No annual report means no way to tell how bad things are at Prasa

The Passenger Rail Agency of South Africa (Prasa) has not published its annual financial statements (AFS) for the year to end-March 2021, and it is therefore impossible to attempt to estimate its financial status.

However, on Monday (December 20), Transport Minister Fikile Mbalula issued a press release stating that “it is common cause that we inherited a broken organisation in dire straits” and that “when we came into office in 2019, we set out a process to address the dire state of the entity”.

Mbalula is concerned that “there is a narrative that seeks to create an impression that there is a crisis at Prasa” and that there is a need to “set the record straight”.

Setting the record straight

Prasa, formally launched in March 2009, was created by the government “to advance its agenda for the transformation of the public transport system into a vibrant, efficient one”.

At its helm were chair Sfiso Buthelezi and CEO Lucky Montana.

Going back to when the ANC government took over, the South African Railways was in existence.

The National Land Transport Transition Act was introduced in 2000, and replaced by the National Land Transport Act 5 of 2009 “to provide further the process of transformation and restructuring the national land transport system initiated by the National Land Transport Transition Act”. (Source: 2008/2009 AFS).

This paved the way for the consolidation of the passenger rail entities.

ALSO READ: It would take at least six years to rebuild Prasa railway stations, say experts

From 2009 to 2014

Between 2009 and 2014 Prasa received government subsidies amounting to R20.1 billion and government capital subsidies amounting to R7.1 billion. In total, R27.2 billion.

In 2014 Montana said Prasa would “roll-out programmes that will deliver a modern train system”.

For its rolling stock fleet renewal programme, Prasa had in 2013 signed a manufacture and supply agreement (MSA) and a technical support and spares supply agreement (TSSSA) with the Gibela Rail Transport Consortium – a black economic empowerment (BEE) rail transport consortium that included French rail company Alstom.

The contract value was R51 billion (including Vat, excluding forex movement and inflation) to supply 600 “New Trains” and 3 600 vehicles over 10 years. The TSSA was estimated to have a duration of 18 years.

But we now know what transpired with that, and with the contracts that followed.

Among the promises made in Prasa’s 2014 annual report:

“More than 500 South African technicians, engineers and other professionals will be trained in the skills and competencies required to build and deliver modern trains of the standard of the X’Trapolis Mega.

“Gibela will build a R1 billion manufacturing site in Dunnottar, 10km north of the town of Nigel, to produce the 580 trains which will be manufactured in South Africa.

“The 600 000m² manufacturing facility is also designed to house an engineering centre and training facility.”

ALSO READ: ‘It won’t take 30 years to fix Prasa,’ says Mbalula

From 2015 to 2020

Changes in top management

Popo Molefe was appointed chair in December 2014, and reigned until 2017. Khanyisile Kweyama was chair from 2017 to 2019, and Leonard Ramatlakane from 2020.

Nkosinathi Khena was appointed acting Group CEO in 2015, Collins Letsoalo was acting Group CEO in 2016, Sibusiso Sithole was Group CEO in 2017 and 2018, Dr Nkosinathi Sishi was appointed acting Group CEO in 2019, and Thandeka Mabija acting Group CEO in 2020.

Government subsidies

Between 2015 and 2020 Prasa received government subsidies amounting to R34.8 billion and government capital subsidies amounting to R20.9 billion. In total, R55.7 billion.

The total government and capital subsidies amounted to R82.8 billion over 12 years.

Fruitless and wasteful expenditure and irregular expenditure totals R32.2 billion

Fruitless and wasteful expenditure for the period 2015 to 2020 amounted to R3.6 billion, and the final cumulative amount of irregular expenditure as at 2020 was R28.6 billion.

Uncertainty on the ability of Prasa to continue as a going concern

• In the 2018 annual report notice was given regarding “uncertainty on the ability of Prasa to continue as a going concern”.
• However, in 2019 the board was of the view that: “Despite the loss of R1.7 billion and R1.5 billion reported by economic and controlling entities respectively in the current financial year, there is no uncertainty regarding Prasa’s ability to continue as a going concern. Evidence of this is positive indicators of solvency and liquidity.” The Auditor-General (AG) issued a disclaimer of opinion for a number of reasons, including the lack of audit evidence to properly account for property, plant and equipment.
• In 2020 the board was again of the view that the financial statements should be prepared on a going-concern basis. The AG again issued a disclaimer of opinion on the basis that he “was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated and separate financial statements”.

Investigations and litigation

Various contracts entered into by Prasa are under litigation, and irregularities and alleged corruption were testified to at the Zondo Commission of Inquiry into Allegations of State Capture.

The Special Investigating Unit is also investigating a number of matters.

ALSO READ: Prasa project ‘on world-class track’, says CEO

Is there cause for optimism?

In a statement issued on Monday, Mbalula acclaims: “I have comfort that the Board has its eye on the ball and is making headway in addressing chronic challenges that have undermined Prasa’s ability to deliver on its mandate in the past”

“Our efforts to turn around Prasa will not take us 30 years, but will deliver tangible results in the coming year.

“Most of the corridors that were shut down will be back to full operation in the new year, including the Central line in Cape Town and the Mabopane line in Tshwane.”

Time will tell.

But first Prasa should publish its 2021 annual report.

-Moneyweb