The Passenger Rail Agency (PRASA) had achieved 45% of its targets for 2016/17. Some of the action plans to address challenges were: recovery plans for rolling stock and infrastructure; combining work of PRASA Rail Engineering and PRASA Tech to collectively address infrastructure and rolling stock; security action revolved around interventions to address hotspots and targeting scrap metal dealers, working with the SAPS; and Acting Group CEO visited suppliers of Rolling Stock programme to assess capacity. The new Criminal Matters Amendment Act of 2015 had strengthened the fight against cable theft.
The Committee was generally unhappy with PRASA's performance and on a few occasions expressed their discontent by exclaiming: 'It is bad, It is bad' and refusing to accept the report. Several Members declared that 'the Board must fall’. Another Member accused the PRASA Board Chairperson coming to this meeting to mislead the Committee. The Committee was very unhappy that security on trains and at stations had worsened; that trains were often late; trains were being burnt and looting was taking place with few arrests. Certain aspects of the rail system had declined over time and the Committee was at pains to find out why this was so, and why this had perpetuated over time.
Members asked what the challenges were with regard to security; why only 45% of the targets were achieved; how the Chairperson foresaw the improvement of trends since he had taken up the position; what corrective measures were in place to deal with the irregularities; which entities were pulling PRASA down; why trains were delayed; why the signalling system had not been fixed for such a long time; why the fencing had still not been sorted out; what was the plan to turn around the deficit. Members asked for more information about the relationship with Werksmans Attorneys and more importantly, why they were paid R80 million. PRASA was asked to supply the board resolution on board member remuneration and confirmation was asked if board members were receiving R75 000 per meeting per person. It was decided that the discussion should continue the next day before PRASA gave a briefing on Metrorail.
Passenger Rail Agency of South Africa (PRASA) on its performance
Mr Collins Letsoalo, Acting Group Chairperson of the Executive Office (CEO): PRASA, said that 45% of the targets were achieved to date. Whereas rail operations did not achieve any targets in 2014/15, in 2015/16, they met 50% of the targets. With regard to the performance in Quarter 1 2016/17, the challenges in the passenger environment were: Metrorail – passengers, trains on time and availability; injuries and fatalities; and Autopax passengers. A further challenge was project delays. Some of the action plans to address challenges were:
- Recovery plans for rolling stock and infrastructure;
- Combining work of PRASA Rail Engineering and PRASA Tech to collectively address infrastructure and rolling stock issues;
- Security action revolves around interventions to address hotspots and targeting scrap metal dealers, working with the SAPS; and
- Acting Group CEO visited suppliers of Rolling Stock programme to assess capacity.
Security around assets and passenger protection included:
- PRASA Protection Services and service providers focused daily on preventing crime, illegal crossing of railway lines and preventing fare evasion;
- The number of arrests in Quarter 1 for Schedule B offences were 6 530, and for serious crimes 218; and
- The Criminal Matters Amendment Act 18 of 2015 resulted in all suspects arrested for cable theft in the last three months were denied bail and remained in jail; and one suspect expected to receive a sentence of 15 years for cable theft.
Implementation of the Committee’s 2015 Budgetary Review and Recommendations Report showed that:
• the manufacture of the first set of trains was on track;
• test train 1 and 2 were currently undergoing safety critical open line testing;
• the first test train received Track-Worthiness certificate in April 2016; and the first train was already tested for 132km/h speed.
Mr Letsoalo said that 32 South African companies had already been contracted for trains in Brazil. To date Gibela had created 449 jobs where:
– 403 were SA citizens;
– 347 were Black
– 336 were skilled Black citizens;
– 185 were women; and
– 261 were youth.
Approximately 19 500 individuals had been skilled over a 10 year period. Gibela had further awarded 180 bursaries, worth approximately R12 million.
Mr Letsoalo said that PRASA was not here to paint a picture that said that all was well in PRASA and its operations. They did walk the stations, go to depots, in fact it was agreed that EXCO meetings were held at stations, and the EXCO staff arrived in trains. If problems were to be solved at PRASA, then they had to be consumers of the services it used. He used the train services with the team and they had found things that were shocking. At Eerste Fabrieke station women had to share the same toilets as men, which was very undignified. The problems at PRASA were acknowledged and attempts were being made to ensure there was forward movement and in a dignified way.
Mr M De Freitas (DA) said that a number of times the presentation referred to infrastructure and parts. He had received the names of people who supplied these goods and they claimed that they were not being paid, The amount owing was in the millions and the length of time was months and they found it difficult to continue to supply to PRASA. So this was one of the problems.
Mr Letsoalo replied that suppliers were owed millions and they were not being paid. This was because the operational expenditure at PRASA was more than the revenue. An example was that the revenue targets for the first quarter of this year had already been missed by 38%. It was funded from other income which was from its property portfolio. In rail operations, those targets had been missed. When targets were missed it meant that there was no money to pay people. PRASA did not have money. There was also a function of accounting that it had gotten wrong. When it bought components that had to be fitted into trains, no matter how big they were, Operational Expenditure (OPEX) was used. The dominant view was that Capital Expenditure (CAPEX) had to be used, because that was capital expenditure and it had to be capitalised. If that had been done going back few years, then money would have been available. It was seeking an accounting opinion, it had its own opinion and matters were being finalised in this regard. This could be turned around; it was being worked on.
Mr De Freitas said that the other aspect was the sub-standard parts. In many cases these companies were not accredited; so this talked to the companies that were supplying these parts. And those that were accredited and provided the correct materials, clearly would be more expensive because those were the correct materials and there were no shortcuts, so these companies were not being used
Mr Letsoalo replied that PRASA had a thing called 90:10; there was also a thing called 80:20. This said that if this thing could do the work, and the price was low, then it should be taken. Thus one often ended up with the cheapest that was not necessarily the best. The situation was now that PRASA would use the South African Bureau of Standards and have PRASA spares tested against those standards. It would also provide for a rigorous warranty process. This included that if train failed, then the company who provided the failed component had to pay PRASA. It was introducing a penalty regime.
Mr De Freitas said there was a lot of talk about arson and criminal behaviour, and there was very much a reactive response. He would have thought that being proactive and making sure these things did not happen in the first place was key; investing in that would be saving a lot more in the long term. He saw a lot of reactive expensive action that was evident.
Mr L Ramatlakane (ANC) asked what the challenges were with regard to security. He asked if it was the 'warm bodies' or technological issues. He would like to hear more about the security tender that was supposed to come through a year ago – what was the situation with that? It was a worry that the Board member who dealt with security was not at this meeting today. This meeting was quite thin on Board members. Mr Steenkamp used to head the committee that dealt with security; so if he was not here today the Committee could not benefit from the work he had been doing and the problems that engulfed that area.
Mr Letsoalo said that PRASA was responsive and not proactive. It could not solve the problems in South Africa – the crime rate was very high. PRASA had had discussions with the police; intelligence services had to be brought in. It also picked up in PRASA what were innuendos. People who could use petrol to destroy signalling systems were well versed in the system as they knew exactly where to do the most destruction. When regions were visited it was found that employee relations were almost non-existent. When one fights with one's own employees, they targeted the system. He wanted to marry this with the security tender that was supposed to go out. Sabotage happens here. PRASA had spent more money on security than on anything else and experienced the worst attack on its system ever. This was the reality. This was being fixed with the help of technology. However the roll out of technology was quite slow in doing this. The pilot – which related to cable theft - was in the Western Cape. Here there were no instances of cable theft. PRASA was moving to the point of being pro-active and getting the technology to work for it. However, as long as it had more than 20 service providers in security there would be sabotage. Internal sabotage was a difficult thing that PRASA had to deal with.
Mr C Hunsinger (DA) said the safety of passengers and the protection of assets was of huge concern and references to this had been made throughout the presentation including that it was working with authorities. The bottom line was that passengers needed protection at stations, and they needed to feel secure in trains. Looking at the numbers of incidents, what additional measures was PRASA going to take to improve the situation, because quite clearly more had to be done specifically at stations and in trains?
Mr Hunsinger said that he had a huge concern following an oversight visit to a number of yards. These places were not fenced. This was a high priority if PRASA was really serious about protecting the assets.
Mr Hunsinger posed a question to Dr Molefe (PRASA Board chairperson) who had been appointed in August 2014. When he looked at the trends through the years, there were a range of contraventions of the PFMA, SCM policy and the CIDB (Construction Industry Development Board). These irregularities included irregular and wasteful expenditure, evaluation criteria not used, and also non compliance with a range of financial regulations. He asked what improvements Dr Molefe expected in the next financial year seeing that he had only been appointed in 2014. How could the trends improve since he have taken over?
Ms S Xego (ANC) welcomed the report although she found it a bit technical for a layperson like herself. Acronyms should be explained. Referring to the 45% of targets achieved, she asked how many targets were planned for.
Mr Letsoalo apologised for the technical presentation and promised that next time it would be toned down to ensure that the presentation could be interacted with by all Members.
Ms Xego referred to page 8, where an irregularity had been noted by the Auditor-General, and asked what corrective measures were put in place so that changes for the better could take place.
Mr M Maswanganyi (ANC) said that it looked like what had been achieved was less than what had not been achieved. He asked for the reason so much had not been achieved, and what remedial measures were in place to deal with this. The Committee had to be told in which areas the targets had not been achieved. He wanted to know which entities were pulling PRASA down.
Mr Letsoalo replied that this varied in a system of 17 000 people as some people did not work. He got up very early in the morning and would present himself at one of the depots, such as presenting himself at 3am at Mabopane. He arrived there and found the ticket examiners were not there including the station manager. For the record, he had given his cell phone number to commuters wherever he went. The people at this station were complaining about the erratic service. There was agreement that some of the issues were management issues. It had also been realised that some personnel – such as at Wolmerton station - did not come to work or some came in very late. There was a need to bring in management and have a shift system instituted. So there were issues of management and of targets not being smart and of course people just hiding in the systems within PRASA. What was also picked up was that there were more people in the sub-system than there were in the structure. PRASA was working on fixing these things.
Mr Maswanganyi referred to the presentation stating 'the construction of the local factory and 32 SA companies already contracted', how many of the 32 companies were Black companies in terms of percentages?
Mr Piet Sebola, Group Executive Strategic Asset Development replied that 18 of those were fully empowered and 14 were white owned companies. Contractually, for the first 20, Gibela (a joint venture between Alstom, Ubumbano Rail and New Africa Rail) was responsible for supplying the trains to PRASA and had no obligation on how it should contract on this particular programme. As soon as the local activity started, PRASA’s contractual obligation was that R36 billion of that had to go to a fully empowered black company. This was what it would be assessing with the SA Bureau of Standards later in the New Year as soon as the factory was up and running.
Mr Maswanganyi referred to page 9 on train delays and cancellations which were the reasons sometimes given for why trains were torched. He asked what the reasons were for delays and cancellations because government at the end of the day found itself losing a huge stock of trains which was very costly.
Mr G Radebe (ANC) said that the CEO here today had to provide an explanation why trains were delayed and he should not mumble; he should provide clarity. He had gone to see what was happening to the trains in Cape Town and he saw that it was a disaster. People were not getting transport, no explanations were provided and no information was communicated to people. This situation was very bad.
Mr Letsoalo replied that the reality was that it was the ageing infrastructure that was causing this. This was compounded by the fact that as it moved, components were not there, but there were also systemic issues that had to be addressed. The reality was that PRASA were also victims of service delivery protests time and again. Trains were burnt. Also there was internal sabotage that had to be dealt with.
With regard to signalling, Mr Radebe said that the Committee had been saying since the time of the former CEO that signalling had to be fixed. The Railway Safety Regulator (RSR) came here and even threatened to stop their trains, but they still have not fixed it. He questioned whether the Board was doing their oversight duties. It seemed that for two years the Board had been doing nothing. The only time the Board was seen to be operating was when they went to the media to launch an attack. Mr Radebe said “It’s bad, it’s bad”.
Mr Mosenngwa Mofi, CEO: Rail Operations: PRASA, said that he had felt it necessary to highlight a critical issue, which had to do with signalling and the findings of the Railway Safety Regulator (RSR) about a critical safety issue. Over 80% of the signalling installations had reached the end of their design lives, hence the re-signalling programme that was currently being undertaken across the board. Gauteng had the worst signalling installation in the country. A joint task team had been set up that looked at signalling together with the Railway Safety Regulator, and they have already appointed the OEMs to do rehabilitative work on the systems. This work had already commenced, and it should be noted the findings of the RSR were mainly about the age of the system itself. However, the vulnerability of the system compounded the problem because if one looked at the problems highlighted in the report, over 60% of the problems had to do with theft and vandalism. One had to put in place what was called 'target hardening' programmes. OEMs had already started. PRASA started with Gauteng and the RSR had extended an appeal that that programme be extended to KwaZulu Natal and the Western Cape. So there was progress and PRASA was implementing the finding of the RSR.
Mr Radebe referred to fencing, saying the Committee had been told that they were starting to fix it, but the report presented today said that they were still deploying companies to go and fix it. He asked again what was happening.
Mr Radebe said that PRASA not meeting targets had become a trend. PRASA should tell the Committee why it was having these problems and not meeting targets. He expressed unhappiness with the situation at PRASA and said that he could not accept their report. PRASA was not even responding to the Committee’s BRRR recommendations.
Mr L Ramatlakane (ANC) said that the main passenger line had been declining over time. However, the National Development Plan (NDP) noted the main passenger line and its particular focus on connectively with the rural areas. The responsibility was on PRASA to make sure that it happened. But with the current programme and decline, it was uncertain whether those requirements would be met. He asked what the challenge was with the deficit and what the turnaround strategy was for this.
Mr Letsoalo replied that there were problems, but South Africa had problems. This Parliament with Cabinet had to decide whether the decision to separate this network between PRASA and Transnet was a thing that made sense. PRASA believed that it should not pay an access fee to Transnet, especially given that passenger rail – commuter or long distance – was heavily subsidised as was the case mostly in the world. So the NDP should give PRASA the mandate and also the power to change certain things to facilitate operations. We should be able to say if we did something wrong we must go back and fix it and acknowledge mistakes. We should give PRASA the mandate but also the power to make it effective for operations. PRASA could not be expected to rely on residual slots. If it relied on residual slots it meant that PRASA's products could not be adapted to the market.
On the deficit, Mr Letsoalo said that there has been a decline and PRASA should start to integrate its services. There was a need to think creatively about this. It was agreed that Mainline Passenger Services had to work very closely with Autopax to ensure that a full service was provided.
Mr Ramatlakane asked if PRASA had an existing contract with regard to components, spares and maintenance, and if the irregularities picked up by the Auditor-General, had been sorted out.
Mr Letsoalo replied that PRASA had contracts on components that were irregular. A decision was then taken that some of those contracts had to be cancelled. People were given six months to get the right people to provide components. They took their own time and the contracts lapsed. The reality was that PRASA did not have a contract for spares. This was why it was talking to Transnet to ensure that it could partner with them with some on the contracts they already had.
Dr Popo Molefe, Chairperson of the PRASA Board of Control, replied that one other matter that Members had to be reminded about was that this Board had been dealing by and large with legacy issues. He was pleased that the Members had referred to 2011, that these challenges were there at that time. The investigations had revealed more, so it should not be surprising if the Auditor-General said there were more irregularities as the AG was very close to the investigations. So they knew about the problems where people were just given contracts without following supply chain management processes. This had presented the company with a very difficult situation because even though the AG said to stop these contracts, all of them could not be stopped. Mr Ramatlakane was fearful the last time and asked if one stopped them how did it impact on the work. One had to look at the value the company was getting and the quality of that work from some of the contracts. It had had to do quite a number of condonations, so that process had been gone through.
Mr Ramatlakane asked if the problem with targets not being met had to do with the slow movement of PRASA in the implementation of the programme and the plans, as a result of a range of other investigations taking place in the organisation. He asked if the investigations had an impact on the accomplishment of the targets.
Mr Letsoalo replied that the investigations impacted on targets to the extent that the contracts were sub judice. For example in the battle with Shifambo, PRASA could not use those locomotives; they were parked there but PRASA could not use them. PRASA did want them but they could not use them. This meant that it impacted on the target because PRASA needed to move a certain number of people.
Mr Ramatlakane asked for guidance on how to deal with questions from a previous session that were not dealt with.
The Chairperson said that the Committees had to deal with issues that were outstanding from PRASA, which if not captured within the presentation, could be raised so that PRASA should respond, because they could not be left hanging continuously.
Mr Ramatlakane referred to a question that he had asked in September 2015 about the investigation and its budget. A company was mentioned called Werksmans that was appointed to do the investigation. No answer was given as to how they were appointed. He wanted to know how much money had been paid to them and which budget catered for that. The Committee had also not been privy to the findings of the investigation. It had not been presented to the Committee. He asked if the report was available and what that investigation had cost the state. He asked if the investigation was complete, or if it was continuing, when it would come to an end. What the scope of the investigation had been and had there been value for money?
Dr Molefe replied that there was a procedure in the company, which had a panel of law firms to choose from, and when work was going to be done, the company looked at the panel of law firms, and the specialisation of those various law firms. This was the procedure that was followed and Werksmans was found to be a reputable firm with the capacity to do extensive forensic investigation. They were appointed and the Board took the decision that Dr Molefe and the Chair of the Audit Committee should exercise oversight on those investigations. He should depose any affidavit that needed to be done and sign applications that had to be served before the court. There was an extensive investigation. They had to take the range of matters raised by the Auditor-General as a basis for the scope. They did what the AG had specified but could not limit it to that because once one does a forensic investigation, one uncovered other things that may be even more serious than what the AG had found. It should be remembered that the audit consists of sample audits on what was brought to them and a few obvious things that had been picked up. He accepted that in the process this case became much bigger than what was expected. They then decided to limit the scope and discussed with the Minister the need to limit the scope. Fortunately they now had the new Acting CEO who was able to deal with a number of issues because some of the issues were straightforward such as some employees had to be disciplined or prosecuted – and this was happening now.
Ms D Carter (COPE) said that she was glad Mr Ramatlakane opened the issue and was hoping that his question about Werksmans Attorneys was not in protection of the following quote: 'Whilst the efforts to clean up the organisation and enhance good corporate governance are commendable, I am deeply concerned that this investigation seemed endless and without a clear scope' [Transport Minister Peters]. Taking into consideration that Werksmans Attorneys was paid R80 million for expenses why would PRASA say that this concern was coming up all of a sudden? And were they giving any consideration to halting this investigation because it was just recently seen in a Constitutional Court ruling, that recommendations of the Public Protector were not negotiable. Those recommendations had to be implemented and could not be changed by the President or anyone else especially. First there was the announcement that the President would oversee state owned enterprises through a council he would chair, and one could see what was going on with the Minister of Finance. An answer should be provided about this.
Mr Ramatlakane said that the Committee was told that there were five Board Members that had to be on call and on duty continually. The Committee had issued a caution to the Board about this. What was important was that the Board was given a budget. If the Board had a sub-Committee, which was functional and operational, who was going to pay for the time utilised. The Committee was told that those five members were doing it for the love of the country, they were not going to be paid extra. The Committee was pleased but suspicious. The Acting Group CEO was asked if they had been paid or not. Mr Ramatlakane asked if they had been paid - although they had said they did not want to be paid – and what they had been paid and requested to see the resolution that stated they would be paid x amount of money for those activities. He also wanted to see the executive authority endorsement of that. So if all these payments had been irregular he wanted to know if there was going to be reimbursement to the state.
Dr Molefe replied that as had been said in September last year people were doing additional work pro bono – they were not being paid for additional meetings. The Board established an ad hoc committee after the then CEO left the company. PRASA was dealing with a transition period and needed a team that was going to work closely with new acting CEO. Due to the many challenges , it became necessary for them to spend a lot of time at PRASA premises. Initially they were not paid for doing that work but later on the Board took a resolution to provide remuneration. But they were not working every day.
Mr M Sibande (ANC) expressed concern about security in passenger rail services. He mentioned a train driver being shot, people hanging outside the trains and coaches being burnt. Who was supposed to be doing oversight? PRASA had been asked several times about the project in Moloto Rail and the Motherwell project for which tenders had been put out in terms of complying with the AG audit report. He asked for an update on these matters.
An official from PRASA said that on the Motherwell Rail link, on the design side, there was 77% progress, and they were hoping to go out on tender for construction of the extension of the line early next year.
On modernisation, an official from PRASA said that at Wolmerton in Gauteng there was a test facility for new trains. The test facility has been completed and PRASA was also on course for the maintenance facility, which should be able to maintain the 20 new trains that would be in the country by early next year. This was one of the positives coming from the main projects that PRASA was undertaking.
An official from PRASA said that the services of repairing coaches was sitting with Transnet. But Transnet was not moving people, they were moving freight. The only thing that was supposed to remain there were the wagons but now they were contracting to assist PRASA in the modernisation programme. The turnaround strategy would also deal with generating revenue through the use of assets.
Mr Sibande said that on page 14 of the report it stated that a 4000 square meter training centre was to be in operation by the third quarter of 2016/17s. He asked if it was practical to state this, given the Committee’s own past experience, when PRASA had told the Committee about the centre, yet when they arrived there, there was nothing. Now a target was given again, so was this practical?
Mr Piet Sebolo replied that when this Committee and the Select Committee on Finance visited PRASA in August last year, there was nothing to see as PRASA was still struggling with the environmental impact assessment and the water use licence. This was ok now, so there was a lot to see now and PRASA was in line with its schedule for the third quarter of the current year, that was when it was anticipating that the training centre – the 4000 square land – ought to be ready because – by the time the factory opened its door in June 2017, all the South African engineers and technicians should have been trained. PRASA was very much on course.
Mr Letsoalo said that this government had only experienced democracy for 22 years and it gave the Gautrain an operating subsidy, per passenger per trip of R60.30 and it gave PRASA at Metrorail R 3.73. This was the reality. The other thing was that Gautrain was a relatively new system and could this be compared to PRASA? He left this information with the Committee and said he was sure the Committee would be supportive when these issues were raised.
Mr Sibande asked what the financial implications were when the Board met for more than the stipulated number of meetings. He asked what they were getting paid per meeting.
Dr Molefe said that the directors originally were not being paid. But later on there was a lot of debate about whether it was fair for directors to be doing additional work without remuneration. Whereas with other state entities or boards, when people had additional meetings they were remunerated. A piece of policy was found that stated that work had to be distributed equitably amongst directors and they had to be remunerated. This statement referred to sub committees but was silent on when there were extra meetings if there should be remuneration. The Human Capital committee of the board, working with the then Acting Group CEO, in interpreting that policy concluded that people should be paid for additional work. The Board took the decision at the time and remunerated the directors. The matter was debated further as it was felt the Minister should consent to this, and if the Minister did not consent the directors were willing to repay that money. This matter was ongoing and the Board was seeking a legal opinion and there has been ongoing engagement with the Auditor General on this matter. He would like to leave this matter as ongoing and receiving attention.
Ms Carter said that net loss had decreased from R1 billion to R312 million in 2015/2016. This was still ridiculous, also considering that only 45% of the targets had been achieved. She asked for a detailed breakdown of all the targets not achieved and a detailed breakdown of what was achieved. The answers had to be tabulated with the monetary value next to it so that the Committee could see what was happening.
Ms Carter said the delays were affecting ordinary workers and this was something that had been spoken about for years. PRASA was not operating a normal business or “doing their work”. People were losing their jobs and were affected every day because of this.
Mr Letsoalo acknowledged that there were serious problems in PRASA. Morale was already low. He was in constant contact with the staff and many were prepared to work.
Ms Carter asked what the level of cooperation was between PRASA, local authorities and municipalities. What framework had been put in place? The Committee had heard about the building of footbridges. She asked if nothing had been put in place, by when it could be expected in terms of a framework with municipalities.
On stakeholder relations, Mr Letsoalo said that there was an admission that PRASA had been pathetic. It was not talking to the Chamber of Commerce or commuters; half the time the trains were late and no one knew what was going on. PRASA acknowledged its problems but was not prepared to say that the problems were insurmountable.
PRASA had a strategic plan – possibly up to 2030 – it sat with municipalities and planned with them. It was going to be very interesting to show the Committee what PRASA could do if it had the capacity to carry people and win back support. It was working with provincial authorities. It had met with all the planning authorities when it did its IDPs. It had also met with Western Cape Minister Grant and with MEC Kaunda in KwaZulu Natal. It continued to meet and formed part of their plans; PRASA did implement and should be judged on this. It did have challenges but continued to implement.
Ms Carter referred to page 8 'levels of critical components in depots to be maintained for quick repair turnaround time'. It was said that this was going to happen in the next month. The Committee had also been hearing about this for the last two years and nothing had been done about this.
Ms Xego referred to safety and security of trains inside and within the rail space and asked if PRASA had its own security arrangements or did it rely only on the SAPS.
On security, Mr Letsoalo replied that commuters were attacking PRASA technicians. A decision had been taken that if broken trains had to be repaired, a marked car would not be used so as to avoid being targeted.
Ms Carter had been on a train recently, it was dirty, the seats were torn and the train smelt of urine. When she got to the part of the railway line which it had been promised a year ago would be fixed, there were luxury air-conditioned buses waiting to pick people up to take them to Simonstown. One asks oneself what were the costs of the luxury busses and when was the railway line going to be fixed. The next question was what about security. On the way back she bought a first class ticket, there were no controls to see if one had any ticket, people were intoxicated, there were fights, and stones were thrown. The second train was immaculate and very clean inside, but there were no security and no controls. Eventually one security person came from another train trying to bring calm with people standing and fighting. So what other security measures were going to be put in place to secure trains. In the news headlines this morning a woman had been raped at a station. One security guard was not sufficient for three coaches.
Mr Letsoalo replied that PRASA had 9 500 security personnel at its disposal; 3 500 of those were railway police. At Phillipi station there was a bad situation. There were 3 000 private security contractors then it also had its own protection services of about 3 000 persons as well. PRASA had increased its personnel costs by 26% on average. About 63% of its costs were for personnel. It was left with 37% for all other expenses on the OPEX side. They need strategic deployment in security services. They are working with security agencies on this – and will release this to the public. When one works on this without joint deployment, then this one or that one pulled back and then said that that was not their jurisdiction. The more that was added, the others were reduced. The memorandum of understanding with police had been outstanding for a long time. PRASA had agreed with police management to move with speed and finalise this.
Ms Tara Ngubane, CEO Corporate Real Estate Solutions (CRESTA) referred to commuter behavior. Bad behaviour from commuters and also the traders selling on the trains and on the station created the problem of litter, and also just the discipline of people when they used the system. PRASA had this open system, it was operating a public facility and people sometimes behaved in a manner that was unacceptable. Vandalism was also a challenge; in winter the communities were stealing and vandalising cables. Those were the challenges, so there should be appreciation that PRASA was doing something about it. The people who were using the facilities had to be educated and those vandalising the system had to be dealt with and punished accordingly. One needed good law enforcement to ensure that vandals were punished.
Ms Ngubane said there should be an appreciation of the aging infrastructure. PRASA did not have the funding that it had today to deal with Capex, so it was now dealing with the backlog and had 585 stations in total across the country and the challenges have been outlined. Having said that, there had been success as well which could be seen if the financials were looked at in detail. As a division that started with revenue of R220 million in 2012 and on 31 March 2016 had R550 million – this showed more than R300 million rand value that has been grown over a three-year period. Started with a loss of R247 million, today it was sitting with R27 million. This was quite an improvement through the commercialisation. Improvements could be seen at Park Station in Johannesburg, Mabopane would be completed at the end of this financial year. PRASA was also focusing on energy efficiencies. The biggest cost as a division was energy – that was utility bills, water, lights, and rates. It was working on some programmes to reduce energy consumption.
Ms Carter said that there were currently five investigations in PRASA of which one was a skills audit. She asked for more details about the other four investigations; and also if it included the 10% paid to the ANC by an Angolan woman that was paid back-handed.
Mr T Mulaudzi (EFF) referred to page 4 of the report where it was stated that 45% of the 2015/16 targets had been achieved and more especially of the 0% achieved for rail operations for 2014/15. He wanted to know what was happening that nothing had been an achieved for the whole year while people were being paid. He expressed concern about the performance of PRASA. He asked what measures had been taken against that division which had set targets to achieve, but then achieved nothing.
Mr Letsoalo replied that he understood Mr Mulaudzi's concern but let us not throw out the baby with the bath water. Mr Letsoalo appealed to the Committee not to discourage PRASA because it wanted to work.
Mr Mulaudzi said it was good that as stated on page 11 that the suspect who burnt the train was arrested. He was concerned that many trains were burnt in the Cape Town area, however nothing had been heard about arrests in Cape Town. He asked if there were problems with video surveillance in those stations and what the role was of PRASA police who seemed to be located mostly in the head office. He asked why they were not deployed at stations where attacks were happening, drivers were threatened, and trains were being burnt. They were supposed to be the first trustees in terms of protection of the staff and other assets.
Mr Letsoalo said that head office had about 100 people out of 3 000 so this could not be true. PRASA had not done strategic deployment in the way that it should have done. The serious challenges in PRASA security were being addressed.
Mr Malaudzi referred to the celebrated high-speed train driving at 132 km/h, saying he was concerned about the protection of the people in the area surrounding the railway where the trains were running very fast. It would be no good if PRASA acted only after a disaster happened. Some contingency measures should be planned for in this regard.
Mr Letsoalo replied that the protection of the surroundings would be dealt with, but one should not do it at the expense of the rail reserve and forget about the impact it would have on communities. There was a need to work very closely with them.
Mr Mulaudzi asked the Department of Transport to provide clarity about what was heard on the news about the stopping of the investigation. He wanted to know if it was true that the investigation stemming from the Public Protector recommendations had been silenced or not.
Mr Mulaudzi said he was sorry that the Minister was not here but the Acting DG could carry the message to the Minister that it would be appreciated it if she could deploy the Acting Group CEO from the Department. This was because he was neutral and could come with a clean slate and start to clean up PRASA. The Committee was also worried about the Board itself, because PRASA today was in tatters while the same Board had been there while the irregularities were happening. The Chairperson of the Board was recently seen in the media talking about the affidavits that were leaked. This was of great concern to the Committee. He would like the Board itself to fall because the current AG report showed that nothing had been fixed, so the trend was the same. The Minister should consider that the Board had to fall because it was, like PRASA, running on autopilot, everything was going from bad to worse
The Chairperson said that Mr Mulaudzi had closed his questions with the words: 'the Board must Fall'. She said what had become very critical was for PRASA leadership to explain to the Committee the challenges raised by the Auditor-General about human resources particularly in relation to management. PRASA’s story was a negative one. Apparently there were people that had gone on training and maybe one needed to know what training had been done, what the scope of the training was and moreover what was being developed to remedy the situation.
Dr Molefe said that the Chairperson had said that PRASA story was a' negative story' but he differed with the Chairperson. He said it was actually a positive story because it said: PRASA and the country are firm about dealing with fraud and corruption. These matters were raised in the Budget Speech and the election campaigns. He said all they were dealing with was what this country had to deal with. Not only that, sitting here with lawmakers, Section 217 of the Constitution set out how to deal with the procurement process - it must be equitable, transparent, fair, cost effective and competitive. To the extent that that did not happen, PRASA had to act. The policy of PRASA mirrors that aspect of the Constitution, and also mirrors the Public Finance Management Act (PFMA).
Mr Bongani Kupe, Acting CEO: Autopax, spoke about another challenge was using assets not designed for short distance. PRASA had busses designed for long distance. He gave the example of Metrorail operating in Mamelodi – where PRASA can look at real integration of rail and busses. Also Autopax, through city to city, touches every corner of the country and it wanted to provide those services in the rural areas. It was discussing 1) establishing infrastructure in rural areas and 2) deal with a captive market by building the necessary infrastructure to do this, and (3) using technology for operations – technology for monitoring services in different areas. An example was the ticketing system so that when rail and busses were integrated, people would then be able to travel seamlessly between rail and busses.
Mr Letsoalo said that those issues of scope and profession were being dealt with.
The Chairperson said the AG had spoken extensively on the supply chain management procedures which were found wanting. She asked if the Committee could be appraised as to progress to date; because in her interactions with the AG one of the issues, which was raised, was the fact that with the commissioning person – the person who approved and who authorised – the lines were sometimes blurred.
Mr Letsoalo replied that this had to do with the segregation of duties. The first thing that was done when he arrived was to make sure that supply chain reported to finance. It used to report directly to the CEO, and then one wondered why irregular expenditure increased. This was corrected. Capital budget was handed back to the CFO. The function of payroll that paid salaries, for some strange reason was sitting in HCM. They had moved it back to finance. Finance has therefore been capacitated. Engineering has been capacitated. It was bringing in technical people to do buying – strategic sourcing.
The Chairperson noted that there was a decline in assets in terms of age and vandalism. On an annual basis budgets were allocated and therefore the Committee needed an indication as to how budgets were allotted with regard to maintenance, procurement, new assets and all things related to assets.
The Chairperson said that the Board had been around for two years and the Committee could only see what the Board was doing based on what one could see from the newspapers. It was not easy to gauge performance based on agreements between the Board, the Minister and the shareholder for that matter.
Mr Radebe said that the Board had been sitting for two years and had nothing to show about oversight.
Dr Molefe said that the report that had been given by the Acting Group CEO indicated that a lot of work had been happening in the organisation including the modernisation programme, signalling system, upgrading and modernisation of the depots – and Board had exercised oversight on these matters. Of course this was not an operational board – it operated as a normal board.
The Chairperson said the AG had also raised the challenges with the service level agreements and asked how far the Board had progressed with this.
Mr Radebe asked for clarity about the absent directors.
Dr Molefe said the Company Secretary could explain further. Apologies had been received. What was needed was probably to work like the Standing Committee on Public Accounts (SCOPA) worked. If one was not going to be to be in a meeting, one wrote directly to the Chair of SCOPA to apologise, and this was what the directors should do. The Company Secretary might want to say something about this.
The Company Secretary, Mr Lindikaya Zide, said apologies were received from the Members of the Board in writing and they were addressed to the Board Chair. These letters would be forwarded to the Committee.
The Chairperson referred to companies that were supplying PRASA and said that the Acting Group CEO had spoken about components and spares, which were a challenge. PRASA had since engaged with Transnet on how best to deal with this situation. She asked what brought about this anomaly and if procurement issues were involved here. What exactly where the challenges regarding components and spares that were short-changing the South African people who were using trains? A further question was what the problems with the contracts were, which made the components and spares to be a challenge.
A PRASA official replied that what was mentioned about infrastructure allocation between PRASA and Transnet also applied to allocation of assets. There were a number of assets which in terms of the secondary mandate, PRASA was supposed to be using to generate revenue. As an example Adderley Street in Cape Town, in terms of the number of trains that moved in Cape, all the assets around the station precinct should belong to PRASA, but in terms of the Legal Succession Act – because there was no clear stipulation on the allocation of assets; those assets were still sitting with Transnet, who was leasing them to PRASA. In terms of the Legal Succession Act, which belonged to this Parliament, PRASA was supposed to be a successor in title to those assets. They should be transferred but were sitting with Transnet. Further Transnet was looting the money (from PRASA), which was supposed to be used for passengers.
A PRASA official enlightened the Committee on Autopax and said that when Autopax was transferred in 2009, from Transnet to PRASA, only the shares were transferred. All the Autopax depots were sitting in the books of Transnet which was now charging Autopax. This meant that the operating costs of Autopax increased very sharply. PRASA's revenue was definitely affected. Transnet was on Mainline Passenger Services. All the dilapidated stations were transferred to PRASA. Transnet was holding all the stations that had commercial holdings. They were having to find mechanisms through the Board to have the gaps in the Legal Succession Act attended to so that PRASA could be in a position to deal with the secondary mandate of setting the assets to work. So the operations, which were sitting in Transnet before 2009, were moved over to PRASA and now cost more to run via PRASA.
Mr Letsoalo replied that PRASA was reintroducing ISO 9000/14000 accreditation. This had been removed. When one had a company that depended a lot on engineering, one had to be extra attentive to things like processes, procedures and regimes. The maintenance regime depended on for example, which region and which engineers would work on it. Consequently PRASA was rebuilding those structures. It was an anomaly why PRASA did not have spares. This was also created by those challenges mentioned.
To the Chairperson, Mr Letsoalo said that PRASA had good stories to tell and people would stop their fascination with the people that were no longer at PRASA. PRASA should not be spoken to about engineers who had no qualifications because they were no longer at PRASA. PRASA was focusing forward.
The Chairperson asked if PRASA had a turnaround strategy and, if yes, could the Portfolio Committee be apprised of it. The Committee would then be able to monitor PRASA based on its turnaround strategy.
Mr Letsoalo replied that PRASA did not have a turnaround programme, it was developing such a plan and had implemented certain aspects. By the end of October 2016, PRASA turnaround plan would be released. This plan would outline the critical areas where interventions were needed and how this would be done.
Mr Letsoalo emphasised the need to be fixated on the future.
The Chairperson said that the Committee had to check with PRASA about the modernisation programme. This was what the Public Protector had also spoken about. PRASA was asked for a detailed progress report to date on the modernisation programme that it would be engaged in. Looking at the budget reviews of 2014 and 2015, the issues that arose in those years were still recurring. The Committee wanted to see whether the monies allocated in PRASA's portfolio had been properly allocated.
On the modernisation programme, Mr Piet Sebolo replied that there was a concern or fear in 2015 that the modernisation programme of PRASA would derail by virtue of what the organisation was facing at the time. That fear never materialised because the modernisation programme of PRASA, which was driven by new rolling stock; in presentation showed that those trains as per schedule, have arrived, and more would be deployed as per PRASA's schedule. Also spoke about signalling programme, which was the second largest thing in the modernisation programme undertaken as a business. When PRASA reported to the Committee last year, it indicated that it had three main suppliers on the ground, which continued to deliver on those programmes. In Western Cape, the facility that was seen in Gauteng, will see the operational activities of Gautrain; come next year February you will have that building ready in the Western Cape. That work continued to happen. In the latter part of next year PRASA would have the same kind of operational centre in KwaZulu Natal. The modernisation programme was very much on course. If one looked at the Station Modernisation Programme, in some of the larger interchanges, one could see that they were changing for the better. As could be seen they were no longer the stations coming in for 'in and out' but were starting to reflect an environment that was fairly conducive to customers like when waiting for the next journey they could have a seat and a meal. Some stations in Gauteng, like Tembisa and Mabopane in Gauteng that were being developed to elect modern day kind of assets that responded to today's customers expectations.. will adhere to what the Chair had requested to prepare a report, which outlined the progress of the modernisation programme.
Dr Molefe said that he had had discussions with the Minister who was not asking for the investigations to be stopped. She was worried about the costs. It had already spent R83 million. It was a matter of concern but money had to be found to conclude this process. It was massive and involved close to R14 billion. Because side by side with these things one also found irregularities pertaining to confinements of about 120 instances, 40 of which had civil action litigation taking place, and others were thrown to the Hawks. There was close collaboration between PRASA legal division and the Hawks. So when will it stop? Obviously we have to look at what we have enough information on and we have spoken to investigators about this to see how to shorten this. But with regard to matters before the courts, it should be remembered that it was out of PRASA's hands. There were civil actions in process where monies could be recovered and these processes would be continuing.
Dr Molefe thanked the Committee for the robust manner in which this engagement had proceeded. A number or reports had been written about the investigations. A way had to be found to write the reports so that they provided sufficient information but did not prejudice the cases before the court. PRASA would discuss with the Minister how to deal with it.
Ms Carter asked if she could be excused because she had two debates this afternoon.
Mr Ramatlakane said that he had asked for the Committee to be copied on the board resolutions, the one being on remuneration. Now the Board Chairperson said that there was a board agreement that in the case of non agreement, the Board of Directors would repay the money that had already been received to date. This suggested that there was an irregular process that had taken place. If that had happened without consent, it suggested an irregular practice by the Board.
There was an undisclosed amount as to what was the resolution of the Board was for the payment. He had also heard speculation about what that payment was. He asked for confirmation that the Board or those directors specifically were receiving quite an exorbitant amount of money per session. He had heard, and this was up for correction, that the figure was R75 000 per sitting per person. If this were so then the Committee would like confirmation of this.
The other confirmation he would like to have is about the matters that went to court and the subsequent statements about them. Dr Molefe had said that the media had an interest in these matters. On some of these matters, he would like to see a Board resolution where it resolved that the litigation of these matters would be handled in a particular manner, including the press conferences that were arranged. Some of those matters seemed to him to be like a public court without actually going to court. But one could not actually engage with them because they were sub judice. There has been a recent press conference about these affidavits and the R10 million that was raised. The Committee needed to receive that resolution as well where the Board had mandated that those issues be handled in that particular manner.
Mr Ramatlakane noted that at the last meeting there was an issue about communication. There was a suspension of the person who dealt with communication. He asked if it was true that a company had been appointed to do communication, even though PRASA had internal communication people. He asked if a company had been given this portfolio to do communication on behalf of PRASA. He asked for evidence of a tender process and if a retainer was paid to them up front, and, if yes, could the Committee be told what that retainer was for that particular company. If the Committee could receive that information so that when it had the meeting tomorrow, it had that information as well.
Mr Radebe said on a lighter note the busses in Mamelodi had been burnt by the EFF. There were 20 security companies, he asked how they accounted for themselves or were their day-to-day operations monitored. He asked if PRASA was getting value for money for it. He found it very strange.
Mr Radebe said he had this challenge, the Board Chairperson spoke about the complaints and the Constitution, “let's not play politics here”. If the Public Protector said in its Report, there was no relationship between Mabunda and Montana but PRASA went and investigated those two people, what did this mean? If the Public Protector said Treasury had to go and investigate all tenders that were above R10 million, what was the Board doing? There was a challenge before about the CFO not attending board meetings. No apologies were received. He wondered what had happened. It was heard that she was not well, but one had to wonder if this situation was still the same. No apologies were received about this. They reacted to some things and on other matters it was said to be sub judice. This Board was playing politics with the Committee. The Board either had to do what it was assigned to do or it should ship out. He did not have confidence in the Board of PRASA. He raised a vote of no confidence in the Board. He was unhappy about the operations of the Board. He said he was going to raise this matter and forward it officially to the Minister – that the Board should be disbanded and be replaced by a new board which would execute the mandate for South Africa. The Chairperson of the Board came to this meeting and misleads the Committee. He said that they were not getting paid. But at the same time they took a resolution to pay themselves. This kind of thing should not be done – it was wrong. As much as the Board said other people were looting, they were also looting. But they loot in a sophisticated way. They had companies running here but at the back. Someone asked the PRASA Board Chairperson, how does someone donate R1 million to your company. We have to be fair, open and frank about it. His view was that the Board was not functioning; it should collapse.
Mr Maswanganyi said, from what his colleagues had said, he would like to see the resolution where the Board took the decision to pay themselves these allowances. He also wanted to see the Ministerial approval, because the Minister was the sole shareholder. He asked to see the Ministerial approval of the Board recommending to pay themselves this money. The Committee also needed to see how much was paid to each Board Member since then. This will provide a better picture of the situation. The Committee did not want to speak from what was heard in the meeting because the Committee were public representatives. He believed that the Board should provide that information so that the Committee could then speak from an informed position.
Mr Maswanganyi asked how this firm of attorneys arrived at the figure of R80 million. The Board was complaining that Transnet was billing it on various items and it did not have money, but it spent R80 million. He asked if the Board was being honest in its dealings with the Committee. There was money to pay Werksmans and this was not even a black legal firm. He asked where PRASA got this money. It might have come from the spares that had to be bought or signalling supplies, perhaps. In this country there were organs of state tasked with investigations. The Public Protector had done her work; he asked why matters had not been referred to organs of state tasked with investigations, which were competent and budgeted for.
Mr Maswanganyi said it should be made clear that there was no one who was hindering investigations. However, he asked if these innuendos that the ANC got R80 million could be clarified. Did PRASA pay the ANC R80 million? He asked further if there was a court judgment that showed that the ANC got R80 million and how the ANC got involved in PRASA investigations. The statement from the Board Chairperson said that there was crass materialism in the ANC in terms of patronage. Mr Maswanganyi said he does not know how the ANC got involved in PRASA investigations. Trains were arriving late, trains were being burnt, there were no signals – PRASA was not doing much about this, but it was making political statements. The Committee was not stopping investigations but PRASA was not a competent authority to run investigations.
On Werksmans, Dr Molefe reminded Members that initiating the investigation came as a consequence of the Auditor General audit report of July 2015. Immediately on the heels of that report was the Public Protector Report with very clear remedial actions. Both these reports made it mandatory for the accounting authority to act on the matters raised. And obviously the budget process had long passed and there would not have been a budget at that stage. The investigation began at that point in time. The Board through the audit committee requested the previous Acting Group CEO to make sure that in the next budget, these investigations were budgeted for; it turned out later that that work was not done. It was not done but it was very important work and was mandatory work. The accounting authority had to discharge this.
On where PRASA was in this process, Dr Molefe said that there were two major applications before the court, one was on the locomotives, and here PRASA was arguing that there was no valid contract for those locomotives. A lot of that evidence would be revealed in court so he would not discuss the details now. The second big case was the one of Siyangena and this had been in the media. Those applications were before the courts; they have been exchanging affidavits and replying. Naturally when a matter was before the court, the media became interested. So the reports that were seen were picked out of the affidavits that were before the courts.
Mr C Hunsinger (DA) asked for guidance from the Chairperson how the session would continue tomorrow. He asked if the Committee was going to continue with the question and answer session tomorrow.
The Chairperson said that she did not think that Metrorail issues would take a long time. They could start with the questions tomorrow and allow PRASA to respond before the Metrorail presentation.
Mr Hunsinger asked if the whole PRASA delegation present today would be available for questions tomorrow.
The Chairperson said, if possible, the Committee would like the whole Board to be present tomorrow as everyone here had issues they wanted the Board to engage with. She asked if the Committee agreed that the question session could be deferred to the next day. This was agreed upon.
The meeting was adjourned.
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