Mending Prasa will be a long haul

Contraventions in supply chain management result in irregular expenditure of R28.6bn in FY2020.
The Hawks and the Special Investigating Unit are currently investigating 50 matters. Some have been referred to the NPA’s Specialised Commercial Crimes Unit. Image: Shutterstock

The issues relating to financial mismanagement and tender irregularities at the Passenger Rail Agency of South Africa (Prasa) have been in the public eye for a number of years.

In 2015, then-Public Protector Thuli Madonsela released her report on the investigation into the various allegations concerning Prasa. These irregularities have been further probed by the Judicial Commission of Inquiry into Allegations of State Capture.

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The minister of transport dissolved the Prasa board of control in December 2019, and a new board was appointed on October 21, 2020 for a period of three years.

These new board members now have to report on the financial year ended March 31, 2020 – which ended six months before their appointment.

In his statement accompanying the financial report, chair Leonard Ramatlakane referred to the unprecedented levels of theft and vandalism suffered by Prasa’s rail and infrastructure network.

Prasa will now focus on achieving stability in key management and skilled positions, strengthening good governance, ensuring the safety and security of operations and passengers, ensuring reliability and availability of rail transport, putting in place strong regional operations as centres of excellence, and consequence management.

This article summarises the main issues arising out of the financial report.

Investigations into irregularities

Numerous investigations are still in progress, including:

  • Those arising from the 2015 Public Protector report;
  • Those being conducted by The Hawks (the Directorate for Priority Crime Investigation), which began in 2016 in terms of the Prevention and Combating of Corrupt Activities Act;
  • Those relating to the contravention of the Competition Act; and
  • Those relating to supply chain management irregularities identified and reported during the 2018/2019 audit.

An agreement was signed on September 11 last year, in terms of which the Special Investigating Unit (SIU) would second resources to Prasa for six months to assist with the finalisation of the investigation into the material irregularity.

The SIU is currently investigating 27 matters. The Hawks are working on 23 matters, some of which have been referred to the National Prosecuting Authority’s Specialised Commercial Crimes Unit.

Internal investigations and disciplinary hearings are under way and three legal firms have been appointed to manage the ensuing disciplinary hearings.

Report of the Auditor-General (AG)

  • In a nutshell, the AG issued a disclaimer of opinion, supported by numerous reasons including insufficient appropriate audit evidence, not being able to verify property, plant and equipment (PPE), not being able to verify whether cash flows from investing were accurate and complete, inadequate impairment assessment performed for PPE, problems with the accounting for unspent conditional grants, incorrect accounting for prior period errors and adjustments, and a lack of governance records.
  • The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework or supported by full and proper records.
  • Irregular expenditure, which amounted to R28.6 billion (2019: R27.3 billion), resulted mainly from non-compliance with supply chain management.
  • Further findings include the lack of consequence management, the constant threat of pillaging and destruction of the rail infrastructure, major capital projects remain behind schedule, and irregularities with supply chain management.
  • Total capital commitments in regard to “contracted but expenditure not yet provided for” amounted to R76.3 billion (2019: R71.1 billion). Total operational commitments in regard to services “contracted but expenditure not yet provided for” amounted to R16.6 billion (2019: R20.4 billion). The AG found that there was a lack of supporting audit evidence to substantiate R15.8 billion of the R16.6 billion.

Other significant numbers

  • Prasa has call deposits of R24 billion (2019: R18 billion). The financial statements do not indicate with whom these call deposits reside. However, they earn interest at an average rate of 5.9% (2019: 6.35%) per annum, and amounted to R1.5 billion for the year (2019: R1 billion).
  • Prasa entered into an agreement with the Gibela Rail Transport Consortium in 2013 for the design, supply and manufacture of 600 new trains. Prepayments for 2020 amount to R8.3 billion (2019: R8.4 billion). Payments were made up front to Gibela for the construction of the assets. Once construction is complete and delivered, the amount is transferred to property, plant and equipment.
  • The carrying value of property, plant and equipment that is taking “significantly longer to complete” is R3.9 billion (2019: R9.9 billion).
  • The carrying value of property, plant and equipment where construction or development has been halted amounts to R2.1 billion (2019: R0.8 billion); R2 billion relates to a legal dispute.
  • Unspent conditional grants for 2020 were R48.9 billion (2019: R45 billion). The AG could not confirm the accuracy of this amount.
  • Contingent liabilities of R2.8 billion (2019: R3.2 billion) include the Siyangena contracts of R2.1 billion. In a judgment handed down on October 8, 2020 the North Gauteng High Court set aside all agreements between Prasa and Siyangena Technologies. Siyangena has appealed the Gauteng High Court decision.
  • The receivable relating to Swifambo Rail Leasing (SRL) of R438.5 million (2019: R459.8 million) was “impaired to the current estimated potential recoverable value in the previous financial year”. This amount is likely to change. Prasa entered into a contractual agreement with SRL in 2013. Thirteen locomotives were delivered to Prasa during the 2014/15 and 2015/16 financial years. No locomotives were delivered subsequently. A forensic investigation revealed irregularities. The high court set aside the contract, and this decision was upheld by the Supreme Court of Appeal. The Constitutional Court dismissed Swifambo’s application for leave to appeal in 2019. There are many legal challenges ahead.

Ramatlakane is confident that Prasa is “too significant to fail”.

Unfortunately, this is the refrain from all of the state-owned entities that have been battered by corruption and state capture.

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Prasa can be mended in one year if the political will was there, but the will is not there. Same for all the SOE’s.

…“too significant to fail”.
The same old mantra!

Yet, across the board, our SOE’s are already failing to carry out their mandates. Their size and significance, refers only to what the country has already squandered.

Unfortunately Prasa will not be fixed. Mainly because it cannot be repaired by the people that broke it in the first place.
Rail traffic all over Africa collapsed when they received their freedom and it is only now after many years that the Chinese have begun to restore some of it.

It is a pipe dream that Prasa can be fixed. As I am writing here there are people chopping up the platforms to get at the copper wires. We need a police force the have the will to fight crime. Go to any railway station and you will see what I mean.

PRASA is unmendable with the same corrupt ANC Cadres in place.

Who should do the fixing ? I think the forces of corruption , criminality and incompetence are far stronger than the diminishing functioning ones.

Investigations….Disciplinary hearings….excuses, excuses excuses….when will this ever end.
A working transportation system is the life blood of any economically sound country – why oh why is this so difficult to understand? All I know is that SAA and SAR&H worked perfectly under the National Government…why can’t the ANC get this right? Could it perhaps be that racist BEE employment practice is employing people based on the colour of their skin and not on their ability and expertise to do the job? If so, nothing is going to change, just more investigations, Hearings and excuses.

The same racist useless thieving bunch are now going to fix what they broke/stole? Hilarious.

Not holding my breath on this one.

It isn’t like the ANC or the cadres imbaciles ever fix anything.

Bread yes. Fix no.

Spellcheck dude …

Comments are insignificant enough to not waste time on proof reading

Another year and more billions in irregular expenditure and no consequences. The rot continues despite the hot air from on high in the echelons of power.

African countries inherited all the infrastructure from the colonialists but they didn’t look after it. People are lifting up the railways as we speak in Gauteng and selling it for scrap metal. Forget about expanding the infrastructure, just to keep what you got for free seems impossible for this lot.

Developing a mass vaccine and roll out action to destroy the general theft gene should be the first priority.

The government has neither the competence nor the intelligence to fix any SoE

Gotta love the solution to all dysfunctional SOE’s … appoint a new board, wait three years or less and … appoint a new board. Wotta laff … only in South Africa.

Beyond mending – the once fine, first world SAR&H has been looted, destroyed and sacrificed on the alter of the anc’s communist, knowitall arrogance and incompetence….period!

Lol, mending SA with the currant leaders will never happen, never mind Prasa.

Without proper policing and proper security fencing this is a lost cause. Scrapyard companies have become a very profitable businesses from Prasa. Also the same so called poor people who need and use trains are building next to and ontop of the railroads on the last part the railroads that have been out of service for one reason or two.

End of comments.

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