PRASA 2020/21 Annual Performance Plan; with Minister

Meeting report

The Chairperson commended the Minister of Transport for his relentless work with PRASA and highlighted this meeting as being of great importance in meeting broader government objectives of economic growth and mitigating unemployment. The purpose of the meeting is to promote transparency and to fulfil the Committee's mandate of oversight and accountability. The Committee would pay close attention to key interests such as PRASA’s infrastructure development as an important catalyst of economic growth.

Minister of Transport opening remarks
Minister Fikile Mbalula thanked the Committee for providing the platform for PRASA to present a turnaround plan aimed at giving PRASA a stable footing. He addressed PRASA’s historical challenges to gain a better understanding on the way forward, noting that PRASA is tainted by maladministration and misappropriation of funds. Drastic measures had to be taken to bring stability for ensuring that PRASA fulfils its mandate. The Minister further highlighted the impact of COVID-19 on the transport sector and PRASA.

The Minister of Transport stated that the endeavour to address PRASA’s historic maladministration has met immense opposition from those who previously benefited from it. Some of the effects of PRASA’s maladministration are tangible in the collapse of security companies, which were irregularly appointed and PRASA’s loss of revenue even before the COVID-19 pandemic. He declared that “the days of PRASA being a cash cow are over”. He highlighted the appointment of the new board as an intervention to bring institutional change. He was grieved at the lengthy court processes that ensued from the dismissal of previous boards, which diverted funds from addressing challenges. He emphasised the need for the appointment of highly skilled individuals at the helm of PRASA as being critical to bringing change and ensuring government funds meet their intended objectives. He emphasised that new appointments will not be done as usual, but that there will be an emphasis on accountability.

The Minister of Transport noted the appointment of Bongisizwe Mpondo as the PRASA Administrator and his strong endeavours in stabilising operations, capacity building and making decisive interventions amidst great opposition. The Minister expressed confidence in Mr Mpondo’s appointments of key executives, such as the CEO appointments of Ms Nosipho Damasane at PRASA Rail and Mr Hishaam Emeran at PRASA Technical. He congratulated Mr Mpondo for moving with “lightning speed” in mitigating corruption through increased auditing. He regarded Mr Mpondo’s team with high esteem commenting that they are men and women of integrity and high calibre.

The Minister of Transport expressed concern that PRASA’s sharp revenue declines have necessitated increased subsidies. PRASA will be working on resuscitating the central line in Tshwane and Cape Town. He has received tremendous support from local government in Cape Town to revive the central line.

The Minister informed the Committee that R1.1 billion has been allocated to both central lines, respectively. that PRASA has incurred R199 million in revenue loss due to COVID-19 lockdown regulations, which drastically worsens PRASA’s historic budget shortfall. He thanked National Treasury for supporting the Ministry’s interventions to mitigate maladministration and misappropriation of funds at PRASA.

PRASA Strategic Objectives and Challenges Presentation
Mr Bongisizwe Mpondo, PRASA Administrator, thanked the Minister for his remarks and stated that PRASA’s values and objectives remain the same and it is essential to reinstate these values to bring about reformation in PRASA. Mr Mpondo spoke to PRASA’s mandate, key interventions, and timeframes for addressing the challenges as well as its interventions in mitigating the effects of COVID-19.

PRASA’s main objectives are to contribute to South Africa’s endeavours in meeting the National Development Plan by encouraging economic transformation through job creation, and providing incentives for education in related fields. He highlighted PRASA’s pivotal role in bridging the remnants of Apartheid and integrating cities across South Africa. PRASA aimed to restore long-haul passenger transport and accelerate the modernisation of rail networks.

Mr Mpondo explained PRASA’s strategic outcome goals of providing rail and bus transport that works by means of regular maintenance and security to ensure predictable timetables, and to develop an organisation that is efficient and ethical. He stressed the importance of reinstating ethical governance as a key aspect of transformation and meeting PRASA’s objectives.

Mr Mpondo noted PRASA’s sharp revenue decline over the years and stated that PRASA intended to increase the revenue generated from fares by containing costs. PRASA would be monitoring indicators such as train trip configuration and punctuality to measure service delivery. Mr Mpondo explained that PRASA intends to build capacity by developing a capital implementation process to accelerate the modernisation of the current infrastructure. A key aspect in cost containment is reviewing PRASA’s organisational structure to address revenue protection and reviewing PRASA’s assets and properties to ensure that the organisation is institutionally sound. The costs depicted on the presentation slides may be misleading, as PRASA is currently in the process of revisiting the organisation’s cost base.

Mr Mpondo said that there were several repeated audit findings that have to be addressed. There are processes in place to investigate how best to address these audit findings. He stressed that supply chain has been a major challenge across PRASA and said he intended to lead the organisation in having a clean audit finding and to specifically target repeat audit findings.

He said that the Minister had found nine areas of concern that PRASA needed to address, which inform PRASA’s corporate plan. Over the years PRASA experienced systematic erosion and decline in requisite capacity. There is a great need for highly skilled individuals to facilitate rebuilding capacity.

Measures Taken
Mr Mpondo assured the Committee that PRASA has already begun to see steady progress from some of the measures he has implemented to bring change. He cited the establishment of the EXCO committee and the appointment of highly skilled consultants to guide PRASA in making strategic decisions to increase service delivery and improve capacity. PRASA’s reforms have led to key partnership with other key government institutions such as Eskom, Transnet and SAPS.

Part of PRASA’s revenue decline can be attributed to the synchronous decline in fare revenue and increase in expenses, which necessitates an increase in the operating subsidy. Although it has become common practice for PRASA to budget for a deficit, he is confident that finding alternative means of creating a more sustainable business model and organisational structure can change this norm. He explained PRASA’s three-month interventions and policy updates to the Committee in detail with a strong emphasis on anti-corruption and capacity building.

Impact of COVID-19
Mr Mpondo stated that the Lockdown regulations have resulted in project delays and extensions, as well as a halt in all construction activity during the first phase of Lockdown. He reiterated that PRASA incurred tremendous revenue losses and supply chain difficulties, specifically its planned critical maintenance was severely affected. Key transport corridors, such as the Southern Line in Cape Town will resume in July with appropriate social distancing measures.

Discussion
Mr T Brauteseth (DA) noted the recurring vandalism and asked why PRASA failed to pay its security companies in the last quarter, which compromises the security of PRASA infrastructure. R28 billion was allocated to the refurbishment and maintenance of coaches, however he found that none of these funds were spent on their intended purpose. He asked why these funds were spent on internal matters such as labour disputes.

Mr Brauteseth said that the South African Maritime Safety Authority (SAMSA) falls under the Minister's jurisdiction. The Minister had allowed vehicle licences that were expiring to be renewed after the lockdown period had ended. He asked if the Minister could also extend a grace period for ship and boat licences as there is a backlog in ship fitness evaluations, due to the lockdown regulations.

Mr Brauteseth explained that he was having difficulty contacting the Director General of the Transport Department, Mr Alec Moemi. He had sent several emails and WhatsApp messages to no avail and colleagues were experiencing similar issues. This was a matter of concern as it is vital to the Committee’s work to have open communication with the Director General.

Ms H Boshoff (DA) said that the Minister had noted that PRASA was experiencing a decline in revenue due to the pandemic and asked for clarity on PRASA’s standing prior to the impact of COVID-19. She noted PRASA’s suspension of senior staff members and asked for further information on what their transgressions were and when the disciplinary hearings will occur. How did PRASA intend to hold these staff members accountable if they were found guilty?

Ms Boshoff pointed out the voluntary severance package (VSP) and asked if PRASA was targeting a specific age group. She also raised payments to the security companies and asked PRASA to provide a payment timeframe and if the security companies would resume operations in July when the Metro lines are opened. She asked that the Committee be briefed on the costs of the technical advisors that PRASA has deployed.

Mr M Rayi (ANC) stated that turnaround is a work in progress and asked that there be another meeting to monitor PRASA’s progress in meeting its objectives. He echoed concerns about the disciplinary hearings for senior managers, asking for clarity as some of the challenges PRASA faces may be directly linked to their behaviour. In the next meeting PRASA’s Administrator should provide more information on the progress of these disciplinary proceedings to avoid a situation where staff are suspended indefinitely without proper accountability.

Mr Rayi asked the Ministry to provide more clarity on how it is assisting PRASA in engaging with counterparts such as Transnet.

Ms B Mathevula (EFF) asked if the Department has a plan to address the non-functional toilets on long distance buses travelling between Pretoria, Johannesburg and Giyani. She asked for an explanation on how it intends to accommodate people with disabilities at stations and terminals.

The Chairperson stated that the Committee previously met with the PRASA interim board on 11 September 2019 and voiced concern that R3 billion transfer was made from the PRASA capital programme to SANRAL. The Committee is happy with the progress in the management of PRASA. However, he voiced concerns about the decrease in passengers over time and the issue of security. He raised the use of manual signal operations and stated that this continued to be a security hazard. It also contributes to delays, emphasising that working South Africans must be able to arrive at work on time. He reiterated that the revenue decline and deficit modus operandi must be mitigated.

Minister of Transport response
Minister Mbalula replied that the Administrator will address the question about PRASA’s operations and revenue decline. On the ship expired licence waiver, he replied that given the exceptional circumstances and unique challenges that the pandemic presents it is possible to extend the grace given for vehicle licences to ships and fishing boat licences. He asked Mr Brauteseth to follow up on the matter and contact him directly for further details.  

The Minister  replied that he is always open to discuss how to tackle corruption, however he had exhausted PRASA interventions via the board, explaining in detail how he had endeavoured to engage with previous PRASA boards and had created the concept of a war room to address the matter. These efforts led the Minister to dismantle previous boards that were benefiting from irregular expenditure, which led to lengthy legal proceedings. The Minister felt that he was decisive in tackling corruption and is happy with the outcomes that he has seen.

Minister Mbalula replied that PRASA’s operational expenditure was depleted, which prompted the transfer of Capex to alleviate financial strain. He had informed Mr Mpondo and the auditors that it is imperative to combat wasteful and fruitless expenditure at PRASA. Mr Mpondo’s expertise and understanding of rail and transport will enable him to lead PRASA in a new direction. He urged the Committee to support PRASA and the Ministry in its endeavours.

PRASA responses
Vandalism and Security
Mr Mpondo replied about the vandalism stating that PRASA owed approximately R6.8 billion, which includes their security company creditors. Many of the security company debts were owed for a period of 180 days. The security companies are owed approximately R116 million. This is included in PRASA’s appeal to National Treasury through the Department of Transport for assistance in bridging this amount

Maintenance
He responded about coach refurbishment and maintenance that this is part of the general overhaul programme. He explained that last year's general overhaul tender resulted in a non-award. This delayed maintenance with detrimental effects on coach maintenance, leading to fewer operational coaches.

Financial Decline
Mr Mpondo replied about PRASA’s decline prior to COVID-19 saying that PRASA’s historical deficit of R2 billion has been increasing over the years. The COVID-19 pandemic exacerbated this with an additional R750 million deficit.

Senior Staff Suspensions
Mr Mpondo emphasised that the suspension of senior staff members were not merely about suspensions, but more specifically, charges. In 2019 the Special Investigating Unit (SIU) was seconded and there were 27 matters in the proclamations. Nine senior staff members were charged following previous investigations and are still to face disciplinary hearings. PRASA is working with SIU on the matter. Further, the Hawks have sent 16 matters to the NPA’s Specialised Commercial Crimes Unit (SCCU). He is working closely with the NPA and the Hawks on the matter.

Voluntary Severance Packages
He clarified that PRASA is not embarking on a hard retrenchment process but is investigating a softer approach where applicable employees can apply for severance packages. There will still be further meetings and investigations on the matter. The target group is employees between the ages of 40 and 60 years old in non-critical positions.

Consultants
Mr Mpondo replied about the cost of consultants, stating that it is a combination secondment from Treasury as wll as Mr Sfiso Simelane from the Department of Transport.

Non-Functional Bus Toilets and Disability Accessibility
Mr Mpondo replied that the inter-city buses have also suffered due to PRASA’s revenue decline. He had consulted and found that there is a need for R200 million in capital to resolve the challenges that the long distance buses were experiencing. The interventions for universal access for people with disabilities has been halted by COVID-19 but it is an issue that PRASA is currently working on.

COVID-19 Measures
Mr Mpondo replied that PRASA is working with SAPS on implementing better crowd control across its networks to ensure that stations are equipped to mitigate the spread of COVID-19 at public transit points.

Manual Signalling
Mr Mpondo replied that manual signalling has led to court cases and it is a matter that PRASA is working on.

Further questions
Ms Boshoff asked when PRASA will be able to manage and comply with risk directives currently being issued by the Railway Safety Regulator (RSR).

Mr Mpondo replied that PRASA is currently working with the RSR. PRASA managed to extend its operating licence and the matters that RSR has raised are being addressed. Some of the directives were to do with manual authorisation, which has been dealt with.

Ms Rayi asked if Mr Mpondo had experienced challenges with cooperation as some of the people who had previously benefited from mismanagement in PRASA still remain. For Mr Mpondo’s endeavours to succeed, he needed cooperation.

Mr Mpondo thanked Mr Rayi for his question and replied that he has experienced resistance and these are dealt with through the usual provisions in labour law.

The Chairperson stated that the Minister's overview of the PRASA objectives have been heard. PRASA’s historical challenges prompted the Minister to intervene in 2019. The Committee's interactions with PRASA and the Department of Transport will carry the Minister's objectives at heart. The Administrator has drafted a three phased approach that will be followed to address PRASA’s challenges. He commended PRASA for staring on a good footing and it was important that PRASA’s interaction with the Committee articulates the areas of focus. PRASA’s strong endeavours on transitioning to a paperless system and to build capacity were noteworthy.

He expressed gratitude to the Minister of Transport, PRASA’s executive team, stakeholders and the media in closing.

The meeting was adjourned.