OUTA calls on China’s state-owned rail company to return US$284m laundered from South Africa

The Organisation Undoing Tax Abuse (OUTA) has written to the executives of a Chinese state-owned locomotive manufacturing entity asking for the return of at least US$284 million (more than R5 billion at current exchange rates) in South African government funds looted by the entity on behalf of the Guptas.

The letter was written by OUTA’s CEO Wayne Duvenage and sent to Hualong Liu, Chairman of the Board of CRRC Corporation in Beijing, China, and copied to South African President Cyril Ramaphosa. The letter refers to the 2012 to 2014 deals in which the state-owned China North Rail (CNR) and China South Rail (CSR) were contracted to supply locomotives to the South African state-owned entity rail company Transnet. CNR and CSR amalgamated in June 2015 to form CRRC.

Duvenage’s letter calls for accountability by the CRRC directors for the looting.

In his letter to the CRRC chairman, Duvenage says that OUTA has evidence that US$284 million was paid in “unauthorised rebates” to front companies by CSR and CNR, and that these payments continued under CRRC.

These “rebates” were paid to companies controlled by the corrupt Gupta family and their associate Salim Essa, who have been heavily implicated in organised corruption networks in evidence before the State Capture Commission.

The US$284 million was 20% of the value of the amounts paid to the Chinese manufacturers from December 2014 to September 2016, the timeframe for which OUTA has evidence. OUTA believes similar payments were made as rewards for all the Transnet locomotive contracts awarded to the same companies from 2012 to 2014, which would have meant up to R9 billion in payoffs.

“We ask that you make the right decision and assist us in placing this specific chapter of the South African State Capture saga to rest, by having the perpetrators held to account and the alleged stolen funds returned to South Africa,” stated Duvenage in the letter to the Chinese SOE’s chairman.

“The Chinese economy has benefitted from deals that are steeped in dishonesty and the abuse of authority in South Africa, with substantive negative socio-economic impact to the people of South Africa,” says Duvenage. “Those in authority as these Chinese state-owned entities cannot claim to be ignorant of the facts that clearly expose their conduct as enablers of these unlawful transactions, which were obviously intended for middleman enrichment purposes.”

These backhanders went from at least 10 of the CRRC group’s bank accounts, flowed into accounts owned by middlemen Regiments Asia Ltd and Tequesta Group Ltd, and from there were transferred into 160 other entities, in what appears to have been a very sophisticated money laundering scheme facilitated by HSBC in Hong Kong.

Regiments Asia and Tequesta were both registered in Hong Kong in June 2014 with Essa as the director. “Neither of the two companies (Regiments Asia & Tequesta) had any personnel, nor did they have any track record of business advisory experience and finally, they did not have the skills as set out in various agreements signed with your state-owned companies,” said Duvenage in the letter.

OUTA trusts that President Ramaphosa will engage with China’s President Xi Jinping on this matter, if not soon, then when they next meet during their international or BRICS bank engagements.

In October 2019, the US Treasury sanctioned the Gupta brothers – Ajay, Atul and Rajesh – and their associate Essa, naming them as “members of a significant corruption network in South Africa” and blocking their financial dealings. This “suggests that the CRRC companies chose their business partners poorly”, says Duvenage’s letter.

OUTA has previously handed information on the corruption in the Transnet contracts to the Commission of Inquiry into State Capture.

OUTA has also provided evidence of this corruption to the South African state’s National Prosecuting Authority (NPA).

Copies of Duvenage’s letter were sent to China’s embassy in South Africa and to South Africa’s embassy in Beijing.

A copy of OUTA’s letter to CRRC is here in English and here in Mandarin.

More information on the Transnet locomotive contracts is here.