Transnet Case Study

Transnet is a South African state owned freight company which was established on the
first of April in 1990[1]. One of the company’s visions is to promote economic growth in
South Africa. In this section, the company will be taken as a case so as to analyze their
practices (which do not align with their visions) and relate them to unethical leadership.

Leaders Getting Involved In Corruption

The former chief executive officer of Transnet Brian Molefe and the former Chief
Financial Officer Anoj Singh have ongoing cases at the courts linked to the  a R93-
million corruption case and the Transnet’s locomotive tender scandal[2]. From the police
investigations, the police found that Brian and Signh were allegedly siphoning money
from Transnet to the Gupta family. This resulted to the increase in cost of the project
which was initially R38 billion in 2012 to more than R50 billion[2]. The significant
increase in cost raised the concerns of the Zondo Commission.
Initially, officials at Transnet were aware that the deal would cost South Africa a
significant amount of money which would result to the violation of the Public Finance
Management Act (PFMA)[3]. The officials ignored this by installing regiments so that
they could secure the deal. A sum of R189 million was paid to the regiments for their
services. Transnet paid R74m to one of its regiments Albatime, for no apparent reason
in December 2015[3].The officials at Transnet were putting people in positions who they
knew they would seal the deal and do corruption without having problems. This is
evident at the time in 2015 when officials at Transnet facilitated the termination of the JB
Morgan advisory services contract which was only two months old and signed another
one with the Trillian which is linked to the Gupta family[3]. With the Gupta family, the
leaders at Transnet would approve invoices which were inflated for instance, the
R93.4m invoice which was paid on 3 December 2015 to Trillian[3]. The officials at
Transnet displayed unethical leadership because they breached the PFMA act, which
they knew could cause some legal action against the company. The officials also
approved massive payments to regiments without reasons. The payments did not
benefit Transnet as a company and other general employees who were not involved in
the scandal, they only financially benefited the leaders involved.
Brian demonstrated unethical leadership because as a leader. He went against the
organizational principles by getting involved in corruption. He did some deviant acts
which are illegal such as money laundering, as a result they caused his arrest and the
damage of Transnet’s reputation. Investors will no longer feel comfortable with investing
in Transnet since they know that they are likely to get a low return on investment if not
losses. Although Brian got involved in the corruption scandal in 2015[2], he is appearing
in the courts now because unethical leadership involves activities which are passive and
they require an in depth investigation so that they get uncovered. This is evident in the
speech given by Advocate Andrea Johnson where he remarked the arrests as an
outcome of complex investigations[2]. The case had other six individuals linked to it
which shows that the CEO prescribed corruption as the norm to the followers[2]. The
individuals knew that their leader Brian would not expose them for corruption since he
was also involved in the scandal.

Informally Appointing Employees

Another former Transnet CEO Siyabonga Gama denied appointing Gugu Gigaba who is
a sister to the former cabinet minister Malusi Gigaba[4]. Malusi Gigaba’s estranged wife
testified that the former cabinet minister told her in 2016 that he wanted to speak with
the Transnet’s CEO regarding the appointment of his sister at Transnet[4]. Three emails
showed some communication regarding the appointment of Gugu[5]. Gugu was
appointed by the Transnet’s former chief operating officer (COO) Mlamuli Buthelezi, on
February 1 2017 as a manager[5]. Gama said he was not aware that the Buthelezi
appointed Gugu for a job which was never advertised and Gama also denied that he
ever met Gugu[5]. The denial by the Gama in the courts shows that, leaders can
facilitate unethical acts in organizations without getting into the unethical acts
themselves. The CEO knew the potential consequences of directly employing Gugu and
used the COO as an insulator. This is a form of unethical leadership since Buthelezi
could not deny unethical orders from his superior. Although no form of intimidation was
used by Gama, Buthelezi could not run the risk of losing his job for denying to appoint
an external individual to a managerial post which was never advertised.

Accepting Kickbacks to Award Contracts.

Taking Kickbacks from Companies

In May 2017, the Transnet chairperson Popo Molefe and group chief executive Tau
Morwe were supposed to shed light on the bribes which have been paid to Transnet[6].
Investigations showed that, a total of R8.3 billion was paid as bribe in 10 lucrative
contracts between 2012 and 2017[6]. Accepting bribes to award contracts is illegal and
unethical. The leaders failed to demonstrate ethical leadership since they could not
expose any of the cases of bribes till investigations were done. The acceptance of
bribes to give contracts would cause damage to Transnet since only the companies with
capacity to pay the bribes would win the contracts whether they could do a proper job or
not. Other companies who could have done the job better would not get the contracts
because of failure to pay the kickbacks. The bribes from the contracts neither benefited
Transnet nor the company employees. The leaders and the companies which paid the
kickbacks would benefit from such unethical activities.
Taking Kickbacks from Employees

In July 2017, the National Union of Metalworkers of South Africa (NUMSA) threatened
to shut down Transnet’s Richards Bay terminal after the workers went on strike[7]. The
workers were striking because their leaders were not awarding them permanent
contracts and Transnet was also practicing labor brokerage[7]. Some workers had
worked for the company for more than 20 years without permanent contracts[7]. Some
workers were complaining about their leaders asking for intimacy favors so that the
leaders would offer them some jobs[8]. Others were complaining that the leaders took
some bribes from employees so as to offer them some jobs[8]. This resulted to the
company taking employees even if they had poor qualifications, leaving out those with
the appropriate qualifications because they did not pay bribe. The leaders acted in
ways which had potential to cause the closure of one the Richards Bay terminal which
clearly shows deviation of their acts from organization principles.

Ignoring Ethical Issues among Employees

In February 2018, a lifestyle audit was done after R46.1 million was spend in
emergency procurement at the Transnet port terminal in Richards Bay[6]. The
employees who were involved were audited and the report showed that, some junior
employees were purchasing property which was way over their annual salaries. For
instance an employee who had an annual gross salary of R351 000, owned five
Mercedes Benz vehicles including an ML350 and a C class and two houses and all the
assets were bought in cash[6]. The investigators also found that, the officials were
abusing emergencies to skip normal tender procedures. The officials would call for
emergencies especially on Fridays, without stating the reasons for the emergencies.
The employees were at liberty to skip procedures because they knew that the leaders
would not do a follow up. This also shows that the Transnet port terminal in Richards
Bay had a weaker ethical environment in 2018 since the employees could call for an
emergency claims without proper follow up from the leaders. The leaders displayed
unethical leadership because they ignored the amounts used in emergency
procurement claims till a significant amount of money was spent. They could have
followed each and every emergency procurement claim to check for its credibility and
expose any false claims from the employees.

Running Private Business during Company Hours

In March 2016, a report was released which exposed two senior lawyers who were
running their private companies during the company time. They held consultations with
private clients when they were supposed to be on duty while using resources from
Transnet. The lawyers resigned from the company before disciplinary action was taken
against them. The use of organizational funds by the senior lawyers to run private
business is illegal and causes financial strain to the company. The leaders approved the
resignation letters of the lawyers despite the lawyers being involved in unethical
conduct. The leaders could have held the lawyers accountable and sign their
resignation letters after receiving their charges.

The investigators also discovered that, some other officials within the legal department
were getting involved in setups with service providers which could cost Transnet some
millions. The officials would file some false reports against the employees who tried to
expose them so that the innocent employees would get fired first before becoming a
menace to the legal department officials. The leaders at Transnet finalized the firing of
the innocent employees without making proper investigations and decisions. This is a
form of unethical leadership because the leaders would make quick decisions which
resulted in their employees losing jobs even if they were not guilty.

Misuse of company resources

In an investigation which was done in October 2017 which dealt with the procurement of
washing machine and dryer at Transnet Richards Bay port Terminal. Transnet was
paying R250 000 per month towards the washing of their employees’ uniforms. The
investigators found that before Transnet signed a deal to get the clothes washed,
Transnet had its own washing machine and dryer which they procured for R250 000.
The machine and the dryer could not fit on a normal door because they were too big.
The procured equipment required 60 Amps and 380 Volts AC to operate and Transnet
was not equipped with power supplies to run the machine and dryer. The leaders did
not hold the engineers who ordered the wrong machines accountable, instead they
chose to sign another contract which cost the company more money for the same task.
This would result to an ethically weak environment because employees would not pay
attention when doing things which can cost the company.

[1] (2022, August 29). About Transnet. Available:

https://www.transnet.net/AboutUs/Pages/Overview.aspx#:~:text=Transnet%20operates
%20as%20an%20integrated,Foundation%2D%20which%20underpin%20our
%20company.
[2] S. News. (2022, August 29). Former Transnet and Eskom execs Brian Molefe and Anoj
Singh arrested on fraud charges. Available:
https://businesstech.co.za/news/government/620881/former-transnet-and-eskom-execs-
brian-molefe-and-anoj-singh-arrested-on-fraud-charges/
[3] S. Reporter. (2022, August 29). Case against senior Transnet executives postponed.
Available: https://www.freightnews.co.za/article/case-against-senior-transnet-executives-
postponed
[4] N. Ngcobo. (2022, September 1). Former Transnet CEO denies knowledge of Gugu
Gigaba’s appointment. Available: https://www.sabcnews.com/sabcnews/former-transnet-
ceo-denies-knowledge-of-gugu-gigabas-appointment/
[5] E. Mabuza. (2022, September 1). Former Transnet CEO denies role in hiring Malusi
Gigaba’s sister. Available: https://www.timeslive.co.za/politics/2021-04-30-former-
transnet-ceo-denies-role-in-hiring-malusi-gigabas-sister/
[6] A. Mashego. (2019, September 3). Transnet’s orgy of greed: How billions were paid in
kickbacks and staff cashed in. Available:
https://www.news24.com/citypress/news/transnets-orgy-of-greed-how-billions-were-
paid-in-kickbacks-and-staff-cashed-in-20190422
[7] (2017, September 4). Numsa demands change at Transnet. Available:
https://www.enca.com/south-africa/numsa-demands-end-to-sex-for-jobs-at-transnet-
richards-bay
[8] K. Motau. (2017, September 4). NUMSA CONCERNED BY CLAIMS AT TRANSNET.
Available: https://ewn.co.za/2017/07/08/numsa-concerned-by-sex-for-jobs-claim-at-
transnet