/ 24 June 2016

Prasa accuses SA ‘partner’ of fraud

Off the rails: A Prasa contractor is now facing liquidation over suspect business practices.
'South Africa is capable of delivering a world-class safe, inclusive and reliable public transport system,' writes Robert Shivambu. (Paul Botes/M&G)

The German government-owned rail company Deutsche Bahn has been drawn into the Passenger Rail Agency of South Africa (Prasa) tender scandal.

Its subsidiary, DBI, wants to have a local empowerment company, Siyaya Consulting Engineers, which bagged more than R5.8-billion in deals from the embattled state rail agency, liquidated.

DBI has exposed how Siyaya Consulting Engineers hijacked its official logo to falsely imply a partnership between them. The “partnership”, which Prasa itself is now labelling a “suspected fraudulent misrepresentation”, was used to dupe the parastatal into concluding various deals with Siyaya. These are now being reviewed.

Siyaya, a subsidiary of a company called the S-Group, is among several firms currently being scrutinised in one of the biggest forensic investigations emanating from the Prasa tender scandals.

DBI has filed an application in the Johannesburg high court to have Siyaya liquidated because of the nonpayment of R12-million owed to DBI for consulting and engineering fees. An affidavit by DBI’s regional director, Benoit Schmitt, signed on May 17, states that the company only ever had a “subcontracting” agreement with Siyaya.

In a statement from its lawyers on Thursday, DBI said it had never granted permission for Siyaya to use its initials or logo, and said Siyaya changed its name after being confronted about this in 2014.

Siyaya’s sole director, Makhensa Mabunda, allegedly positioned himself to score from Prasa deals as far back as 2008 when details of the rail company’s overhaul had not yet been publicly released.

He set up two companies and incorporated the initials “DB” into the Siyaya name, using the logo and branding of DBI on official letters to Prasa and other industry players. This was allegedly done without the consent of DBI. 

“It is clearly to purport a partnership between the German parastatal and the Siyaya entities,” said one source with knowledge of the investigation. 

Siyaya landed at least four big deals from Prasa relating to signalling and telecommunications and the modernisation of the Braamfontein and Salt River depots.

The Mail & Guardian has seen documents drafted by the second company, Siyaya DB Engineers, highlighting a “partnership with DB international”. 

On these documents, the initials “DB” are incorporated into the Siyaya logo on each page. Despite this, Mabunda this week concurred that the German company was “only ever a subcontractor”. 

The alleged “fraudulent misrepresentation” of DB’s association with Siyaya was uncovered by the ongoing forensic investigation into the Prasa scandal. 

The investigation is a result of public protector Thuli Madonsela’s directive that all Prasa contracts worth more than R10-million awarded since 2012 be investigated.

The public protector found no evidence of wrongdoing in the awarding of one contract to Siyaya or of a relationship between Mabunda and a former Prasa chief executive, Lucky Montana.

However, in her report, titled Derailed, Madonsela put Mabunda’s version of the relationship on record, stating: “Siyaya DB is a BEE [black economic empowerment] company in partnership with Deutsche Bahn International.”

No evidence suggests that Prasa was aware of the alleged misrepresentation by Siyaya. On Thursday, in response to questions, the rail agency said it was currently investigating the validity of contracts awarded to Siyaya on the basis of its purported partnership with DBI and for not having followed “open tender processes”.

The M&G has established that Schmitt, when told of his company’s “partnership” with Siyaya, came from Germany to meet local forensic investigators twice in recent weeks. 

Schmitt, in his statement filed for the liquidation of the company, listed four projects on which DBI worked as a subcontractor for the company.

Attached to his affidavit is a letter Siyaya wrote to DBI on February 3, explaining that it was unable to pay creditors owing to nonpayment by Prasa. 

This letter did not bear the contentious combined logo of Siyaya DB Engineers, although it was still on the S-Group’s website this week.

Contacted for comment, Mabunda denied there was “friction” between his company and DBI. He said his relationship with the entity dates back to about 2008. He added that Siyaya was party to an agreement for “strategy assistance” signed with Prasa and the German rail company in March 2011.

“We hosted Prasa in Germany and at DB’s offices for a week in order for management to network with the Germans,” Mabunda said.

He attended this event with Montana, former Prasa board member Bridgette Gasa and its disgraced former chief engineer, Daniel Mtimkulu.

“The liquidation application will certainly be challenged. We will file our papers in this week. DBI is not able to be patient, maybe because they are operating under their own kind of pressure,” Mabunda said.

The Prasa locomotive scandal, exposed last year by the Sunday newspaper Rapport, has so far seen the departure of Montana and Mtimkulu. 

In court, the current Prasa chairperson, Popo Molefe, described the pair as the masterminds of the fraud in one of the other deals under investigation. The two have previously denied any wrongdoing. 

The overall scale of the Prasa fraud scandal has been described by a forensic investigator as “the worst and most systemic corruption practices in a state department”.

“The monetary value and criminality found by investigators scrutinising Prasa [deals] is mammoth-like and had gone on for years,” said another.

Update: June 24 2016
Makhensa Mabunda, director of the S-Group and its subsidiaries which include Siyaya DB Consulting Engineers and DB Siyaya International, said the companies only used the DB-link in its correspondence or letterheads for work for which it had sub-contracted to the German international company.

He said the “intention” had always been to establish a joint venture with DBI, but this never materialised due to “internal” issues at DBI. He confirmed that the company officially dropped the use of the initials DB in its name after discussions with the international company, adding that this had provided Siyaya with an opportunity to establish its own identity.

Mabunda said his company is currently suing Prasa for non-payment in respect of work done to date. The M&G has been told the company has so far been paid nearly R1-billion for contracts of more than R5.8-billion awarded.

Asked whether his companies benefited unlawfully from Prasa contracts, Mabunda said: “We are not aware about the illegality or unlawfully beneficiation from the contracts. As far as we are aware and to the best of our knowledge, each and every request made through MOU or works advertised and awarded to us, went through Prasa’s own procurement process and was approved accordingly.”

Siyaya DB Consulting Engineers had sub-contracted the German company on among other projects, the condition assessment of existing infrastructure in SA, safety management systems as well as station and real estate development.

Mabunda said he was unaware of any investigation into his companies.

Behind the relationship
• In 2008, Makhensa Mabunda changed the name of a shelf company to Siyaya DB Engineers.
Incorporating the German company’s initials was allegedly done without that firm’s consent. 

• In 2011, Mabunda took a second shelf company and renamed it DB Siyaya International. Both companies landed Prasa deals on the strength of the “partnership” with DBI. 

• At around the same time, Prasa and Siyaya signed a memorandum of understanding (MOU) for “strategy assistance” at the Deutsche Bahn offices in Germany. Former chief executive Lucky Montana was a signatory to this agreement on behalf of Prasa, which said the MOU is now also under scrutiny.  — Pauli van Wyk