PRASA Annual Report 2021/22
NCOP Transport, Public Service and Administration, Public Works and Infrastructure
30 November 2022
Chairperson: Mr M Mmoiemang (ANC, Northern Cape)
Passenger Rail Agency of SA (PRASA)
In its final meeting for 2022, the Select Committee met on a virtual platform with Passenger Rail Agency of South Africa (PRASA) to discuss its 2021/22 Annual Report
The PRASA Board Chairperson said that PRASA is still working on solving longstanding inherited problems such as organizational capacity at the executive level and so permanent appointments have been accelerated. The PRASA team detailed progress in dealing with past irregular expenditure and efforts to rehabilitate the rail corridors that had been vandalised during the Covid pandemic and the encroachment of informal settlements on rail reserves.
In the discussion, Members asked about the many 2021/22 unachieved targets; status of the National Station Improvement Programme (NSIP), National Station Upgrade Programme (NSUP) and depot modernisation programme; delivery of train sets; Afro-4000 locomotives financial claw-back; too many acting executive management positions; ongoing litigation with former PRASA Group CEO; 3 000 ghost workers; defunct rail corridors such as East London operations; PRASA turnaround strategy and audit action plan. The Committee Chairperson appealed to the Board to bring the litigation with the previous GCEO to an end.
PRASA Group Chairperson’s overview
Mr Leonard Ramatlakane, PRASA Group Chairperson, introduced the delegation that included the Acting Group Chief Executive Officer (GCEO), Acting CFO and the other PRASA Executives.
Mr Ramatlakane admitted that the PRASA audit disclaimer had not been pleasing. Although positive action was noted in addressing some audit findings, there were certain stubborn issues that needed to be dealt with. AGSA had identified four issues and three of those issues have been dealt with. The only outstanding item involves assets that caused the disclaimer. PRASA is working hard to ensure that by the next audit, asset authentication finding cited by AGSA will be dealt with. PRASA has a two-year outlook in terms of obtaining a clean audit.
The PRASA Board is working on the problems they have inherited. It has been evaluating capacity which has been a burden to the organisation. Mr Emeran has been asked to accelerate the full-time appointment of people with the requisite skills. PRASA has been able to insource capacity to to help with the lack of capacity. Teams have been assembled to work on clearing the asset problem.
In the previous Select Committee meeting, PRASA reported its inheritance of R28 billion in irregular expenditure. PRASA has managed to submit R12 billion of that to National Treasury for condonation and PRASA is awaiting direction from Treasury. It is continuing to work on authenticating the remaining irregular expenditure so it can be submitted to Treasury by the end of the financial year for condonation. The Acting GCEO will provide more detailed information.
PRASA 2021/22 Annual Report
Mr Hishaam Emeran, PRASA Acting GCEO, said that the 2021/22 financial year was considered “a year of continued improvement”. PRASA had committed to ensuring improvement in addressing irregularities and organisational stability in revitalizing PRASA.
PRASA Board addressed irregularities with R12 billion submitted to National Treasury. There was also the conclusion of Special Investigating Unit (SIU) investigations which saw the institution of disciplinary hearings for 33 employees. Currently, there are 13 disciplinary cases ongoing. Other achievements included the resumption of five out of 10 corridors with electrical services available during both peak and off-peak hours. Corridors such as Pretoria – Mabopane and Cape Town – Bellville via Goodwood were provided with new train sets. Fencing contracts that commenced in March 2022 will ensure fencing for six train depots equipped with concrete walling and high technology for completion by end of 2022/23.
Despite, the many achievements highlighted within the PRASA Annual Report 2021/22, PRASA only achieved three out of its 17 performance objectives (19%). Performance objectives included rail modernisation through manufacturing, infrastructure development and maintenance, rail and Autopax recovery performance and improvement of operational safety and security
The presentation outlined the financial performance report, balance sheet and audit outcomes.
Mr M Dangor (ANC,Gauteng) asked when the Committee can expect progress on the Kliptown-(Lenasia)-Orange Farm railway line so that railway line can be linked up to Johannesburg Park Station.
Mr M Rayi (ANC, Eastern Cape) noted that the Minister of Transport Fikile Mbalula was currently in a Cabinet meeting. Therefore the next time the Committee meets with PRASA, the meeting day must be altered to ensure that the Minister is available such as meeting on Tuesday instead of Wednesday to ensure the Minister’s availability. The reason that Minister Mbalula must be available is that PRASA is facing major challenges that require his attention. He also wanted assurance from the Minister that these challenges are being addressed
Mr Rayi commented that for PRASA to achieve 19% of its predetermined objectives is a total failure. To make matters worse, there are a lot of people occupying acting instead of permanent positions at the executive level. Apart from being GCEO, Mr Emeran is also the Chief Technical Officer (CTO). This means that there could be someone acting in that position in the PRASA technical departmentt
Mr Rayi suggested that the Powerpoint presentation can be the product of subjective editing. People include the positives and omit the negatives when conducting presentations. As a result, his preference was for the annual report itself as the source of information.
He asked the tenure of an acting position at PRASA as the Committee might have to deal with another Acting GCEO. At the last meeting the Acting GCEO was Mr Mphelo. What is Mr Mphelo’s current status and is there a particular tenure period for the Acting GCEO?
Mr Rayi requested an update on the GCEO position. He cited newspaper reports that former PRASA GCEO Mr Matthews is still challenging his dismissal. Will PRASA wait for the conclusion of this particular labour dispute before appointing a new permanent GCEO. PRASA had an Acting Chief Financial Officer, Acting Chief Information Officer, Acting Executive Of Human Capital Management, Acting Group Executive for Legal, Acting Chief Audit Executive, Acting Rail Division CEO and Acting CEO: Real Estate Solutions. Group Company Secretary was also vacant.
Mr Rayi said that the performance does not align with the PRASA PowerPoint presentation. He expressed frustration with PRASA’s performance and cited the Ministrial outcome of safe and reliable transport. The target for new trains was 44 but actual achievement was 33. Another performance indicator was station improvement projects. The planned target was 43 but the actual achievement was seven. This signaled 16% achievement. The reasons given are an unsuccessful procurement strategy blamed on the National Union of Metalworkers of South Africa (NUMSA) strike and the Covid-19 pandemic.
The target for number of Metrorail passengers was 64 million while the actual achievement was 16.69 million which was again 16%.
The target for main line passengers in 2021/22 was 183 000 passengers while actual achievement was 10 786 passengers which was 6%.
For Autopax passengers in 2021/22, the target was 19.5 million while actual achievement was 80 000 passengers which was 44%.
The target for safety occurrences in specified categories reported in 2021/22 was 748 and the actual number was 247. The target for security occurrences per Railway Safety Regulator (RSR) categories was 425 828 and the actual number was 1705.
The Gauteng interlockings target was 26 while achievement was 15. Western Cape interlockings target was 11 with 5 achievements.
The target for completed Electrical Modular Unit (EMU) capacity depots was 186 and achievement was 0. Depot fencing and yards target was 7 and achievement was 0.
Mr Rayi commented that such performance required the attention of the Minister of Transport.
The refurbishment of train coaches target in was 10 while actual achievement was 0. The target for number of overhauled metro coaches was 110 while achievement was 0.
Mr Rayi acknowledged that the GCEO had already summarised the audit findings. However, he warned that the GCEO cannot deceive him as he values highly the opinion of Auditor General South Africa (AGSA) for full transparency. He requested a report from PRASA highlighting the AGSA findings and PRASA’s plan to remedy these.
A R3.5 billion procurement contract for locomotives was awarded to a bidder but the evaluation criteria used were not consistent with the criteria stipulated in the request for proposals, PRASA supply chain management policy and Section 51 of the Public Finance Management Act (PFMA) on contract management. R307 million of the contract was issued as performance security four months after the contract had been signed. This was after PRASA had paid a deposit of R460 million. This was contrary to the requirement of the PRASA SCM policy which states that performance security must be provided prior to concluding the contract with agents which was not highlighted in the presentation by Mr Emeran. The accounting authority did not take effective measures to prevent fruitless and wasteful expenditure as required by Section 51 of the PFMA. Fruitless and wasteful expenditure to the value of R19 million was incurred due to interest and late payment penalties of creditors.
AGSA reported significant internal control deficiencies and non-compliance with legislation.
Mr Rayi said that there are challenges with daily and monthly processing and reconciling, procurement management, regular and accurate financial reports, annual financial statements, compliance with legislation as well as achievement of planned targets.
Mr Rayi suggested to the Chairperson that within seven days the Committee should receive a report on what PRASA has done to address the identified issues.
Mr Rayi stated that whenever they met with PRASA he would raise the topic of East London. He spoke of past assurances from PRASA about East London and depot corridors, fencing and upgrading of train stations in the area. However, there has been no changes in East London. At the 22 June 2022 meeting, he reported that there was only one train operating early in the morning from East London to Berlin. Currently there is not a single train operating in East London. As a result, people in East London and surrounding areas receive no service from PRASA. There has been no progress in solving the signalling and interlocking challenges within East London. He was aware that some issues are being handled by Transnet. However, there appeared to be no communication between PRASA and Transnet on East London signalling and interlocking issues.
Mr Rayi said Mr Emeran updated the Committee on consequence management but it only occurred after AGSA reported the matter to the Special Investigating Unit (SIU). Otherwise, if AGSA did not report the matter perhaps it would not have been addressed. He acknowledged that although the Acting GCEO did not rely on the SIU report, PRASA is following up on consequence management.
Mr Rayi said that the Committee has been receiving reports about the relocation of occupants on the Central Line railway in Cape Town. He remembered that Mr Ramatlakane was scheduled to have a meeting with the then Cape Town Mayor Dan Plato in 2021. However, it appeared there is no progress on the relocation of railway occupants on the Central Line. He requested an update on exactly what is happening with this particular relocation in the Langa area.
Mr Rayi said the PRASA Annual Report addressed the insourcing 3 100 security officials. He requested an updated security report. It also reported the installation of anti-vandalism and anti-theft technology. He enquired about the installation progress and asked for an update.
Mr Rayi asked why the purchase target of 44 Electrical Modular Unit (EMU) trains was not reached with only 33 EMU trains purchased.
Mr Rayi noted the PRASA Annual Report 2021/22 addressed the completion of multi-year re-signalling of 15 stations from a target of 26. Nine belonged to PRASA while the remaining six belong to Transnet Freight Rail (TFR). He asked why four stations had to be canceled. TFR did not accept PRASA’s re-signalling interlocking of one of the train stations and enquired what the reason for the rejection was.
On the Autopax business rescue plan, Mr Rayi said the PRASA Annual Report indicated that the shareholder had not provided resources for the plan. "The funding required to implement the approved Autopax business plan and end the business rescue process has not been approved or made available to date". He asked the Department of Transport (DOT) to explain why.
On the Northern Line between Cape Town and Bellville via Goodwood, a train service has been reintroduced but with an old fleet of trains. Why could PRASA not use the EMU trains instead for that particular line?
Mr Rayi finished his questions for the moment but would return with more questions on Autopax, bus breakdown challenges with engineand gearbox failures. He requested an update on the National Station Improvement Programme (NSIP) and the National Station Upgrade Programme (NSUP) and depot modernisation programme performance. When will these plans take place in towns other than those on Gauteng, KwaZulu Natal or Western Cape?
The Chairperson thanked Mr Rayi for his comprehensive engagement and “interrogation” of the PRASA Annual Report 2021/22 presentation
Ms M Moshodi (ANC, Free State) commented on how difficult it was to follow Mr Rayi’s questioning since he covered a sizable ground and raised important questions. She echoed his questions about vacancies and asked if the labour court had reached a decision on Mr Matthew’s contract termination. If the matter has not been concluded how will PRASA appoint a new GCEO?
Ms Moshodi said that in March 2022 Minister Mbalula in a presentation to the Standing Committee on Public Accounts (SCOPA) revealed that PRASA uncovered 3 000 ghost workers in the system who have been receiving full salaries. This meant that there was systemic corruption within Human Resources. She asked if there were investigations to find out who was responsible and if not, why not. She requested an update from Mr Ramatlakane on the matter.
Ms Moshodi agreed that the Committee meeting day should be alternated to ensure the availability of the Minister of Transport. She argued that the challenges facing PRASA require the involvement of the political head of the Department of Transport.
The Chairperson noted that Mr T Apleni (EFF, Eastern Cape) was unable to participate in the meeting because of connectivity issues.
The Chairperson enquired about the organisational capacity at the executive level of PRASA to gauge the staffing and planning set in place to deal with the capital expenditure underspending. The 2021/22 capital budget expenditure was around 35%. He asked Mr Emeran to make a reflection on that. He asked if under expenditure was linked to internal organisational capacity or the Treasury procurement directive due to the litigation on the provincial procurement policy.
The Chairperson asked the PRASA team to take them into confidence about the litigation involving Mr Matthews but also (1:37:55 inaudible). During its engagements with PRASA on both 26 June and 8 September 2022 the Committee had raised the litigation. Also during those meetings, it had raised the rail modernisation programme which focused on the rehabilitation of rail and the modernisation of the Central Line and so on.
The Chairperson acknowledged that the Committee had received the general turnaround strategy from PRASA which aimed to confront its challenges. However he again referenced concern about litigation and the new GCEO being appointed against the backdrop of litigation by Mr Matthews.
The Chairperson said that AGSA had raised concerns about PRASA’s turnaround strategy. He asked how the team would allay fears whether the turnaround strategy would bear fruit. Although that strategy has been presented to the Select Committee, there were concerns. However, he noted the the energy of the presentation and he noted the news clip on the reopening of the Naledi railway line on 28 November 2022 after two years.
PRASA Board response
Mr Ramatlakane, PRASA Group Board Chairperson, replied that PRASA’s acting position tenure was that an appointment to an acting position lasts six months. The position is rotational meaning that different people will occupy the acting position. PRASA is committed to its acting position policy and its implementation.
On the subject of the former PRASA Group Chief Executive Officer (GCEO) Mr Zolani Matthews, Mr Ramatlakane reminded the Committee that the PRASA Board terminated his contract. The reason for the termination of the contract was that Mr Matthews did not perform to PRASA standards upon evaluation. Mr Matthew’s evaluation period was six months and was extended for another three months. The evaluation led to the discovery that Mr Matthews was not performing up to PRASA’s standards. This led to the PRASA Board terminating the employment relationship. In response Mr Matthews took the matter to court which led to arbitration which was reached in his favour.
Mr Ramatlakane argued that the arbitration conflicted with government policy as the award claimed that Mr Matthews did not require a security clearance certificate. It further claimed that he was “a mere person that managed training”. These claims were contrary to current state policy. The legal decision was appealed and is currently being dealt with by the Labour Court.The legal process will be time consuming because of a long waiting period. The board decided that there was no law prohibiting the appointment of a new GCEO. PRASA has proceeded with the appointment of a new GCEO despite the ongoing legal dispute with Mr Matthews. The PRASA Board has begun the process of promoting interview advertisements and interviewing potential GCEO candidates. The PRASA Board has a deadline to appoint or make a proposal by the end of the year. By 15 December, the PRASA Board needs to determine the next PRASA GCEO. A disciplinary committee (DC) is happening currently for the suspended Chief Financial Officer. The suspension came following an investigation into financial matters. The suspended CFO is currently undergoing a DC. The setting out of charges will be finalised by 9 December to proceed.
Mr Ramatlakane replied that currently interviews for the position of PRASA Group Company Secretary are being conducted. The previous Group Company Secretary Mr Sandile Dlamini was fired due to performance and took them to the CCMA. During that period PRASA was unable to advertise the PRASA Group Company Secretary position. Since Mr Dlamini made a settlement proposal, the PRASA has been able to proceed with interviews for the position. By January 2023, PRASA will appoint a new Group Company Secretary after interviews are conducted.
Mr Ramatlakane promised to deal with the accounting authority in reply to Mr Rayi’s request for a report within seven days on the procurement as well as fruitless expenditure audit issues. This report will also provide assurances of PRASA’s turnaround strategy where the Auditor General said that that turnaround is maybe not that sufficient - there will be an explanation.
On relocation of people living on the Central Line railway, Mr Ramatlakane replied that Mr Rayi is correct about a PRASA report submitted on the matter. In terms of timeframe, the end of November 2022 was when PRASA agreed that it was time that a court order was attempted for the relocation of “people squatting on the rail line”. Unfortunately, PRASA along with the support of Minister Mbalula, did all they could on relocation including finding suitable land. The City of Cape Town municipality has been engaging to unlock this relocation including implementation and adherence to City of Cape Town emergency regulations. Despite PRASA being dependent on that, the City of Cape Town reneged on cooperation towards relocation. As a result, there is no land available for relocation. Additionally, there has been disagreement between both parties over the responsibility for payment for bulk services. He was of the understanding that the bulk services payment would be be settled at the local level of government, that is, the City of Cape Town. Currently, both parties have reached an impasse. However, there has been recent progress as SCOPA made a proposal for a joint SCOPA meeting with the different spheres of government.
The previous day, the PRASA Board was informed that the City of Cape Town passed an official motion to reject the land issue previously agreed upon by all stakeholders. This action has impeded PRASA's progress in acquiring land for relocation as PRASA is not legally authorised to acquire land. Therefore the relocation is unable to be resolved.The legal authority on land which PRASA lacks is vested with the City of Cape Town and the Department of Human Settlements (DHS). The Human Settlements Minister Ms Mmamoloko Kubayi was present at a meeting with Minister Fikile Mbalula to discuss this. During the meeting, both ministers discussed finding funds for purchasing land. However, acquiring funds will not quick so PRASA will be waiting on that.
Mr Ramatlakane stated that there must be cooperation between all three spheres of government on Central Line railway occupation. At the moment PRASA’s hands are tied on this issue despite PRASA still being committed to reaching the Presidential targets and priorities.
On the dispute with Mr Matthews, Mr Ramatlakane replied that this is presently being dealt with by the Labour Court. All of PRASA’s legal arguments have been submitted. It will be about a year before the Labour Court reaches its decision. The Board will still proceed with the appointment of a new GCEO.
On Autopax, Mr Ramatlakane confirmed the existence of a business rescue plan. The rescue plan required an additional investment partner.
On the mechanical problems of Autopax, Mr Ramatlakane replied that is the condition of the rail buses and investment is needed. PRASA is still looking for an investment partner. He confirmed that the plans on how to deal with the investment partner have been submitted to DOT.
Mr Ramatlakane said that Mr Emeran will explain that some of the EMU targets were reduced from 44 to 30 during the COVID-19 pandemic.
On the 3 000 ghost workers, he can only confirm that ghost workers were insourced. Currently, these workers are deployed in various places either at a rail station or corridor. Mr Emeran will comment further.
Mr Ramatlakane explained the 0% refurbishment target achievement saying the refurbishment programme was only approved by the PRASA Board in April 2022. The implementation will not commence until there is an agreement on the tender process. The refurbishment companies are only appointed after the tender process. Information on this matter will be provided by Mr Emeran
On the 2021/22 audit, the PRASA Board will ask the Chairperson to add “certain things” involving the concerns of AGSA. He acknowledged that there is serious work to be done by PRASA in response to the AGSA report on what was needed to change PRASA’s organisational situation.
Adv Smanga Sethene, Chair of Human Resources and Remuneration Committee (HCM-REMCO) Board Sub Committee at PRASA, explained that as GCEO Mr Matthews like any PRASA employee faced a probation period. Mr Matthews was twice assessed on performance by the PRASA Board Chairperson. On those two occasions, Mr Matthews’ performance was assessed as below the acceptable standard. Due to these circumstances, the PRASA Board had to refer to PRASA’s probation policy which stated that “in the event an employee on probation does not perform, PRASA cannot confirm his contract. This enforcement of probation policy explained the situation of Mr Matthews.
While the PRASA Board was still processing the probation, it received a letter from Minister Mbalula who was PRASA Board shareholder. In his letter, the Minister informed the board that State Security had communicated that Mr Matthews’ security clearance was not confirmed. One of the conditions of employment confirmation in addition to probation was that employment was conditional on positive security clearance from State Security . That denial of security clearance overtook the probation process and Mr Mattews was placed on precautionary suspension who took the matter to Labour Court. Arbitration then ensued. The arbitration sided in favor of Mr Matthews. The arbitrator directed the PRASA Board to reinstate Mr Matthews. The decision was not understood by the PRASA Board as the decision was on the basis that the arbitrator stated that Mr Matthews had no duty to disclose his citzenship to the board, amongst others. Following a legal opinion, the PRASA Board was of the view that the arbitrator did not properly “apply his mind to that aspect”. The reason for the termination of Mr Matthews was because of non-disclosure of his dual citizenship status and his dealings with various companies. Mr Matthews failed to disclose any of that information and that information was considered “material’ by the PRASA Board.
Once the PRASA Board received word about the reinstatement of Mr Matthews, it reconvened. Followed the legal opinion from its PRASA Senior Counsel on the award, it was raised that the arbitrator’s decision cannot be appealed but as one cannot appeal to the Labour Court but instead an arbitrator’s decision can be reviewed.
What happened then was that the PRASA board members reminded themselves probation was still not dealt with. On 22 April 2022 Mr Matthews was issued with a letter of employment termination from PRASA due to an adverse probation period because of non-performance on two assessment occasions. The performance assessment was conducted by the PRASA Chairperson and is being challenged by Mr Matthews himself. Mr Matthews awarded himself a score of 1/5 and 2/5 which immediately signaled non-performance. Based on failure to perform during probation, this meant that the employment contract of Mr Matthews was not confirmed. The time frame since 22 April 2022 to date was approximately seven months and a few days.
Adv Sethene stated that Mr Matthews has never challenged his second dismissal either through the Commission for Conciliation, Mediation and Arbitration (CCMA), an arbitration, a labour court or through a high court to specific performance on the issues of his employment. Therefore as far as the PRASA Board is concerned for seven months, Mr Matthews never challenged his second dismissal on probation.
Adv Sethene said that after much consideration,the PRASA Board concluded that nothing legally impeded them from filling the GCEO position. He wanted to clarify this so the Committee is not left with the impression that the PRASA Board is not being logical. There are no contractual issues between the PRASA Board and Mr Matthews whatsoever although litigation is pending at the Labour Court. There will not impede PRASA’s appointment of a new GCEO. As far as the PRASA Board is concerned, Mr Matthews has not challenged his termination based of the letter he received on 22 April 2022. It was for that reason that the PRASA HCM-REMCO Board Sub Committee saw no legal reason to compel the PRASA Board not to fill the GCEO position.
The Chairperson said that they would come back to this matter later in the meeting.
PRASA Executive response
Acting GCEO Emeran replied to Mr Dangor’s question that the Kliptown-Lenasia corridor was listed as a priority by PRASA and will be traduced to the market in the following week. This is so that within 2023, PRASA will obtain a bid award and begin with rail recovery. Additionally, the Kliptown corridor to Vereeniging will likely be completed in a second phase as the Vereeniging section has been badly vandalised and requires further reconstruction – as well as the length of the corridor. The rail corridor will be tackled in two phases from Stretford through Kliptown to Johannesburg during the first phase. It will then be extended to Vereeniging.
The next round of corridors listed as priorities will include the Braamfontein corridor in Gauteng and the Daveyton corridor. The Naledi corridor is currently under construction. The Naledi corridor also includes a section between Pretoria and Johannesburg as well as a link into Leralla and there has been progress. PRASA is on target with the completion of the electrical rehabilitation of the Pretoria-Kaalfontein corridor. There will be some improvements by December 2022. There is a challenge in the operationalisation of the Pretoria-Kaalfontein corridor mainly impacted by Eskom infrastructure which contributed to the railway network and energised PRASA’s substations. Additionally, Eskom’s infrastructure has also been vandalised. The recovery programme for the Eskom infrastructure will experience a delay. PRASA met with the Eskom leadership to discuss how to resolve this and accelerate infrastructure recovery. The discussions are still ongoing but there is progress being made.
Other prioritised corridors included those in Cape Town and KwaZulu-Natal over and above what has been presented in the presentation.
In response to Mr Rayi, Mr Emeran noted his detailed request on the AGSA findings and written responses will be prepared to cover these.
He acknowledged that Mr Rayi was correct about the targets and the actual achievement. The target for the new EMU trains was 44 and the actual achievement was 33. In the presentation, there was a figure of 39 and it noted that 6 had to be pushed into the new financial year in terms of acceptance. This explained why the actual achievement figure was 33. The main reason for the variance was the impact of Covid-19 on the delayed supply chain of key components which contributed to the manufacture of trains being delayed. The October 2021 NUMSA strike had also impacted on the achievement of targets and the 33 instead of 44 EMU trains being rolled out.
The Committee was aware that the Gibela contract aimed at ensuring that PRASA would receive 600 train sets by 2029. Currently, there are an estimated 111 new train sets running across the country.
The National Station Improvement Plan (NSIP) target was 43 but achievement was seven. The challenge was a procurement strategy that saw some earmarked projects receiving non-awards and the procurement process restarted. Additionally, there was the February 2022 National Treasury advisory on not proceeding with procurement due to a court judgment and its legal interpretation which impacted the progress of these items.
Going forward, PRASA has currently placed 35 of 43 train stations under construction. The following week, a further 55 new train stations were in the procurement phase. This indicated “significant movement within the NSIP”.
On passenger numbers, Mr Emeran acknowledged that actual achievement in 2021/22 was far below the target be it Metro, Main Line Passenger Services (MLPS) and Autopax. On the topic of Metrorail, the recovery of the these corridors is being dealt with and there are limited services that have been rolled out on those corridors.
Mr Emeran said that PRASA had seen the “take-up” of the work-from-home situation stemming from COVID-19 regulations was still very much in effect in 2021/22. The number of passengers returning was not accelerated as PRASA had initially hoped. The passenger numbers were significantly lower than the targets set. When examining the trains operating during that period throughout the day there was significant spare capacity on those trains for passengers to occupy.
However, with the newly reopened corridors such as Pienaarspoort and Naledi, the trains are being filled with passengers very quickly. PRASA is under pressure to run higher frequencies on these newly launched corridors.
On safety, Mr Emeran replied that the actual achievement was lower than the target and this was a positive in the case of safety and security. The target was 748 and there were only 247 incidents involving safety. This was an improvement on the original target. This was also applicable to security as a lower achievement number indicated improvement.
On signalling, Gauteng had a target of 26 interlockings with 15 being completed while the Western Cape saw five out of 16 interlockings completed. As highlighted, there were challenges with contracts involving railway lines owned by Transnet. Train stations on those railway lines ensured alignment and coordination around these matters. Additionally, some of the targets were impacted by the inability in completing the Cape Town Central Line due to the occupation of the reserve.
It was correct that the depot fencing during 2021/22 had zero achievement. The depot walling programme started in March 2022 and is still ongoing. PRASA is hoping that before the end of the 2022/23 financial year, six depots will be completed across the country
PRASA had already spoken about refurbishment. There was movement from April 2022. However, the signing of the refurbishment rail contract only took place in June. The refurbishment project is underway as train coaches have been sent to suppliers in various regions for a general overhaul.
Mr Emeran acknowledged the request for an audit action plan for the AGSA findings. Ms Ndidinwangani Mpye will comment on matters relating to the AGSA. The issues raised in the presentation will be addressed as well as the historical matter involving the locomotives.
Mr Emeran replied that PRASA is presently dealing with the R3.5 billion irregular contract with Swifambo Rail Leasing – as declared by the courts. An update will be provided after discussions with the liquidator and the Original Equipment Manufacturer (OEM) to examine a special commercial agreement involving the locomotives. It was very critical for business to operate some of these new locomotives.
Mr Emeran agreed with Mr Rayi that there is a huge challenge in East London. Parallel to this there was the issue with the approval these Afro-4000 locomotives to operate on the PRASA railway network there. There was already Railway Safety Regulator (RSR) approval to allow for the operationalisation of Afro-4000 diesel locomotives on the 25 kV network in the Free State, Northern Cape and Eastern Cape. There was discussion on submissions being made to the Railway Safety Regulator (RSR) on examining utilising Afro-4000 diesel locomotives on the 3 kV rail network to ensure that the locomotive height is not problematic. The discussions are still ongoing around a possible solution for the Afro-4000 locomotive which are made up of diesel locomotives and hybrid locomotives which use both diesel and electricity.
Mr Emeran reminded the Committee of the locomotives’ liquidation process. Seven of the new locomotives costing R40 to R50 million rand per locomotive were auctioned. It was discovered that the locomotives were auctioned for a fraction of their price totalling an estimated R90 million.
Factoring in the East London situation, especially for long distances, there was a need for an excess of 60 locomotives. During 2021/22 there were attempts by the parties involved to reach a more sustainable and effective solution. He promised that an update on the East London matter among others will be included in a future PRASA report.
Mr Emeran addressed documentation management and said that PRASA will proceed with ICT recording keeping to ensure that everything will be stored in cloud storage as well as PRASA’s (2:23:35) that have been rolled out. The necessary training has been provided to ensure the maintenance and correct electronic capture of records. The management of historical information referencing PRASA’s challenges will coincide with the rollout of document digitalisation.
On East London operations, it is an unfortunate situation that involved locomotives and PRASA was still trying to address the matter. However, it was only due to locomotives. In addition to examining potential leasing options for the Afro-4000 locomotives, there were also discussions with Transnet to investigate locomotive availability to ensure that services can be quickly resumed in East London. He promised that the East London plan will be shared once PRASA has received more detailed information on locomotive availability.
On the encroachment affecting the Cape Town Central Line, Mr Emeran said that another item was the security aspect that impacted PRASA’s recovery programme for the Central Line. PRASA managed to recover Phase 1A and B which was from Langa to Pinelands as well as from Langa to Bellville via Sarepta towards Chris Hani into Khayelitsha as well as Kapteinsklip into Mitchell’s Plain. The relocation from Langa was urgently requested. There was also encroachment to be dealt with at Philippi and Khayelitsha where relocation was needed.
PRASA also had to deal with security. There have been signalling challenges due to “project hijacking” and security risk concerns. PRASA had experienced a three-month work delay which disrupted infrastructure recovery as well as the NSIP. A new security intervention has been implemented on rail corridors which included cooperation with the South African Police Service (SAPS) and its Anti-Gang Unit. A security solution had been deployed in November which has led to rail contractors returning back on site. Currently, there is the finalisation of the revised programme based on the delays PRASA has experienced on the Central Line. The contractors are “back on-site” due to the security solution on the ground which would include the involvement of small and medium enterprises (SMEs) on the corridor. This security solution would also see the employment of communities into the security process. This process looked promising and positive since its initiation.
Mr Emeran noted that Autopax had been addressed by Mr Ramatlakane
On the Cape Town-Bellville rail corridor, Mr Emeran replied that it was initially launched with the existing yellow-gray fleet of trains as there was a limited blue-gray fleet. One of the key programmes to be launched by PRASA is depot modernization. Along with the new train deployment, PRASA needed to ensure that train depots are fully modernised. However, the modernisation programme is eight years behind schedule leading to a significant delay in the rollout of depot modernisation. PRASA had conducted interim interventions at depots in CPT, Paarden Island, KZN and Springfield to ensure these depots gain the ability to maintain the limited blue-gray fleet.
On the new fleet of trains coming out of the factory in Nigel, a further number of these are being deployed to various regions. There were 12 trains originating in CPT and now there are 22 new trains. It is estimated by the end of the week there will 24 be new trains en route to CPT. PRASA is currently preoccupied with the testing and approvals required by RSR before deployment
PRASA is happy to report on the launching of the blue-gray fleet on the CPT-Bellville railway line via Goodwood. It will include the Monte Vista railway line and be an addition to the operation of trains on the Southern Suburbs railway line. The Southern Suburbs railway line will travel to Simonstown as well as the Cape Flats area and Athlone where the blue-gray trains pass.
Mr Emeran clarified that the 3 000 ghost workers came as a result of the initial phase manual verification undertaken. The 3 000 represented the number of people who did not appear during the initial verification period but since then the verification had increased. However, it was clear there are anomalies and there were concerns at the beginning of the verification process. There was a spike in resignations involving people receiving pay raises as uncovered by a Case Management Committee (CMC). It was discovered through this CMC process that the ghost worker matter required a more detailed investigation. The PRASA board has been trying to “get an independent party on board“ with the employment of a forensics company to deal with the matter. This is because the scale of what has been discovered within the Human Capital Management (HCM) space in terms of depth and sophistication warranted forensic investigation. This investigation will be conducted at corporate and regional levels to uncover what has transpired. The information gathered from the CMC process indicated that many workers were removed from the payroll system. It was estimated that in the 10 months since the beginning of the process, there has been a reduction of an approved R20 million per month over the 10 months. The total amounted to R200 million. PRASA will report to the Committee following the conclusion of the forensic investigation.
On the capital programme under-expenditure, Mr Emeran stated that one of the challenges was the capacity to execute the capital programme. One of the key finalisations is currently the appointment of an Engineering, Procurement and Construction Management (EPCM) provider. There is also the incorporation of various engineering skills into PRASA which is bringing management skills into PRASA in engineering and contract procurement. He expressed the wish that organisational capacity will ensure the execution of the capital programme
One of the areas being dealt with by PRASA planning, design and implementation capacity will be available through the acquisition of skills. PRASA will also examine skills transfer and internal capacity to ensure that in the future, skills will be internalised at the right level.
Another key aspect around the slow execution of the capital programme was the SCM challenges and the bottleneck of projects sitting in the SCM space. More recently the SCM policy had to be reviewed and included PRASA operating procedures becoming more “agile” in gaining projects through the SCM process. This was conducted in compliance with the relevant policy and legislation. An example was the previously referenced depot modernisation programme which is behind schedule. PRASA will be cooperating with the Development Bank of Southern Africa (DBSA) in receiving financial capacity to assist with the procurement process. DBSA will also assist with the evaluation of the adjudication process on the various key depots already in the evaluation phase. This is to ensure the continuation of the implementation of the depot programme for the Milnerton depot currently undergoing Phase 3. Benrose in Gauteng is ready for evaluation as well as Braamfontein. The other two are turnkey solutions. PRASA is looking to roll out with urgency due to “lost time”.
On the PRASA turnaround strategy, Mr Emeran stated there were two aspects to the strategy. The first aspect was based was on the audit action plan in terms of recovery which Mr Ramatlakane will comment. Mr Ramatlakane will comment on what has been accomplished on the appointment of an audit task team as well as the audit action plan. The second aspect of the turnaround strategy was the strategy performance plan and performance objectives. AGSA found that various PRASA turnaround strategy documents. This highlighted the need to consolidate the PRASA turnaround strategy into a clear and concise single document. The strategy exists and it is now about its implementation that is of primary importance.
Board Audit and Risk Committee response
Ms Thinavhuyo Mpye, PRASA Board Member and Audit and Risk Committee (ARC) Chairperson, stated that she will articulate PRASA’s progress on the Audit Action Plan and give clarity on the issues raised by AGSA. When the PRASA Board began in October 2020, a lot of material irregularities – about six – were referenced by AGSA. PRASA now has only three remaining material irregularities that need to be dealt with. This was a major achievement of the 2021/22 financial year.
Ms Mpye referred to Mr Emeran’s statement on the various plans needing to be consolidated into one comprehensive turnaround strategy plan as raised by AGSA. The plan had recently been compiled and it would be presented to the Audit and Risk Committee (ARC) and then to the PRASA Board. PRASA will then submit the turnaround strategy plan to AGSA.
AGSA also raised capacity as one individual within the PRASA financial department was tasked with compiling the financial statements. Given the “magnitude” of PRASA, this was not enough and the PRASA suffered from limited capacity inside its financial department. Now that the problem had been highlighted, PRASA undertook an extensive process of capacitating its financial department. Ms Mpye was happy to report that PRASA’s financial department has been continually capacitating to deal with its shortcomings.
The internal audit was incapacitated due to an expired contract and a new contract has been awarded for a three-year period. This greatly assists PRASA’s internal audit department as AGSA had raised the lack of review of financial statements before being submitted to the external auditors. The capacitation will assist in addressing that particular concern. SizweNtsalubaGobodo (SNG) had been appointed to deal with this.
Ms Mpye reported there have been challenges with assets. The existence of assets was always an issue because of vandalisation. There had not been an “assets count” in ten years. As a result, PRASA assets have not been verified. During the previous year, PRASA embarked on an exercise to count all assets for their verification. The process was extensive. During the 2021/22 financial year, PRASA was still embarking on asset verification. AGSA was very pleased with the asset verification. However, one concern raised by AGSA in the audit was the valuation and impairment of assets that particularly affected the depreciation of assets. She was happy to announced that PRASA had subsequently finalised a contract with an entity that is going to assist PRASA with the evaluation of the assets to determine the residual values and the “useful life” of the assets.
AGSA raised a concern about the Gibela contract where PRASA was aware that it had an Master Service Agreement (MSA) but it was not properly capacitated to deal with that contract in terms of all the aspects such as the indexation and rollout of contract penalties that had to be accounted for. PRASA embarked on the creation of a team to deal with this particular matter. This is to ensure that the contract is properly accounted and attends to this AGSA concern.
The PRASA Audit and Risk Committee recommended that the performance contracts of the executive needed to be organised in a way that addresses audit outcomes of the various departments and the executives leading those departments. This is because the AGSA findings “cut across” the various departments within PRASA. Therefore, the performance contract of the executive should be attached to the audit finding. This is done to ensure that the findings are cleared. The responsibility for that matter has been entrusted to the Office of the GCEO.
AGSA had reported that there was an issue with Work in Progress as it needed R6.3 billion capital as there was a lot of WIP not capitalised. She was informed by PRASA management that the process had been attended to. Of the R6.3 billion reported by AGSA, R5 billion of that was dealt with. The remaining amount was being finalised to ensure that it has been properly capitalised.
Ms Mpye said AGSA took note of and welcomed the improvement in security based on PRASA’s effort to safeguard its assets. However, PRASA was still not in a position to store its newly-acquired trains. Of the 111 trains produced, only 40 trains can be used as a result of cancellations and delays in depot modernisation. She was happy to report that PRASA had embarked on an Engineering Procurement Contract Management (EPCM) function. The EPCM was going to assist in ensuring the acceleration of depot modernisation. PRASA is currently finalising a Memorandum of Understanding to deal with depot modernisation.
PRASA has formed a task team to deal with the audit findings in conjunction with the PRASA turnaround strategy. The task team has been set in place and has created an Audit Action Plan and it will involve representatives from AGSA, internal audit and PRASA management. PRASA is aiming to move from a disclaimer to a qualified audit opinion in 2022/23. The action plan will ensure that in the year thereafter PRASA will move from a qualified to an unqualified audit opinion.
Ms Mpye reported that the AGSA is pleased with PRASA’s progress made so far considering its dealing with longstanding challenges of the past. The irregular expenditure (IE) needed to be regularisation and R11.6 billion of the R28 billion IE had been submitted to National Treasury for condonation. PRASA went through a "loss control function" process to determine if value for money was received.
On the general overhaul (GO) contracts which were the majority of the R11.6 billion, there was an SIU investigation to determine if there was any evidence of fraud. The investigation stated that there was no loss suffered in the GO contracts that were rendered irregular. The information had been submitted to the National Treasury for condonation. The ARC and the Board approved submission for final approval by National Treasury.
Currently, a further R3.4 billion IE is undergoing a loss control function determination test to submit to the ARC and PRASA Board for approval to go to National Treasury for condonation. ARC had made recommendations to the PRASA Board which will approve its submission to the National Treasury for condonation. The Board is hard at work to ensure PRASA regularises the IE items which were listed for the longest time in the irregular expenditure registry. At present, PRASA is dealing with a balance of R5.8 billion which still needs to go through that process. A written update on the condonation process will be provided.
Mr Ngwako Makaepea, DOT Deputy Director General: Rail Transport, clarified that DOT must explain how and why there is no support for PRASA’s business rescue plan by the Department.
As Mr Ramatlakane indicated earlier, there was a process where the DOT cooperated with PRASA on a business turnaround plan. The cooperation was in terms of how to proceed forward with Autopax in recapitalising it. The shareholder of Autopax would then become PRASA. DOT had submitted its request to National Treasury and it is still engaging with Treasury to receive a favorable response – considering that where we are, Autopax certainly needs capacity and that particular mandate is not really subsidised together with Rail Transport which then becomes its primary mandate.
On the Central Line in the Western Cape, Mr Makaepea replied that DOT is cooperating with all spheres of government and PRASA. DOT is managing that cooperation process through an implementation protocol submitted by the parties involved. One of the key challenges is between the City of Cape Town and the Department of Human Settlements over the responsibility for payment for bulk services. Land needed for the relocation has not been finalised. The PRASA Board had indicated that the relocation process will consequently be extended. In line with SCOPA’s recommendation, DOT will engage with stakeholders to find a solution.
Discussion on GCEO position
[Mr Rayi asked about irregular claims linked to PRASA insurance office but he lost connection].
The Chairperson commented that the GCEO situation was an important part of strategic leadership for the PRASA Board to confront head-on. The GCEO issue must be concluded due to the concerns voiced by the Auditor-General on leadership stability. There was arbitration in terms of the contract and that there was an award. DOT had placed the arbitration award under review.
The Chairperson said that Adv Sethene did not indicate if the review was still underway or if it was finalised. If it was finalised, it is important to find a way to finally bury the matter.
The Chairperson commented if the Board was going to rely on a legal opinion at the expense of the arbitration award, it it becomes a tricky question because dual citizenship was found by the arbitrator not to be a challenge which led to the arbitration award being in favour of the former GCEO. Now the team went back to other grounds to terminate. He feared that the labour dispute between Mr Matthews and the PRASA Board will lead to continuous litigation which will contintue to affect the leadership of the institution. Is the review process finalised or still underway?
Adv Sethene replied that the PRASA Chairperson had noted that the review process was still pending at the Labour Court. This process was not finalised
The Chairperson commented that while the process is ongoing, there was a legal opinion from the senior counsel which stated that there is another legal ground that can be explored. This would create further entry points of litigation which leads to a tedious protracted process. It must find a way to conclude this process without being legalistic.
Adv Sethene responded that he would not debate further.
The Chairperson appealed to the Board Chairperson to resolve the GCEO matter. Its was important to acknowledge that litigation will continue to impact the performance of PRASA. The probation process should have preceded the arbitration.
Adv Sethene interjected saying that he doubted the Chairperson understood what he and the PRASA Board articulated.
The Chairperson referenced the legal opinion which stated that PRASA was not prevented from embarking on another process. This process involved the two probation reports that were used to terminate Mr Matthews’ contract. He asked Adv Sethene if that was what he articulated.
Adv Sethene replied that the Chairperson completely misunderstood him. He suggested that in the interest of time a detailed report be sent to Committee to avoid further confusion. This could be shared with the Committee along with the other requested information within seven days.
The Chairperson confirmed that a PRASA report should be forwarded to the Committee within seven days. He also requested a detailed report on the review process and the legal grounds.
Mr Ramatlakane stated that PRASA will comply with the request from the Committee for a comprehensive report within seven days. Issues raised by Mr Rayi will be included in a memo from the PRASA Board to the Chairperson. If any further information was required, PRASA will gladly ensure that the information is available. He promised that PRASA will provide information as much as possible to the Committee.
The Chairperson thanked Mr Ramatlakane and appreciated the effort shown by him in leading his team before the Committee. He was pleased with the achievements of PRASA and the acknowledgment of its performance challenges reported during 2021/22. He took comfort in PRASA’s reflective attitude towards the status of its various programmes in the PRASA Annual Report 2021/22. Based on the targets set by PRASA from the previous financial year, there continues to be work in progress.
The Chairperson stated that PRASA must understand that based on performance expectations, the Committee must ensure the efficiency of state entities such as PRASA, that there is adequate spending and stability within the PRASA Board and at the executive level.
The Chairperson called on the Board Chairperson to display leadership to ensure that the matter of the GCEO is laid to rest and relying on legal opnions must be within the context of urgency and bring the matter to finality. State institutions must take management stability more seriously as it is critical. Since SA is a constitutional democracy, any administrative decisions must be rational, transparent and comply with the rule of law. If the executive makes a decision against rationality in violation of the Constitution, in terms of section 165,the courts will not hesitate to intervene and set the decision aside.
Mmoiemang, Mr MK
Apleni, Mr T
Dangor, Mr M
Mathevula, Ms B
Moshodi, Ms ML
Rayi, Mr M
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