One of Prasa’s longest-running legal battles against one of its contractors heads to court in February 2020, when a full bench of the North Gauteng High Court in Pretoria will hear arguments in civil proceedings between the SOE and Siyangena Technologies.
Siyangena, which specialises in electronic security systems, bagged contracts in 2011 and 2014 to roll out a so-called Integrated Station Access Management System (ISAMS) at Prasa train stations across South Africa. The deals originally had a combined value of roughly R4-billion. However, according to papers filed in the pending court case, the combined value subsequently ballooned to nearly R6-billion. Siyangena was tasked to install a video surveillance system, automated access gates and fire detection devices at the stations, among other products included in the contracts’ scope.
To date, Prasa has paid Siyangena about R3-billion. The company claims the SOE owes it a further R2.8-billion, a liability the cash-strapped Prasa would want to avoid in the face of longstanding allegations of corruption, bid-rigging and sub-standard work related to the ISAMS contracts.
Former Public Protector Thuli Madonsela’s 2015 report titled Derailed highlighted serious flaws in one of the contracts Prasa awarded to Siyangena. The SOE, at the time led by Lucky Montana, improperly extended the scope of the first phase of the ISAMS project in order to secure for Siyangena a contract worth just under R2-billion, Madonsela had found. There were more significant red flags around these contracts, which we’ll get to further down.
The Derailed report effectively caused Prasa to halt its payments to Siyangena and compelled it to institute review proceedings in an attempt to have the ISAMS contracts set aside. Siyangena, in turn, instituted arbitration proceedings against Prasa in relation to unpaid invoices and countered Prasa’s attempts to have the contracts set aside. What followed was a complicated legal tussle between Prasa and Siyangena fought throughout 2016 and 2017, which partly revolved around Prasa’s failure to lodge its review application within the prescribed period of six months after each ISAMS contract had been awarded. The long and the short of it, however, is that a full bench of the North Gauteng High Court will determine whether the contracts were indeed unlawful and should, therefore, be set aside. The case will be heard from 24 to 28 February.
According to the court papers, Siyangena maintains that Prasa owes it R2.8-billion for outstanding invoices related to the ISAMS roll-out and the interest on the unpaid claims. This is on top of more than R3-billion the company had already earned from Prasa. In other words, the two ISAMS contracts started out with a combined value of about R4-billion but had somehow ballooned to nearly R6-billion. Siyangena’s own court filings reveal how this had happened — with a mere stroke of a pen, Montana in 2014 had increased the value of Siyangena’s contracts by a hefty R905-million by signing an “addendum” contract with the company for the maintenance of its own security products.
The high court’s upcoming findings on the matter are therefore crucial for the cash-strapped Prasa’s finances. If Prasa wins, it would not have to pay Siyangena a further R2.8-billion, and it may have solid grounds to recoup a portion of the R3-billion it already forked out on the ISAMS project. If Prasa loses the case, it would have to settle Siyangena’s claim.
But come February next year, Prasa may not have any lawyers in its camp to defend it in the Siyangena matter. Scorpio has learned that the SOE’s inability or refusal to pay its service providers — an ongoing crisis that is at least four months in the making — has also affected the law firms it appointed for investigations and civil proceedings relating to some of the dubious contracts identified in the wake of Madonsela’s Derailed report.
According to Scorpio’s sources, Prasa has fallen behind on its payments to law firms Bowmans, Webber Wentzel, Norton Rose Fulbright and Werksmans. The latter firm has to date acted for Prasa in its legal battle with Siyangena. Sources familiar with the matter say Werksmans won’t be able to stay on board as Prasa’s attorney of record when the case goes to court next year unless it receives its outstanding fees.
“There are some very frustrated people in Prasa’s finance department,” said one Prasa insider. The source claimed that one of Prasa’s newly appointed executives is responsible for a payments freeze that is now affecting virtually every major contractor on the SOE’s books, ranging from the law firms to companies responsible for the maintenance and refurbishment of Metrorail’s large fleet of ageing passenger carriages.
“This is nothing short of a crisis. The business is at a standstill and it is affecting our operations all over South Africa,” said the source.
Multiple red flags
This reporter has been tracking Siyangena’s dealings with Prasa since 2015, when a report in Rapport newspaper detailed how attorney Riaan van der Walt had purchased one of Montana’s properties in Johannesburg for double its market value. Van Der Walt, who is closely linked to Siyangena Technologies, its parent company, TMM Holdings, and the latter’s boss, Mario Ferreira, had used a shelf company to effect the transaction.
The same shelf company, Precise Trade and Invest 02, was also used to purchase luxury properties for a whopping R38.4-million that were either registered in Montana’s name or for which he took possession of the keys once the deals had been concluded. One of the properties was partly bought with R11.5-million that originated from a business deal involving Ferreira.
Ferreira at the time “vehemently denied” that he, TMM Holdings or its subsidiary, Siyangena, had laundered money through the business deal in order to illicitly help Montana acquire the property.
The money started to flow from Siyangena to the Moodley entities after Siyangena clinched its first ISAMS contract from Prasa in 2011. Suspicions that these payments may have been for the benefit of senior politicians were strengthened by the release in 2017 of investigative journalist Jacques Pauw’s The President’s Keepers. The book detailed how Zuma had been on the payroll of Royal Security, one of Moodley’s companies. This is the same entity that received a portion of the R550-million linked to Siyangena’s Prasa contracts.
Former Gupta lawyer Gert van der Merwe, who represents Siyangena, previously stated that this reporter’s “adverse assumptions” regarding his client’s payments to the Moodley entities were incorrect and that he would address detailed queries on the issue “when afforded the appropriate opportunity”. To date, Van Der Merwe has seemingly not found the opportune moment to do so.
Van Der Merwe last week remained coy when asked for comment on Siyangena’s upcoming court battle with Prasa.
“The courts have all the facts, it will deliver its judgment based on the facts at its disposal,” said Van Der Merwe.
Prasa did not respond to our queries. DM