Trade unions have welcomed the decision by Transport Minister Fikile Mbalula to dissolve the board of the ailing Passenger Rail Agency of South Africa (Prasa) and place it under administration with immediate effect.
Economists said Mbalula did not have any other option but to take action to address the serious issues confronting Prasa, which provides employment to 16 350 people.
Prasa has in recent years received a series of qualified audit opinions from the Auditor-General for governance failures and irregular and fruitless and wasteful expenditure; it had a number of different boards that failed to resolve the issues facing it; it was the subject of adverse findings by the Public Protector; and had a number of issues referred to the Hawks for investigation.
Bongisizwe Mpondo, who has served on the boards of many public entities, including South African Express and South African Airways (SAA), has been appointed administrator of Prasa with immediate effect.
Mbalula said on Monday that Mpondo will run Prasa’s affairs as a board of control, as envisaged in the Prasa founding law, and as an accounting authority in terms of the Public Finance Management Act (PFMA).
“This intervention will continue for 12 months, after which a permanent board will be appointed to run the affairs of Prasa,” he said.
Mbalula said he has no doubt Mpondo has the right credentials to tackle the challenge of turning Prasa around, address its operational deficiencies and take on the intractable challenges confronting its divisions and subsidiaries.
He said his department will in the coming days be concluding a service-level agreement, that will outline in detail the terms of reference for Mpondo’s engagement.
Mbalula’s announcement came shortly after President Cyril Ramaphosa said in his regular newsletter that despite the current challenges facing state-owned enterprises (SOEs), none of them is lost and he is ready to make tough decisions over their future.
It follows SAA being placed in voluntary business rescue last week.
Ramaphosa said business rescue is not the preferred option for fixing SOEs, nor will it necessarily be advisable in other circumstances.
“But the resolve we have shown in putting SAA into business rescue cuts across all key SOEs. Whether it is Transnet or Eskom, Denel or Prasa, we are taking all necessary measures to turn them around,” he said.
Zanele Sabela, media officer for the SA Transport and Allied Workers Union (Satawu), said the union welcomes Mbalula’s move because there is a crisis at Prasa.
Sabela said the minister indicated that there will be a meeting between the unions and the administrator in January and that Satawu is looking forward to it, so it can provide meaningful input into what happens next at Prasa.
She said Satawu is ultimately concerned about its members’ job security, which is the reason the union is insistent that it has a seat at the table at the January meeting.
Steve Harris, general secretary of the United National Transport Union (Untu), said its leadership has assured Mbalula and Mpondo that it will be “available 24/7” to assist in finding solutions and identifying critical areas to help the SOE to provide safe working conditions for its members, ensure commuters get a reliable service and prevent a situation where Prasa will have to close its doors.
Harris said it is critical that Prasa employees are paid at the end of this month and to implement immediate measures to ensure employees are safe at work.
He added that Untu realises that Mbalula had no alternative but to implement drastic measures.
Harris commended Mbalula for his bold actions and indicated that Untu will support and contribute to the efforts made to ensure the 14 000 jobs provided by Prasa are not affected.
Economist Mike Schüssler said it is about time the government took action because Prasa has lost 80% of the passengers it had ten years ago.
Poorest of the poor affected
“It’s a nightmare because the poorest of the poor use trains because it’s a cheap form of transport. The cost to them is huge if they have to use another form of transport.
“The trains don’t work anymore, they are unreliable and then you have the crime on those trains. It’s concerning that the people who have to make use of trains have been left so long in the dark.
“I think some of the previous management should go to jail for treason because they damaged vital infrastructure of this country,” said Schüssler.
Dr Azar Jammine, chief economist at Econometrix, said the decision to place Prasa under administration shows that all the SOEs are collapsing.
Jammine said Ramaphosa did not have any option but to take action, although it will obviously cause friction in the ruling party.
He said Prasa had to either be placed in business rescue, liquidation or bankruptcy.
“The trouble with bankruptcy, from my understanding, is that the government has to immediately pay off all the creditors, whereas with business rescue they can negotiate with them on a payment plan.
“I’m wondering if, for the Ramaphosa faction in government, it’s the way to go because it also means that in this way they overcome the power of the unions,” he said. “If the unions go on strike, it will be the collapse of their organisation.”