/ 13 April 2018

Corruption laden Prasa chugs along

Of 216 contracts with Prasa only 13 are above board

UPDATETransport Minister Blade Nzimande has appointed a new interim board at rail agency Prasa headed by the CEO of Business Unity South Africa Khanyisile Kweyama.

In a statement released late on Thursday evening Nzimande stressed that the move was in line with the new period of change, renewal and revitalization brought on by President Cyril Ramaphosa.

Former Rand WAter CEO, Dr Simo Lushaba has also been appointed as the Acting Group CEO (AGCEO) of PRASA.

The new interim board which will be serving for an initial period not exceeding 12 months also include, Mr Sango Ntsaluba, Mr Louis Wessie, Ms Jenny Schreiner, Mr Nazir Alli, Ms Doris Tshepe and Ms Mashila Matlala.

“I am committed to change the state of paralysis which currently obtains at PRASA and that this must be a thing of the past.

“This Board is carefully selected on the basis of skills and expertise required to run a company of this magnitude. Their skills set include amongst others the technical, corporate governance, legal, finance, risk management and human resources,” said Nzimande.

These appointments follow the resignation of former interim chairperson Tintswalo Makhubele, who left last month to take up a position as a High Court Judge.

The new board will be joined by representatives of from the Department of Transport, National Treasury and SALGA.

The mammoth clean-up facing the new brooms at the state-owned enterprises is illustrated by the case of the Passenger Rail Agency of South Africa (Prasa), where 216 contracts worth R19-billion are being investigated by the treasury.

Thirteen forensic and legal firms have examined these contracts and only 13 are above board, according to reports leaked to the media.

The job may be huge but it is hardly proceeding at a breakneck pace. It is almost a year since the treasury sent Prasa a draft report of investigations done into its contracts entered into between 2012 and 2015, which showed extreme levels of corruption, financial maladministration and negligence, but nothing has happened yet.

Former deputy finance minister Sfiso Buthelezi, now the deputy minister of agriculture, is implicated because, as the chairperson of the Prasa board at the time, he apparently failed to stop the financial mismanagement taking place. A report by Deloitte found that the board at the time should be held accountable for “contravening section 50(1) (a) of the PFMA [Public Finance Management Act] in that it failed to ensure reasonable protection of procurement records and the Accounting Authority [board] should report the irregular expenditure”.

Some of the damning findings of the investigations point to serious contraventions of the Act by Buthelezi, who is accused of failing to execute his oversight role to prevent wasteful expenditure, criminality and compliance with Prasa’s internal policies and regulations.

A report by forensic investigators Strategic Investigations and Seminars recommended that he and his fellow board members be criminally charged for contravening several sections of the Act.

The treasury said the draft report into the 216 contracts, which was sent to the agency in May last year, was being considered by Prasa. An interim board was appointed in October.

The agency said this week a review of the report is “still underway. There will be a formal announcement in this regard in due course.”

The investigations were commissioned following a recommendation by then public protector Thuli Madonsela. In her 2015 report, Derailed, which looked into mismanagement at the agency, she recommended that all contracts awarded after 2012 and worth more than R10-million be investigated.

The treasury said a total of 13 forensic and legal firms were appointed at an average cost of R1.8-million a firm, amounting to R24-million in total.

The 216 contracts exclude two other Prasa investigations into two contracts that were allegedly issued unlawfully, one being to Swifambo Rail Leasing, worth R3.5-billion, for the supply of trains, which were later found to be too high for South Africa’s rail network. The other is a contract for security related services issued to Siyangena Technologies, worth R4-billion.

In all the reports by the investigators, there were complaints of little to no keeping of records, and of important documents and information not being made available for them to conduct their work properly.

After several attempts to get information from senior Prasa officials, audit firm Deloitte had to classify nearly R30-million in expenditure for contracts that the agency entered into with Fantique Trade for supposed “drainage upgrades” as irregular, because it had not received “any documents relating to Fantique that deals with this suppliers’ appointments and the method used to appoint it”.

Deloitte concluded that “these documents relating to the appointment of Fantique on both contracts do not exist, and/or Prasa does not want to provide these documents, and/or that these documents may have been destroyed”.

Former Prasa chief executive Lucky Montana has also been implicated in several irregular contracts and irregular transactions, and Resurgent Risk Managers, one of the forensic investigators, has called for him to be charged for failing to comply with his fiduciary duties and general responsibilities in line with the PFMA.

The rail agency has been subject to other investigations as well, notably one by Werksmans Attorneys, which was paid an estimated R150-million to investigate corruption.

Following a high court ruling to set aside Swifambo Rail Leasing’s contract, Werksmans issued a letter on behalf of Prasa to demand a repayment of R2.6-billion with interest. Swifambo has been granted leave to appeal the ruling at the Supreme Court of Appeal.

The treasury has said that, when Prasa finalises its consideration of the reports, the final report will be sent to the public protector and Prasa will act, including by laying charges.

Transport department spokesperson Ishmael Mnisi said the minister would meet Prasa’s interim board “soon” to get an update on the agency. The minister would then look into appointing a permanent board.

But, Mnisi added, the interim board could make the necessary changes and act on the report’s recommendations. The interim board, headed by Xolile George, of the South African Local Government Association, “has the full powers and authority over the decisions of the organisation”, he said.

Tebogo Tshwane is an Adamela Trust trainee financial reporter at the Mail & Guardian