UNACCOUNTABLE #23

How Prasa was looted and left for scrap

By Open Secrets 13 April 2021

The link between corruption and lived experience is nowhere more obvious than the erosion of passenger train services in South Africa. Prasa’s service has declined so dramatically over the past decade that the majority of working-class South Africans who once relied on the affordable service have had to turn to more expensive modes of public transport.

The recent National Household Travel Survey estimated that 80% of South African train users — about 550,000 people — have abandoned their use of rail since 2013. At the root of this decline is a series of exorbitantly expensive and corrupt contracts that siphoned billions of rands out of the Passenger Rail Agency of SA (Prasa) into the hands of politicians and businessmen from 2009-2015.

In South Africa, the legacy of spatial apartheid means that most working-class citizens are pushed to the periphery of cities, far away from jobs and other opportunities. Affordable urban commuter rail can play a significant role in reducing these spatial inequalities in the face of other more expensive forms of public transport. However, the long-running financial and governance crises at Prasa have stunted any attempts at reforming the broken state-owned entity (SOE) and providing a workable commuter rail service.

It is important to understand how and why Prasa came to be in the state it is, and who still needs to account for the destruction of passenger rail systems in South Africa. These are the institutions and individuals that were mandated to ensure the effective functioning of the SOE which half a million of South Africans once relied on to get to work every day. Instead of fulfilling their mandate, they have actively enabled, participated in and covered up systemic corruption at Prasa. It is about time they account.

Pipe dreams: The formation of Prasa 

Prasa was launched in March 2009, and integrated branches of rail and coach transport which had been separate. This included Metrorail, which operates commuter rail services, Shosholoza Meyl, which operates long-distance regional rail services, and Autopax, which operates coach services. The consolidation of these entities was aimed at increasing the efficiency of South Africa’s rail system and followed a Cabinet decision on 1 December 2004 which aimed to “offer rail passengers integrated services that prioritise customer needs, provide better mobility and accessibility to transport in pursuit of a better life for all”.

The consolidation of Prasa and integration of South African railway systems represented an ambitious project of modernisation. It required a significant increase in state investment. According to Prasa’s first annual report, government funding increased from R800-million in 2007, to about R5-billion in the 2008/2009 financial year. South Africa was set to host the Fifa World Cup in 2010, and the government wanted to ensure that the public transport system could cope with the influx of passengers and show off an efficient public transport system to the world.

Central to this mission was a series of mega-projects that were set to modernise South African rail infrastructure and service. This included a significant upgrade of Prasa’s locomotive fleet, upgrading station and train security and the installation of high-end technological services at certain stations. Although many of these upgrades were not completed by the time of the World Cup in 2010, the government continued to significantly increase funding to Prasa for the modernisation of rail infrastructure and the upgrade of passenger fleets.

Coming off the rails

The first indication that Prasa’s modernisation drive was not all that it seemed came in 2012, when the South African Transport and Allied Workers Union (Satawu) called a strike, demanding an independent forensic investigation into alleged corruption and nepotism at Prasa. Satawu also called for the dismissal of CEO Lucky Montana for ignoring the allegations. The union claimed it had documented evidence detailing irregular and corrupt tenders and presented it to Montana, who allegedly ignored all accusations. 

Prasa’s board insisted there was no basis to suspend Montana. Prasa’s internal auditors and external firm Deloitte investigated Satawu’s claims and dismissed the allegations. In court documents, Prasa contended that because Deloitte is an independent auditing firm, and that it assisted in the investigation, Satawu’s “call for a forensic investigation was pointless”. Satawu denied that the investigation was independent or forensic in nature. However, the strike was declared unlawful by the Johannesburg Labour Court on 20 April 2012. 

Nothing further was done to address the allegations until 2015, when Public Protector Thuli Madonsela released her report Derailed into allegations of corruption and maladministration at Prasa. The basis of the investigation was 37 complaints laid by Satawu in 2012 which alleged serious maladministration, flouting of the procurement process, nepotism and whistle-blower victimisation.

Derailed found evidence of systemic mismanagement and maladministration within the procurement process and supply chain management at every level of Prasa’s organisational structure — from the board and CEO to low-level officials within the procurement process. However, some of the allegations had to be deferred for further investigation because the Public Protector’s office had struggled to both access documents requested from Prasa’s management, and verify their authenticity. Some did not have dates or were unsigned.

In addition to further investigations by the Public Protector’s office, Madonsela called on Prasa’s board to take disciplinary action against a number of officials implicated in maladministration. Significantly, she also instructed the board, with the National Treasury, to “Commission… a forensic investigation into all Prasa contracts above R10-million since 2012 and take measures to address any findings regarding systemic administrative deficiencies allowing ongoing maladministration.”

The uphill battle for justice and accountability

In 2014, a year before the release of Derailed, Prasa’s board was replaced. Metrorail’s service was in serious decline and the SOE in a dire financial state — with a reported accumulated loss of R4.4-billion from 2010/2012. Popo Molefe took up the position of board chairperson. CEO Montana was released by the new board in July 2015 amid a resurgence of allegations of widespread maladministration at the SOE detailed by the 2015 Auditor-General’s Draft Final Management Report.

After the release of Derailed later that year, the new board acted quickly to try to stem the tide of irregular expenditure and dodgy contracts. Several executives implicated in corruption were dismissed, and, importantly, the board commissioned forensic investigations into all contracts worth over R10-million. In February 2016 the National Treasury, in compliance with Madonsela’s recommendations, commissioned investigations into 216 contracts awarded by Prasa between 2012 and 2015. Of these 216 contracts worth around R15-billion, only 13 were found to be above board. 

The independent investigations revealed a staggering level of corruption and maladministration at Prasa. Taken together, they indicate that Prasa had been captured by private interests determined to drain the coffers of the already faltering rail agency. The investigations and subsequent Swifambo and Siyangena court cases implicated a series of businesspeople, including Makhensa Mabunda, Mario Ferreira and Roy Moodley, all of whose businesses secured lucrative tenders from Prasa from 2009-2014. The reports and court judgments indicate that these private interests were protected and enabled within Prasa, namely by the ex-CEO Montana and the board under the chairmanship of Sfiso Buthelezi. 

On the basis of these findings, Prasa’s board laid about 40 charges with the Directorate for Priority Crime Investigation (DPCI/Hawks) and took the Siyangena and Swifambo tenders to court. These two large tenders cost Prasa more than R5-billion and were riddled with serious irregularities. The Molefe board also commissioned the law firm Werksmans to investigate tenders that were not within the scope of the Treasury investigations. 

However, the new board faced major pushback from figures in the ANC, both within the Parliamentary Standing Committee on Transport and from Minister of Transport Dipuo Peters. This pushback attempted to bury the forensic reports from the public eye and stop the Werksmans investigations commissioned by the board, according to Molefe’s testimony at the Zondo Commission.

The forensic reports only became public in late 2017 when whistle-blowers within Prasa leaked them to commuter activist group UniteBehind — this leak became known as the #Prasaleaks. UniteBehind viewed the failure to release the reports as an effort to cover up the extent of the rot at Prasa and protect political interests. They shared the documents with GroundUp news, a community news organisation, for further investigation and dissemination to the public.

Who is to blame for the dire state of Prasa?

The capture and looting of Prasa did not happen in isolation. A network of corrupt businessmen, civil servants and politicians sanctioned and participated in the looting of the state-owned enterprise. Although most of the individuals involved in Prasa’s capture have left the SOE, many of them have evaded any accountability. Powerful businessmen still enjoy the fruits of dodgy contracts — many of them incomplete or dramatically overpriced — while politicians who either obstructed justice or actively participated in corruption continue to get recycled into new cushy positions in government.

Here are some of the key institutions and individuals who were complicit in the capture of Prasa.

The ministers of transport

Prasa is wholly state owned and reports to the minister of transport. The minister is supposed to provide oversight in relation to Prasa’s mandate to provide efficient and accessible transport to South Africans. The minister is chiefly responsible for appointing the Board of Control (BOC), which is responsible for approving large tenders — alongside the minister — among other oversight roles.

Most transport ministers since the formation of Prasa have turned a blind eye to the capture and looting of Prasa. This includes S’bu Ndebele, Ben Martins, Dipuo Peters and Joe Maswanganyi, all appointed by former president Jacob Zuma.

As indicated previously, Peters, who was appointed in 2013, is alleged to have blocked further investigations into corruption commissioned by the Molefe board. Molefe and four other board members were fired unexpectedly by Peters in early 2017. Molefe testified at the Zondo Commission they were fired for “shaking the tree” with their investigations, which he claimed were viewed as a threat to certain political interests. Molefe successfully took the minister’s decision to court and the board was reinstated to finish its term. The high court lambasted the minister, finding that Peters’ decision was “so unreasonable and disproportionate as to be arbitrary and irrational”.

Peters was fired soon after the judgment and replaced by Maswanganyi. Maswanganyi continued where Peters left off, with Molefe testifying that Maswanganyi put pressure on the board to step down, after the court ordered its reinstatement. Molefe also accused Maswanganyi of deliberately leaving executive positions vacant to isolate the board and make it dysfunctional until its term expired later in the year. The SOE did not have a permanent board until the end of 2020, nor a CEO until 2021. 

While Ben Martins was minister for only a year, he famously met with Tony Gupta, Montana and Duduzane Zuma at Martins’ home during his stint as transport minister. Martins has said that the meeting was to ensure that the Guptas would not try to get Montana and the BOC fired, after hearing rumours that this might happen.

The board

The Board of Control’s primary responsibility under Prasa’s Board Charter “is to ensure that Prasa complies with obligations imposed by various laws and regulations that are applicable to Prasa and management of regulatory compliance, such as the PFMA [Public Finance Management Act]”. Significantly, the board also has the power of “approval of capital expenditure, acquisitions and disposals in excess of the discretionary power delegated to the Chief Executive Officer” as well as approving of major contracts.

Sfiso Buthelezi was appointed as Prasa first BOC chairperson in 2009. Buthelezi is alleged to have played a central role alongside Montana in the capture of Prasa by a network of shady businessmen. Buthelezi is an ally of Zuma, having served as an adviser to Zuma from 1994-1999 when Zuma was economic development MEC in KZN. In 2017, three years after leaving Prasa, he was made deputy finance minister when Zuma removed Pravin Gordan and Mcebisi Jonas in one of his infamous Cabinet shuffles.

The forensic investigations into corruption and maladministration at Prasa commissioned by the Treasury recommended that Buthelezi and his fellow board members be criminally charged “for contravening several sections of the Public Finance Management Act (PFMA) in the course of awarding at least 30 contracts” and for “ignoring all responsibilities in record keeping within the procurement process”.

Buthelezi has also been accused of failing to disclose his business interests for Prasa contracts in which businesses he has shares in profited from while he was the chair of Prasa’s board.

The CEO

The chief executive officer (CEO) is mandated to lead Prasa while reporting to the BOC. The CEO has significant decision-making authority. The Public Protector’s report, the forensic investigations as well as the recent court judgments which set aside the Siyangena and Swifambo contracts, all implicate Montana — Prasa’s first CEO (2009-2015) — in enabling and participating in the capture at the state-owned railway agency. Montana, alongside a network of corrupt executives within the procurement process, achieved this through ruthless leadership and systemic flouting of procurement and supply chain processes, including the bodies that were mandated to provide oversight on tenders and procurement, such as the Bid Evaluation Committee (BEC) and Cross-Functional Sourcing Committee (CFSC), according to the high court

Montana led Prasa with an iron fist, firing anyone who stood in his way. In the high court judgment which set aside the Swifambo locomotive contract in 2017, the court highlighted that “the discovery of corruption was impeded by the tyrannical manner in which Prasa was controlled by Montana”. This was substantiated by Fani Dingiswayo’s testimony at the State Capture Commission of Inquiry in 2020.

Dingiswayo, who was Prasa’s former general manager for legal services, testified that Montana “ruthlessly abused his power” when CEO of Prasa. He accused Montana of creating parallel structures within Prasa to advance his own interests and deal with anyone who stood in his way — especially in the legal department. Anyone who dared to challenge Montana’s authority, or flag potential tenders as irregular, was pursued by Montana until they left the SOE. Dingiswayo alleges that he was fired on the spot for refusing to sign off on an irregular contract that Prasa had entered with a company called Prodigy. 

Business

The primary beneficiaries of corruption at Prasa were a group of businessmen, some of them with links to Zuma. Makhensa Mabunda, Roy Moodley, Mario Ferreira, Arthur Fraser, Manala Manzini and Auswell Mashaba all benefited from lucrative contracts with Prasa, many of which have since been declared unlawful. The companies implicated include Siyaya Energy, Siyaya Rail Infrastructure, Royal Security, Resurgent Risk Managers, Siyangena Technologies and Swifambo Rail Leasing, among many others.

Many of these were shelf companies that had little to no experience in the rail industry or capacity to deliver. Yet by manipulating the supply chain and procurement processes alongside Prasa executives, they received lucrative contracts. It became commonplace for large contracts to bypass required procurement bodies and be extended with little to no oversight or approval. 

This was the case for the infamous Swifambo Rail Leasing contract, which inexplicably resulted in Prasa spending billions on trains that were too tall for South African railways. This shocking contract will be dealt with in the next instalment of Unaccountable.

Getting people to walk: Commuters suffer the consequences while the bad guys run free

The effect of corruption and maladministration on Prasa’s services has been catastrophic: Cape Town’s Central Line, the busiest line serving the poorest communities, including Khayelitsha, Mitchells Plain, Nyanga and Bonteheuwel, stopped all services in October 2019. Prasa blamed the closure of the line on vandalism and cable theft and restored a very limited service to the line only in February 2021. It will cost billions to repair the infrastructural damages to the rail infrastructure and the train fleets, which are severely dilapidated and in short supply. This is just one example of the impact of the collapse of rail infrastructure around South Africa.

To rebuild Prasa and restore its essential service to the public, it is imperative that those who enabled and participated in the looting of Prasa are held accountable. The Hawks and the National Prosecuting Authority have been sitting on Prasa-related cases for more than five years, with seemingly little to no progress being made, despite having access to extensive forensic reports which document systemic corruption. Unless and until these cases are finalised, Prasa will continue to fall victim to looters who thrive in an environment of unfettered impunity. DM

Open Secrets is a non-profit organisation that exposes and builds accountability for private-sector economic crimes through investigative research, advocacy and the law. Tip-offs for Open Secrets may be submitted here.

Previous articles in the Unaccountable series are:

Unaccountable 00001: Dame Margaret Hodge MP — a very British apartheid profiteer

 Unaccountable 00002: Liberty — Profit over Pensioners

Unaccountable 00003: Dube Tshidi & The FSCA: Captured Regulator?

Unaccountable 00004: Rheinmetall Denel Munition: Murder and mayhem in Yemen; 

Unaccountable 00005:National Conventional Arms Control Committee: handmaiden to human rights abuse?

Unaccountable 00006: Nedbank and the Bank of Baroda: Banking on State Capture.

Unaccountable 00007: HSBC — The World’s Oldest Cartel

Unaccountable 00008: FNB and Standard Bank- Estina’s Banks

Unaccountable 00009: McKinsey — Profit over Principle

Unaccountable 00010: Jacob Zuma — Comrade in Arms

Unaccountable 00011: Thales — How to buy a country

Unaccountable 00012: John Bredenkamp — Agent of BAE Systems

Unaccountable 00013: Fana Hlongwane — Agent of BAE Systems

Unaccountable 00014: BAE Systems: (Profit) Before Anything Else

Unaccountable 00015: The BAE Corruption Bombshell

Unaccountable 00016: Deloot- How Deloitte gets away with it.

Unaccountable 00017: EY- Incompetent, Negligent or Criminal?

Unaccountable 00018: KPMG at the heart of State Capture 

Unaccountable 00019: IRBA — soft-touch audit regulator in turmoil

Unaccountable 0020: Credit Suisse — An enabler of mega-looting in Mozambique

Unaccountable 0021: Bain & Company — The KGB of consulting 

Unaccountable 0022: The Chinese Railway Rolling Stock Corporation: China Inc boards the State Capture train

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All Comments 12

  • Thank you for this brilliant expose, which details and is so symptomatic of the debilitating corruption and rapacious looting of our SOEs and the taxpayer. All those implicated, irrespective who they are, MUST be prosecuted, all the proceeds from their theft recovered and sent to rot in jail.

  • The bottom line is that racist BEE policies were the initial cause of this demise. Our SOE’s employment was based on skin colour or ANC connection rather than experience and expertise…..And then of course the opportunity for looting arose and the rest is history! A real tragedy….

  • The grenade has exploded and it can’t be put back together. Sadly, it seems as though the effort to prosecute is too much hard work. Thoroughly unsurprising

  • The wheels of justice grind slowly….. there are so many looters and BEE beneficiaries in this and other SOE debacles that justice will not reach them in their lifetimes. The only way to deal with this is a reverse class action. Irrespective of the level of guilt, they all get 5 years in the can.

  • Rail has gone for good. Where is the money coming from to fix it? Talk of privatization; who would even go there? For a year no trains from Springs to Randfontein. Stations and overhead lines have been stripped and disappeared. Laughable! Or Cry! Take your choice. ‘Our People’, the voters, have put the cANCer in charge, so suck it up!

  • This terrible state of affairs affects the more affluent only indirectly so does not get much prominence. Yet for the working masses a functioning rail service is key to access work opportunities and more. It is impossible to run a successful economy without affordable and efficient commuter rail.

  • Sadly, the “bad guys” will NOT “run” but drive free, in their ill-begotten luxury cars. Perhaps sometimes they will at least curse the taxis into which their victims, the commuters, are squeezed….

  • Do we have a jail big enough for this vast hoard of thieving low-lifes?

    It strikes me that justice of a kind might be to let the people, the ordinary South Africans pick over like voracious crows, all the assets they possess.

  • Also, who stands to benefit from the Prasa disaster? The Taxi industry of course.
    I am willing to bet good money that the taxi industry is behind at least some of the vandalism we see on the Prasa infrastructure. If the taxi bosses are capable of killing each other, burning a train is conceivable.

    • Absolutely. I agree with you 100%. SANTACO largely to blame for vandalism and theft. I’ll take a strong bet with anyone that’s keen.

  • Rail networks save commuters 60% in travel costs. This could be injected straight into the economy. Government must sell off what’s left of PRASA and privatize it. This way it will serve the community and generate taxes for Treasury. Simple. Economy will flourish.

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