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Former board chair of the Passenger Rail Agency of South Africa Popo Molefe on Thursday told the Zondo Commission of inquiry into state capture that ex-CEO Lucky Montana had attempted to hide key information on important manufacturing and locomotive contracts from the board.
According to Molefe, Montana also provided false information about the cost of the contracts, which later ran into billions more than the amount allocated.
Molefe, who was the third witness to take the stand regarding matters at the state-owned rail agency, told the commission that when the board he chaired took over in August 2014, Prasa was entering into a R172-billion 'modernisation programme' set to take place over a period of 10 years.
The programme was intended to see the rail agency revived through the manufacture of new state-of-the-art trains, 20 of which would be procured in Brazil and SA to foster job creation, according to Molefe.
"Various railway stations were to be renovated… there were depots that were going to be modernised. Overall, the program of modernisation was estimated to cost R172 billion," Molefe said.
Molefe told the commission the project had provided a glimmer of hope for the struggling state-owned entity, and had been welcomed by the board.
'Ambitious, exciting programme'
"This was quite an ambitious and exciting programme… being on the board of Prasa at that historic moment would have been very attractive," said Molefe.
But the commission also heard that when the new board took over, it found that several contracts had been concluded and signed by the previous board. Among these was a R51-billion tender that had been awarded to the Gibela Rail Transport Consortium, which has previously made headlines for its links to politically-connected businesspeople.
Molefe told the commission it has been difficult to gain access to details of the contracts.
"In order for us to exercise proper oversight, we felt duty-bound to ask for detailed presentations on the contracts by the group CEO and his executive team. We also requested the actual contracts so that we could see precisely what the company was committing itself towards," said Molefe.
According to Molefe, the board asked then Group CEO Lucky Montana for records on existing contracts and their statuses.
"The group CEO was reminded that the board needed those contracts. He doesn’t say no, but he doesn’t provide. When we initiated engaging with the firm lawyers that did the contracts…the group CEO was very angry that we went directly to those lawyers to ask for these contracts," said Molefe.
"In respect of these contracts…the main focus was on the R51 billion which was being allocated for the manufacturing of the new locomotives," the former chair said, adding that the cost of procurement ultimately swelled by over R3 billion.
Molefe said there were major disparities between what was disclosed about the contracts and details that were discovered by the board.
Irregular expenditure
Molefe also said the board found irregular expenditure amounting to over R500 million by 2014 and 2015, which would escalate to billions within a year.
"The audit report of the year 2014/2015 by the auditor general recorded that there was an irregular expenditure of over R500 million, which in precise terms was R515 million. Queries arising out of the report projected that in the following financial year, the irregular expenditure would be in the region of R8 billion.
"The conclusion of the audit and risk committee was that [in] literally all the departments of Prasa… [some] people in those positions did not have requisite skills and that they were unable to discharge their responsibilities as they were required," said Molefe.
The commission will continue to hear Molefe’s testimony on Friday.
