Executive and board clashes at state rail agency Prasa have escalated, with Transport Minister Dipuo Peters turning the tables on the ousted board, saying it was not up to the job and had lied to the public about the salary scandal involving former chief executive Collins Letsoalo.
The minister on Thursday responded to an urgent court application by Prasa board chair Popo Molefe about her dissolution of the agency’s board. In her affidavit, she was scathing of Molefe and his fellow board members, saying that under their watch the agency had fallen into a state of collapse.
Molefe filed an urgent application in the high court in Pretoria to have the board’s dissolution declared unlawful, reinstate the board and prevent an interim board from being appointed. The case was meant to be heard on Thursday but was rolled over to Friday to allow Peters to respond.
In a strongly worded answering affidavit, the minister said her relationship with the board had broken down irretrievably and she cannot trust the members — and, she claimed, neither can Parliament.
Peters said the board’s unceremonious removal of Letsoalo last week ensured that control of Prasa reverted to the same board that had overseen the mess at the agency.
The minister accused the ousted board members of trying to protect their own interests.
The case comes on the back of a damning letter Molefe had sent Hawks boss Berning Ntlemeza about the lack of progress in a multitude of criminal investigations referred to it.
Peters suspended the entire board just days after it had sent seconded chief executive Letsoalo packing for allegedly increasing his salary by 350%.
Letsoalo earned R1.3‑million a year at the department of transport. The deal had been that his “rank, salary and benefits would stay the same” when he took over at Prasa, Molefe claimed in his urgent application.
But when Prasa staff refused to sign off on a new salary of R5.9‑million a year, Letsoalo allegedly fired the official and appointed someone who approved the salary hike. Once the board found out about this, they appointed senior counsel to advise them on the matter, after which they fired Letsoalo.
But, Peters said after examining various documents, it is clear that Letsoalo never instructed anyone to pay him a specific amount, although he did inquire about what the salary package for an acting group chief executive was meant to be.
“After deliberations among various officials regarding his salary, to which he was not privy, he was paid an annual salary of R5.9‑million. That was the salary applicable to the position at the time of his appointment,” Peters said.
“Incidentally, Dr Molefe was copied in on some of the email deliberations among the officials and yet at no stage did he tell them that the board had to approve the salary.”
In her affidavit, the minister claimed that the “true reason” for removing Letsoalo was that he refused to accede to “improper interference by the board” in the running of Prasa, meddling in procurement issues and increasing irregular expenditure.
Letsoalo, Peters said, had also been pressing Molefe and his board colleagues to repay the money they had paid themselves and that the auditor general found to be irregular.
Letsoalo has applied to join the proceedings “to assist the court with further facts” to support the contention that Molefe and the other board members are unfit to be reinstated.
Peters said she was copied in on an email Letsoalo wrote to Molefe on February 28, alleging that he had refused “improper” requests to accept CVs of people recommended by Molefe for employment.
Peters said that, though these allegations were untested, she had other concerns around payments due to the Werksmans law firm.
She said Werksmans has to date been paid R127‑million for “unending investigations” whose scope is clearly not budgeted for. Molefe and his board are therefore part of the irregular expenditure problem, Peters said.
The Werksmans probe was commissioned by the board following former public protector Thuli Madonsela’s Derailed report, published in August 2015. In it, Madonsela found Prasa to be fraught with an alarming degree of maladministration, nepotism and non-observance of procurement and employment policies. Madonsela recommended that Prasa and the treasury investigate all contracts exceeding R10‑million awarded since 2012.
In her statement, Peters accused Molefe’s board of failing to implement the remedial action recommended by Madonsela despite being at the agency’s helm for two years.
But Molefe, in his affidavit, said the Werksmans investigation had “uncovered the true extent of fruitless, wasteful and irregular expenditure at Prasa” totalling R14‑billion. He said that further probing might uncover irregular spending of up to R24‑billion.
In addition, the auditor general reported an additional R550‑million in irregular expenditure at Prasa during the 2014-2015 financial year.
This was “merely the tip of the iceberg inasmuch as damage to Prasa is concerned”, Molefe said in his urgent application. “The results [of the Werksmans investigation] have been alarming.”
In her papers, Peters also said that Molefe had authorised payments to himself of more than R1‑million, at “an astronomical fee” of R76 000 a meeting. When Molefe and other board members failed to pay back this money, Letsoalo sent them letters — to which some did not respond well, Peters said.
She said Letsoalo had a proven track record in fighting corruption and the board had decided to remove him without discussing it with her, something she considered “of grave concern” because she had seconded him to Prasa to help turn things around.
Peters said board members had misconstrued her actions in appointing an interim board — a decision backed by the portfolio committee on transport. Their interpretation of her reason was “self-serving”, she said, betraying their lack of appreciation that Prasa could not operate without a board even for a week.
“While I was aware of the urgent application launched by the applicants, I could not take the risk of Prasa continuing without an interim board,” Peters said.
Peters said she had written to Molefe a number of times over several worrying factors, including in January when she raised concerns about R1.5‑billion in irregular expenditure. “In fact, the irregular expenditure has exceeded R2.2‑billion,” Peters said.
Meanwhile, the minister also challenged Molefe to produce proof that he represents all the other board members cited in his urgent application.
She said Molefe and those who support his legal challenge to their suspension have created the misleading picture that they had been acting as a “responsible board” that was discharging their legal duties in an “impeccable fashion”.
She accused them of having “deliberately misled” the court and the public about Letsoalo having increased his salary by 350%.
“They have used this misleading narrative as a ruse to remove a man who has a track record of fighting corruption and enforcing compliance with the prescripts governing public finance,” Peters said.
Despite repeated promises of a “turnaround”, quarterly reports from Prasa continued to paint a worrying picture of increased irregular, fruitless and wasteful expenditure, she said. But, since she appointed Letsoalo in June 2016, he has devised and implemented a turnaround strategy to “change the fortunes of Prasa”.
Following the Werksmans findings, in 2015 Molefe’s board instituted civil proceedings involving more than R7‑billion worth of contracts, initiated action to recoup lost money and took disciplinary steps against key Prasa employees.
One of the contracts Prasa wants reviewed and set aside is that awarded to Swifambo: the company that notoriously supplied locomotives that are too tall for the South African rail network.
In documents filed during court proceedings to review the contract, Molefe related conversations he had with Swifambo’s managing director, Auswell Mashaba. Molefe claimed that Mashaba admitted to paying about R80‑million to Maria Gomes, an ANC fundraiser and friend of President Jacob Zuma. Mashaba denied that the funds relate to the tender awarded to his company.