Remedial action to get Prasa back on tracks - As it happened

The National Treasury’s Chief Procurement Officer:

"In consultation with the PRASA Board, consider commissioning a forensic investigation on all PRASA contracts or tenders valued above R10 000 000.00 issued between 1 April 2012 and 30 June 2015.

"The terms of reference to be approved by the Public Protector and to include a forensic examination of all suspected or alleged corrupt relationships.

"The Public Protector to be kept abreast of the progress of the investigation and favoured with the final report."

The Acting GCEO of PRASA is required to do the following:

"Should ensure that PRASA adopts a monitoring system that ensures that proper procurement processes and HR processes are followed on appointing service providers and individuals.

"To ensure PRASA reviews the existing policy or the policy provisions on managing conflict of interest to ensure there is no confusion regarding expectations from employees and Board Members.

"Together with the Board, review the entire PRASA SCM Policy in particular clause 11.3 of the policy.

"To ensure that prior to signing a formal contract or service level agreement with a contractor must ensure that such contracts or agreements are legally sound to avoid potential litigation and to minimise possible fraud and corruption. This must include legal vetting by at least the Legal Services of the agency. Such contracts or agreements must be actively managed in order to ensure that both the agency and the contractors meet their respective obligations.

"To ensure that there is compliance with paragraph 11.1 of the Disciplinary Code and Procedure of Metrorail to avoid prolonged and costly suspensions of employees.

According to Madonsela the chairman of the PRASA Board needs to ensure that:

"The PRASA Board takes cognizance of the findings of maladministration and improper conduct by Mr Montana and other functionaries at PRASA and takes or ensures that appropriate disciplinary action is taken against the responsible officials, where it considers appropriate.

"The PRASA Board evaluates the effectiveness of PRASA’s internal controls on Supply Chain Management and Human Resources processes to identify systemic deficiencies with a view to take corrective action to prevent a recurrence of the improprieties referred to in this report.

"The PRASA Board reviews the PRASA SCM Policy regarding the R350 million. threshold value for competitive bidding process of procurement of goods and services.

"The PRASA Board reports to the National Treasury and the Auditor-General, particulars of the alleged financial misconduct and the steps taken in connection with such financial misconduct, as contemplated in section 85 of the PFMA.

"To commission the National Treasury in conducting a forensic investigation into all PRASA contracts above R10 million since 2012 and take measures to address any findings regarding systemic administrative deficiencies allowing ongoing maladministration and related improprieties in its procurement system.

Remedial action to be taken by Madonsela...

The Minister of Transport to:

Take cognizance of the findings regarding the unethical conduct and maladministration by PRASA relating to the irregularities mentioned in the report.

Ensure that the PRASA Board considers the report and, where appropriate, acts in terms of section 84 and as contemplated in section 85 of the PFMA.

Ensure that the PRASA Board considers the acts of maladministration and improper conduct referred to in paragraph 8 of this report and takes appropriate disciplinary action against the officials of PRASA in respect of their conduct referred to therein.

Include in her oversight activities with regard to PRASA as an State Owned Enterprise, the monitoring of implementation of remedial action taken in pursuit of the findings in terms of powers conferred under section 182(1)(c) of the Constitution.

Madonsela details her general observations...

"The transactions investigated and related findings reveal a culture of systemic failure to comply with the SCM policy, particularly involving failure to plan for bulk procurement, test the market appropriately for competitive pricing and to manage contracts, which culture may have cost PRASA millions in avoidable expenditure and preventable disruption of services.

There also seems to be a culture of either poor information management or hiding of information that could provide evidence of maladministration and other forms of improper conduct. If the pattern is not arrested it has the potential to derail the effective and efficient procurement of goods and services to support PRASA operations and consequently service delivery by this important national asset. Poor financial management also has implications for the national revenue as it may mean frequent yet preventable rescue funding.

Regarding PRASA’s failure to provide information, it must be appreciated that public accountability via administrative bodies such as the Public Protector is not accountable to Complainants but to the public that entrusts public functionaries with public power and resources. It is, accordingly, not open to public functionaries to try and win a case by withholding or hiding information.

The remedial action I take in terms of section 182(1) (c) of the Constitution is to require:

Regarding Mr Montana’s alleged improper transferring of Mr Stephen Ngobeni without a disciplinary process being followed for his alleged irregular appointment of a Training Contractor to provide training services on the handling of People with Disability:

I have deferred my finding on the alleged failure by Mr Montana to take disciplinary action against Mr Stephen Ngobeni as PRASA has failed to provide the necessary documents relating to the issue.

No evidence was found in support of the allegation that Mr Ngobeni is Mr Montana’s cousin.

I have deferred my findings on this allegation and will be dealt with in the second report.

Regarding Mr Montana’s alleged improper taking of a Blue Train trip to Cape Town together with 10 female companions during the period between 24 to 27 September 2009 and return by SAA flight at an estimated cost of R170 000 and possible fruitless and wasteful expenditure:

The evidence regarding this issue is inconclusive. While the photographic evidence received from the Complainant apparently places Mr Montana on the train and a hotel with women companions, he he has denied the allegation but referred to a different trip.

I have deferred my finding on this allegation and will be dealt with in the second report.

Regarding PRASA’s alleged failure to take disciplinary action against staff members allegedly involved in fraudulent Electronic Funds Transfers amounting to R8.1 million:

The allegation that PRASA failed to take disciplinary action against employees involved in the fraudulent electronic financial transfers of its funds, from its corporate bank accounts, is partially substantiated.

Action was taken against one of the six (6) employees found responsible by a Deloitte forensic investigation, for security lapses that led to the fraudulent electronic transfer of PRASA funds amounting to R8.1million in its KwaZulu Natal and Gauteng bank accounts.

PRASA took action against Ms Pallaiyiah but inexplicably failed to take disciplinary action against the other six individuals recommended for possible disciplinary action as mentioned in paragraph 13.3 of the Deloitte Report of 26 February 2010.

The conduct of Mr Montana regarding failure to take disciplinary action against the other five (5) employees constitutes maladministration and improper conduct.

Regarding PRASA’s alleged improper replacement of the Group Executive HR with the GCEO’s uncle, Mr Mphefo Ramutloa, without following proper recruitment process:

The allegation that Mr. Mphefo Ramutloa was improperly appointed in replacement of Group Executive HR by PRASA is not substantiated.

No evidence could be found to support the allegation that Mr. Mphefo Ramutloa is Mr Montana’s uncle.

Regarding the GCEO’s alleged improper appointment of Mr Joel Chimanda at a cost of R2 million as a Special Advisor:

The allegation that Mr. Montana improperly appointed Mr Chimanda for advisory services is substantiated.

However, it was Mr. Chimanda’s company, AR Chimanda Consulting that was contracted for R1 999.750.00 on a monthly retainer of R150 000.00, which makes the appointment a procurement contract and not an employment contract. As juristic person cannot be an employee, the contract is incapable of being defended under the GGEO’s powers to appoint special advisors, as attempted by Mr Montana in his submissions.

The appointment of Mr. Chimanda’s company was not preceded by a competitive bid process, nor is he offering exclusive specialised services entitling him to be the sole provider in terms of the provisions of the PRASA SCM Policy.

The conduct of Mr Montana, in appointing AR Chimanada Consulting, is accordingly in contravention of the SCM policy, the PFMA, PPPFA aand sction 217 of the Constitution.

The conduct of Mr Montana accordingly constitutes maladministration and improper conduct.

Regarding PRASA’s alleged improper appointment of Ms Shiela Boshielo, wife of then Board Member, Mr. Bushy Boshielo, as the General Manager of Autopax:

I have deferred my finding on the alleged nepotism regarding the appointment of Ms Boshielo as PRASA has failed to provide the selection and appointment memoranda and some of the relevant documents.

In its initial response Mr Montana stated on behalf of PRASA that Ms Boshielo was appointed on 06 April 2010 through a headhunting process. Later, in response to the provisional findings, Mr Montana turned around to state that the submission was a mistake as Ms Boshielo was appointed through a recruitment and selection process and was selected from amongst other candidates but repeatedly failed to honour requests to provide the recruitment and selection documents to substantiate the assertion.

Regarding Dr Bridgette Gasa’s, a PRASA Board member’s alleged failure to disclose and manage a conflict of interest arising from her interest in ARUP and her directorship in another company providing consultancy services to PRASA:

The allegation that the then PRASA Board Member, Dr Bridgette Gasa, failed to disclose and manage a conflict of interest arising from her appointment to the Board while two companies she had an interest in provided services to PRASA, is not substantiated.

Whilst Dr Gasa was indeed a Director at ARUP from 09 February 2011, she made the necessary disclosure to PRASA on 20 July 2011, resigned on 15 May 2012 and when making her disclosure on 10 October 2012, excluded ARUP, as she no longer was a board member.

ARUP SA (Pty) Ltd was indeed awarded a contract by PRASA for the Park Station Development Framework on 21 June 2011; however the contract was for R3.8 million which would not have required Board approval.

Regarding PRASA Board Chairman, Mr Sfiso Buthelezi’s alleged failure to disclose and manage a conflict of interest arising from his interest in Makana, a subsidiary of Cadiz, a company allegedly providing advisory services to PRASA on the Rolling Stock Programme:

The evidence regarding the allegation that Mr Buthelezi, former Chairman of the PRASA Board, improperly failed to disclose and manage a conflict of interest arising from his interest in Makana, a subsidiary of Cadiz, a company alleged to be providing advisory services to PRASA is inconclusive.

The documents have not been provided by PRASA, whose GCEO only offered an explanation disputing the allegation and providing the names of companies involved in the said advisory services.

Accordingly, I have deferred my findings on this allegation and will be dealt with in the second report.

Regarding the GCEO’s alleged improper suspension of employees resulting in labour dispute settlements amounting to R3.35 million thus constituting fruitless and wasteful expenditure:

The allegation that the GCEO suspended employees without following proper disciplinary procedures is substantiated in respect of some of the employees as others were not suspended by him.

PRASA suspended 7 employees without following proper procedure as provided for in the Labour Relations Act and paragraph 11 of its Disciplinary Code and Procedure, leading to loss of approximately of R2 million in wages during their suspension period.

The case studies regarding the seven (7) officials mentioned in paragraph 6.28.2.3 of the report support the conclusion of a pattern of habitual suspensions for periods exceeding thirty(30) days without following proper procedure.

Regarding the GCEO’s improper termination of contracts of Executives resulting in fruitless and wasteful expenditure amounting to an estimated R5 million:

The allegation that Mr Montana improperly terminated the services of 5 of its Executives mentioned in paragraph 6.27.2.1 of this report is substantiated.

Mr Montana terminated the services of five Executives during 2008-2013 without following proper procedure as provided for in paragraph 4.4 of PRASA’s Disciplinary Code and Procedure. This resulted in the CCMA overturning some of the terminations and others being settled out of court at cost to PRASA.

PRASA subsequently paid labour dispute settlements amounting to R3 816 735.32, principally due to procedural irregularities in the disciplinary steps taken against involved officials, which payments can be said to constitute fruitless and wasteful expenditure as envisaged in section 38(1)(c)(ii) of the PFMA.

Failure by PRASA to follow its corporate disciplinary procedures and labour laws relating to procedural fairness constitutes maladministration and improper conduct.

Regarding PRASA’s alleged improper incurring of rental expenditure on Intersite Building after vacating the building 10 months before the expiry of its lease resulting in fruitless and wasteful expenditure:

The allegation that PRASA improperly incurred rental expenditure and the consequent fruitless and wasteful expenditure, due to vacating Intersite Building before the expiry of its lease, is substantiated.

PRASA vacated the Intersite building about 10 months before the lease expiry date and continued with rental payments for the building for the vacant building until the expiry of the lease.

PRASA vacated the Intersite building about 10 months before the lease expiry date and continued with rental payments for the building for the vacant building until the expiry of the lease.

Regarding PRASA’s alleged incurring of rental expenditure for Jorissen Building after vacating it 20 months before the expiry of its lease resulting in fruitless and wasteful expenditure

Findings:

Grand leadership marketing tender - conduct of Prasa's tender committee in contravention of supply chain management - improper and maladministration.

Project timeline extended by 6 months.

Findings:

Improper appointment of Ezra Ndwandwe (consultancy) to the value of R6m by CEO Lucky Montana.

No process was followed - improper conduct and maladministration.

Findings:

Improper appointment of Royal security to the value of R2.5m - not substantiated.

Payment of Enlightened security - maladministration and improper conduct.

Improper appointment of a media company to produce a magazine - substantiated  - without transparent process,

Arrangement with KG media company 'bizarre' totalling an amount of R33.5m unlawful.

Findings:

Improper appointment of security tender (R3.7m) - substantiated (no evidence it was done on Montana's order)...maladministration and improper conduct.

Findings:

Siyengena tech tender of R1.95bn for high speed passenger gates...extension to more stations that were not specified...maladministration finding.

Siemens dark fibre and integrated communication systems R256m (alleged R800) - substantiated...maladministration finding.

Madonsela: Authenticity of documents relating to procurement 'doubtful'...undated and unsigned.

Madonsela: Reference to whistle blower victimisation.

Prasa management was principally represented by the CEO Mr Montana...meetings were held to clarify evidence already held.

Spoke to Montana assisted by his lawyers.

Madonsela now details how the investigation was conducted:

Interviews, meetings with selected witnesses...research into the regulatory framework...guided by the PP standard approach.

Report says obtaining information from management and the board was extremely difficult.

Many documents still outstanding.

Madonsela: 19 of 32 complaints on Prasa were substantiated.

The complaints were brought by unions Satawu and National Transport Movement in 2012. They involve more than R2.8bn.

37 complaints were lodged but the report only details 32.

Prasa has reported an accumulated loss of R4.4bn R2010-2012 and an accumulated loss of R1bn for 2014/15.

Madonsela: 37 complaints investigated (lodged by Satawu)

Relating to procurement, irregularities, and nepotism...

News24 journalist Thomas Hartleb has gone into 'lock in' with the Prasa report at the Public Protector's office - no electronic devices allowed.

In 2012, the SA Transport and Allied Workers Union (Satawu) reported allegations of corruption and tender irregularities at the agency to the public protector.

The union alleged that former CEO Lucky Montana was responsible for wasteful expenditure and had violated sections of the Public Finance Management Act.

It reportedly claimed he irregularly awarded tenders worth an estimated R1bn.