Chinese locomotive deals under spotlight
Chinese company CSR is under pressure in both South Africa and Pakistan after selling both countries sub-standard locomotives, which have cost Pretoria and Lahore billions of dollars.
The Namibian government has also been forced to scrap a Chinese locomotive tender after the machines they had bought were sub-standard.
Initially, the Chinese government-owned CSR corporation won a tender in South Africa to supply more than R8bn of locomotives but in January 2017 this hit a snag when it became clear that the new engines were plagued with technical problems.
Namibian and Pakistani railway authorities were also forced to either cancel or write off their Chinese-made locomotives when it became clear they were not only technically sub-standard, but dangerous.
Transnet of South Africa tested the first two locomotives this year and found that the alternators posed serious problems, rendering them inoperable.
That's before a total of 92 locomotives were supposed to be shipped to South Africa as part of a lucrative R52bn (or $1.5bn) contract.
Since the contract was signed, CSR has been bought out by another Chinese state-owned company called CRRC. Transnet has now blankly refused to accept the 18 other locomotives which CRRC has built, saying they have broken the agreement in two ways.
First, the locomotives are of such a low quality that they vibrate excessively, and, second, they were built in China when the initial tender agreement stipulated that they be partly built in Africa. The Chinese initially claimed they needed to be built in China as prototypes, but all 18 were also produced there leading to Transnet suspending the deal.
Namibia has already returned their consignment of locomotives to China, citing the excessive vibrating of their electric engines and the quality of the construction as unacceptable.
While the Chinese government- owned company has refused to comment, it's now clear that the South Africans are not going to accept the locomotives after two initial deliveries failed a number of tests.
But they're not alone. Pakistan Railways faces a crisis because 32 of the 69 locomotives bought from Chinese company CRS are unserviceable.
Former Pakistan president Asif Ali Zardari, who was forced out of office in corruption allegations, reportedly demanded the locomotives be purchased.
The China South Locomotive and Rolling Stock Corporation Limited or CSR was formed in 2007 with the specific purpose of targeting developing nations for the building of trains.
Soon thereafter it began to win contracts despite having no track record in the production of trains. Pakistan Railways is going to replace all 16 of their locomotives brought from CSR after engineers identified serious defects and declared them unsafe to operate, especially for the passenger segment. The defects included under-frame cracks, which is a dangerous phenomenon that usually indicates the use of sub-standard metals.
Things are heating up for the Chinese company in South Africa with reports that the country's parliament is now probing three specific deals involving the Gupta family and ruling party officials.
Transnet is owned by the state and its previous CEO, Brian Molefe, has been implicated in a host of corrupt deals which tie in the Gupta family, which has nurtured close relations with ANC officials and the state.
One of the deals which has come to light involves another Chinese state-owned company, ZPMC (Shanghai Zhenhua Heavy Industries). It supplied cranes to Transnet for use in port operations to the tune of R70bn. However, News24 reports that documents show the cranes were priced at $92m each, way more than their value of $81m. The difference was paid to a Dubai company called JJT Trading, which is owned by the Gupta family.
It doesn't end with the Chinese, German software company SAP is now also named in a slew of deals where extra payments were made to intermediaries who offered no additional value. In business this is regarded as "skimming" or, in some cases, bribery.
South Africa's parliament is beginning to investigate the Transnet deals which could be bad news for both Chinese companies and also for those involved as intermediaries.