Prasa board bites back

The board of the Passenger Rail Agency of South Africa (Prasa) that was summarily dissolved by the minister of transport earlier this month, has filed a heads of argument detailing why the action should be deemed arbitrary and irrational and against the best interests of the agency.

It is seeking to have the High Court grant an interim order suspending the removal of the directors, reinstating them and interdicting new board members from taking office.

Transport Minister Dipuo Peters dissolved the Prasa board (led by former chair Popo Molefe) on March 8, following the ongoing spat between the board and temporary CEO Collins Letsoalo, over his claims to a grossly inflated salary while he was seconded to the agency from the Department of Transport.

Peters says the board was removed for “frustrating the actions of Mr Letsoalo” in unison and ultimately removing him.

In its heads of argument, the board claims it had lined up a number of potential candidates to replace Lucky Montana (previous group CEO), and the secondment of Letsoalo was only accepted by them reluctantly, at the suggestion and insistence of the minister.

This decision turned out to be a disastrous one for all concerned. In order to have his massive salary increase approved (from R1.3m to over R5m) – and despite a letter from the minister stating he would retain the same rank and salary as he had at the department of transport – Letsoalo fired the acting group executive for Human Capital, Bhekani Khumalo, who had declined his request, and replaced him with a lady that approved his increase.

“In short, Mr Letsoalo demonstrated a reckless disregard for the board, and failed to adhere to even the most basic tenets of good corporate governance.” This led to them terminating his secondment in February of this year.

But far from being the culprits in the wrongdoing that has plagued Prasa, the board believes it has been dissolved to frustrate the investigations it undertook shortly after its appointment in August 2014, when it uncovered a number of irregularities and misconduct.

The board claims the minister made “vague and unsubstantiated” allegations of misconduct in her affidavit as well as alluding to misconduct and dishonesty that have been occurring for months and years. “It appears, with respect, that these additional reasons have been deployed after the fact, in an attempt by the minister to shore up the basis for her removal decision,” the board wrote in the heads of argument.

Prior to being shown the door, the board claims to have instituted a number of investigations into fruitless and wasteful expenditure at the agency, which had led to legal actions to have money recovered and certain contracts nullified.

This was substantiated by the Auditor General, who found in July 2015 that there was approximately R550 million in irregular expenditure during the 2014/15 financial year and approximately R14 billion for the 2015/16 financial year. In August 2015, the Public Protector published a series of damning indictments of affairs at the agency, and instructed National Treasury to investigate every contract above R10 million.

In response, the board appointed Werksmans Attorneys to investigate the irregular expenditure identified by the AG. It found that Prasa’s wasteful, irregular, fruitless or unlawful expenditure over the period ranged from R13 billion – R24 billion.

With this information in hand, the board under Popo Molefe instituted two applications to review and set aside unlawful contracts amounting to some R7 billion. (These cases will be heard in the High Court in May and June this year.)

In addition, the board has also instituted proceedings to recoup monies lost as a result of corruption or other unlawful behaviour and has submitted 39 reports of potential corrupt practices pertaining to over 60 entities.

The board argues that given the complexity of the investigations, it is crucial that it remains in place to ensure these processes are successfully pursued to completion, something that would be in the best interests of Prasa.

The document asks rather pointedly, if the minister believed the board itself was engaged in “wholesale misconduct”, why didn’t she remove the members earlier and institute a disciplinary hearing against them and have no problems or delay in formulating the reasons for their dismissal.

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