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Cape Town – The Passenger Rail Agency of South Africa (Prasa) admitted on Wednesday there was a “general collapse in controls” which led to irregular expenditure of R14.6bn in the 2015/16 financial year.
“We must concede: there was a general collapse in controls in all areas of the business,” said acting CEO Collins Letsoalo. “In the area of finances, supply chain management, human resources – all these controls were non-existent and where they did exist they were inadequate.”
Prasa appeared before Parliament’s finance watchdog, the Standing Committee on Public Accounts (Scopa), to give account of its multi-billion rand irregular expenditure cited in its latest annual report.
Of more than 480 national departments and state entities, Prasa’s irregular expenditure was the biggest of all.
David Ross, Democratic Alliance MP, asked Prasa board chairperson Popo Molefe if he agreed that Prasa was responsible for over 50% of total of irregular expenditure across national departments and entities.
“Yes, I know we account for the biggest amount,” Molefe said. “But there’s a context to it. These are irregularities, which haven’t been exposed before. But they’ve been exposed now. We’re dealing with legacy issues that go back to 2012.”
In the 2015/16 financial year Prasa incurred irregular expenditure of R4.1bn, but an additional R9bn was identified in the same report that related to previous years.
In Wednesday’s Scopa meeting, Prasa said it received a budget of R14bn in terms of capital expenditure and R4.8bn for operational expenditure.
Molefe pointed out that Prasa could not merely cancel all the contracts that are deemed irregular, as some of them are linked to its operations.
"If we just stop these contracts, it will have an impact on the lives of ordinary people and we’ll paralyse the country and the economy. We can’t just stop maintenance contracts for example because the procurement processes were irregular,” Molefe said.
Prasa’s investigations into instances of irregular expenditure are still ongoing. National Treasury is currently investigating 100 cases, as well as an undisclosed number by Werksmans Attorneys, while the Hawks are probing an additional 39 cases.
Prasa also incurred "fruitless and wasteful expenditure" to the value of R255.3m in the year under review for among other things a lack of planning and failure to follow the correct process when former chief executive Lucky Montana was dismissed, which resulted in a salary payment in excess of R3m.
Lucky Montana's R3.9m salary package
According to the report Montana, who was dismissed in July 2015, received a salary package of R3.9m plus a further R458 000 in the latest financial year.
The initiation of the probe followed former public protector Thuli Madonsela's damning Prasa report last year, in which she instructed Prasa and the National Treasury to launch investigations into all Prasa contracts valued above R10m.
Law firm Werksmans was appointed by the Prasa board to conduct its probe.
The investigation is said to involve among other things a contract awarded to Swifambo Rail Leasing in 2012, valued at R3.5bn, to provide 70 new locomotives to Prasa.
Swifambo subsequently bought the locomotives from Spanish manufacturer Vossloh Espana, but reports revealed Vossloh’s Afro 4000 locomotives were too tall for South Africa's rail network.
The investigation also focuses on Siyangena Technologies, which received an improper tender contract worth R1.95bn to install high-speed passenger gates at the Doornfontein and Nasrec train stations.
The tender was extended beyond the advertised scope, in violation of Prasa’s supply chain management policy.
Letsoalo confirmed that there could be “criminality” involved in the awarding of these contracts.
