South Africa

GroundUp: Treasury fails to act on grand-scale corruption at Prasa

By GroundUp 29 November 2017

Deputy Finance Minister Sfiso Buthelezi and former CEO Lucky Montana are implicated over and over again. By Steve Kretzmann and GROUNDUP Staff.

First published by GroundUp

For almost a year, National Treasury has kept the lid on almost 200 investigations into Passenger Rail Agency of South Africa (Prasa) contracts which show that up to R2.5-billion was siphoned off in contracts which should never have been signed.

The investigations, into contracts worth R10-million or more, were ordered by former Public Protector Thuli Madonsela following her 2015 report on mismanagement at Prasa. The Treasury parcelled them out to 13 different auditing and legal firms.

The documents, leaked to GroundUp by the UniteBehind Coalition, paint a picture of incompetence, corruption and mismanagement on a grand scale.

There are more red flags in the 1,000-odd pages of reports than at a Moscow May Day parade.

 

Read all the forensic reports here:

The reports detail in page after page contraventions of Prasa’s own Supply Management Policy and the Public Finance Management Act, irregularities in procurement, improper constitution of Bid Evaluation Committees, irregular expenditure and absence of proper documentation from Prasa. The names of Lucky Montana, then chief executive, chief procurement officer Dr Joseph Phungula, and head of security Kabelo Mantsane crop up again and again.

Also mentioned is Deputy Minister of Finance Sfiso Buthelezi, then chair of the board. Frequently the board is found to have been derelict in its duty. GroundUp emailed Buthelezi for comment but received a response that he is out of the country.

In one in five cases (39 out of 193) the investigators recommend that criminal proceedings be launched.

The auditors list companies owned by a single person benefiting from tens of millions of rand, forged signatures, rigged tender awards, bid committee meetings where all the members somehow gave the bidders identical scores, contracts awarded without quotes from the companies, and contracts awarded to companies apparently created just to get the contract.

At least one company was awarded a contract even though its managers had not attended the compulsory briefing session.

Security companies were paid millions to guard stations and vital equipment, and safeguard commuters, yet continually extended contracts are riddled with irregularities. One security company was not even registered with the Private Security Industry Regulatory Authority.

In many cases the auditors note that because of the time lapse between the contract and their investigation they have not been able to check whether the work was done properly or at all.

Of the investigations into 193 contracts worth over R10-million that Prasa entered into between 2012 and 2016, only eight got the all clear from the auditors. In the R9.1-billion paid to contractors, the investigators found irregular expenditure of up to R2.5-billion, if money in all the contracts labelled irregular is included.

Lindikhaya Zide, acting group CEO, who was company secretary during the period, did not respond to an invitation from GroundUp to comment. The Treasury did not respond to questions about why the reports had not been released.

 

GroundUp unsuccessfully attempted to contact Montana on Tuesday before publication. Following publication, Montana criticised the article on Twitter. He described the forensic reports as “poor”. He wrote: “I assume [Treasury] has authorized GroundUp to publish draft reports that Treasury itself has not finalised.”

Among the investigators’ findings are:

  • Montana was responsible for the irregular and unconstitutional appointment of Lufthansa Consulting in a R15-million contract to turn around the Shosholoza Meyl operation. Like many others, this contract was signed as a “confinement” – a procedure which allows Prasa to deviate from competitive bidding rules under certain circumstances such as emergencies. The auditors found no justification for this and recommended the matter be reported to the police for criminal investigation.
  • Construction company Superway was awarded a R105-million contract although the budget for this had not been approved, and without submitting the required Construction Industry Development Board grading certificates, a factor which disqualified two other bidders. Scoring sheets at the bid evaluation committee level were incomplete and the recommendation was not signed.
  • An R11-million construction contract to Steverob Investments was also awarded without a Construction Industry Development Board certificate and despite a competitor getting a better score.
  • A R22.6-million contract to clear vegetation in KwaZulu-Natal was awarded to a company called SN Projects, which described itself as “black woman owned” but had only one shareholder, a Mr Phakamile Fesi. The company was based in Klerksdorp. In this glaring irregularity, Fesi received R1.9-million from Prasa for one-and-a-half months of work, charged at R6.60 per square metre of vegetation control. Comparative schedules obtained by Bowmans from Prasa Kwazulu-Natal offices show the market rate was between R0.15 and R0.22 per square metre. This contract was signed as a “confinement” process by Montana and his network, until it was stopped in December 2015.

Montana and Phungula were involved in all the deviations investigated by Deloitte. The firm said: “In our view, both Mr Montana and Dr Phungula’s actions (specifically to appoint Lufthansa) constituted a breach of their duty to act diligently and in the best interests of Prasa. In our view, both Mr Montana and Dr Phungula acted negligently.”

All in all, the reports reveal the cavalier mismanagement of public funds supposed to be spent on ensuring that the two-million South Africans who daily rely on Prasa are able to commute safely and on time.

It is clear why our train services are in such dire straits. In fact, it’s a miracle they run at all. DM

Photo: Metrorail’s service has deteriorated over the past few years. Leaked reports commissioned by Treasury show why. Archive photo: Mandla Mnyakama

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