Transnet, Gupta-linked firm contract was clear evidence of fraud, Zondo hears

Transnet payments to Regiments were described as intriguing because the company simply did not have the technical capacity to do the work but was nevertheless paid.

A video screengrab of Deputy Chief Justice Raymond Zondo opening proceedings at the commission of inquiry into state capture in Parktown on 20 August 2018. Picture: YouTube

PRETORIA - A corporate finance expert described some of the payments Transnet made to Gupta-linked consultancy firm Regiments Capital as clear evidence of fraud.

Jonathan Bloom made the allegation on Wednesday at the state capture commission of inquiry in Parktown.

The commission investigators commissioned Bloom to investigate several questionable finance advisory contracts the state-owned company entered into.

Bloom studied the contract between Transnet and JP Morgan to facilitate a cross-currency swap, as a form of hedging.

Evidence leader Paul Pretorius asked Bloom how Regiments featured in this deal.

Pretorius asked: “Regiments was not appointed to do anything in relation to the cross-currency swap, JP Morgan was appointed to do that work?”

Bloom responded and said that was correct.

He has described Transnet payments to Regiments as intriguing because the company simply did not have the technical capacity to do the work but was nevertheless paid.

Paul Pretorius clarified the matter so Bloom could confirm it for the commission.

“So once again, JP Morgan is appointed to do a certain edging swap, it would’ve used it own intellectual property to execute this complex financial experiment; notwithstanding Regiments was paid a separate amount of R5.7 million for apparently doing the work that JP Morgan was formally appointed to do.”

Bloom said that was all correct.

He flagged over R150 million worth of questionable payments to Regiments.

WATCH LIVE: Jonathan Bloom concludes testimony into Transnet


Bloom also told the inquiry how Transnet concluded a R12 billion loan agreement but in just three days, applied to have the terms swapped to a fixed rate agreement.

He said Transnet must have known it would change its loan interest rates to a fixed rate before it concluded the deal on a floating rate which incurred costs paid to Regiments. He said it was not a last-minute decision.

“They would have to understand what the impact is on the debt structure. So, it’s not only going out to the market for pricing; there’s a lot of calculations, understanding and authorisations that need to happen. So in my opinion, it can’t happen in three days.”

He explained what that meant.

“Prior to entering into the club loan on a flat rate basis, Transnet officials would’ve intended to effect interest rate swaps, effectively converting the loan into a fixed interest loan,” he said.

While Transnet was saddled with significantly higher interest rate costs, Regiments was paid a fee for facilitating the deal.

(Edited by Mihlali Ntsabo)