SCORPIO ANALYSIS

Prasa lawyerless on eve of R6bn contracts battle despite pleas to Ramaphosa and Co.

By Pieter-Louis Myburgh 21 February 2020

An all-important legal tussle over allegedly corrupt contracts at Prasa is finally heading to court. As things stand, the state rail operator won’t have any legal representation in the matter, despite pleas to President Cyril Ramaphosa, Finance Minister Tito Mboweni and Transport Minister Fikile Mbalula. 

On Monday 24 February, the North Gauteng High Court in Pretoria starts hearing arguments in civil proceedings between the Passenger Rail Service of South Africa (Prasa) and Siyangena Technologies, a former Prasa contractor demanding payment for outstanding fees amounting to R2.8-billion. If Prasa loses the case, it could end up paying Siyangena more than R5-billion after interest on the unpaid invoices had been factored in.

Siyangena, which was tasked to install access gates and other security-related products at Prasa stations, clinched contracts worth around R6-billion during former Prasa CEO Lucky Montana’s reign at the SOE.

By all accounts, Prasa would be able to put forward solid arguments for why the Siyangena contracts need to be set aside — of the more than R3-billion the company ended up receiving from Prasa, a staggering R550-million flowed to Durban businessman Roy Moodley, a known financial benefactor of former president Jacob Zuma (EXCLUSIVE: Zuma friend’s R550m bonanza

None of the parties involved have been able to explain Moodley’s massive Siyangena windfall beyond vague claims that one of Moodley’s companies had been a “strategic partner” of Siyangena.

Apart from allegedly corrupt payments, Siyangena has also been accused of bid-rigging and supplying Prasa with inferior products and services at inflated prices. 

But come Monday, Prasa won’t have any lawyers on its side in court, seeing as Werksmans Attorneys, which has been handling the Siyengena matter from the outset, has not been paid.

Correspondence relating to Werksmans’ Prasa account, seen by Daily Maverick, lays out the potential financial consequences of the ongoing impasse. Prasa owes Werksmans about R19-million for work related to the Siyangena case and other matters. This constitutes less than 0.4% of the more than R5-billion that Prasa would have to pay Siyangena if the latter secures a default judgment against the SOE.

In mid-January, recently appointed Prasa administrator Bongisizwe Mpondo undertook to ensure that Werksmans would receive a portion of its outstanding fees before the end of that month. The rest would be paid before the end of February, Mpondo promised.

“The matter of Siyangena is very important to us and I have been advised by Prasa’s Group Legal Services that Prasa has good prospects of success in it and that a number of Prasa employees who were implicated in the irregularities, fraud and corruption that led to the award of the contracts to Siyangena have been dealt with by Prasa,” Mpondo stated in his letter to the law firm.

But despite Mpondo’s assurances, no payments were forthcoming from Prasa.

Finance Minister Tito Mboweni, Treasury director-general Dondo Mogajane and a staffer from Transport Minister Fikile Mbalula’s office were included in one of Werksmans’ letters to Mpondo in January.

In early February, Werksmans again wrote to Mpondo. This time, the law firm also sent the correspondence to several staffers in President Cyril Ramaphosa’s office, along with Mboweni, Mogajane and the Mbalula aide.

Werksmans’ high-level appeals did not move Prasa to settle the legal bills. 

The Ramaphosa administration’s apparent unwillingness to intervene seems to be at odds with the president’s commitment to fixing South Africa’s woeful commuter rail offering.

“A key priority this year is to fix commuter rail, which is vital to the economy and to the quality of life of our people,” Ramaphosa promised long-suffering rail commuters in his most recent State of the Nation Address.

According to the president, the government has set aside R1.4-billion for much-needed work on key rail lines in Gauteng and the Western Cape. Ramaphosa also referred to “work underway on other lines [that] includes station upgrades, parkway replacements, new signalling systems and overhead electrical traction upgrades”.

A default judgment that may drain as much as R5-billion from the financially-crippled SOE’s coffers would almost certainly place these projects in jeopardy.

Ramaphosa’s spokesperson, Khusela Diko, said she had referred our queries to the ministry of transport.

This week, several sources familiar with developments expressed fears that strings were being pulled behind the scenes to ensure that Prasa ends up in court in as weak a position as possible.

“There are plenty of people who can’t wait for that R5-billion to start flowing out of Prasa. One way of making sure that happens is to send Prasa to court without legal representation,” suggested one source. 

Werksmans director Bernard Hotz this week emphasised that a significant amount of public money was at stake in the Siyangena saga.

“We believe that the matter is so important that it deserves to be properly adjudicated upon in a court of law,” said Hotz.

“We are continuing to engage with Prasa on a daily basis to try and find a way forward,” he added.

Prasa too seems to believe that matter can still be salvaged.

“Prasa is working hard to ensure that our lawyers continue to represent us on the matter. We are confident that the agency will be properly represented at court when the matter is heard,” Prasa spokesperson Makhosini Mgitywa told Daily Maverick.

Mbalula’s department said the minister had “noted the various claims made by alleged creditors” of Prasa, but that they would allow the SOE’s administrator to deal with such matters.

“The minister continues to support the work of the administrator and while challenges remain, minister Mbalula is encouraged by the early signs of progress,” said the department

Mboweni’s spokesperson did not respond to queries.

Former Gupta lawyer Gert van der Merwe, who acts for Siyangena in the Prasa case, told Daily Maverick in December 2019 that the high court “will deliver its judgement based on the facts at its disposal”. DM

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