PRASA hearing on irregular, fruitless & wasteful expenditure 2020/21; with Minister

Public Accounts (SCOPA)

29 March 2022
Chairperson: Mr M Hlengwa (IFP)
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Meeting Summary


PRASA Annual Report 2020/21

In a virtual meeting, the Committee conducted a hearing on the annual report and financial statements for the Passenger Rail of South Africa (PRASA) for the 2020/21 financial year, as well as irregular, fruitless and wasteful expenditure relating to the entity.

Transport Minister Fikile Mbalula said that the process of service recovery had been painstakingly slow because of the state of the infrastructure. The recovery plan had identified ten priority corridors for recovery by the end of 2022. It had been previously indicated that the full recovery of the Central Line in Cape Town has been hampered by the process of relocating the illegal settlements on the rail tracks.

The following achievements had been realised against the planned targets for the year:
- 25 out of 35 new trains had been delivered
- 22 out of 32 signalling commissions had been completed
- 14% qualifying small enterprises spending against a target of 15%
- 11% exempted micro enterprises spending against a 15% target

He mentioned that PRASAs audit outcomes had stagnated over the past three years. It had once again received a disclaimer from the AG. This was an untenable situation that was receiving the Departments urgent attention.

The AG had highlighted a number of root causes for the audit outcome, including:
- inadequate governance records
- instability in key positions
- poor financial management and discipline
- lack of compliance, monitoring, and enforcement
- lack of consequence management
- lack of effort to resolve matters related to PRASA and its subsidiariesfinancial viability
- inadequate oversight
- inadequate financial reporting processes, including reviews
- ineffective audit finding action plan

DoT was deeply concerned with these findings from the AG, as it believed that these were challenges that could be resolved quickly through decisive intervention.

SCOPA Members raised concerns about the lack of concrete plans from PRASA to improve the state of the entity. Questions were raised on PRASAs audit action plan to deal with the repeat findings from the AG, why full salaries were being paid during 2020/21 when no work was being done, and on the 3 000 ghost workers. The topic of a possible organised crime syndicate being responsible for the systematic vandalism and destruction of PRASA was also raised.

Members were disappointed in the lack of practical responses to their questions. The Chairperson asked PRASA to provide monthly progress going forward and encouraged PRASA to come with tangible solutions rather than abstract thoughts and ideas”.

Meeting report

Opening remarks
The Chairperson welcomed Members to the hearing of the Passenger Rail of South Africa’s (PRASAs) annual report and audit outcomes, which had been delayed and subsequently tabled.

The Committee had thought to take advantage of the fact that Members had been to PRASAs Western Cape and Gauteng sites recently. This was because parliamentary oversight had been cancelled due to the Motion of No Confidence debate tomorrow. The Committees time slots had opened, so it was best to round up PRASA matters. He thanked Transport Minister Fikile Mbalula and the PRASA Board for attending on short notice.

The Chairperson welcomed the Minister and the delegation from the Department of Transport (DoT), Transport DDG: Rail and Transport, the Chairperson of the PRASA Board and PRASA executives, led by the Acting CEO, the Auditor-General, Treasury, and the Committees support team.

The Minister had discussed some PRASA matters with the Committee the previous week but would make opening remarks.

Ministers Input
Minister Mbalula said that PRASAs annual report reflected performance improvement. However, an improvement of 11% (from 18% to 29%) was a far cry from where PRASA needed to be. This remained unacceptably low. It needed to be noted that reporting the period under review covered the period when the Covid-19 pandemic was at its peak, when the country was under hard lockdown (Level 5), with travel restrictions continued under Level 4.

The disruption of the pandemic had come during a time when PRASA was grappling with security challenges in its environment. These challenges resulted from the termination of irregular security contracts, with there being no contingency plan in place.

This had left the PRASA environment exposed to criminality that had all but stripped bare its infrastructure. The wanton destruction, theft and vandalism of rail infrastructure had affected all PRASA business units, severely impacting plans to resume services after travel restrictions had been lifted.

The process of service recovery had been painstakingly slow because of the state of the infrastructure. The recovery plan had identified 10 priority corridors for recovery by the end of 2022. It had been previously indicated that the full recovery of the Central Line in Cape Town has been hampered by the process of relocating the illegal settlements on the rail tracks.

The following achievements had been realised against the planned targets for the year:
- 25 out of 35 new trains had been delivered
- 22 out of 32 signalling commissions had been completed
- 14% qualifying small enterprises spending against a target of 15%
- 11% exempted micro enterprises spending against a 15% target

There were no findings on the audit of predetermined performance objectives. PRASA was in a dire financial position, as it was not generating sufficient revenue to cover its operating costs. PRASA had posted a loss of R1.9 billion for 2020/21. Its high operating costs marginally increased to R15.5 billion in 2020/21. This was against a backdrop of a R900 million decrease in revenue, due to network and train unavailability caused by Covid-19 restrictions and infrastructure damage. Consequently, PRASA had become dependent on operational and capital grant subsidies.

PRASAs audit outcomes had stagnated over the past three years. It had once again received a disclaimer from the AG. This was an untenable situation that was receiving the Departments urgent attention.

The AG had highlighted a number of root causes for the audit outcome, including:
- inadequate governance records
- instability in key positions
- poor financial management and discipline
- lack of compliance, monitoring, and enforcement
- lack of consequence management
- lack of effort to resolve matters related to PRASA and its subsidiariesfinancial viability
- inadequate oversight
- inadequate financial reporting processes, including reviews
- ineffective audit finding action plan

DoT was deeply concerned with these findings from the AG, as it believed that these were challenges that could be resolved quickly through decisive intervention.

The Department was pleased with the progress made in stabilising the management team through a recruitment process and implementation of a new organisational structure. It had also seen progress with consequence management across PRASA.

The implementation of the Special Investigation Units (SIU) recommendations, following an investigation into irregular expenditure (mainly from irregular procurement processes), comforted the DoT that consequence management had been internalised into the work culture at PRASA.

The SIU had identified 44 PRASA employees that needed to face disciplinary action. 33 of the 44 were still employed by PRASA. In implementing consequence management, these 33 employees had been grouped into categories according to seniority levels and significance of findings against them as follows:

- Priority 1 (employees in senior management): 14 affected employees had been placed on precautionary suspension and their disciplinary cases were at an advanced stage
- Priority 2 (junior managers, specialists and middle managers): 10 affected employees had been served with letters indicating intent to subject them to disciplinary processes and giving them an opportunity to present a case on why they should not face disciplinary action
- Priority 3 (junior officials): 9 affected employees had been served with indicating intent to subject them to disciplinary processes and giving them an opportunity to present a case on why they should not face disciplinary action

Irregular expenditure remained a serious cause for concern but had significantly decreased from R3 billion in 2019 to R1.3 billion in 2020. This was still unacceptably high. The Department had committed to reduce irregular expenditure in all its entities in its performance agreement. PRASA needed to implement measures to deliver this reduction. The main goal was complete elimination of irregular expenditure. This was an area the Department was keeping on its radar, as it also affected the Ministers performance.

The Department had also committed to completely eliminating fruitless and wasteful expenditure by 2024. In 2020/21, fruitless and wasteful expenditure was R48 million.

The deviations, variations, and expansions at PRASA were a source of concern as they indicated managements poor planning. The DoT appreciated the sluggish pace of PRASAs implementation of capital programme, exacerbated by the onset of the pandemic, had created a need for PRASA to play catch-up” and accelerate its spending on capital projects. PRASA needed to work smarter, rather than expose itself to unmitigated risks.

While the Board had made some progress in strengthening the internal control environment, this remains weak and ineffective. DoT had directed the Board to build a necessary capacity to address the deficiencies and ensure the robustness of internal controls.

Significant strides had been made post-2020/21, with tangible progress in the infrastructure rehabilitation and upgrades that had enabled commuter services to be restored in a number of priority corridors.

Mr Leonard Ramatlakane, Chairperson of the PRASA Board, would lead the PRASA team on the presentation and responses.

Minister Mbalula introduced the Acting DG, DDG: Rail and Transport, advisors and staff from the DoT. The PRASA Board and management team were present.

Hearing on the annual report and financial statements of PRASA for the financial year 2020/21, as well as irregular, fruitless and wasteful expenditure
The Chairperson said that since the Committee had received the presentation beforehand, it could be skipped, and Members could move on to questions.

Ms B Van Minnen (DA) said that the main objective of PRASA was to ensure that rail commuter services were provided within, to and from South Africa, and to provide long-haul and passenger rail and bus services within, to and from South Africa. The second objective was to generate income from the assets it acquired. This was in line with the Cabinet decision made in December 2004, to offer rail passengers integrated services that prioritised customer needs, and provided better mobility and accessibility to transport, in pursuit of a better life for all.

After having looked at the audit results, she reminded the Committee that the last three years predated Covid-19. PRASA had failed to meet its mandate. At this point, it could be seen as a completely failed entity. Ms Van Minnen asked PRASA to provide an answer on whether or not they agreed with this. If not, why did PRASA think differently?

Mr Ramatlakane said that PRASA agreed on the challenge surrounding PRASAs mandate. The three years that were referred to, were the three years before the current Board and included the issues of instability, Covid-19, and inability of PRASA to function properly, which has been compounded by the vandalism of PRASA infrastructure. This was a burden that the Board had to handle.

It could be said that PRASA had failed. The Board was aware of these weaknesses that resulted in this. This was why the recovery programme was being implemented on both the core and secondary mandates. If PRASA could not generate income, it meant that the Board needed to turn the situation around.

Since the recovery process was in progress, the Board would need time to prove that PRASA was changing.

Ms Van Minnen recalled that the Minister had emphasised the need for speedy and decisive action. However, over the last decade, 80% of South African train commuters had abandoned rail transport. How was PRASA going to convince SCOPA that the capacity exists for speedy and decisive action? How was PRASA intending to appeal to just over half a million people who were no longer using rail network, to return to it?

Mr Ramatlakane said that the problem was that people were confronted with a lack of availability of rail services because of the infrastructure damage. People were forced to use different modes of transport, including taxis. This was at a high cost to their disposable income. There was no alternative, so people have been using other available transport.

PRASA aimed to make rail services available and also market the services. Now that Mabopane was fully operational, people have returned. The same thing would happen to the Central Line after it was fixed.

The feedback was that people wanted the trains back. There was hope that people would trust the rail services' availability, punctuality and safety again. This was not an easy job for the PRASA Board or management.

PRASA worked with people, by talking to communities and all other stakeholders to help PRASA mobilise. It was early days in the recovery of corridors. A couple has been recovered, on top of the 16 operational services. Almost half of the 46 or 47 corridors have been recovered.

Ms Van Minnen recalled PRASAs performance in the last two years. In 2019/2020 only 17% of PRASAs predetermined objectives had been achieved. In 2020/21, that increased to 25%. Pre-Covid, in 2016/17, only 55% of core objectives had been achieved.

Although there was a more rapid decline during Covid, what were the reasons for the declines prior to Covid? What was now being done internally? Particularly, what was being done about the failure to meet those objectives?

Mr Ramatlakane said that what PRASA had done and what it continued to do, was to get a relevantly skilled team to implement the plan. Historically, PRASA had not been able to spend its capital expenditure (CapEx). The programme has not progressed, mostly due to the lack of capacity of personnel with the requisite skills. Most of the work had been cancelled before being finalised.

With systems of the DoT, there was some capacity (secondment of skilled personnel). Advertising (vacancies and new positions) takes long. PRASA wanted to have a holding arrangement for capacity of relevant skills. PRASA needed to build capacity on CapEx, procurement, and line chain management, which had been problems in the past.

The decrease was because of lack of capability and skilled personnel. 2016/17 was early days – there was no Covid, but the problem of capacity had always been there. Even in 2016, PRASA did not have the capacity for train repairs. The general contract had not been functioning. The Board was committed to turn around and recover” what had been lost in the past.

Ms Van Minnen said that for skilled personnel, the vacancy rate was at 19%. Had that changed at all in recent months? What was the progress in filling those vacancies?

Mr Ramatlakane said that most of the senior positions had been advertised. Those that did not affect the organisational restructuring had already been advertised. The Board wanted stability in management positions. Key positions should be filled in by May, latest June, and this would be around the time that the restructuring of PRASA was completed. In the past, it was a top-heavy structure and unable to make quick decisions. The restructuring would lead to a better organisational and business structure. Some positions would disappear. For these positions, match-and-place would occur. In the event that a match-and-place could not occur, PRASA would take Section 189 of the Labour Relations Act 89 route and create a lean and mean structure”.

Ms Van Minnen recalled that on the recovery programme and the routes that PRASA wanted to get up and running, 60% of the routes that were being targeted this financial year had been achieved so far. The Members had visited a number of stations in Gauteng. Some had already had work done to get the stations operational again, some stations which were visited unannounced were complete shells.

On what PRASA had managed to achieve so far, how were the revenue and the number of commuters in the first two quarters of the 2021/22 financial year looking?

Mr Ramatlakane said that a member of the management team could provide a breakdown of finances to see if there had been an improvement.

Since there had been a decrease in rail commuters, income generation from fares was gradual in line with the return of certain corridors. In Mabopane, from the ticket counter, there was an improvement from the first train to when the Board had visited. This showed that people were using the rail services.

The Acting CEO could add more on finances and income progression.

Mr David Mphelo, PRASA Acting Group CEO, said that the trajectory of revenue starts with the corridors with high usage. Figures came from more popular stations, such as Mabopane. Weekly and daily numbers were dictated by access. PRASA was not there yet but was seeing improvements as it opened up new corridors.

Mr Brian Alexander, PRASA Group CFO, said that there was still a decline in revenue from last year. As of 28 February, PRASA was sitting on R66 million in revenue, which was a similar number to that of last year. A third of PRASAs revenue was from rail services. There had been a slowdown in activity, which could be seen in PRASAs expenditure. This impacted the business. He expected a significant increase in revenue in the forthcoming financial year.

Ms Van Minnen asked how many of the corridors that were currently up were diesel. What were the increasing diesel costs doing to expenses and PRASAs bottom line? The diesel price was probably not going to come down any time soon. A number of the corridors in Gauteng were running on diesel, because of vandalism, problems with Eskom, and cable theft.

Mr Mphelo acknowledged that a diesel service compared to electrical was more expensive. PRASA had decided to prioritise rendering the rail service. This was its first mandate. It had also restricted a number of trips in the diesel space, focusing on peak hours rather than running continuously as was done on electrical tracks. This was how PRASA was minimising costs, while also rendering the service.

Mr Nelson Malefane, PRASA Rail CEO, said that out of the 19 lines that were running, three ran on diesel ([inaudible] to Pretoria, the Gautrain, and Naledi to Johannesburg). As it was diesel, these did not run the whole day. It was limited to the peak periods: the morning and afternoon trips.

Ms Van Minnen said that one of the most visible indications surrounding security concerns was the stations, lines, overhead cables, damage and vandalism. There was a concern that there would be no infrastructure to run the station. What progress was being made with security? At what stage was the current litigation with the previous security companies? What was being done with the deployment of new security?

Mr Ramatlakane said that what PRASA would always struggle with, was the challenge of providing public transport to the poor working class, who struggle to get to work every morning. PRASA had taken the position that even if it had to run a one-lane diesel train during peak hours, it would have to do that due to the situation on the ground. Expenditure on this would increase, given that running a diesel train and the train ticket was not compatible. There would be a deficit.

If the Committee could understand PRASAs point of view. It would do its best, even if that meant running one lane on the Central Line while fixing another. This is because many commuters lived in this area and needed access to rail services. PRASA was not hiding anything.

On security, It was regrettable that PRASA had found itself in this situation where it had to cancel contracts without an alternative. It had inherited a R4 billion bill because of this. It was working hard to close the gap. Additional security of 3 100 people had been brought on board. Insourcing was done using the existing company, as there was still the dispute that PRASA needed to resolve (on not engaging with some of the previous security companies before ending contracts).

New contracts could not be advertised until PRASA resolved the dispute and brought to the court a comprehensive security plan (which had now been finalised).

Mr Mphelo said that the integrated security plan came in phases. PRASA had to complement its internal capacity before bringing in private companies. This was to enable PRASA to manage the private companies through internal management. This was why the additional 3 100 security personnel had been employed, to prevent private companies from doing whatever they wished.

At the peak, there had been 10 000 boots on the ground”, which had been depleted to 2 000. The additional 3 100 brought it up to 5 000. PRASA was now able to manage and monitor the private companies.

There was also a corridor approach. As each corridor was recovered, the service providers that were helping PRASA redeploy the infrastructure, secured the infrastructure. When they moved out, there was a transition plan that came in between the insourced capacity and the external companies. In the absence of direct contracts, PRASA used its sister company, Airports Company South Africa (ACSA), to source security from those nine companies, as permitted by Treasury.

PRASA had been engaging with the security companies through their lawyers. By the time the ACSA contract expired, in 9-11 months, PRASA would be able to go out directly to hire security personnel. In Mabopane, there had not been a single incident since it had been recovered and security had been deployed. This was evidence of the integrated security plan working. If there were incidents, they were not security-related.

Communities around that environment who relied on the rail network were working with PRASA and had said that they would deal with vandals and thieves. This showed that the community was beginning to own the infrastructure for themselves.

Mr Alexio Papadopulo, Acting Prasa Corporate Security, said that there had been a security deployment in Germiston and Park Station over the past month. There had been no incidents of vandalism. The flow from Mabopane of the integrated security plan had shown extreme successes.

Ms Van Minnen asked how PRASA intended to transpose this to the Central Line in Cape Town, where there were thousands of people in Langa, Nyanga, and Phillipi living on the line? PRASA had a mandate to ensure that people had access to transport. How did PRASA intend to roll out this mandate to those areas, given its current enormous constraints?

Mr Ramatlakane said it would be helpful to give a summary of the challenges PRASA faced in Langa. The clearing of the line was linked to a court decision. The court decision suggested that before moving people, the land needed to be serviced and that all required services were available in the relocation area.

The deadline for the completed removal process was July. It was a challenge to get access to the land, as it was not in PRASAs mandate. The Department of Public Works, Human Settlements and Local Government also needed to be involved.

PRASA had pieces of land but was unable to move people in Langa because the receiving community had objected on the basis that the people who were being relocated were coming with a shack. This affected their property prices.

PRASA then looked for alternative land, including private sector land that could be purchased. This was where PRASA was currently at. It needed to service the land. This slowed down the process. PRASA had been working against the clock as it needed to finalise this. PRASA did not have the money to purchase the land (parastatal or government land). The delay was in implementing protocols. This was now being finalised and signed. The service level agreement needed to still be finalised, so that every Department and sphere of government was clear on its mandate and financial obligation during the relocation process.

Ms Van Minnen asked about the ramifications of not meeting the July deadline. Human Settlements as a sector was a highly regulated field. Many conditions need to be met when dealing with communities. One could not just move people out of the way.

Mr Ramatlakane said that PRASA would have to make sure the court supported PRASA, in case it required an extension. It should be clear where it was in the process in July. The land availability and the process of removing people from the line would take up the most time. If the land was able to be serviced, or if the land was able to be received on load, that would make the process go quicker.

PRASA was currently focusing on its plan to remove people from Langa and Phillipi to open up the line in Mitchell’s Plain and Khayelitsha. If the material conditions were not met, PRASA would have to inform the court. The integrated team that was driving this process in all spheres of government was ensuring that these goals were achieved.

Mr Mphelo thanked the Minister for facilitating the intergovernmental collaboration. PRASA was managing the dates and programme, based on who was engaged and what they needed to do. PRASA needed to also look at areas not affected by encroachment on the Central Line. PRASA was working on a solution so that trains would run around those areas.

Cape Town to Langa and Langa to Cape Town (via Pinelands and Mitchell's Plain) were being worked on as there was no encroachment. The segment that came through Langa into Belville via Sarepta was also being brought in. The challenge was moving from Nyanga to Khayelitsha, as there were encroachments. This would have to wait for a resolution from the inter-governmental collaboration.

Ms Van Minnen asked what was being done to ensure there was no further encroachment of the communities living on the line.

Mr Mphelo said that service providers were fencing these areas to prevent further encroachment. At the last oversight meeting with SCOPA, this question had come up and this was now in the process. Langa was currently being done. Phillipi had a different dynamic, as there were latrines on top of the lines instead of dwellings. Nonkqubela was also a fencing exercise in cocooning the current encroachment to prevent it from spreading. These areas would have security once fenced.

The stakeholder management kicks in. The communities are close and know each other. They would see the benefits of this relocation. The current communities that PRASA had spoken to were working with PRASA to ensure the fencing stayed in place and that the encroachments did not explode.

Ms Van Minnen said that on the very high levels of vandalism and theft, had any arrests or progress been made on who was behind it? It was not just an impoverished community stealing what they could; there seemed to be a much bigger issue. The wholesale damage and vandalism could not be happening spontaneously. What progress was being made on this?

Mr Ramatlakane said that recently it had been reported in the media that the Minister had been dealing with the theft of scrap metal [referring to metal from railway infrastructure]. This would not have happened if the integrated security plan had been in place before. Currently, with the capacity of the security personnel, PRASA was working with the security cluster. It was able to detect and get intelligence on the syndicate. There had been some successful arrests due to the integrated approach.

Mr Mphelo said that the integrated approach required PRASA to collaborate with other state machinery. Smaller thieves had a sting and took it to bigger syndicates and smelters. PRASA had to bring in intelligence and police, as it could not deal with counterintelligence alone. The army was required in some areas (only hotspots), after seeing retaliation from some syndicates.

Mr Papadopulo said that 454 suspects had been apprehended to date, of which 118 court cases had been finalised (amounting to 764 years and six months of imprisonment). There were currently 85 pending court cases. 186 suspects were awaiting trial dates. This was a result of the integrated security approach.

Ms Van Minnen asked about the rolling stock indicated in the audit report that PRASA acquired for just over R72 billion and operational commitments of R16.9 billion. The expenditure was not provided for in the budget. What was going on in this case?

Mr Alexander said that PRASA had capital commitments and that it paid for the rolling stock over a period of time. There were adjustments because of price increases through DoT and the Treasury, which had undertaken to provide PRASA with the capital to purchase the rolling stock. There was no risk on PRASA, it was on government, on acquiring the rolling stock.

Mr B Hadebe (ANC) referred to Ms Van Minnens question on securing the Central Line to prevent further encroachment. The response indicated that a fence would be erected. Would PRASA engage with those communities prior to erecting the fence? It needed to be explained why the fence will be erected. Had such engagements already taken place?

Mr Ramatlakane said that there had been community engagement, and this needed to be ongoing. Communities were there and could see what was going on (regarding the encroachment and the fence preventing further encroachment). There would be accelerated engagement going forward. There had been engagement from the Boards side with communities, but this had not been sufficient.

Mr Hadebe recalled that the Beitbridge fence had wasted around R43 million and had been breached within no time. If there was no buy-in or understanding from the community, why was PRASA erecting this fence? This might be a case of fruitless and wasteful expenditure. Prior engagement was required before anything was done so that the community acted as PRASAs eyes and ears on the ground and appreciated PRASAs good intention with the fence.

On PRASA”s failure to submit its annual financial statement, the AG had highlighted that PRASA had proposed deadlines but had failed to submit accordingly. PRASA had failed to meet its deadline of 31 May (the legislative deadline to submit annual financial statements). It had then committed to submit on 30 June 2021 but had only submitted incomplete statements. On 10 September, approved financial statements were submitted but were still incomplete. On 1 October, PRASA had committed to submit on 6 October, but this draft was incomplete and not signed. Why was PRASA failing to meet legislative deadlines?

Since then, the AG had highlighted that there had been pushback from PRASAs side. The AG had tried to schedule several meetings with the Board and management. To date, on the finalisation of the audit, PRASA had refused or been unwilling to cooperate with the AG. Why was this the case? Why was PRASA refusing to cooperate with the AG?

Mr Ramatlakane apologised for the unfortunate situation, particularly with the auditing. PRASA and the AGs relationship had not been on good footing. The Board was committed to fixing this relationship. The AG had a job to do and PRASA had to comply.

The Board had promised to have a meeting with the AG, which had happened already. There had been an agreement on a timeframe, to avoid constant shifting from one date to the next.

He explained that the unmet dates were because of PRASA offices being closed, due to finance people testing positive and working from home. This was not reason enough to excuse not meeting three sets of dates. Going forward, the AG and PRASA would have three meetings. The matter, which had been problematic, was being handled at the highest level. The Board had discussed this and told management that it was unacceptable to not meet its deadlines.

On the capacity of skills as mentioned earlier, PRASA was working with the Minister on secondment.

It was unfortunate that PRASA and the AGs relationship had soured. PRASA had now overcome that and was looking forward to the new financial year.

Mr Hadebe wanted to get confirmation from the AGs team on Mr Ramatlakane's statements on relations between PRASA and the AG.

Ms Ilze Slabber, Senior Manager of the PRASA audit, said that the audit was in the early stages. The AG had indeed held meetings with PRASA to resolve past problematic relations.

Mr Hadebe said that during the 2018/19 and 2019/20 financial years, the AG had raised key concerns about the instability of the Board and the key management level, including the PRASA CEO and CFO. This instability had been negatively contributing to PRASAs inability to get its plans in order. The previous Board had been instated and then dissolved within no time. The CEO and CFO positions were currently filled by those in acting roles. What were the plans in place to fill these vacancies? These vacancies impacted negatively on audits. Where was PRASA in the filling of vacancies?

Mr Ramatlakane said that on the instability of senior management, the first thing the new Board wanted to do was to bring stability into management and policy. This would minimise corruption.

In this implementation, senior management was subjected to evaluation during probation. There was a breakdown of trust with the previous CEO, after having this explained to him. Next week, PRASA would be in arbitration with him on reinstatement. Evaluation reports showed that the previous Board was not making progress – there was no delivery on the operations side.

Going forward, it was better to have a transparent relationship with the AG. PRASA needed to have a briefing and engagement, particularly when there was a problem. PRASA needed to be able to take the AG into its confidence.

On the CFO, she was on precautionary suspension, as she had had non-compliance issues with the condition of employment. There had been a preliminary investigation that revealed non-compliance of the CFO was a concern. Precautionary suspension with pay was thought to be the best way forward. PRASA would also ask the CFO to account and explain. This process might clear her. The Board was committing to cleaning up”, no matter how much it was criticised for either non-action or taking action.

The Board had put together a committee and advertised the CFO position. That committee was responsible for interviewing and making a recommendation. PRASA could not afford to continue this trajectory of people acting in positions.

There was a plan for when the Board wanted to achieve filling vacancies. Other positions had been slowed down because it did not want to duplicate positions as it restructured the organisation. This should be done by mid-2022.

Mr Hadebe said that PRASA knew, coming into this meeting, that one of its key issues was instability. To inspire confidence in the Committee, he would have expected a detailed timeline so that Members would understand the goals. For the past three years, this had been an issue. Only hearing that there was a plan and no insight, did not convince him.

The AG had highlighted that even though PRASA had a concerted effort in executing its action plan, the plan itself was ineffective in addressing issues. There was a complacent attitude and lack of effort in senior management in audit controls. These problems were not just from the last financial year; they had been there previously. PRASAs response was not convincing.

Had PRASA investigated the officials that lacked effort? What measures need to be put in place to address the bad attitude?

Mr Ramatlakane said that on not providing details on the plan, the Board had set a target of 90 days to appoint the Group CEO. The Group CFO was still on precautionary suspension. The rest of the positions would be finalised by May/June. Shortlisting was taking place. A committee, along with the Board, was involved in the interview process. The plan could be made available to SCOPA.

On the audit action plan, a team had been appointed to work through the backlog of two years of repeat findings. It had not been brought to the Boards attention that there was an attitude issue. For year 1, 85% of the repeat findings had been cleared. For year 2, 65% of repeat findings had been cleared.

In the work that had been done, the Group CFO and CEO were the people to implement this type of plan. They were providing feedback on what PRASA was lacking and how to address it.

Mr Hadebe said that the Acting Group CEO needed to also address what made the audit action plan ineffective, before adding to Mr Ramatlakanes response.

Mr Mphelo said that there was an audit task team and that Mr Joseph Mpho headed it. The results of the work already done that had started in the middle of 2020/2021 would be seen during the audit. There was a key performance indicator (KPI) in each scorecard which looked at effectiveness of executivesfunctions in dealing with audit findings, particularly repeat audit findings. Each of the areas could be measured by the end of this year to look at the performance of each division.

An analysis had been started on the AGs findings, including looking at where the repeats were coming from (either the big unresolved contracts or in the culture at PRASA). A report would come through soon. Mr Makoro had started on this work and would cluster the findings into categories. This would be used as input into the improvement of PRASA into a cleaner entity. It needed to start with an improvement in performance management of the areas highlighted in the AGs findings. This was currently on the performance scorecard.

Mr Joseph Makoro, PRASA General Manager: Risk, said that the AG had found the audit action plan to be ineffective. The main reason was that PRASA always found itself in a catch-up situation. There was no time to implement the plan between the time to look at the findings and the audit. PRASA was discussing the annual report now and the next audit for 2021/22 was upon it. The AG had acknowledged the effectiveness of the audit and the audit action plan.

The problem of attitude contributed to the solving of the audit findings. Each member of PRASA EXCO had committed to reporting individually on the programme and had allocated senior people in their divisions to drive the audit action plan. This demonstrated commitment. The problem of attitude would be taken up with the AG.

On the audit action plan, it was in place and one of the actions was to engage with the AG so that there would be alignment between PRASA and the AG on root cause analysis. The audit action plan was premised on cost reduction.

On the challenge of resourcing, it was an area that PRASA Exco had spoken on yesterday. It was undertaking physical asset verification. Specialist skills are needed to be deployed in some areas. Exco had committed to resolving this matter. PRASA hoped for a much better opinion from the AG on the audit action plan. Treasury had also shown interest in helping PRASA get things done.

Mr Hadebe said that poor record-keeping had been previously reported but had not been addressed. This was despite a previous commitment by PRASA that there was a move to a cloud-storage structure. The AG had said that the lack of approved governance records relating to document management. This had had a significant impact on PRASAs audit, as certain procurement approvals could not be secured in line with the delegation of authority. How was PRASA proceeding with procurement, if there was no confirmation of delegation of authority (DOA) in writing? These were basics. How did PRASA sit in meetings where people were paid, but there were no records of these meetings? Why was this still the case in 2022?

Mr Ramatlakane said that he was surprised by this question as the issue of record-keeping had been inherited from the previous Board. The Board had been working to ensure records and signed minutes were kept. The DOA for every official who had responsibility (all executives) had been implemented by Exco. There was no problem with the DOA. He thought that the issue of record-keeping had been resolved. He said that PRASA was making decisions that would be contested in court and so it needed to be supported by clear records.

Mr Mphelo said that there was a difference between the year that was under review that PRASA was reporting on and the current situation. When the cloud was activated, in the second half of the year under review, all activities with the current Board from then would be on the cloud. Prior to this Board, all records would be on paper. PRASA was currently scanning all past papers. The problem that the AG had mentioned was before moving to the cloud. There was a document storage management environment and a cloud environment. PRASAs meetings were held virtually, recorded, and stored in folders on the cloud. Retrieval of paper documents was in progress but was slow. Interns would be brought in to assist with the back scanning.

Mr Hadebe said that the Committee placed reliance on the audit outcomes for progress that had occurred. This was a similar case from previous years. There was no system in place to identify and disclose irregular expenditure. All he was hearing was that PRASA was trying, but irregular expenditure was still taking place. Were there systems in place to improve the situation?

Mr Ramatlakane said that the Board had inherited an awkward situation. There were both the good and bad of the past. There had been a problem with irregular expenditure, which had accumulated. When the new Board had arrived, it had put rules in place as per Treasurys regulations.

The Board had to address the irregular expenditure to see if services had been rendered. It had then sought to apply for condonation if it was confirmed that the expenditure was irregular, but the goods had been received. The Board had applied for condonation of R12 billion of inherited irregular expenditure. The Board had been able to bring the R29 billion in irregular expenditure down from 2019/20. This would be finalised by Treasury.

Work was being done on detection of irregular, fruitless and wasteful expenditure. The Board had been assured that this was a problem of the past. There was documentation.

Mr Mphelo said that there were three pillars. The first was the system, the second was the policies, processes and controls, and the third was the culture itself. The systems ran on an SAP environment, which included contract management and finances. PRASA was exposed by the legacy systems, including the real estate application that was currently on it. It could not be easily bypassed. The majority of the old applications had gone through undetected. PRASA was in the process of upgrading the system on three fronts: the financial controls, the SCM controls, and contract management. There would then be automated detection. Whoever bypasses it would be able to be identified.

On policies, processes and controls, PRASA had, along with the internal audit team, decided to run a consultative environment of 70/30: 30% auditing, 70% consultative, to rebuild the control environment. Policies were being signed off and updated if needed and recorded.

On culture, consequence management was brought in so people understood what would happen if there was non-compliance.

These three pillars had not been there during the year under review.

On repeat findings, this would continue until management had either condoned or regularised it. This was taking a while to deal with.

Mr Hadebe said that there was a huge difference between what people said and what had actually happened. The AG report on consequence management had stated that disciplinary steps had not been taken against officials who had incurred irregular expenditure. It had also stated that all irregular, fruitless and wasteful expenditure needed to be investigated. Had PRASA investigated all the irregular expenditure in this financial year?

Mr Mphelo said that there was a different picture today on consequence management compared to the year under review in the report. The presentation had highlighted executives that were out of the system, going through disciplinary processes, and others that had been fired. 

Mr Hadebe interrupted to clarify his question: he said that he was expecting a response on what the AG had recommended. Had all instances of irregular, fruitless and wasteful expenditure been investigated? It was a yes or no answer.

Mr Mphelo said that the previous cases had been investigated, but the current ones that had been highlighted in the audit were in the process of being analysed.

Mr Hadebe clarified that PRASA was in the process of analysis and had not done anything.

Mr Mphelo said that the analysis addressed the investigation. He said that the 44 cases were based on the SIU report, which was in the process of being dealt with. and 11 of those were out of the system. Currently, PRASA was dealing with 33 cases, 14 of which had been suspended. Names could not be exposed, as these cases were in different stages of the litigation process. This would be shared with SCOPA as soon as the cases were resolved.

Mr Hadebe said that the Board needed to exercise oversight on corrective action to address this matter. Had the Board done so? Was it comfortable with what the Group CEO was indicating?

Mr Ramatlakane said that the audit had been delayed and was finalised in December for the engagement with the AG in January. Not everything that was in this financial audit had been dealt with, as some findings were new. He agreed with Mr Mphelo on the cases of irregular expenditure. The task team would deal with the audit findings and incorporate the recommendations into the 44 cases. The audit task team needed to regularly report on its progress.

Mr Hadebe asked who were the contractors that had not qualified with the CIDB and had not qualified for contracts? How many contracts were there? What had been done on this? Why had it been allowed for contractors not registered with the CIDB Board to be awarded contracts? Based on the oversight and consequence management, the Board should be able to provide a response.

Mr Mphelo said that around 7 to 8 slides in the presentation highlighted this (see slide 27). The Premifield leasing of locomotives for Main Line Passenger Services (MLPS) was around R28 million, Transnet itself with R1.1 billion, and Premifield again for R22 million. This was a repeat as PRASA had needed to continue with the service while regularising it, through a deviation submission to Treasury. GVK-SIYAZAMA for Isipingo was R268 million for consequence management, and the Cape Town cleaning services (Bidvest) for R28 million with R4.4 million that was regularised and approved through an extension.

Mr Hadebe asked if there were 17 contractors. Who had awarded the contracts without registering with CIDB? What was the number? What had been done with the officials and committees that had conducted these irregularities? Had PRASA identified the responsible persons? Were they still awarding contracts? Were they part of procurement supply chain processes? How many officials were implicated? What was their current status regarding the supply chain and bid adjudication committee?

Mr Mphelo said on all the newer ones, from this audit, PRASA was still going through the analysis to look at who and which contracts were involved so that it could take them into the process. The older ones had already been identified and were going through the process.

Mr Hadebe asked what had happened to the completed investigations. What had happened to those officials? He was trying to ascertain whether these repeat findings were not a result of these officials who continuously neglect the supply chain management policies. 

Mr Mphelo said that all the old ones had been dealt with. Isipingo was one of those.

Mr Hadebe said he was asking about the officials involved.

Mr Mphelo said that all the old ones had been dealt with.

Mr Hadebe asked about the sanctions. How many officials were involved? Were they still adjudicating? Were they given written warnings? The AG had said that disciplinary steps had not been taken against officials who had incurred irregular, fruitless and wasteful expenditure. If it had changed, PRASA needed to demonstrate based on its disciplinary outcomes that it had changed. It was not enough to answer yes, there needed to be evidence.

Mr Mphelo said that the spreadsheet of the newer investigations was being gone through. For the older investigations, he mentioned that with Isipingo, a senior manager, an executive, and two managers had been discharged based on PRASAs disciplinary code. Some internal hearings had been concluded in 2021. Others were pending and were on suspensions as they went through the CCMA. Others had been let go. This was just Isipingo.

A similar approach to the analysis would be taken with the newer investigations.

Mr Hadebe asked said that he still did not understand why the AG would arrive at this conclusion unless the disciplinary processes and investigations had been conducted after the AG had tabled the report. He awaited the finished report to see whether PRASA had been able to do as guided by the AG.

On material irregularities (MI), he asked PRASA to explain the process of addressing findings of the AG.

Mr Ramatlakane said that on the MI process, a report had been submitted to the AG on all the material irregularities. There were 17 of these that PRASA was required to keep detailed accounts of. The Board was supposed to take action. He had submitted a report to the AG on these material irregularities and provided a full explanation.

Mr Hadebe asked if Mr Ramatlakane could deal with specifics.

Mr Ramatlakane said that he had made the follow-up around 15 December on the locomotives. He said that he could forward a copy of the explanation to SCOPA.

Mr Hadebe asked if the AG could clarify the locomotive.

Ms Marina confirmed that she had received the responses regarding the remedial action from PRASA. The AG had requested additional information that was currently being assessed by the team.

Mr Hadebe was concerned about PRASAs submission of its annual financial statements, which contained material misstatements and a reliance on the audit process to correct them. Had PRASA put measures in place to eradicate the reliance on the AG for submitting proper financial statements?

Mr Ramatlakane said that the Board had discussed this. This was a function of another set of skills. PRASA had recognised that it needed to ensure that the finance division was properly skilled. The secondment was minimising this reliance. When PRASA had approved a statement for submission on 31 May 2021, it had been brought to the attention of the AG that there would be adjustments on the financial statement. A prior warning was given and a reason was provided.

Mr Hadebe said that this problem had been unresolved for the last 4 to 5 years. Would this be repeated in the next financial year? Could PRASA give the Committee assurance that this would not be repeated?

Mr Ramatlakane said that going forward, the situation would change.

Mr A Lees (DA) wanted to ensure that the terminology was understood: scrap metal was not scrap, it was very good material turned into scrap. This was a massively profitable business. He mentioned an incident of his son being hijacked on the N12 last year by members of the police force. His son and another motorist had had their arms tied behind their backs with cable ties. When they had gone into the community to ask for help, no one would open their door to help at 2am. If this was the case, how was the community going to protect PRASA assets from highly armed gangs? How would they work with the community to prevent wholesale stealing?

Mr Ramatlakane said that PRASA was getting the community to participate in what happens in their communities. PRASA just needed information about culprits, it was not asking community members to become police/security, just to provide information. This was part of the process of arresting people. Communities were the best place for getting this information.

Mr Lees said that the success of information gathering had yet to be tested. In his experience, PRASA needed to recruit informers and pay them. It was much more than having community meetings.

The period under review was 2021, a year that PRASA had been effectively shut down. This was evidenced by its revenue dropping to R178 million compared to the taxpayer subsidies of R11.7 billion given to PRASA. During that year, the expenditure on employees had amounted to R5.8 billion, so most of the taxpayerssubsidies went to employees. What were these employees doing? As of February this year, there were 16 700 employees. Why were they not put onto the Covid-19 Temporary Employer-Employee Relief Scheme (TERS) programme?

Mr Ramatlakane said that there was a commitment that employers and employees made in the relationship of being a worker. PRASA had been shut down during this period because of Covid. It did not tell employees that they would not receive salaries. Employees still received their full salaries. No one knew when Covid would end, or when it would get better. Employees were working from home. The issue was that PRASA did not cut salaries. There was no 50% cut in salaries, as had happened in the private sector.

PRASA structurally had too many people, so it was being rationalised based on the new functioning model. This would deal with the match and place, or Section 189, to deal with the bloated salaries.

Mr Mphelo said that Covid had taught the industry many lessons. Not knowing when Covid would end, meant that it was a risk to get rid of staff and cut salaries, as this would have discouraged staff and would have disposed of skills needed during PRASAs recovery. R5.8 billion had been spent, but PRASA had had to prepare itself for the recovery process. Going forward, PRASA could rationalise, based on what is required.

Mr Lees said that the only reason PRASA had adopted this approach was because taxpayers had bailed it out. It had money, so did not need to bother with trading. This was incredulous. It was a consequence of the State trying to run enterprises this way. There was no financial pressure on PRASA as there was in the private sector. Despite the government bringing the TERS programme to the table, PRASA had chosen to pay full salaries. South Africans who were unemployed had to live on R350 a month, while PRASA and its executives received their full pay. He understood about scarce skills, but PRASAs operations were a fraction of what they should be and it still had high staff numbers. PRASA was still talking about rationalising. He thought it was incredible that the taxpayers could be looted in this way, as the infrastructure at PRASA had been looted.

Where was PRASA with the locomotives that needed to be modified to fit the tracks? Where were those locomotives now? How many had been modified and delivered to South Africa?

Mr Ramatlakane said that there was stability between management and employees. He said that no employer could make a unilateral decision on conditions of employment. This was the honest answer to what PRASA could do in those circumstances. He would not agree that there was looting.

On the locomotives, PRASA had had a discussion after the contracts were set aside. The locomotives had been given to a liquidator, to liquidate and recoup the R2.6 billion the State had paid. PRASA had started by selling locomotives. Six had been sold and this had only generated R65 million. The liquidator had said that PRASA could not proceed with the sale, as it was basically giving away” the locomotives. The liquidator was looking for another way for PRASA to regain the money lost.

This took PRASA into a tripartite discussion between the affected parties. The Tshwane liquidator was leading the process. The tripartite agreement was the best way for PRASA to recover the money and then go to the High Court with the tripartite agreement on how to utilise the remaining locomotives.

Stadler Rail, which had modified the locomotives, was asked about giving back the locomotives to South Africa. It had agreed to modify the locomotives. The only thing standing in the way was the agreement and going to court. PRASA had given Stadler six months. This approach would bring in R1.1 billion, along with another two-year training programme for drivers.

Mr Lees said that there was essentially no progress, since the last report on this, because PRASA was waiting for the courts. Had PRASA made an urgent application to the court to handle the matter? If so, what was the outcome? If not, why not?

Mr Ramatlakane said that he had gone to Spain in October 2021 to discuss this with Stadler leadership. A technical committee from PRASA had gone with to check that the requested modifications had been made. PRASA was now waiting to finalise the agreement and was going to the High Court in April.

Mr Lees said that Mr Ramatlakane had already mentioned his trip to Spain, so SCOPA had already been aware of the draft agreement. The process might be in the hands of the liquidator, but the longer it took, the better off the liquidator would be. The R2.7 billion was South Africas. He expected PRASA to be putting huge pressure on the liquidator to sort it out. He urged PRASA to do that and not sit back.

It was unfortunate that PRASA was such a mess and cost the taxpayers so much. Commuters were paying much more to commute than they should be. This was a consequence of state capture and the long-term corruption at PRASA. He said that as critical as he was, he had to accept that PRASA was doing what it could.

Mr S Somyo (ANC) said that the report said it all – the effort to resolve PRASAs financial viability was an uphill battle. This was amplified by the cost of analysis which went beyond R3.6 billion against PRASAs fare revenue of R900 million. This was eating into PRASAs viability as an entity. Its instability was also a concern, as it affected its sustainability. How was PRASA going to improve its standards of performance going forward? How was it going to improve its sustainability to ensure its financial viability?

Mr Ramatlakane agreed with Mr Somyos comments. Instability challenges had already been identified by the Board. Infrastructure protection and security were required for PRASAs process. The integrated security cluster was key. Performance challenges and sufficiently skilled personnel were being worked on by the Board. It had to fix the brokenness. It had done something, but it was not sufficient. These were just the building blocks.

Mr Somyo asked about the timeframe PRASA had set itself to ensure executive positions were filled.

Mr Ramatlakane said he would submit a detailed plan to the Committee. This was done by the Board and would be finalised by April. On the Group CEO, a recommendation would be made within 90 days.

Mr Somyo said that PRASA needed to identify the ratio between its core operations staff and its support staff in the report it would submit to the Committee.

Mr Ramatlakane said this was what a business model should tell PRASA and the Committee. He would share the business model with the Committee.

Mr Somyo said he was from the Eastern Cape, and the second largest township in the country was serviced by PRASA. There was no train movement in the last two weeks when people had been hit hard by fuel price increases. Locomotives were there but were not in motion. This told a story of the effects of maintenance failures and PRASA systems failures. What were the operational hindrances there? This was the same situation in Port Elizabeth.

Mr Mphelo said that there was a different dynamic in Eastern Cape and Port Elizabeth, as the infrastructure belonged to Transnet. Due to money disputes, Transnet had pulled their locomotives, so PRASA had had to stop services. PRASA had other locomotives which would be sent. It was working on this. This would be finalised in the next few weeks. PRASA was engaging at that level.

Mr Somyo said that PRASA was paying people for not working.

Mr Mphelo said this had to be done while they were working on a solution.

Mr Somyo said that harmonising two entities that offered the same services had its challenges, but PRASA would be held responsible. PRASA needed to improve its communication on these challenges.

The Chairperson said that on operational services and the 3 000 identified persons that were ghost workers at PRASA, the Board had indicated that it would deal with this in the annual report.

Could PRASA answer on the recovery of money lost by PRASA, consequence management, and HR? SCOPA needed an action plan from PRASA. Was this process still ongoing to safeguard the integrity of PRASAs payroll?

Mr Ramatlakane said that PRASA would come back and report on the action plan that PRASA needed to share with the Committee.

PRASA was on Phase 1 of identification and implementation of the 3 000 employees that did not collect their salaries. Phase 2 was drilling down on these individuals. Police would need to get involved in this phase.

Mr Mphelo said that there were three phases and PRASA was now on Phase 2, analysing the people who had not done physical verification.  Here, a few things were being done. One was identification, if they were South Africans, or if not, did they have work permits to be in the country, and lastly looking into the system to find the source of this activity (date and person who loaded them into the system). This would quantify how much money was being looted. Then PRASA would cut them out. After this, the information would be handed over to the police for fraud and identity issues. It could be a racket or syndicate.

62 foreign nationals had been identified, some with fraudulent identities, who had to be dealt with by Home Affairs and the police. Others had expired work permits or no permits, which would be dealt with by automatic exclusion from the system. PRASA needed to find who had loaded them and when and who the beneficiaries on the other side were. These people would be taken to task. Internal processes would also take place after the analysis of the report.

The Chairperson said that he did not see a concrete plan for dealing with these challenges. He asked for monthly reports on progress with these problems from PRASA.

3 000 persons meant that a lot of money had been lost. It was not accidental that these people were on the payroll. He had expected something more concrete from PRASA since this was previously discussed in January.

He had been observing that there was a syndicate derailing PRASA, based on how organised vandalism and looting had been. He was concerned about the capacity of intelligence services. He mentioned the arrests of foreign nationals from Zimbabwe regarding the looting/smuggling of rail infrastructure. This matter continued to require attention. It should not be characterised as xenophobic. Rail infrastructure remained a critical concern.

Were there any discussions with foreign governments to push back on these syndicates? There needed to be some diplomatic intervention, other than tightening border control, as the Beitbridge border had been a total sham. Something had to give. Collaboration and cooperation of inter-country security were required to deal with this. It was a drop in the ocean of what was occurring. He asked the Minister to give insight into any discussions that had been taking place.

Ministers closing remarks
Minister Mbalula thanked the Committee and PRASA executives. At the previous SCOPA meeting, the Board could not attend and the management executive was at sea”.

PRASA was still a mess. He would have wanted to provide a better report to the Committee. He had made his disappointment clear to the Board and management. He had thought that PRASA would have been further along with its progress. Work was being done, but slowly and indecisively. The problem was known: PRASA was a capital-intensive company, it could not afford to lose even a cent.

He had impressed upon the Board that they needed to fix this. Questions from Members on what had been done about various challenges had not been answered very clearly.

The Minister said that he was asked to sign off R2 billion for a contract. When it was looked into, there was corruption (from the same people awarding tenders). The contract was sent back, not signed. He had asked the former CEO what action the Board was taking on people perpetuating fruitless expenditure and awarding contracts without checking. He was happy that the board was addressing some of these challenges now.

There was an opportunity with this Board, with all their knowledge and the DoT, to make the end of the year different. There would be a better report provided to the Committee to follow up on concerns raised here. The Department would also follow up.

On ghost workers, he said that there should be no philosophising; PRASA needed to institute forensic investigations and involve the police immediately. The crime had already been identified but PRASA was just sitting on it. 3 000 people did not come to collect their salaries; their salaries should have immediately been stopped. This was a crime. PRASA could spend money on getting experts to investigate. SCOPA, the AG and Treasury would understand. This needed to be wiped out of the system. There were people with no matric, no qualifications, and fake identity documents at PRASA. It was clear that PRASA was dealing with a scam. All necessary steps needed to be taken to investigate when dealing with a scam.

When PRASA came to SCOPA, it needed to give clear answers on what it had done and offer to provide a report within 48 hours. This was so SCOPA knew PRASA was working on it. If PRASA did not exorcise this criminal element, it would not make a dent. He hoped that the report would be different. If it was not, he would be the first to admit that they had failed.

South Africans already knew how corrupt PRASA was. The job of the Board was to undo this. It could not be done over a year or so, but the reports on the basics needed to be different. He was very disappointed with the past year. PRASA had promised that vacancies would be filled and the organigram would be created– the Board needed to deliver on that.

There was no point in him having a beef” with the Board, but he would not have Board members doing as they wished. DoT would not repeat the past mistakes of disbanding the Board, but those who were doing well needed to continue with their work. The constant chopping and changing” did not work.

He hoped that vacancies would be filled and that the arbitration cases would be settled. He understood that suspensions would not be resolved quickly. The Board could not be blamed, but it needed to take measures. People should not be paid if they had been suspended and not attended the disciplinary process. It could not be business as usual. PRASA had to do its job. It could not come to SCOPA and ask for favours. The job must be done decisively.

Covid-19 was down for now. Regarding regulations and restrictions, there was space for the Board to operate.

Some of the issues with the report had to do with concerns that the AG had raised, particularly on procurement, crisis, and accountability. These needed to be dealt with decisively within the system.

For challenges within PRASAs purview, it had the power and authority to make changes. PRASA needed to change what could be changed.

Whenever he visited, he asked PRASA executives what they did every day to sort out the mess when they came to work. The former CEO had travelled the whole country at some point and was in Beaufort West when the Minister had phoned to ask him what he was doing. The Minister had told him that when he came back from Beaufort West, the problems of Cape Town would not have been solved. He was happy to see the recovery of stations in Cape Town. If there were executives who were focused on their job, there would be progress.

He had had an induction meeting with the Board and had addressed corporate governance issues. Experts were invited (and were not paid). This was so that there was no overlap. The Board was the Board and management was management. The Department had given full support to this. Delegation of authority should be clear. The ministerial shareholder compact was given. A transitional plan was also provided, that was supposed to have been implemented. A full corporate plan had been sent to the Portfolio Committee. Based on this, PRASA was not where he thought it would be.

He had been personally involved with the Cape Town Central Line and the Mabopane Line. Mabopane was now running. He was involved in security matters and mobilising plan. PRASA could not rely only on the state. PRASA needed to beef up" its own security. This was costly, but people pay for punctual, secure service.

He reiterated the PRASA report needed to be different from what it was, with at least an 80% improvement. He was in full support of the Board in executing the plan it had committed to implementing.

Closing remarks
The Chairperson thanked the Minister for his candid closing remarks on PRASA.

The Board was clear on the expectations from Parliament, the Executive and the South African public. The situation did not inspire any confidence and needed to move at a faster pace than it was currently.

On the series of appointments made preceding the current Board, the interim Board had been a complete disaster when they had met in Parliament and the short-lived appointment of the former CEO, these factors combined had not boded well for stability. There needed to be a renewed focus on stability in PRASA to ensure key critical appointments were made. There was a need to get governance and the business model right at PRASA to roll out services in a way that would do justice to its mandate.

He agreed with the Minister on not being satisfied with the reporting on operations. There were probably many concerns that Members had wanted to raise. The Committee needed monthly reports on progress.

The Committee would give PRASA three months to get things going. PRASA needed to be on standby for the Committee to call on it at any time.

After the report on PRASA was completed, SCOPA could make recommendations. He encouraged Members to do oversight on PRASA locations close to them and advise accordingly.

PRASA remained a key focus for SCOPA, as it was the backbone of the economy.

He said that however clichéd, shape out or ship out” applied to all entities and it needed to be integrated into government administrative structures. It was in national interests to embody that kind of honesty. 

The Board had the Committees support as long as it made progress in fixing PRASA with the necessary speed and urgency, implemented decisions, and responded to the AG. At the next meeting, more practical responses were required rather than theoretical.

The Chairperson thanked everyone for attending.

The meeting was adjourned.

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