 2018, Treasury refused.

Audio recording

The audio recording of the Transnet tender subcommittee meeting on 13 February 2018, where director Stanley Shane said he was “inclined to keep T-Systems’ contract” has been detailed by the City Press.

I’m happier with the risk of getting sued by Gijima, who did not get a contract, than getting rid of the incumbent [T-Systems] that we helped to create. I think it’s suicide.

My understanding at the time of putting this thing out to tender was that we wanted to keep T-Systems honest.

That was actually the motivation… we putting this thing out to make sure that we were not paying T-Systems R2.5 billion where we should be paying R1.5 billion.

Our contract management in this place, excuse my French, is k*k. It is k*k. It is terrible.

They [T-Systems] are the disingenuous, dishonest, thieving outsource partner that is the incumbent [T-Systems].

T-Systems statement

T-Systems released a statement on 19 April in which it argued that Transnet’s original decision to award the ICT contract to T-Systems was both correct and legally valid.

“T-Systems was awarded the contract based on its price, modernisation, service standards, and crucially the low risk to Transnet’s IT system on which South Africa’s rail and port networks depend,” said T-Systems SA MD Gert Schoonbee.

“While we would accept not winning a tender on competitive grounds, we must take steps to protect our reputation,” he said.

“By placing the verifiable facts on record before the court and the public, our key stakeholders can see exactly how, why, and on what grounds we won the contract.”

T-Systems highlighted that Transnet’s decision to terminate the contract refused to consider the serious risks identified by Gartner, its own independent consultants.

Gartner found that the Gijima bid created “major” and “almost certain” risk to Transnet, said T-Systems.

“Any failure to Transnet’s IT systems – particularly the data centre – puts their operations, commercial viability, and even the safety of their personnel and customers at risk,” said T-Systems.

T-Systems added that any award to Gijima would be invalid.