Autopax & Intersite 2018/19 Annual Reports
08 October 2019
Chairperson: Mr M Zwane (ANC)
The Committee met to discuss the audit outcomes and annual performance reports of Autopax and Intersite, subsidiary entities of the Passenger Rail Agency of South Africa (PRASA). It felt that Intersite provided little information on its performance targets, and also inquired about the process of consolidation between PRASA Crest and Intersite. Members expressed concern at the audit outcomes reported by the Auditor General of South Africa (AGSA), and wanted to know what was being done about the high incidence of irregular and wasteful expenditure.
The Committee questioned why there was a delay in concluding a probe into a 15-year deal between Intersite and Vodacom in 2016, over allegations that members of the Intersite board had not followed proper procedures to enter into the deal, including relying on an alleged forged signature of the then Transport Minister. They also wanted to know why a contract with a fibre optics company had been allowed to lapse.
The Committee was disappointed that Autopax had submitted its report only a few hours before the meeting, and suggested that this had done been deliberately to prevent Members from gaining an informed opinion of the entity’s dire financial situation. Its financial statements had received a disclaimer from AGSA for the past two years. Members said they were shocked at the level of gross financial mismanagement and irregular expenditure, and asked why there had not been investigations and those responsible arrested. They questioned the PRASA board’s logic of appointing Autopax’s chief financial officer as acting chief executive officer, when financial mismanagement had been responsible for the entity’s current poor financial situation.
Intersite Annual Financial Statements
Mr Mtandeni Mntungwa, Acting CEO): Intersite, presented the entity’s 2018/19 financial statements. He said that in previous years, Intersite had been receiving unqualified audits, but this year it had received a qualified audit. This had had to do with the lease withdrawal agreement and also a financial waiver from Passenger Rail Agency of South Africa (PRASA), which had come into effect and had to do with the issue of sustainability of Intersite, and which had led to the entity being given a qualified audit outcome.
He referred to the financial trends of the entity pre-2010, and said the revenue from 2005 and 2009 had been on an upward trend, and the bank balance position had been positive before 2010. The major event in 2010 had been the restructuring of the entity, whereby Intersite was split into two. Property management services had been divisionalised, and Intersite had remained as an investment entity. What had not happened was a transfer of assets to Intersite to underpin the strategy of being an investment company. So prior to the 2010 split, the company had been sustainable and had an upward trajectory in terms of profits, but after the split one could see it fall in terms of revenue.
Mr C Hunsinger (DA) repeated what the Chairperson had said earlier -- that the entity was boxing below its weight. He noticed from the entity’s financials that the fruitless and wasteful expenditure had increased by 55%, and irregular expenditure by 30%. He asked about two of the 11 core findings of the Auditor General’s (AG’s) audit outcomes, which suggested that there no formal procurement process had been followed on the renewal of the office lease agreement, which he assumed would be basic elements someone in the property environment would know.
He also pointed out that there were irregularities around expenditure in the current financial year and also issues relating to retainer fees, which was caused by unfavourable barriers which were explained to a lesser extent. He regarded it as important to the Committee, because what happened was that certain invoices were not processed as per the instruction of the group chairperson of PRASA, and were not processed in an adequate manner. There were issues surrounding the approval of this in accordance with the shareholders compact of 2018/19 which had huge governance, audit and financial implications.
He also pointed out issues regarding the zoning of certain developments, which again should be a basic aspect one would know about if one was in property development. It was an important aspect in property development because one could not enter into and sign agreements if the zoning of the development was not sorted out. He also commented on the fibre optic interest of the entity, saying it was higher than the annual incremental rate and he wanted to know what the reason behind this was.
He also asked for an update about the optic fibre agreement with Dark Fibre Africa and the issue around making this available for government enterprises, as well as the issues around the forged signature when Mr Joe Maswanganyi was still Minister of Transport. When he looked at the annual performance report (APR), he noted that out of the 23 annual performance targets that were not met, 13 had nothing more than copy and paste explanations in the comments. The entity could have been more innovative than to just try and present copy and paste explanations.
Mr K Sithole (IFP) asked about the relationship between PRASA and Intersite in respect of property, as Intersite said that it did not own property and depended on PRASA for it. What mechanism did PRASA use in making property available to Intersite? He also asked about the process of consolidation of property, as they did not have specific timeframes in place for the process, and he wanted to know the timeframes and when they would report back on the process of consolidation.
Mr M Chabangu (EFF) asked whether Intersite would make the rezoning of special developments in rural areas when they had new developments, especially after land expropriation without compensation. Did Intersite deal directly with PRASA, or did it deal directly with ailing municipalities with regard to their properties.
Mr P Mey (FF+) asked whether PRASA or the private sector was the biggest investor in the entity.
Ms N Tolashe (ANC) said she saw brilliant development ideas along the PRASA rail line, but at a distance she saw only a few provinces benefiting out of this development. She wanted to know why the majority of developments were in Kwazulu-Natal (KZN) and the Western Cape, as these were not the most rural provinces. She asked Interstate to take the Committee through why this was the case and why these developments were not happening in other provinces.
Ms M Ramadwa (ANC) wanted clarification from Intersite on the issue of infrastructure decaying, and what the entity was doing about this, as they were also looking into building houses next to the station. The station Intersite was doing work on was not its only station that was decaying, and she wanted to know what was being done at the other stations which were decaying.
Mr B Yabo (ANC) said he had picked up a comparative slide between PRASA’s presentation and Intersite’s presentation, He referred to slide number 36 on Intersite’s 2018/19 annual presentation, which addressed the performance targets, and to the PRASA 2018/19 presentation -- which read “performance against pre-determined objectives” -- which states that Intersite’s performance was at a 100%. However, the Intersite slide states performance was at 41%, so he wanted clarity about what exactly the slide was speaking about. Were they referring to the same thing, or were they referring to different things?
He further ask about the list of impediments which Intersite had raised -- what kind of projects or targets had been impacted by these impediments? He gave the example on slide 37 on Intersite’s presentation about viable development partners through the National Labour & Economic Development Institute (Naledi), but on the same slide it says that Intersite was unable to secure funding for the commercialisation of PRASA’s energy assets. He wanted to know the impediments the entity had on raising funding, which type of asset class it affected, and which type it did not have an impact on. This was so the Committee could know about the legislative or policy bottlenecks and discuss how these bottlenecks could be opened up in order to add value on the bottom line of Intersite and subsequently PRASA. These were the issues he would like to have some clarity on
Mr L Mangcu (ANC) said he enjoyed the pictures in the presentation, as it had given him a good understanding of what Intersite was doing, but unfortunately he had found very little information on what they had presented through the entity’s annual report. The presentation tells one what it did not achieve, but did not set out what the particular targets were. He thanked Intersite for the problem statement included in the presentation, as he had found it very innovative. Perhaps the Committee could engage at a later time with the entity on the problem statement discuss how best it could assist it in solving its problems.
The PRASA presentation had not had a lot of information on Intersite, and he thought the Intersite presentation would be helpful. The PRASA presentation also had not mentioned anything about PRASA Crest, and in the Intersite presentation it referred to competition between PRASA Crest, yet there was no information on PRASA Crest, which makes it difficult for the Committee to make an informed decision on these comparisons and to objectively say what Intersite was raising was something that the Committee needed to worry about. It was a gap which he had identified especially on PRASA’s side. It would have helped if the presentation had outlined what PRASA Crest does and what Intersite does, because when he looked at the pictures he thought it was the work of PRASA Crest, only for Intersite to say it was its work.
He referred to slide five, page three of the Intersite presentation, which spoke about the transfer of assets, rights and advertising, and said that slide 34 on page 17 it shows that advertising was generating high levels of revenue, which was non- existent at the moment. Again, he feels like this left a gap, as the Committee did not know whether the advertising component went to PRASA Crest or what happened to it, as it showed good potential of revenue generation.
He also made reference to what the Chairperson of the Intersite board had said -- that the board already made a decision to bring the two entities together. However, the CEO of Intersite had said that the entity was still a waiting a recommendation from the G-Tech report which was still being finalised, and he saw that as another gap.
Lastly, he would like to highlight the AG’s finding of serious internal control deficiencies, and it seemed it was not the first time this issue had been raised. He wanted the Committee to make a separation between what the entities had presented as their problem statements and what they had presented as their annual performances, so when the Committee made recommendations going forward it could have a better understanding.
Mr L McDonald (ANC) asks about the 2018/19 business plan Intersite had sent the Committee earlier, and why the there was so many discrepancies between that document and the current report, as the business stated the entity had 15 employees, and the annual report had said it 13 employees. He referred to travel expenditure, where according to the annual report the entity was spending R673 000 per year on travel expenditure on 13 employees, which averaged around R45 000 a year on each employee, just on travel services. Professional services had cost the entity R2.1 million, which was about 11% of the entity’s total income -- what were these services, and were any of the country’s previously disadvantaged people or companies and small, medium and micro enterprises (SMMEs) benefiting from these services? The salary expenditure represented about R1.5 million per person, which seemed high, and the company needed to finds ways to cut that amount. He asked why Intersite wanted to build houses at the stations.
Mr Mntungwa responded first on the issue of building houses near stations, and said Intersite did not actually build houses but facilitated and made it possible for developers who wanted to get involved in social housing or development near stations. They did not invest any equity in these projects but simply made it possible for stakeholders to access these land parcels. The entity facilitated this for a simple reason, because if one looked at the expenditure of disposal income by poor households, the bulk of the cost was transportation, communication and food, and the entity wanted to contribute to at least bring the transportation cost down by assisting and bringing these households closer to transportation facilities.
Regarding salaries, most of the entity’s human resources were qualified personnel like engineers and chartered accountants, and from a salary bill perspective you could expect the current salary bill the entity had, as these qualified personnel were generally expensive. Qualified skills were the main drivers for those costs, as they had a mainly professional core team.
Dr Menelis Mdebuka, Chairperson: Intersite board, added that the moment Interstate worked at full capacity and increased its revenue, the cost to income ratio would no longer be an issue. The only reason it stood out as a sore thumb was because these qualified personnel were not properly utilised by the entity. If Intersite could work at full capacity, they would bring in so much revenue that this issue would no longer be a problem.
Mr Mntungwa responded to the issue of travel, and said that Intersite had only one central office and did not have any regional representation, so part of the travel cost was around staff travelling around to projects in different parts of the country. Secondly, the chairperson of the board was based in Cape Town, and that also contributed towards the travelling costs. The lack of regional representation meant the entity’s staff had to move from Johannesburg to wherever a project was happening, and that was one of the main reasons travel costs were high. Over the years they had tried to apply containment measures in areas such as car hire to bring costs down.
Dr Mdebuka added that the entity was sensitive to travel costs, and when he had joined Intersite he had changed the policy for flights for the chairperson from business class to economy, to try and bring costs down.
Ms Khanyisile Kweyama, Chairperson: PRASA board, explained the confusion between PRASA Crest and Intersite, and the joining of the two entities. The PRASA board had taken a decision, but was waiting for processes to run. Intersite had a property mandate, and PRASA Crest was a division of PRASA which managed property. The engineering and technical department also had property that it was managing.
The board had found there were many pieces of property management all over the place and therefore there had been a need to consolidate them so that they could be more efficient. She spoke about the process of consolidation, and said that when it started there had been an internal committee set up to run with the process, and initially it had been only PRASA Crest and Intersite. The engineering properties came in only later, but there was a conflict as to whether to bundle Crest into Intersite or Intersite into Crest. There were also certain technical aspects which required a structure such as G-Tech to carry out a technical exercise and advise which way the process should go, and it was one process to ensure that at the end of the day there would be one property division. The report from G-Tech would clarify whether Intersite could be a stand-alone company or not.
Dr Mdebuka responded to the issue of timelines, and said it had been intended to take only six months, but they had then realised that they might compromise the quality of the report and had decided to do it properly and bring in an independent partner like G-Tech, so it would take another financial year to finish the report.
Mr Mntungwa responded to the issue of performance figures being different on the PRASA and Interstate slides, and said that all the performance targets which had been given to the entity by PRASA had been reached, but some of those which were not reached were targets Intersite had set for itself. Intersite currently had 13 employees, and the reason why there were 15 listed on the other document was because two executives had retired, and the entity had not replaced them.
Regarding the problem statement and the annual report, he had felt it was important to give context to the Committee, because they trying to speak to the issues it faced. It helped to explainj where it came from and where it was heading to, but he agreed with Mr Mangcu that they needed to be more specific.
The issues raised by the Auditor-General regarding internal control deficiencies were related mainly to the lease agreement that it had. It already had an agreement and had entered into a contract, and could not just cancel it, so it had to allow it to runs its course so it could exit, and it had then become a repeat finding. The retainer fees which the Auditor General had also flagged as a point of concern, was beyond management control and had to do with cash flow issues.
The advertising portfolio had come to Intersite in 2013, and had left again on the instructions of PRASA. Intersite did not have a say on whether it stayed or not. The advertising did, however, show potential to generate significant revenue for Intersite, and he thought that through the consolidation it would be addressed properly.
He also distinguished between PRASA Crest and Intersite. PRASA Crest was a property management company, and Intersite focused on property investment, which meant it invested mainly in the property assets of PRASA. However, over time there had been a blurring of lines and that was why the process of consolidation was happening to address those shortcomings.
Dr Mdebuka added the intention was that after Intersite had invested and developed these properties, the aim was to hand them over to PRASA Crest.
Mr Mntungwa referred to funding, and said that currently they did not have funding from PRASA or externally. If a transaction happened on a development, station or land, the benefit that accrued to PRASA would be the rental .The problem that Intersite was raising was that there was gap in the value creation curve in the sense that if one rezoned these developments properly, one actually added in the value and what one could get from the market. The second point was if one invest ed now in structures above the ground, this was additional revenue apart from merely managing the land.
Dr Nkosinathi Shishi, Group CEO: PRASA, said that the process of consolidation was a work-in- progress. There were two reports. and the one to which the entities keep referring was not on the table – it was the consolidation report which had been jointly compiled by both PRASA Crest and Intersite, which was an important report which contained a set of proposals and recommendations. The report included a lot of work on trends internationally and locally. It was a useful document that, when it finally got considered by the board, would give guidance as to what kind of model should be adopted. This would be aided by the G-Tech report once it also had been presented. They would have considerations from both reports, which would make the margins for error smaller.
Mr Mtungwa responded to the issue of developments happening in the rural areas. Only KZN and the Western Cape had been used as a way of example, but what limited the entity was that it works only on assets that are owned by PRASA, while railways lines and infrastructure in other rural areas might be owned by Transnet -- and they do not do work on assets owned by PRASA. The entity’s operations were being limited to those areas or regions where PRASA had operations, which were Gauteng North, KZN and the Western Cape. To some extent, PRASA had operations in the Eastern Cape, but the Infrastructure was owned by Transnet. That was the main reason why they focused only on operations in these provinces.
Dr Mdebuka said another element which limited them from working on infrastructure in all areas revolved around the entity’s capacity. They would like to do more, but what they did was limited to the resources they had. If they received more funding, they would be able to do more.
Mr Mntungwa referred to dealing directly with ailing municipalities, and says they dealt directly with both PRASA and the municipalities, and when they went to municipalities, they went with a PRASA representative.
Regarding who was the biggest investor between PRASA and the private sector, the biggest investor was PRASA. However, social developments were mainly in the private sector, and the entity retained the right to co-invest depending on the availability of funding. Therefor, if an asset was for the sole aim of professional requirement, then the funding would be mainly from PRASA, but social housing and malls would be done mainly through the private sector.
Intersite was wholly owned by PRASA. It was a separate entity, but a subsidiary of PRASA, and as everyone had indicated, there was a process under way to consolidate the work of Intersite and PRASA Crest. Once this had been done then the issue of asset placement would be dealt with by one entity in respect of property.
PRASA had around 2 000kms of railway line, and about 50% was under fibre coverage and the other half still under old copper cable, which was currently being replaced by fibre. He explained that PRASA used fibre for signalling, which was not an intensive application for the use of data or bandwidth, so there was excessive capacity which could be utilised for commercial purposes.
Dr Mdebuka responded on the issue of the forged signature, and said the current board was very frustrated as nothing was happening, and the board before was not correlating. It had therefore decided to get an independent legal opinion, as it could not just sit and fold its hands while action was not happening. The board had decided to go to the Minister of Transport directly to get intervention to get things moving, and it had been at this stage -- when the board had sent all the documents and someone had reported back -- that the documents had been forged. The matter was still being investigated.
Mr Mntungwa referred to the issues involving the APP, and said they needed to reflect on how to compile it properly. He said the Dark Fibre Africa agreement had fallen through, and the entity had not updated it, so there was no agreement at the moment. Regarding the zoning of developments, if one was looking to develop a property which was not in the shareholder’s compact, one then had to go to the municipality and apply for certain rights to be able to do a development there. This required money, and Intersite did not have access to capital funding or the ability to borrow. This limited its ability to create developments, and the next best thing was to look at private sector because as time goes by, assets become derelict and vandalised. By partnering with the private sector, the entity would ensure activity at particular stations, which would benefit both parties.
He acknowledged the shortcomings of the cut and paste issue, and said the entity would do better next time.
The Chairperson says the entities should deal with perception created by the posture of PRASA and Intersite at this meeting. This involved them not agreeing on issues, with Intersite having its own way of thinking how it should go about around the aspect of transferring assets, while PRASA had appointed G-Tech, which was also a government company. He asked whether PRASA was paying them for the work being done. As a subsidiary of PRASA, PRASA should have informed Intersite properly of the process. What was becoming evident was that PRASA had to make a decision whether it was comfortable having so many subsidiaries which could be consolidated into one, and use the funds efficiently and effectively. He thought Intersite was making the argument that they had been around for a long time and deserved be to a stand-alone subsidiary.
He said the issues raised by Mr Hunsinger were very serious, and the fact that the entity had acknowledged most of them should be commended. The cut and paste job made him frown, because there was someone actually being paid to do it. The signature forgery issue needed to be dealt with so the Committee could get closure on the issue.
The ANC policy was very clear, that where they could they must take services to the people. The entity must not to duck and dive, and would be commended for building houses next to stations. He sympathised with the Member who had asked where the development in the Eastern Cape was, but accepted the fact that Intersite followed PRASA. The government wanted to know what development happened in areas where PRASA did not operate, but this was a question Intersite might not be able to answer.
Ms Kweyama says that the issue of the contract lapsing had to be addressed. When they first appeared before the Committee, this matter had been was raised and they had immediately instructed the internal audit department to conduct an investigation. It had taken longer than expected, and there was a draft report, but there was no agreement on it and the board had then instructed further investigation to take place. There was an investigation currently under way, but it was not completed and the report had not been finalised.
She added that the terms of reference were not around the signature, but more around the irregularity of the contract, so the finding would talk to the irregularity. However, since other issues had now been mentioned , those issues should be raised in the terms of reference
The Chairperson said there was a tendency by government to outsource issues involving dealing with discipline to outsiders. When government gives a company that mandate, it normally exceeded the timelines given and then come back with a reason to extend -- and government normally extends. He felt government needed to be sensitive about using money on establishments that were not capable.
Autopax Annual Report
Ms Kweyama started out by apologising on behalf of Mr Xolile George, Interim Chairperson of the Autopax board. She reminded the Committee that the Autopax board had resigned because they were not willing to serve on the board of an entity that was trading recklessly, so PRASA as the main shareholder, had had to intervene and appoint an interim board. Mr Louis Wessie was a member of the Autopax board, and would represent the chairperson. Mr Ig van Rensburg was the Acting CEO of Autopax, and was the chief financial officer (CFO), but had been acting in this position for the last few months.
Mr Wessie said he wanted to give the Committee some kind of perspective of the kind of challenges the company had been facing over the last couple of months. The Committee knew that it was wholly owned by PRASA and that it had faced serious challenges in the environment in which it operates. It had suffered severe losses and which obviously necessitated reviewing the kind of business that it was running.
When one did a deep analysis of what was impacting the company, running buses and not having a proper team structure to look after them could create a problem. PRASA, as the sole shareholder of Autopax, was faced with challenges in terms of the mandate of the shareholder compact and what was deemed to be fair in the eyes of the public. The company was faced with a situation that some matters may have to be dealt with at a later stage, because of the need for ensuring the Autopax operation carried on, as it provided affordable travel to many South Africans. As a board member of both PRASA and Autopax, he believed there needed to be a serious balance between the limits they could actually set.
Mr Van Rensburg said that in essence, Autopax and PRASA had the same mandate. Autopax had a capital and labour intensive operation, and functioned in a highly competitive environment where passengers were very price sensitive, and taxi intimidation was prevalent in most provinces.
The resignation of the board had had a negative impact on the organisation, and had led to governance and leadership instability. This had also led to the annual financial statements not being submitted within the set deadlines. The performance of Autopax had largely declined.
He reflected on the external audit and the findings of the Auditor General, and says the AG was of the opinion that the financial statements were not appropriate. Autopax had received a disclaimer this year and the previous year. In 2014, it had received a clean audit, but things had changed over the years. He referred to a graph in the presentation, and explained the decrease in revenue from 2015 till 2019. He added that Autopax’s holding entity had been serving as their banker, as Autopax did not have an overdraft facility.
The cash requirements to fund the company’s losses had come from the company’s holding entity, and was an amount of R250 million. This could be attributed to bottom line issues, but could also be attributed to some impairments on assets that had to be made in 2017 of R10 million, and at further R43 million in the 2018/19 year. The reason for this was that the company’s fleet was renewed in 2010 and had an economic life span of eight years. It was 2019 now, meaning the fleet had been running for nine years and was moving in on to 10 years. Given the cash flow challenges, the company had been trying to harness the vehicles as best they could, but had found themselves losing major components, putting vehicles physically of the . The fleet had been reduced about 140 vehicles which they could operate currently
Assets and revenue had declined in tandem with vehicle availability. There had been a drop in revenue of R76 million. Passengers had declined from 2.5 million in 2016, to 2.2 million in 2017, and 1.8 million last year. The figure currently stood at 1.6 million for 2019. The personnel-related costs represented 38% of the total cost, energy costs were 19%, and repairs and maintenance were a additional 12%. These were the three largest costs for the company, which had an unsustainable cost component.
The company had achieved 21% of its targets, and not achieved 71%. The targets achieved involved fuel consumption, a slightly increased network up time and reduced passenger complaints. The targets not achieved were all related to the number of vehicles the company had, and liquidity issues played a major role in not achieving these targets.
There was also a slight increase (2.4%) in operating costs, and the operating loss year on year was R344 million. They had also tried to pay accounts at the very last minute to earn some interest on them. The accumulated loss of the company had been corporatised over the last few years, and amounted to R1.3 billion.
Mr Van Rensburg said the company needed to look at refurbishment. Its operational environment was manual, and they would like to use information communication technology (ICT) to improve efficiency. Autopax needed to get a fully functional operational environment going, and see how best it could streamline that process.
The Chairperson said the Committee had to discuss whether or not to engage with Autopax, as they sent their report in only today at 14:00, not giving Members enough time to process the report, and some of them wanted to send Autopax packing. The issues of Autopax were now on the table, and Members were welcome to comment.
Mr Hunsinger says the statements made by Mr Van Rensburg sent a message that they needed help, and that cry for help was soon found in the very late submission of this report, where the company’s losses had increased by millions from last year to the current year.
The AG had found that financial statements were not prepared in accordance with the prescribed financial reporting framework, and when it came to procurement, goods were not acquired according to procurement processes and there was insufficient evidence of proof around procurement processes. The company had failed to apply the preference points system, and steps were not taken to correct wasteful and irregular expenditure.
There were also payments made where the company derived no benefit. These were financial administrative management matters, and the Committee could not help them, as they were management issues. He asked if the company had in any way refinanced its fleet since 2010. Had Autopax had been hiring out its permit to companies other than PRASA, or other Autopax subsidiaries?
Mr T Mabhena ( DA) commented that the acting CEO was actually the company’s CFO, and the Auditor General had lamented the challenges involving basic accounting issues within Autopax, and the lack of accurate financial statements. He asked how long Mr Van Rensburg had been CFO of Autopax and what measures he had taken to redress the situation. What mechanism was there between PRASA and Autopax to try and fix the entity? Why was Autopax not engaging with the National Prosecuting Authority (NPA) and the South African Police Service (SAPS) to bring the people responsible for wasteful expenditure to book? He asked whether it was time to do away with Autopax, or to put it in business rescue.
Ms N Nolutshungu (EFF) said the presentation had said nothing about mismanagement, and what had been displayed today lay solely on mismanagement, with a total disregard for corporate governance. How did the CEO explain what was happening at Autopax?
Ms Tolashe said the Committee was being abused by people who were responsible for the work and then came and asked the Committee for help. There should be investigations so the people responsible for this were arrested. The CEO was also the CFO, so he was the cause of his problems.
Ms Ramadwa wanted clarity on what plan of action Autopax had to correct all the disclaimer findings they had been getting from the Auditor-General. She added that the standard of Translux had gone down, and one of the things that Autopax needed to remedy was that.
Mr Yabo was deeply saddened about the situation at Autopax, and personal review of the documents before him left him feeling scary. The audit findings indicated the company had been unable to present financial statements that were credible enough for the AG to actually form an opinion. There was irregular expenditure amounting to R1.1 billion which was awaiting condonation. He wanted to know what had caused such irregular expenditure, and how PRASA, as a shareholder, could make the CFO acting CEO when the Autopax problems were within the financial space? He also pointed out that the liabilities exceed the assets of the company
Mr Mangcu says he understood why the report was submitted late. It was done deliberately so the Committee did not have enough time to go through it. The Committee would need to engage with Autopax for longer and the report must be studied to assess the legality of it. Anything that had to do with PRASA was seen to be failing, and this could not continue being the case. He had a dossier of illegalities which were happening at Autopax, and it was scary. He wanted the Committee to have the same knowledge that he had, as it was the tip of the iceberg, and PRASA could not be exonerated from this
Mr McDonald said Translux used to have a very high reputation of good service, but that had declined over the years because of it having unsafe buses on the road, and the inadequate servicing of the vehicles.
The Chairperson said he would give the PRASA board chairperson time to respond, but they would not dwell on the matter long. Autopax would be summoned back to the Committee to account. Because of the insufficient time they had had with the report, they needed more time to process the information, and it was not necessary for the acting CEO to respond.
Ms Kweyama said the reason PRASA had appointed PRASA board members to the interim board of Autopax was to get a grip on a dire situation. They had appointed people who they thought had knowledge of the business and would ask the right questions in turning it around, and the board still had confidence in them.
The board had been receiving requests from Autopax for more money to turn around the company’s situation, but their track record said something different. The board had asked what would be different this time. Autopax was unable to break even and PRASA had been faced with a threat, as workers would not have been paid and would have gone out on strike, so they had been forced to pay out more money to Autopax. As they stood now, Autopax had not submitted a strategy on how they would turn the situation around. The board had, however, put management on terms and expected them to do certain things within certain timeframes.
Mr Wessie said the situation at Autopax was not a simple one, and the Committee had to look at the timing as to when things had happened. However, he admitted that the observations which had been made by the Committee in regard to the financials had left the board in shock. He accepted the comments about how PRASA could actually defend Autopax when it had such gross mismanagement.
Mr Van Rensburg said it had been bought to his attention only on Monday that they had to submit the report. Since then, they had had a power failure, and also had not received their processed financials, so wanted the Committee to take note that the delay had not been intentional.
The Chairperson requested on the behalf of the Committee, that the entities should take the advice seriously. He thanked PRASA for affording the Committee a chance to engage by putting the information in front of it. Emotions were running high because the situation was terrible, but the Committee’s criticisms were not personal. The Committee had commitments running from next week, and if it had sent Autopax away, they would not have been able to work on the reports. They should have a session Autopax and the Department of Transport so they could get to the bottom of these issues. The Committee would also decide whether to involve the Special Investigating Unit (SIU) or other actors to help investigate. The Committee must not be afraid to act.
The meeting was adjourned.
Zwane, Mr MJ
Chabangu, Mr M
Hunsinger, Mr CH
Mabhena, Mr TB
Mangcu, Mr LN
McDonald, Mr LE
Mey, Mr P
Nolutshungu, Ms N
Ramadwa, Ms MM
Sithole, Mr KP
Tolashe, Ms N G
Yabo, Mr BS
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