War over Prasa’s multibillion-rand inquiry of irregular tenders heats up

Dipuo Peters has 'categorically denied' that she was trying to stop the investigation. (Nadine Hutton)

Dipuo Peters has 'categorically denied' that she was trying to stop the investigation. (Nadine Hutton)

The war over Prasa’s multibillion-rand investigation into irregularly awarded tenders has been turned up a notch when the state rail agency’s board chair Dr. Popo Molefe this week refused to back down.

In a strongly-worded letter to his political head, transport minister Dipuo Peters, Molefe said termination of the investigation and subsequent litigation would cost Prasa R12-billion in fruitless and wasteful expenditure.

“The board does not have a reason to stop the investigation at this point and is satisfied that stopping the investigation will be harmful to Prasa,” Molefe said in a letter dated August 24, which the Mail & Guardian has seen.

Peters has qualified her initial instruction that the investigation must be “close(d) off” in answers to the M&G.

She “categorically denied” that she was trying to stop the investigation, insisting that she instead “implored that the investigations be speedily concluded as opposed to unlimited and ever ongoing investigations costing the entity many millions of rand without any tangible report tabled”.

In her initial letter to Molefe earlier this month, Peters was unhappy with the R80-million spent so far on the forensic investigation conducted by Werksman’s Attorneys and complained that she did not know what the scope and objective of the investigation was. This even though she claimed to have commissioned the investigation.

The stand-off between Molefe and Peters comes amid widespread political pressure on Molefe to halt the investigation and growing suspicion that the some of the findings may lead to President Jacob Zuma and his friends.

Asked for comment, Zuma’s spokesperson, Bongani Ngqulunga, said the Prasa matter is “under investigation and whoever you are referring to will most probably be afforded an opportunity to respond to the allegations and explain their participation. Neither the presidency nor the president has any role to play in the matter”.

Peters’ perceived hindrance of the investigation comes on the back of Cabinet’s announcement this week that Zuma will keep his grip firmly on the strategy of all state-owned companies, including Prasa, through a new presidential coordinating council.

The Democratic Alliance’s Manny de Freitas was highly critical of Peters’s letter, labelling it as a “gross abuse of power” and an “attempt to thwart and ultimately terminate” the investigation.

“As such her conduct in this regard remains highly irregular and possibly unlawful and she must be sanctioned for acting outside her remit in what we contend is an abuse of power.”

The investigation by Werksmans Attorneys was commissioned by the Prasa board and relates to widespread corruption and fraud unearthed by the Auditor-General and Public Protector.

Central to the alleged irregular expenditure is Prasa’s former chief executive Lucky Montana, who presided over the purchase of trains that were later found to be unsuitable because they were too tall for SA’s rail system.
Montana stands accused of benefiting directly from various Prasa deals and of facilitating the employment of “Dr.” Daniel Mtimkulu to Prasa chief engineer without him having the necessary qualifications.

The current forensic investigation into a string of Prasa deals involves billions of taxpayer’s rands.

In his letter, Molefe says the Werksmans investigation so far has unearthed an estimated R14bn in irregular expenditure. The Public Protector has made adverse findings on irregular contracts worth about R3.7-billion and the AG identified R550-million in irregular expenditure.

Prasa has also initiated litigation against two companies in a bid to recoup R2.6-billion already paid out and to set aside contracts awarded to them worth R7.1-billion.

Molefe justified spending the contentious R80-million saying he has struck a competitive deal with Werksmans and that the subcontractors have agreed to charge only 60% of their usual rates. The multi-disciplinary investigative team consists of attorneys, forensic auditors, IT specialists and general investigators.

They are currently juggling 37 Prasa investigations after sourcing 1.2-billion documents from Prasa employees – this includes documents which other staff had tried to destroy in a bid to hamper the investigation.

It would be a “sad day”, Molefe said, if the investigation does not reach its logical conclusion.

“To add insult to injury, Prasa’s opponents are utilising monies that they gained unlawfully from Prasa to oppose the legal proceedings instituted by Prasa against these very entities and individuals,” he continued.

Other investigations
Prasa has so far paid about R80-million to Werksmans Attorneys to conduct a specialised forensic audit, assist Prasa in litigation flowing from the investigation and assisting the Hawks in their criminal investigations.

Minister of Transport Dipuo Peters complains that this is excessive.

Looking at other investigations, however, provide context.

KPMG’s highly controversial documentary review into the establishment of an investigative unit in the South African Revenue Service cost the taxpayer R26-million. The report has not officially been released to the public and it was handed to Sars with a caveat making it useless in any litigation process.

Sars also previously spent R400-million to investigate businessman Dave King for tax evasion. The parties eventually settled on R1-billion payment to Sars.

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