A Transnet Freight Rail train leaves the Bronkhorstspruit station near Johannesburg in April, 2022.SIPHIWE SIBEKO/Reuters
Canada’s export agency says it lost money on a US$450-million loan to a scandal-plagued South African state company whose former top executives are facing corruption charges for allegedly inflating contracts and embezzling funds.
Export Development Canada, a federal agency, provided the loan to state-owned Transnet in 2015 to support a US$1.2-billion contract under which Transnet ordered 240 locomotives from Bombardier Inc. BBD-B-T
Former top executives of Transnet and an ex-cabinet minister are currently before the courts in South Africa, facing corruption charges for allegedly inflating the cost of the massive US$5-billion locomotive deal, which involved the purchase of 1,064 locomotives from Bombardier and three other manufacturers.
An inquiry into state corruption heard testimony that Transnet was infiltrated by cronies of the Gupta brothers, an Indian business family whose close relationship with former president Jacob Zuma was the main trigger for the inquiry.
An EDC spokesperson told The Globe and Mail in 2018 that the agency was reviewing the Transnet loan, but it did not disclose the fate of the loan until now.
In 2019, the export agency acknowledged that it had made an error by lending US$41-million to the Gupta brothers in a separate transaction. The loan helped the Guptas buy a Bombardier jet, which EDC later acknowledged could have been used for illegal activities.
Now, EDC has disclosed that it reviewed the Transnet loan and eventually sold it to a third party at a loss. It did not divulge the amount of the loss.
“The loss resulting from the sale was neither significant nor material to EDC’s business,” EDC spokesperson Anil Handa told The Globe in response to e-mailed questions.
“Our review encompassed several elements related to the transaction, which included monitoring the company’s financials as well as developments that could affect the credit quality of the loan,” he said.
“We also closely followed the various investigations into Transnet’s procurement process and its ongoing involvement in court proceedings.”
The sale of the Transnet loan is not mentioned in EDC’s financial reports, but Mr. Handa said the agency made the sale in October, 2024. It cannot divulge any other details because of “commercial sensitivity and confidentiality,” he said.
Transnet was a key target in the “state capture” scandal during Mr. Zuma’s presidency, when the Guptas allegedly seized control of state companies and looted massive amounts of money from them. The Guptas were business partners with Mr. Zuma’s son.
Transnet went to court in 2021 to seek to nullify the Bombardier contract. Transnet’s media office, responding to questions from The Globe, said the state company later negotiated a settlement with Bombardier. It said the terms of the settlement were confidential.
Testimony by a Transnet executive at the state corruption inquiry suggested that Bombardier and a Chinese locomotive supplier had inflated the cost of relocating their manufacturing plants after Transnet had requested the relocations.
Bombardier Transportation was purchased by French company Alstom SA in 2021. In its latest financial report, Bombardier says it conducted an internal review of the Transnet matter and found no wrongdoing, but it also acknowledges that South African prosecutors could still be probing the matter.
“While the National Prosecution Agency of South Africa has not communicated any request to the Corporation, the Corporation understands that the NPA may be continuing to investigate the Transnet contracts,” Bombardier says in the report.
Transnet, the South African state transport company, launched the locomotive program in 2011 to modernize its freight rail system and shift traffic from road to rail. Its contracts with the four manufacturers – two Chinese companies, one U.S. company and Bombardier – were originally budgeted at a total of about US$3.5-billion, but the cost ballooned to US$5-billion.
Evidence at the state corruption inquiry showed that Transnet signed contracts with Gupta-linked advisory firms, allowing millions of dollars in transaction fees and other services to be siphoned off from the locomotive contracts and laundered to bank accounts connected to the Gupta network.
Four of Transnet’s top executives at the time of the locomotive deal have been charged with fraud, corruption and money laundering. A former minister of public enterprises, Malusi Gigaba, was recently added to the list of defendants in the case. Mr. Gigaba, the cabinet minister overseeing Transnet at the time of the locomotive contracts, is accused of accepting cash from the Gupta family.
Many of the new locomotives were severely delayed, never delivered or deemed defective, leaving Transnet suffering from aging infrastructure at a significant cost to South Africa’s economy.
With a report from Matthew McClearn in Toronto
Editor’s note: This article has been updated to correct a reference to Mr. Anil Handa.