In a media briefing at Prasa, Mbalula said the affairs of Prasa had not improved but have regressed.
JOHANNESBURG – Transport minister Fikile Mbalula on Monday flagged worse audit outcomes in the last two financial years to dissolve the interim board of the Passenger Rail Agency of South Africa (Prasa) and put the troubled entity under administration for 12 months.
In a media briefing at Prasa, Mbalula said the affairs of Prasa had not improved but have regressed instead since the appointment of the interim board led by businesswoman Khanyisile Kweyama as chairperson.
Mbalula said this period was also characterized by dissonance at the highest levels of the organization, characterized by tensions between the board and management.
“I have therefore decided to dissolve the interim board and place Prasa under administration with immediate effect,” Mbalula said.
“The administrator will run the affairs of Prasa as a de facto board of control as envisaged in the Prasa founding law and as an accounting authority in terms of the Public Finance Management Act.”
Mbalula said this intervention will continue for 12 months, after which a permanent board will be appointed to run the affairs of Prasa.
He said the process to recruit a permanent board would be initiated at least 6 months into the tenure of the administrator to ensure a seamless transition at the end of the intervention.
Mbalula also withdrew the secondment of Prasa’s acting group chief executive, Dr Nkosinathi Sishi, with immediate effect.
He said the role of the Group CEO will be integrated into the role of the Administrator as an integral part of the intervention.
Mbalula said merely replacing an interim board with a permanent board would not address the deep-rooted fault lines at Prasa.
He said the majority of the irregular, fruitless and wasteful expenditure disclosed in the financial statements was caused by non-compliance with supply chain management prescripts, as well as payments made, where the value derived could not be justified.
In the decade of its existence, various Chapter 9 institutions have flagged corruption at Prasa as it agency has experienced many challenges that became pronounced in the 2015/16 financial year.
The Auditor-General flagged serious governance breaches, particularly in the supply chain management. Irregular expenditure stood at R4.1 billion alongside fruitless and wasteful expenditure of R541 million.
The Public Protector also released her report on Prasa titled “Derailed”, which highlighted serious lapses of corporate governance, resulting in National Treasury instituting a forensic investigation on some of the issues flagged by the Public Protector.
The Auditor General (AGSA) in its Management report for the 2018/19 financial year raised critical issues on governance, which included a finding that PRASA did not take effective and appropriate steps to prevent irregular and fruitless and wasteful expenditure, as required by law.
In 2017/18, Prasa had four boards in a single financial year and lost 1 246 employees over this period, 27 percent due to natural attrition and 18 percent resigned.
Irregular expenditure stood at R23.4 billion, an increase from R19.6 billion the previous year.
Similarly, fruitless and wasteful expenditure escalated to R1 billion, up from R988 million the previous year.
Mbalula said it was precisely these fault lines that prompted his department to establish the Prasa War Room, which has helped to gain a better appreciation of the magnitude of challenges facing this entity.
“The urgency of addressing Prasa’s turn-around cannot be overemphasized, and tangible results that people can see must be realized in the shortest possible time,” Mbalula said.
“I am pleased to announce the appointment of Mr Bongisizwe Mpondo as the newly-appointed administrator of the Passenger Rail Agency of South Africa, with immediate effect.”
Mpondo is an entrepreneur who has an extensive record in corporate governance and working with public institutions to improve operational efficiencies.
He has served on the Boards of many public entities which include the East London Industrial Development Zone (IDZ), South African Express, South African Airways, and Cross-Border Road Transport Agency.
“He has published many papers and articles covering topics as diverse as freight logistics, aviation, cost of increased demand for transportation, land use and sustainable development,” Mbalula said..
“He has led a diverse range of projects that include project management for the Department of Transport for the 2010 World Cup, serving as a transaction advisor for the Housing Development Agency and many others.”