PRASA Report (This document is being reviewed)
The Committee met to continue engagements with the Passenger Rail Agency of South Africa (PRASA) and the Department of Transport on commuter operations and safety.
It noted that:
- The invitation had been for Chief Executive Officers (CEOs) of PRASA subsidiaries to also come before the Committee. why were there no CEOs before the Committee
- there remained no indication of the status of the still outstanding Annual Financial Report (AFR) which had been outstanding and due for the Budgetary Review and Recommendations Report (BRRR) which had also long passed, even in the report submitted by PRASA that morning
- it had long ago asked after PRASA’s risk management which seemed to be non-existent
- Wished to be furnished with the remuneration schedule for the inquorate board which seemed to have been sitting for meetings.
The Committee asked whether the report had been discussed by the PRASA interim board before being tabled to the Committee. It also required for the Chief Financial Officer (CFO) of PRASA as it believed that individual was best placed to respond to the its questions. Did PRASA sit with the Rail Safety Regulator (RSR) regarding signalling?
Had PRASA ever engaged State Security together with SAPS on the allegation that cable theft was organised criminal syndicate activity?
Had PRASA already paid the security company which was claiming R2 billion for services rendered, because there had been allegations that the work done had not been worth that amount of money.
How much would it have cost PRASA to repair just one train?
Deputy Minister Sindisiwe Chikunga undertook that the Department of Transport was going to appoint a permanent Group Chief Executive Office and permanent board for PRASA as she believed that for as long as those structures were acting structures then the chaos would continue at the State Owned Company.
The Chairperson welcomed everyone and noted that previously the Committee had ended the meeting abruptly as a number of people were rushing for flights. She said that the Committee preferred to receive documents quite in advance, rather than the morning of the meeting as that hampered proper engagement on the content of the presentation. Lastly, she said that the board Chairperson of the Passenger Rail Agency of South Africa (PRASA’s) had notified her about her non attendance and that there would be a leader of the delegation from PRASA.
Prof John Maluleke, Acting Board Chairperson, PRASA, gave a brief introduction on his qualifications.
Mr L Ramatlakane (ANC) said that previously the agreement between the Committee and PRASA was that the report would have been submitted to the Committee within 24 hours after that last engagement. PRASA had been reminded on two separate occasions to submit the report but that had not occurred. He wanted to know why PRASA had not complied with its own agreement. According to his understanding, the invitation had been for Chief Executive Officers (CEOs) of PRASA subsidiaries to also come before the Committee; he wanted to know why there were no CEOs before the Committee.
Mr H Hunsinger (DA) said that the PRASA report which was before the Committee had to be reconciled with a number of outstanding issues that the Committee was still awaiting from PRASA. He suggested that the Committee ensure that nothing slipped through in that regard. More concerning was that there remained no indication of the status of the still outstanding Annual Financial Report (AFR) which had been outstanding and due for the Budgetary Review and Recommendations Report (BRRR) which had also long passed, even in the report submitted by PRASA that morning. He asked that the Committee be allowed to evaluate what had been presented to it against what it had determined to be outstanding. Furthermore he wanted a report of the prioritised report back on the status of that AFR.
Mr K Sithole (IFP) said the report submitted did not contain anything from what the Committee had determined to be outstanding; why then would it entertain PRASA when it was showing blatant disregard towards the Committee.
Mr M Sibande (ANC) asked whether the report had been discussed by the PRASA board before being tabled to the Committee.
The Chairperson wanted a status report on the Annual Report (AR) of PRASA as that was one of the priority outstanding issues, which even Parliament's Chairperson of Chairpersons Mr Cedric Frolick had always been inquiring about from the Chairperson.
Prof Maluleke acknowledged that PRASA was apologising for submitting the report late.
Mr Cromet Molepo, Acting Group Chief Executive Officer (AGCEO), PASA, replied that the audit of PRASA financial statements had been completed in 2017; however the Auditor-General South Africa (AGSA) had notified the Department of Transport (DoT) and PRASA that because the PRASA board was inquorate the AGSA could not sign-off on those annual financial statements (AFS). The short-comings regarding the board quorating as a result of a delay from the National Treasury (NT) were only sorted out in the previous two weeks. At a forthcoming meeting the PRASA board which now quorated would be finalising the AFS on 1 March 2018. Beyond that AGSA had also informed PRASA that it would need two weeks to finalise that.
The Chairperson interjected that PRASA was putting the Committee in a precarious situation as Government's financial year would be ending soon and the NT budget had been tabled. By the end of April and the start of May 2018 the Committees of Parliament would be dealing with budget debates and the Committee was expected to say all was well with PRASA? By the time the Committee had to deal with budget debating, it would not have processed the PRASA AR.
Mr Ramatlakane said that in terms of the Public Finance Management Act (PFMA) there was a whole process provided for AFS submissions as that section of work was closed long ago for the 2016/17 financial year. Financial statements were supposed to be monthly reports in the first instance, so that by 30 May every end of financial year those could be signed off and an AFR be submitted. May 2018 would be the second financial year end; for financial statements of 2016/17, what had been the problem all that time with their submission?
The Committee did not have the two weeks that PRASA had reported is needed by AGSA to finalise PRASA’s AFS, he suggested that perhaps the Committee had to urgently schedule a meeting with AGSA around its financials.
The Chairperson asked for the Chief Financial Officer (CFO) of PRASA as she believed that individual was best placed to respond to the Committee’s questions.
Mr Molepo replied that the ACFO was off-sick until 10 March 2018.
The Chairperson asked if that ACFO had been off-sick when the AR was being compiled such that the leadership before the Committee could not speak to it?
Mr Molepo replied that the issue of a delay in the AFS being finalised had hinged on an inquorate board. The former Minister of Transport had written on the 24 September 2017 to then Minister of Finance to nominate a NT representative on the PRASA board. That process had only been completed two weeks ago; a meeting had been held with AGSA. AGSA had then said it would need two weeks from 1 March 2018 to finalise PRASA’s financial statements as there were after-audit matters which followed completion of an audit.
The Chairperson reiterated that she required the finance unit of PRASA.
Mr Sibande said that the Committee’s bigger concern were the citizens that needed functional trains. He was also concerned that Prof Maluleke’s 27 years experience in rail transport was different from the daily experiences of train commuters. The Committee had long ago asked after PRASA’s risk management which seemed to be non-existent. The interim board had been in office for five months; what were its priorities? The interim board seemed to have no priority list.
He said that the report before the Committee seemed to have not been vetted by the interim board and he also wished to be furnished with the remuneration schedule for the inquorate board which seemed to have been sitting for meetings.
Mr Hunsinger noted that what Mr Molepo had just said was new information when the Committee had met PRASA at least three times in 2018 already; why had that information not been shared before with the Committee as it related to historic events and deadlines? Had DoT been informed of the current status of affairs at PRASA and what was the Department’s position?
Ms N Nolutshungu (EFF) said that it was obvious that many things would remain outstanding so her proposal was for the PRASA interim board to respond to what had been agreed upon previously namely; PRASA’s framework on communication of roles and responsibilities of the board vis-a-vis PRASA management. Secondly PRASA was supposed to be presenting its turnaround strategy and its contingency plan and thirdly PRASA was supposed to report back on a whole host of outstanding information from previous engagements with the Committee.
Mr Lindikhaya Zide, Company Secretary, PRASA, said on 24 November when PRASA appeared before the Committee the entity had indicated the status of the AR at the time. What had happened was that draft annual financials were submitted by end of May each year for auditing by the AGSA. At that time, the then board's term was expiring by the end of July 2017. At that time that PRASA board was inquorate but submitted those draft financials to AGSA. The AGSA had accepted the financials in principle and audited them. On 21 July the AGSA informed PRASA that it was unable to complete the audit because of the inquorate board and that had been escalated to the DoT. The term of that board expired then on 31 July 2017; therefore between 1 August and 19 October 2017 there was no PRASA Board. PRASA was only able to approach AGSA with advice from DoT that a process of appointing a board was underway however; in the PFMA section 49 (2) (b) could be invoked which meant the AGCEO at the time could be taken as the accounting officer of PRASA. When the Interim board started in October, AGSA had indicated then that the completion of the audit was dependent on the interim board being quorated. The interim board had been appointed lacking a NT representative on the board, that member had only been appointed by NT on 5 February 2018. Upon appointment of said NT representative PRASA had found that the representative would only be available earliest on 1 March 2018, which then guaranteed the signing-off of the audited financials.
Mr Hunsinger was unhappy about Mr Zide’s report as he recalled the interim board Chairperson promising the Committee - on 24 November 2017 - that PRASA’s AFS and AR would be ready on 30 November 2017. The report from Mr Zide was new and he was in support of a proposed meeting with AGSA as the Committee needed clarity. The Committee could not withstand people shifting blame like that whilst it was made to look foolish.
Prof Maluleke said he would have no problem attending a Committee meeting where the AGSA was present as Mr Zide’s report reflected what the interim board had committed itself to do.
Mr Sithole was disturbed that PRASA had not responded to questions last raised at the most recent meeting and it could not go on with a presentation without starting there.
Mr Ramatlakane complained that one of his questions had not been answered
The Chairperson said that as had been proposed PRASA would be allowed to present to the Committee so that unanswered question could be then ventilated through that report, she was pleading for the Committee’s indulgence for PRASA to be allowed to table its report.
Prof Maluleke said there had been alleged assault of #unitebehind members on 17 January 2018 but Mr Molepo would respond to that.
The Chairperson proposed that Mr Molepo had to indicate which page he would be referring to as he was presenting.
Mr Sibande proposed that possibly it would be better if PRASA was allowed to table its report as it was instead of moving to and fro on the presentation.
Prof Maluleke said the interim board had decided to start with Public Protector (PP) Report-Derailed regarding the issues around Werksmans Attorneys and to ensure that all those implicated in that report could be followed through with disciplinary action. The interim board had also managed to meet with Werksmans on 19 January 2018 to understand how the attorneys had been appointed; terms of reference if there had been any and the scope of work in general. What PRASA received from that meeting were legal documents that were difficult to decipher such that the interim board asked for summarised reports. Werksmans had told the interim board that it had to go through all those reports and no summary reports were handed over. The interim board had not processed the reports that far.
The Chairperson interjected that there was a proposal that the Committee deal with Werksmans report section by section so that it could deal with it and move on to other matters.
Mr Ramatlakane said the interim board’s confirmation was that Werksmans had been appointed illegally. How much money had been paid to those attorneys up until the time of the meeting of 19 January?
Mr Sithole said that because no summary reports were ever submitted to PRASA what would be the way forward? What kind of relationship did PRASA have with Werksmans?
Mr Sibande wanted to know whether Werksmans continued to work for PRASA or not?
Ms Nolutshungu wanted to know who had appointed Werksmans and whether that person was still part of PRASA.
Mr S Radebe (ANC) recalled that the Committee had advised that the Werksmans contract had to stop when Werksmans had already collected R84 million billing receipts from PRASA. It had been told then that it was attempting to stop the investigation at the time when in fact it was questioning the legality of the appointment. He also wanted to know whether after the Committee’s advice Werksmans had stopped working or is still on PRASA’s payroll. How much more had been paid afterwards?
Mr M De Freitas (DA) said the appointment of Werksmans was a separate thing and it had been paid more than R170 million to date. It had produced about R170 million plus of work which the Committee wanted to see. What were the reports saying? He could not help feeling that PRASA was delaying as reading the documents was possible however long that would take; the interim board could just read, summary reports could not be a reason for the interim board to know what Werksmans had uncovered. He wanted to see the reports. The report before the Committee kept referring to attachments which the Committee had had no sight of.
The Chairperson apologised as the attachments were still being printed.
The Chairperson said the Committee required the terms of reference as speedily as possible during the meeting so that by its end, the Committee would have had sight of them.
Mr Molepo said that the 64 reports submitted by Werksmans to PRASA were available and would be shared with the Committee and the investigation had been completed by the end of July 2017.
In terms of the mandate and scope of the investigation; during the meeting of 19 January where PRASA had asked the same question to Werksmans; what had become clear from the correspondence was that the appointment had not been done administratively at PRASA as there was no group legal person party to the appointment of Werksmans. The appointment had been done at board level.
The Chairperson interjected asking for elaboration from PRASA as to what Mr Molepo meant by appointment at board level.
Mr Molepo replied that the appointment had been done by the previous PRASA board as there was no letter from PRASA management appointing Werksmans. During that appointment period the head of legal and General Manager (GM) of legal affairs at PRASA had been suspended by the previous GCEO. In the attachments there was only a letter from Werksmans confirming appointment though there was no letter from PRASA indicating scope of investigations. Having asked for it, Werksmans is still to produce it for PRASA.
When the interim board had asked Werksmans what their scope of work was it had become clear that there had been a creeping scope in that as things came up in the investigation Werksmans continued chasing those new things. Additionally Werksmans had appointed its own investigators. Moreover arising from the investigation there had been individuals that had needed to be disciplined which Werksmans had taken upon itself to discipline.
Mr Sithole said from the reporting of Mr Molepo there seemed to have been no communication between the then PRASA board and senior management and even to date it seemed the trend was carrying on, as Mr Molepo and Prof Maluleke kept referencing each other.
Mr Radebe said what the Committee had just received was that Werksmans had been operating without or beyond a set scope of work. The way the issue of Werksmans was being reported the Committee had to dig deeper as that said a lot about the previous board. He could not understand how Werksmans continued doing work when there actually was no appointment letter from PRASA.
Mr Ramatlakane said Mr Molepo had to inform the Committee how much had been spent on Werksmans to date. The Committee wanted to know who in the previous board had appointed Werksmans as the Committee had been told previously that the tariffs and hourly rates for Werksmans had been negotiated by the former audit Subcommittee Chairperson and board member, Ms Zodwa Manase. The Committee wanted to know the hourly tariffs that Werksmans charged PRASA. Where was the letter confirming those rates agreement?
The interim board would also need to have a plan of action on what steps it would take if Werksmans appointment had been illegal as the PFMA had particular action it provided for including recovery of the money. The Committee had pointed out the problem of the appointment of Werksmans before Werksmans were appointed in November 2016 to the then board Chairperson Dr Popo Molefe and AGCEO Mr Nkosinathi Khena at the time.
Mr Hunsinger asked whether the investigation had been concluded in July 2017 or had it been stopped. He did not believe that Werksmans would have continued with work illegally and without a framework and therefore that had to be investigated. From the outstanding questions unanswered, he still wanted to know the total fees paid to date as well as the rate paid per hour. What was the current status of the investigation, the relationship with Werksmans and who exactly on the previous board had appointed Werksmans. What had happened to the employees implicated in the investigation in terms of them liaising with Werksmans as there surely there would have been a line of communication? What could PRASA show for the R170 million plus paid to Werksmans
Mr De Freitas said the interim board had come highly unprepared as PRASA was aware that members had the tariff charges letter which the interim board knew about. PRASA had by that time still not informed the Committee about what the result of the investigation had been; was PRASA saying unless there were summarised reports from Werksmans then nothing could be done? Where was the legal head or legal division of PRASA as he had information that the division had been informed not to attend the Committee meeting?
Mr Sibande also noted that head of legal was supposed to be before the Committee and that there was also a trend within State Owned Entities of CFO’s and other senior officials resigning from their positions every end of financial year. He was also concerned about PRASA not complying with the Committee’s recommendation for Werksmans services to be terminated.
The Chairperson indicated that the Committee had requested that all the CEOs of PRASA subsidiaries had to be before the Committee so that not only the AGCEO would be burdened with questions as misconduct at PRASA was ongoing under someone’s leadership. What had happened to the other chief executives as she only had sighted only two in the delegation. Probably the Committee should have called South African Police Service (SAPS) as it was processing the matter of Werksmans as it was affecting the Committee very adversely and had been doing so for a long time.
Mr Molepo took full responsibility for the absence of the chief executives from the Committee meeting as the delegation before the Committee had anticipated that it would be able to deal with governance issues and all other matters. He was apologetic about that oversight.
The Chairperson interjected that the Committee was dealing will all of PRASA and not individuals and therefore the AGCEO could not selectively choose who would be responding to what and at what level. She was not accepting the apology as it seemed that PRASA wsd daring the Committee with its non-compliance to the Committee’s requests. There was no finance official or legal official from PRASA though it was aware the Committee required responses to those questions. Mr Molepo was supposed to be able to ask the relevant chief executives to respond if they were in attendance.
Prof Maluleke said he had simply complied with communication that had invited him to appear before the Committee.
The Chairperson noted that probably PRASA would have to return to the Committee more often but there would have to be an arrangement on who would bear the costs of such an exercise as it seemed it would deal with one item each time PRASA came.
Mr Ramatlakane reiterated that the Committee simply wanted to know why the officials were not before the Committee. The Committee was aware that subsidiary chief executives had been told not to come to the Committee; why had that been done?
Mr Hunsinger wanted to know who decided who came to the Committee or not, seeing that Prof Maluleke had said that he had received communication that he was required by the Committee.
Mr Sibande said something else needed to be done because PRASA were failing to respond to the same things the Committee required from them.
The Chairperson asked Mr Molepo to respond to the allegation that the chief executives had been told not to come before the Committee.
Mr Molepo said that when the leadership was preparing for the meeting and the agenda brief sent to PRASA had said that the meeting would be a continuation of the outstanding issue from the meeting of 13 February 2018, the SOE had decided that the delegation that had been present then had to return to the Committee for the meeting of the day. It was an error from that point of view which was why he was taking full responsibility for the absence of the subsidiary chief executives.
The Chairperson pleaded with the Committee to move forward with the meeting and park that issue as the perception that PRASA had created was that it was trying to hide certain things.
Prof Maluleke said the Committee would be able to judge from the 64 reports whether Werksmans had produced work worth the money it had been paid. The amount paid to Werksmans had been R178 million to date.
The Chairperson interjected wanting confirmation whether payments were continuing or not to Werksmans as PRASA had indicated that Werksmans had been briefed to represent PRASA in court and for disciplinary work it had undertaken.
Ms Natasha Skeepers, Board member, PRASA said that the interim board had been given by Werksmans documents that were statements with line items and if one compared the documents with the line items, there had not been a break down which would say for telephone calls, short text messaging (SMS) and e-mailing particular amount had been charged. Therefore that was why the interim board's understanding had been that to that point, the invoices had been paid per invoice as it was being received. The interim board had then initiated a process of suspending the legal panels of Werksmans which as members would have been following in print and broadcast media the interim board had been accused of trying to suspend the work of Werksmans when in fact it was intervening. Werksmans was doing work for PRASA in terms of the litigation and disciplinary processes Werksmans was undertaking against PRASA employees implicated in the Werksmans investigation.
The Chairperson asked whether PRASA had no labour unit which could deal with discipline and other misconduct at the SOE.
Ms Skeepers said that the interim board was not in opposition to the Committee but agreed with most of its sentiment as when it arrived at PRASA it had been concerned about the ongoing intervention by not only Werksmans but lawyers in general. She referred to an annexure which contained e-mail correspondence from former director Manasa and current legal head Ms Martha Ngoye and the CFO clearly pointing out that PRASA’s internal processes had not been followed in terms of the appointment of Werksmans. In terms of why the legal people of PRASA were also not present, Ms Skeepers acknowledged that PRASA’s internal legal processes were also under question, thus the crisis the company was in. Additionally the R178 million had been found to be irregular expenditure by AGSA instead of illegal expenditure.
The Chairperson asked about the consequences for those found to have committed misconduct.
Mr Molepo said the interim board had commissioned attorneys to assist it in the implementation of the PPs remedial action and to also look at the Werksmans issue. It had also been apparent that when Werksmans undertook work it had done two separate things: they had carried out an investigation which had ended in July and then from the investigation there had been two matters namely; Swifambo matter and the Siyangena matter. Both were sub judice and parallel to that were the disciplinary matters which were ongoing. In total from the investigation mandate arose other matters which were still running.
The interim board had received letters demanding undertakings from the board to never ever terminate any brief to Werksmans.
The Chairperson asked where the letters of undertakings had come from.
Mr Molepo replied that one undertaking request had been from GroundUp and the other from #unitebehind. The interim board had to clarify that the current legal panel on PRASA’s payroll from which Werksmans had been selected had last been developed in 2005 and correctly AGSA had found that the current legal panel was supposed to have been put out to tender and the interim board had then decided to suspend the panel as it was outdated however; before the ink was dry there was already a high court challenge to that decision in the Western Cape.
The Chairperson reiterated her question regarding PRASA’s labour unit and its existence.
Mr Hunsinger said he did not understand how PRASA could say there had been no scope of work at the appointment of Werksmans but at the same time PRASA was speaking to an investigative mandate. He asked PRASA to differentiate the two there as there seemed to be a link there.
He then repeated the questions for Mr Molepo.
Mr Molepo replied that the rates were contained in a letter confirming the appointment of Werksmans signed by his predecessor Mr Khena. Annexures contained that information. That contract of appointment had been declared by AGSA as irregular because of the response Mr Khena had given the previous board when asked about the appointment, as his signature appeared in the letter of confirmation. That same letter gave a lot of back ground to former director Manase driving the process and a lot of consultations between Werksmans and former board Chairperson Dr Molefe. The documents showed that was where the appointment of Werksmans was mainly driven from in the board. The Committee would also note correspondence in the annexures regarding the authorisation of invoices where Mr Khena at some stage had expressed uneasiness in authorising invoices he knew nothing about. It then had been decided that because Chairperson had been driving the consultation between the then board of PRASA and Werksmans he would authorise the invoices.
In terms of the status of the contract it had become clear that the only thing that had stopped had been the investigation but the litigation was continuing. The question was that discipline in terms of PRASA’s disciplinary code had to be handled internally depending on the seniority of the individual but there were cases where an external person was utilised. From the looks of things it seemed Werksmans had instituted disciplinary action against PRASA employees before the interim board was appointed.
Mr Sibande said what the Committee was doing was not entirely fair as some of the matters were sub judice but in terms of its core functions of doing oversight PRASA was not responding directly to questions put to it.
The Chairperson proposed that in view of the Committee having agreed that there would be an investigation could the matter of Werksmans not be added to matters for the investigation?
Mr Hunsinger agreed that it could be added to the investigation of the Committee but he needed clarity as to whether the investigation had been concluded in July or stopped.
Mr Ramatlakane said if PRASA was already being pressured to never terminate the Werksmans contract by various parties. This would be a problem as PRASA would now be continuing with Werksmans out of being pressured to do so even if it did not want to continue that relationship. What had been the right contained in the agreement; as someone had to have had sight of the document which was being used to coerce PRASA. Where was that document? If PRASA and Werksmans both could not produce such a document then there was no formal agreement and PRASA could not continue paying such ridiculous amounts based on a gentleman’s agreement. The company secretary certainly would have been in possession of a copy of such an agreement otherwise he had to tell the Committee what he knew about that issue.
Mr Radebe said that the matter of Werksmans remaining legal representatives for PRASA would not end and would give the Committee very serious problems. He recalled that he had said that the one who had been claiming that he was stopping corruption at PRASA was the biggest corruptor and it was being relieved at that stage that those claiming to prevent corruption were the corruptors. The investigation by the Committee had to establish what relationship Werksmans had with the previous board Chairperson of PRASA, Dr Molefe.
Mr Molepo said the Committee would hear from an audio recording of the meeting PRASA had had with Werksmans where he had noted that in his experience in business; he had never seen an exchange between an attorney who was on brief with his/her clients engaging in such a manner, as there was a level of respect that had to be maintained between the parties. The level of disrespect by the attorney towards the client showed clearly that Werksmans brief as they perceived it was elastic.
Subsequent to that meeting of 19 January 2018; on the instruction of the interim board Mr Molepo had convened a meeting with senior partners of Werksmans to express the interim board’s displeasure with how the board had been engaged when it had been inquiring reasonably from the attorney of record. Senior managers of Werksmans had undertaken to deliberate within Werksmans and revert to PRASA’s interim board but that had not occurred yet. On the same 19 January 2018 after the attorney of record had shown such low regard for the board from which he/ she were supposed to receive instruction; an undertaking had been sent to PRASA that after the insult the interim board had to guarantee that it would never terminate the brief with Werksmans.
Ms Nolutshungu said that PRASA had mentioned that the legal panel which Werksmans were part of had been running for 12 years since 2005. Obviously there was an agreement and in that agreement there would have been a timeframe for that legal panel because that could not have been an open-ended contract. PRASA could not be telling the Committee that it was continuing with Werksmans on the instructions of #unitebehind as there was a legal document that could protect PRASA; what had it done in that regard?
Mr Molepo said normally an organisation went on tender looking for a service provider for labour, litigation and other needs. That list had last been updated in 2005 and in terms of NT guidelines it had to be updated after every 5 years. So there was no contract but rather people who were authorised from amongst which one could select if on required services.
Mr Ramatlakane asked if AGSA had already flagged the expenditure on Werksmans as irregular but PRASA continued with that transaction how would it respond to AGSA recommendations.
Mr Molepo said the interim board’s decision to terminate the services for all the legal firms on the panel had been based on AGSAs findings and PRASA had undertaken a process of securing permission as it was going on tender from the South African Civil Aviation Authority (SACAA) to utilize their panel of attorneys. Any new brief would be handled by that SACAA panel. For the matters already in progress the old panel would continue as some of the matters had already reached the courts.
The Chairperson welcomed Deputy Minister Sindisiwe Chikunga and briefed her about how the Committee had been engaging PRASA and what the way forward would be. The Committee was highly dissatisfied with the delegation from PRASA including its leadership as it had purposely left subsidiary heads and Department/unit heads behind which undermined the authority of the Committee. Furthermore, there was a lot of blame shifting regarding the AR of PRASA which to date had not reached the Committee. How was the Committee supposed to allocate funds to PRASA whilst it seemed to be so much in disarray?
Shareholder’s compact entered into by and between the Government of the Republic of South Africa and PRASA
Mr Mkhacani Maluleke, DoT board representative & Chief Director (CD), said the compact for the 2017/18 financial year had been seen by the interim board, endorsed and signed. The DoT internally had processed the compact however; he could not confirm whether it had been signed as there had been a change in the executive recently.
The Chairperson said the report from Mr Maluleke had not responded to the Committee's concerns.
Mr Hunsinger wanted an outline of the shareholder compact as the Committee were still awaiting printed and e-mailed copies of the compact.
Mr Maluleke replied that the compact managed the relationship between the shareholder who was the Minister of Transport and the accounting authority of PRASA which was the board of control. It also outlined deliverables, compliance documents including financials, as well as reporting and accountability of the board to the Minister. Deliverables were divided into annual targets.
Mr Hunsinger said according to his understanding the interim board having been appointed in October 2017 and the work of Government entering March 2018, the Minister would not have signed-off yet on the compact; were those facts?
Mr Sithole said, having perused annexure C, he had found that the Minister had not signed-off.
Mr Sibande asked if the shareholder compact had been submitted to the Minister of Transport.
The Chairperson replied that PRASA had indicated that the compact had been submitted to the Minister which had been verified.
The Committee would have to ensure that as the financial year was ending the new Minister would have to ensure that in the first quarter of the new financial year that the compact would have been signed-off. That was paramount as the compact outlined expectations of Government from PRASA from governance to operational matters. If the Minister of Transport had not signed there was little room for accountability and therefore she was suggesting that the Committee had to move on to the following agenda item.
Mr Hunsinger asked on what basis the interim board is operating on, if indeed the outgoing Minister of Transport had not signed-off on the compact. Had there been no appointment letter?
Mr Sibande said he was not shielding the Minister but wanted a date on when the compact had been submitted to the Minister as PRASA had submitted its updated presentation that morning.
Mr Maluleke said PRASA had complied with all legal prescripts in terms of submitting the corporate plan and shareholders compact before the beginning of the 2017/18 financial year. The delay in the signing-off on the compact was due to DoT processes which were beyond his control as an official as he was responsible for ensuring that the documents were submitted. He said the same corporate plan seen by Parliament had been approved by the previous board including the compact.
Mr Radebe proposed that PRASA be given a timeframe to return to the Committee with a signed compact.
The Chairperson proposed that PRASA be allowed to submit the compact to the new Minister, until June 2018 so that within the first quarter of the new financial year the Committee would have been apprised of the contents of the compact to enable proper oversight in that regard.
National Treasury Investigation
Mr Molepo said the NT investigation had been based on the PPs report into PRASA. He referenced the paragraph:
To support 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 maladministration and related improprieties in its procurement system
NT had conducted an investigation and issued a preliminary report in August 2017 for comment. The response had been that there had been certain matters which had been omitted as there had been no communication between those commissioned to do the investigation and PRASA. As there were comments from the investigators about access to documentation those documents had been prepared and availed to the investigators even before the appointment of the new interim board. After the interim board appeared before the Committee on 24 February PRASA had had to clarify that the NT report had not been finalised yet tough PRASA had earlier reported it final. Subsequent to that PRASA had received formal correspondence from NT confirming that having received outstanding documents NT is in the process of procuring services to finalise the investigative report. The curve ball thrown at PRASA is that NT expected PRASA to pay for the finalisation of NTs investigative report. The view of the interim board was that the NT investigation stemmed from the PPs report and that there was no allocation in PRASA’s coffers to carry out a NT investigation, as it had been proposed to be an independent investigation done by NT. To date the report that had been circulated was preliminary as the final version was still to be completed.
The Chairperson asked for the preliminary report.
Mr Molepo said that would be submitted to the Committee.
Turnaround Strategy for PRASA Operations
Dr Sipho Sithole, Group Chief Strategist, PRASA, said that the turnaround plan or strategy had been included in PRASA’s corporate plan which had been tabled to Parliament on 28 February 2017. On 18 May 2017, PRASA had presented on the turnaround plan again. Four pillars had been prioritised in the turnaround namely:
Concern about declining passenger numbers because of the underperformance of the rails system to offer a safe, reliable and predictable service.
Having reviewed the performance of 2008/09 where Metrorail had around 800 million passenger trips versus 2016/17 where the passenger trips had halved, PRASA understood that something had to be done.
The causes of failure had been identified to be non-availability of coaches, cancellations and train delays which clearly showed that PRASA was failing in its mandate. Having realised that PRASA went into a strategy turnaround and had decided that its already tabled corporate plan had to continue in the same trajectory of addressing service decline in PRASA’s performance. PRASA could no longer pretend that issues affecting commuters were not affecting it as a company including job losses, late coming because of train delays and thereafter being disciplined were because of PRASA’s failure to deliver on its mandate.
PRASA had also highlighted in its corporate plan that some of the issues hindering its performance were as a result of amongst others, the continued attack on PRASA assets & infrastructure, vandalism and cable theft which took long turnaround times to get trains running again which led to high levels of community unrest as a result of the slow speed of service delivery.
PRASA had to date categorised per region the number of trains sets available to render the envisaged service and the type of interventions which had been implemented. At the core of that turnaround strategy was the objective to achieve 80% customer satisfaction in the following five years which PRASA understood very well; was a big target to set.
The target had been informed by the need for better communication; how PRASA communicated and on which platforms that was done, because PRASA had realised that it was one thing to tell passengers that a train was delayed but a separate thing to detail the reasons for the delay and without that reason annoyance resulted. Therefore PRASA had been using information desks, SMS’s which had already been rolled out and social media platforms.
Bringing back of coaches to service had been broken down into phases:
- the recovery phase- the first 12 months
- the stabilisation phase
- the growth phase
PRASA had not made much progress in recovery because of the coaches it had returned to service at least 1070 plus coaches had been burnt or vandalised not to mention PRASA employees were being attacked. PRASA had planned to arrest its service decline by returning 3500 coaches into the service though PRASA was supposed to be operating 4500 coaches however; at the time of the development of the turnaround it had been operating 2702 coaches. PRASA had realised that rail operations could not function without support from engineering and PRASA had had to develop a thorough turnaround strategy for engineering alone which included returning coaches but added to that was the issue of infrastructure.
- signalling and telecoms faults by 15%
- electrical overhead traction equipment and substation faults at substations by 25%;
- perway faults by 15%
- Speed restrictions from the current 135 Km to 75 Km.
In terms of business support the intervention was whether it was the rail or bus sector of PRASA’s business it had to be supported by an efficient business sections. It had identified the need for improvement efficiencies in Information Communication Technology (ICT), aligning support functions as there was quite a lot of duplication at the company that needed to be combined or collapsed into one.
For each of the set objectives there had been a team assigned to ensure the achievement of the objective.
Dr Sithole said the biggest objective had been the reduction in expenditure by R3.4 billion over the Medium Term Expenditure Framework (MTEF) period which could have been over ambitious when the turnaround plan was being developed but PRASA remained committed to achieving that figure. The company aimed to increase its revenues by 10% in the MTEF to just over R1 billion. Amongst the identified cost reduction areas was reduction in personnel costs by R579 million which remained a target though there were a lot of matters that PRASA had to address. Some would be achieved through natural attrition and others not the filling of vacancies as they were becoming vacant. Additionally reductions had been identified in energy, security and haulage costs. And PRASA had planned increases in fare and other revenue driven by PRASA’s core mandate.
PRASA continued its commitment to modernising the rails system which had to do with rolling stock fleet renewal, station upgrades and perway improvements. PRASA also recognised that it needed to grow into new settlements and it was busy doing work to expand its rail network though the expansion would not necessarily be realised in the current MTEF period. For instance PRASA knew that in Cape Town someone travelling from Khayelitsha to Bellville had to go around changing trains often but it would have a Blue Downs rail link to cut across that distance. In Port Elizabeth there was the Motherwell rail link expansion and in Gauteng there was the Etwatwa- Daveyton including the Hammanskraal and Moloto rail corridors. The company recognised that in its network expansion it was not only to remain a people’s carrier but had to expand such that people would come to PRASA commercial hubs where they could shop, trade, dine and return home all within the rail network as it had happened at kwaMnyandu station because Dr Sithole’s previous life had been board director at the Airports Company South Africa (ACSA) where ACSA’s slogan had been simple; to build shopping malls where aeroplanes happened to be landing.
Summary of Operations Turn-Around Plan
PRASA to date had not achieved much in terms of its turnaround strategy and had not realised the planned cost reductions. The company was still engaging the National Energy Regulator of South Africa (NERSA) in terms of energy reductions. Security costs would increase because of the security industry being regulated. PRASA had not done fair revenue increases in 2017 as it had felt that it could not increase fair revenue because of the underperformance in its service offering.
Also included in the report that PRASA had submitted were region specific turnaround strategies.
Mr Hunsinger said when exactly the same was said in the meeting on 13 February 2018, the Committee had raised concerns and recommendations which from the look of things had not been considered as the report was the same as raised previously. Most importantly, the protection of commuters and assets were the main reasons for PRASA’s declining interest from commuters and why coaches were becoming less and less. There was no turnaround strategy that would change the fortunes of PRASA other than protection of commuters and infrastructure. As he had understood it there was an agreement with SAPS what had happened with that because as the meeting was underway at least three robberies had occurred at Belhar station where there was no security insight.
At a trade and industry Committee meeting SA Airlink had presented excellently on a best practise framework for a turnaround strategy which Mr Hunsinger suggested that PRASA review. The presentation was envisaged ideas at best as he saw no integration in terms of the crisis PRASA had; because it boggled the mind that Metrorail Gauteng could get an 80% conviction rate on vandalism but in the Western Cape (WC) the conviction rate was 5% for the same contravention. PRASA could not withdraw service and advice commuters to get to work on their own as if it did not care. a contingency plan had to be in place where busses would transport commuters to their places of work without paying one cent extra as they would have paid for a train ticket. Where was that contingency plan?
The Committee had also requested deadlines for the action steps which Dr Sithole had mentioned because they were implementable solutions. When would what action happen; and when and how would it happen?
He was quite disappointed to see the replication as he had expected a solid strategic plan which was credible.
Mr Sibande said an allegation had been made at the last engagement with PRASA that it had 88 security guards which were gangsters in fact, in the WC which together with four armoured vehicles had been secured by PRASA for security purposes. Had PRASA ever engaged State Security together with SAPS on the allegation that cable theft was organised criminal syndicate activity?
Did PRASA sit with the Rail Safety Regulator (RSR) regarding signalling?
Ms Nolutshungu said the visitors in attendance had simply come to hear from PRASA how the company would move them to work? The company needed a simple plan on what PRASA would do when service breakdown occurred. How would PRASA deal with overcrowding in trains? There was a need for an integrated coordinated transport plan; it was high time that working in silos ended and PRASA engaged other transport modes to assist it in resolving the challenge of getting people to work.
She had not heard PRASA speak to the multidisciplinary rail forum which had been recommended for establishment by the Committee.
PRASA had presented a high level plan when in fact at the previous engagement there had been presenters with security suggestions.
Mr De Freitas said his colleague had been diplomatic because listening to the presentation from PRASA he had been beyond disappointed because two weeks previously the Committee had sat with PRASA and asked it how it planned to get people moving, apart from the fancy plans it had presented then. The response from PRASA had been about weird things like drones and today the Committee was back to the same place; and he had not seen a strategy document from PRASA even in 2017; whether PRASA called it that or something else to him, it was a wishlist but not a strategy document.
He had been on a Metrorail train once in Cape Town and his experience had been horrific, and imagining those that travelled daily with the train travelled in the most inhumane, embarrassing and dehumanising conditions and PRASA senior management simply did not understand that because they repeatedly had been feeding the Committee nonsense. What had annoyed him with the last presentation was that PRASA had intimated that passengers were to blame as they vandalised trains which showed the lack of understanding because commuters were frustrated and quite rightly angry; though he was not justifying destruction of property. However; one got to a certain point where no other avenue of complaining was left but for vandalism to ensue.
What had been happening with all other things like the suspension of the WC regional manager who was in attendance and whom Mr De Freitas thought had been doing his job by getting the central line reopened which had been closed. Those were the type of answers that the Committee needed as that spoke directly to moving people. His recommendation was the PRASA leadership be released to return shortly with a real concrete turnaround strategy plan and not the nonsense that had been given to the Committee; what the outcomes would be and how those could be measured.
Mr Ramatlakane said possibly the Committee had not made itself clear as PRASA had regurgitated information that the Committee already had; as the previous meeting had ended abruptly the Committee had asked for a turnaround strategy for the current problems affecting PRASA in specific regions including loss of coaches. How PRASA would be intervening in the WC in the medium term; because all Dr Sithole had said was correct for a long term view but it had not answered the question of what would happen the following day.
He said in the last two years not one official from the AGCEO to board Chairperson indicated how PRASA would react to availability of spare parts when a breakdown occurred in the WC or KwaZulu Natal (KZN); no one had been able explain the difficulty of ensuring that a service line got up and running in a day or two or what the challenge would be in doing that. Therefore he was wondering whether centralisation of decision making power was a creation of jobs in Pretoria and taking away of decision making at functional areas where decisions had to be made. Why had a regional manager to first call Pretoria for a decision that affected a region and needed resolution speedily? PRASA’s business was not centralisation but the ensuring of movement of people to their destinations in the regions PRASA operated in.
PRASA had terminated the irregular contract with Transnet and had promised to get a new contract with Transnet to fix and service trains early in 2017 but in Salt River trains were parked there. Of the 100 trains it should have been operating it was operating 54 trains only; that meant that there was a large volume of people that were not been serviced by the trains.
He had thought the turnaround would speak to all the things he had just listed. PRASA could certainly do better. He was fairly disturbed but glad that DM Chikunga was present because the engagement had been quite tortuous as the report from PRASA leadership about why its chief executives of subsidiaries and heads of Departments were not present had been that they had been booked off sick. However; he was sitting with an SMS from Martha Ngoye, Group Executive of Legal Risk and Compliance, PRASA who had informed him that they had been told to not attend the Committee meeting by PRASA leadership and in fact she was not sick. That was telling, because it was saying that there were officials who feared that their colleagues would reveal to the Committee information which PRASA were attempting to hide.
The previous week the Committee whilst dealing with the turnaround it had requested a briefing from the WC regional manager Mr Richard Walker, as PRASA executives had not responded to Committee requests to present themselves. During that briefing Mr Walker informed the Committee that he could not continue as he was being handed a suspension letter. That had created the impression then that Mr Molepo and other PRASA Rail CEO, Mr Mthuthuzeli Swart were in a degree of cahoots with a union called the United National Transport Union (UNTU). UNTU statement after the suspension letter had been served had been that its demand had been that its members which were train drivers, would down tools if Mr Walker was not suspended. After Mr Walker had been suspended indeed drivers had returned to work. It was alleged that Mr Swart was plotting to execute a strategy with UNTU to what end; it was unknown to Mr Ramatlakane. He was in possession of evidence illustrating machinations to cripple the central line by Mr Swart without him being present through illegal work stoppages.
People were suffering particularly those dependent on state intervention through trains as a form of transport.
Had PRASA already paid the security company which was claiming R2 billion for services rendered, because there had been allegations that the work done had not been worth that amount of money?
The Chairperson said she was questioning whether vetting was done when making appointments by the interim board because the Committee was sitting with allegations about the appointment of people with questionable credentials. It looked as if in the WC PRASA was no longer working in line with the succession Act which established PRASA, because coaches were not been repaired but there were armoured vehicles, separate security details and drones. She wanted to know how much PRASA were spending on all of that.
How much would it have cost PRASA to repair just one train?
The Committee had asked at the meeting on 13 February 2018 whether PRASA had been party to the rail summit between PRASA, WC Provincial Government (WCPG) and the City of Cape Town (CoCT) which had been taking place simultaneously as the Committee held a meeting. The PRASA leadership had distanced the company from that summit but the following day print and digital media identified Mr Swart as having participated at that summit. She bemoaned the fact that the Committee was being lied to repeatedly and that PRASA were undermining Parliament as the lies had been made under oath.
Mr Radebe said that on top of locomotives not being in use there were spares that had been procured where trains had been repaired and serviced but were not being utilized. He also wanted to know who was responsible for ensuring delivery back into the service, of repaired trains. If there were trains parked whilst having been fixed, someone had to be behind that; what steps could be taken against that responsible individual?
Prof Maluleke acknowledged that there was a lack of communication with the commuting public. He also explained what an integrated transportation plan entailed, including the fact that it was done at municipal level guided by a provincial land transport framework. At national level the national land transport strategic framework would be guided by the National Land Transport Act 5 of 2009. PRASA was like any other transport company however the difference was that it had an obligation to ensure that other modes of transport could intervene as a contingency plan. In terms of the land transport Act one needed to have a forum where all relevant stakeholders including the travelling public were represented to deal with their transportation concerns
Mr T Mpanza (ANC) interjected that that he thought PRASA would respond but it sounded like PRASA was workshopping the Committee. The Committee required tangible answers and Prof Maluleke was giving broad and general responses. He asked the Chairperson to instruct PRASA to respond to what had been asked and answer questions specifically.
Mr Hunsinger said the latest and newest ideas which had just been presented and Prof Maluleke’s response had cast huge suspicion on everything heard to date because the issues which Prof Maluleke had raised should have been held within PRASA as preparation before engaging the Committee.
All the Committee required was for the PRASA delegation to say how it was going to get PRASA’s credibility back as the Committee believed that was possible.
The Chairperson ruled that the questions asked would have to stand over but was reluctant to set a deadline because PRASA had trouble keeping deadlines set by the Committee.
Ms Nolutshungu emphasised that the Committee was being lied to because it had been asked at the beginning whether the interim board had seen the presentation where the question had been affirmative. It had become clear during the discussion that the board had not sighted the presentation and that the interim board actually did not communicate with PRASA’s senior executives.
Mr Sithole proposed that the Committee allow the DM Chikunga to give input and then close the meeting as PRASA had failed to answer the Committee’s questions.
Deputy Minister’s remarks
Deputy Minister Chikunga said sitting in the meeting, listening and being the DM of Transport, it hurt to be in her position. She apologised that the Committee had requested officials from PRASA to be present and they had not arrived. She asked that invitation to please be sent to her liaison as well as she had just reviewed her line of accountability from the SA constitution which prescribed that DM’s were accountable directly to Parliament.
It possibly would not work well at PRASA whilst structures were not in place at that SOC, especially a permanent GCEO which DoT was in the process of finalizing quickly. The Committee was a witnesses that AGCEOs had gone through a rotating door and the instability at that level of such a large company created problems. Additionally the absence of a permanent board also created problems at a group level, the period of a non-quorate board and absence of decision making at PRASA had created far reaching consequences which Government would live with for some time. DoT was speeding up the processes of appointing a permanent board as well.
DoT is saying to the interim board of PRASA: when misconduct is picked up, then people had to be held accountable.
She requested DoT be allowed to respond in writing to the Committee in relation to all the questions put to PRASA. The DoT wanted PRASA to fulfil its core mandate and if that meant cleaning house for PRASA to move people to their destination, then so be it. As the President of the republic of SA Mr Cyril Ramaphosa had noted that there needed to be life style audits, She thought that PRASA had to be first in line to have those commissioned, including the vetting of officials that the Chairperson had alluded to.
The Chairperson said that the Committee expected PRASA to respond by Friday 2 March 2018 to all the outstanding questions so that it could process the responses and to find a way forward.
Mr Radebe said that on matters that PRASA executives thought would affect PRASA operations; those had to be resolved and PRASA could not allow external influences to block the work of the SOC because the Committee was the body PRASA was accountable to.
Mr Sibande was concerned whether the undertakings made by DM Chikunga would materialise where PRASA was concerned.
The Chairperson said she had been hurt by seeing school children attending the Committee meeting because of non-operational trains barring their travel to schools. PRASA had centralised tenders and could procure armoured vehicles but could not operate trains to allow children a ride to education.
The new Minister of Transport had to put his foot down and clean up where he had to. The Reconstruction and Development Plan (RDP) of the ANC had indicated that there had to be efficient, reliable, safe and cheap public transport. What had been happening was that there were 10% kick backs awaited by those putting out tenders and the Committee were going to investigate those issues.
PRASA could certainly do better because if the PRASA executives did not understand what was required; the Committee was a phone call away.
She said the visitors that had attended the meeting had missed a day’s work and school because they believed that the Committee was failing to represent them in holding PRASA accountable. The Committee was to remain in a closed session to finalise the terms of reference of the investigation the Committee would undertake into PRASA irregularities. The acting deputy director general (ADDG) for Rail at DoT was definitely slacking at work otherwise the Committee would not be complaining so much.
The meeting was then adjourned.
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