Gravy trains: Prasa’s ‘Dr’ Daniel Mtimkulu helped sister’s company pocket R57m for ‘non-existent’ work

By Pieter-Louis Myburgh 20 October 2019
PRETORIA, SOUTH AFRICA – JULY 6: Dr Daniel Mthimkhulu (Prasa head engineer), Mosenngwa Mofi (CEO of Prasa Rail ) and Lucky Montana (Prasa Group CEO) during a media briefing on July 6, 2015 in Pretoria, South Africa. It is alleged that Daniel Mtimkulu is not registered with the Engineering Council of South Africa (ECSA) and it is a requirement that all engineers who work with the state be registered with the council. (Photo by Gallo Images / Beeld / Deaan Vivier)

The cash-strapped Passenger Rail Agency of South Africa (Prasa) paid more than R57-million to a company owned by a sister of ‘Dr’ Daniel Mtimkulu, the SOE’s disgraced former chief engineer. Scorpio’s latest investigation shows Mtimkulu himself orchestrated the deal. Most alarmingly, well-placed sources claim that the company didn’t do any work in exchange for the millions it received from Prasa.

In late November 2013, “Dr” Daniel Mtimkulu, Prasa’s former executive manager for engineering services, penned a memorandum for the attention of his boss, the then group CEO Lucky Montana.

Under the subject line “Request to Augment the Capacity within Infrastructure”, the document sought to get the go-ahead for adding new contractors to Prasa’s procurement database. Mtimkulu argued that Prasa was “thin on capacity” and needed new external service providers to help the SOE repair and maintain its rolling stock and rail infrastructure.

The memorandum included a list of 27 companies that Mtimkulu wanted to bring into the Prasa fold. About two weeks after the submission, Montana signed off on the document. Thanks to Montana’s formal blessing, these companies could now secure fat contracts from Prasa for infrastructure projects. And they wouldn’t even have to submit tenders. The memorandum stipulated that the new contractors could be appointed through so-called “confinements”, which would allow them to side-step the standard competitive bidding process required for any large contract.

One of the companies on Mtimkulu’s list was called Y-Rail Trans Trading In All Aspects. (We’ll just refer to it as Y-Rail.)

The company’s only director is a woman by the name of Kulekwa Roseline Msutu.

Y-Rail was seemingly established specifically to tap into Prasa’s contracts. According to company records, Y-Rail was only registered at the Companies and Intellectual Property Commission (CIPC) in January 2014, a month after Montana had approved Mtimkulu’s request to add the new contractors.

A source who had been privy to some of Y-Rail’s dealings told Scorpio that Mtimkulu had done more than just add his sister’s company to the list of new Prasa contractors. He allegedly also helped her get it registered at the CIPC.

Y-Rail was Daniel’s company, he controlled it. His sister was just a front,” claimed the source.

On the surface, Y-Rail’s registration details don’t offer any hints that the entity is closely linked to Mtimkulu.

But Scorpio established that Mtimkulu and Msutu in 2012 founded another company called Rail-X. They were Rail-X’s only directors. It is not yet clear whether or not this entity also benefited from Prasa contracts.

Further research revealed that Msutu’s maiden name is in fact Mtimkulu. What’s more, Daniel and Kulekwa Mtimkulu have on several occasions listed the same address in Sebokeng, south of Johannesburg, as their home address. Scorpio also tracked down two sources who are familiar with the Mtimkulu family. They confirmed that Kulekwa was Mtimkulu’s biological sister and that the address in Sebokeng was their parents’ home.

A report on Prasa’s affairs, compiled by law firm Werksmans, confirmed that Mtimkulu was instrumental in ensuring that his sister’s company was registered as a supplier to Prasa.

Werksmans and several other law firms were appointed by Prasa to probe the SOE’s scandal-ridden procurement environment on the back of a 2015 recommendation by the then public protector, Thuli Madonsela. (Some of the documentation used for this investigation was provided to Scorpio by GroundUp, the non-profit responsible for the #PrasaLeaks series.)

Staff members at Prasa Rail SCM [supply chain management] and Prasa engineering services confirmed that the identification and selection of suppliers to participate in [the] Infrastructure 2013 program was solely undertaken by the end user, D Mtimkulu (then Executive Manager Engineering Services), without the involvement of SCM,” reads the report.

Mtimkulu seemingly didn’t leave behind any paper trail in regards to how or why he selected his preferred contractors.

Prasa Rail SCM and Engineering Services have been unable to provide the investigation team with any documentation explaining the identification and selection process,” Werksmans found.

Scorpio last week attempted to obtain Mtimkulu’s take on why he selected Y-Rail to work with Prasa.

The SOE’s axed former head engineer claimed that he couldn’t recall the company or whether his sister had been involved.

I have no clue,” said Mtimkulu. He vowed to try and find more details.

Let’s talk in an hour’s time. I should be able to talk better [about Y-Rail],” said Mtimkulu. He also promised to send this reporter another cellphone number with a better signal.

But after that phone call, Mtimkulu seemingly went to ground. He ignored Scorpio’s subsequent messages and phone calls.

Msutu proved even more difficult to get hold of. All of her listed numbers either didn’t work or simply kept ringing. She did not respond to messages requesting her comment.

R57-million Prasa bonanza

In October 2014, Y-Rail received its first payment from Prasa. According to figures Prasa furnished us last week, over the course of the next 18 months the company would earn R57.3-million in revenues from the SOE.

These payments stemmed from a R52-million contract Y-Rail obtained in 2014 for “Ad-Hoc Repair Work, Call Out and Technical Support.” It is not clear whether this contract’s value ended up being exceeded or whether Y-Rail also earned revenues from Prasa through other projects.

Y-Rail’s contract commenced in June 2014, although it was only signed by Montana and a representative of Msutu’s company in November 2014. It is interesting to note that Msutu’s signature does not appear on the document, despite the fact that she is the company’s sole director.

Out of 32 companies that clinched contracts from Prasa for ad hoc repair work that year, the one awarded to Y-Rail was the most valuable, according to a list of contractors obtained by Scorpio.

This was quite an impressive feat for Msutu’s company, especially in light of the fact that Y-Rail had no track record in the rail industry, had been in existence for less than a year and didn’t even have a website.

The company’s registered address placed it at a residential estate in Midrand.

When it comes to the value of the contract awarded to Y-Rail, all fingers again point to Mtimkulu.

According to the Werksmans report, “Individuals at Prasa Rail SCM and Prasa Engineering Services confirmed that the determination of contract values and period awarded to each supplier was solely undertaken by D Mtimkulu.”

But some of the blame regarding the irregularities around the confinement contracts awarded to Y-Rail and the other entities Mtimkulu brought to Prasa can also be laid at Montana’s feet.

Werksmans noted that Montana gave the go-ahead for the programme without seeking the approval of the Prasa board and in doing so “exceeded his delegation of authority, which is limited to transactions not exceeding R100-million”.

Mtimkulu’s proposed infrastructure maintenance programme was supposed to run for a period of two years at a capped cost of R136-million. But Werksmans determined that the collective value of the contracts awarded to Y-Rail and the other companies exceeded a jaw-dropping R575-million. Scorpio has identified red flags with at least two of the other companies appointed alongside Y-Rail and will deal with these in upcoming reports.

Montana told Scorpio’s Sikonathi Mantshantsha that he had no idea Y-Rail belonged to Mtimkulu’s sister.

I don’t know who that company is, I don’t know who the people involved are,” said Montana.

Prasa policy required the group CEO to sign off on contracts that weren’t awarded through a competitive bidding process, but he played no role in doing a due diligence on such entities, said Montana.

All the work [evaluating the contractors] was done by the divisional CEO and their supply chain management, so the people involved there must answer if they brought in their own family,” argued Montana.

The people who went and brought in their own uncles and relatives must be held accountable for it.”

Gravy train or value for money?

When it comes to Y-Rail specifically, the question that needs to be asked is whether it actually did the work in exchange for the R57-million it received from Prasa.

The SOE last week provided Scorpio with a list of the projects that Y-Rail had billed it for. The company apparently “worked on [the] supply and installation of signal remote control equipment, testing and commission of points machines [and the] supply of signal power equipment, spares and [the] rehabilitation of uninterrupted power supplies,” among other services.

It also worked on Prasa’s so-called perway infrastructure, which includes bridges and platforms.

The work was carried out in Gauteng, KwaZulu-Natal and [the] Western Cape,” said Prasa.

It insisted that all of Y-Rail’s work had been “inspected and approved by Prasa officials” and that “there are supporting documents in all cases”.

But there are good reasons to suspect this may not be the case.

Scorpio has reliably learnt that Prasa, in fact, does not have supporting documents for all of the payments it made to the company and that at least one transfer of more than R6-million cannot be backed up by the necessary paperwork. This transfer happened to have been signed off by Mtimkulu himself.

One of our sources familiar with Y-Rail’s operations alleged that the company didn’t do any work whatsoever. “It was a scam. Y-Rail took money out of Prasa without doing any work,” claimed the source.

According to Prasa, the Special Investigating Unit (SIU) is probing the SOE’s most dubious contracts awarded after January 2010.

At this stage, it had not come to the board’s attention that Ms Kulekwa Roseline Msutu is the sister to Daniel Mtimkulu. We are certain that the SIU forensic investigations will uncover all those details. Based on the SIU findings, guilty parties will be subjected to the course of the law, which includes criminal prosecution and civil action to recover proceeds of corruption,” said Prasa. DM


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