Wrong foreign exchange rate led to Transnet cost escalation: Callard

SABC News Francis Callard - Wrong foreign exchange rate led to Transnet cost escalation: Callard

Former Transnet electrical engineer, Francis Callard, has told the Commission of Inquiry into State Capture that the wrong foreign exchange rate was used to justify a cost increase in the acquisition of 100 locomotives from Gupta-linked China South Rail.

Callard was referring to the alteration made to a memorandum which was meant to be a Mitsui confinement, but was later altered by former Transnet CEO Brian Molefe in favour of China South Rail.

Callard has told the Zondo Commission that a R1 billion cost increase in the acquisition of 100 locomotives was excessive and unjustified.

Callard also said that those who altered his memorandum for 100 electric locomotives failed to change the foreign exchange rate from a Japanese Yen to the US Dollar.

His original memorandum motivated for the purchase of locomotives from Japanese manufacturer, Mitsui. He says this led to a cost escalation from R3.8 billion to R 4.8 billion. The increase was allegedly attributed to the depreciation in the Yen, Callard explained.

Deputy Chief Justice Raymond Zondo was appalled by the news. He called the failure to take note of the currency change by those who altered the Callard memorandum carelessness.

Callard also testified that the 60% pre-payment paid to China South Rail was excessive. He says Transnet paid over R7 billion to China South Rail in upfront fees.

He told the Commission that the payment increased the freight company’s foreign borrowings to honour the payment.

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