Prasa still ‘a far cry’ from where it should be, says Mbalula | Fin24

Transport Minister Fikile Mbalula.

• Transport Minister Fikile Mbalula said the Passenger Rail Agency remained troubled despite cutting irregular expenditure from R3 billion to R1.3 billion.
• Prasa chair Leonard Ramatlakane said the entity tried to recoup funds by selling locomotives, but only made R65 million after selling six.
• Mbalula said the entity needed to consider every option because it depended on government funding and could not cover itscosts.

The Passenger Rail Agency of South Africa (Prasa) is in talks to have 23 locomotives returned for use that were obtained during an ill-fated procurement drive that cost the rail agency billions for unlawfully procured trains, members of Parliament heard on Tuesday.

In a marathon four-and-a-half-hour session, oversight body the Standing Committee on Public Accounts (Scopa) held a hearing that dealt with the delays in Prasa’s submission of its annual report and financial statements for the 2020/21 financial year. The state-owned entity submitted the report in December last year. 

The annual report submission followed several delays and differences with the Office of the Auditor-General on the validity of Prasa’s financial statements. The submission of the annual report was tabled in the legislature seven months after the time stipulated in the Public Finance Management Act.

Scopa member and DA MP Alf Lees asked whether the entity had managed to resolve losses related to irregular procurement.

Prasa had, among other things, made headlines for the controversial “tall trains” saga, where Swifambo Rail Leasing had been used by Vossloh Espana to secure a R2.3-billion contract that resulted in the rail agency coughing up for trains that were reportedly too tall for local railways.

Prasa chair Leonard Ramatlakane said since the locomotive contract was set aside, the appointed liquidator in the matter allowed Prasa to recoup R2.6 billion by selling locomotives Prasa could not use. By the time six locomotives were sold, only R65 million was generated.

But, he said, in a bid to resolve this, Prasa was in discussions with Stadler – the parent of locomotive company Vossloh – in Spain, to have the remaining locomotives returned for use. 

“We were granted permission for a commercial agreement. Prasa engaged with Stadler in Spain to say we want 23 locomotives back in South Africa so they can be put to use. They have agreed, but we need to get a date for us to go to court and finalise the agreement,” said Ramatlakane.

Ramatlakane said Prasa wanted the locomotives within six months, and it expected the courts to decide on whether to clear the commercial agreement in April.

Lack of urgency

Lees said he was not satisfied with Prasa’s lack of urgency to get this matter concluded.

According to the annual report, while the rail agency managed to decrease irregular spending from R3 billion to R1.3 billion, it suffered a loss of R1.9 billion in the financial year, with operating costs remaining high at R15.5 billion. At the same time, Prasa saw a revenue decline of R500 million. 

READ | Prasa sues whistleblower for R45 million

Transport Minister Fikile Mbalula said while Prasa managed to reduce irregular expenditure and slow operating costs, this was “still a far cry from where the entity should be”. He blamed delays in the tabling of the annual report on the hard lockdown at the beginning of the Covid-19 pandemic in 2020.

“The untenable situation is getting the department’s attention: inadequate financial records, poor financial management, monitoring, and enforcement deficiencies. We terminated irregular security contracts, but this left infrastructure exposed to theft and vandalism,” said Mbalula.

Mbalula said the Special Investigating Unit helped Prasa investigate irregular expenditure in a process that identified 44 employees that should be disciplined. Of these, 33 employees still worked at Prasa. A total of 14 are on precautionary suspension and the other 19 were served with letters of intent to discipline them.

Mbalula said Prasa needs to explore all possible options to fulfil its mandate, as it had become reliant on government funding and was not generating enough money to cover its own costs.

Scopa member and DA MP Benedicta Van Minnen asked the Prasa delegation how far Prasa was with getting security to guard its infrastructure, as the scrapping of irregular security was being challenged in court by the affected companies.

Ramatlakane said the entity got 5 000 security personnel through interventions such as leveraging an Airports Company South Africa security contract and insourcing.

However, he said, because the cancelation of the previous contracts continues to be challenged in court, Prasa cannot advertise for new suppliers of security services. At its peak, Prasa security personnel was 10 000 strong.

Scopa member and ANC MP Bheki Hadebe asked the delegation why the entity failed to submit appropriate financial statements on time, to which Ramatlakane said the relationship between the office of the Auditor-General (AG) and Prasa leadership was strained.

Ramatlakane said Prasa will engage with the office of the Auditor-General on the development of the audit plan, with support from National Treasury. He said Prasa’s 2021/22 financial statements will be finalised in December with engagements with the AG following in January.

Get the biggest business stories emailed to you every weekday.

Go to the Fin24 front page.