Another South African state company collapses – placed into administration

Transport minister Fikile Mbalula has placed the Passenger Rail Agency of South Africa (Prasa) under administration and dissolved the interim board with immediate effect.

In a press briefing on Monday (9 December), Mbalula said that Bongisizwe Mpondo has been appointed as administrator and will run the affairs of the embattled rail operator as a ‘de facto Board of Control’.

“I arrived at a conclusion that a more incisive intervention that enables quick turn-around times in decision-making with a view to stabilise operational performance is more urgent that an appointment of a permanent board. This view was supported and agreed to by cabinet,” Mbalula said.

“The continued decline of the quality of service Prasa provides to the commuting public requires urgency in the interventions we put in place.

“Prasa is an important institution that plays a major role in South Africa’s public transport value chain and its impact on the economy cannot be emphasised enough.”

In November, Auditor-General Kimi Makwetu told parliament that Prasa’s audit outcome for the current financial year has regressed to disclaimer after two financial years of a stagnant position of a qualified audit opinion with findings.

The AG reported that Prasa has failed to comply with supply chain management legislation when awarding contracts for large infrastructure related projects.

The committee heard that this has continued to trigger irregular expenditure which has resulted in Prasa being continuously ranked as one of the top offenders with regards to irregular expenditure in the public sector.

Acting group chief executive officer, Dr Nkosinathi Sishi painted a dismal picture of the group’s performance in a note posted in Prasa’s annual report for 218/2019.

“Prasa continues to offer a service that is poor, unreliable, unpredictable and that is not safe, thus resulting in the decline in customer and stakeholder confidence,” Sishi said.

He said that in the last eight years, Prasa has not been able to reach 60% of its performance targets. Only during the financial year 2015/16 did Prasa exceeded 50% of its pre-determined objectives by meeting 55% of its performance targets.

“The fact that Prasa still performs below 60% remains a worrying factor, as this suggests that the organisation is far from delivering on its mandate.”

He said that he 2018/19 financial year fell short of expectations, where only 26% of the performance targets were met, even though this was better than 2017/18 where only 21% of the objectives were met.

He also noted that passenger patronage continues to decline from 262 million paying passenger trips to 208 million trips. All the regions experienced a decline on 2018/19 in numbers of passenger trips.

The overall decline in paying passengers is 21% compared to 2017/18, Sishi said. The decline per region is 37% in Western Cape, 15% in Gauteng, 13% in KwaZulu-Natal and 4% in Eastern Cape.

He pointed to an untenable situation where the organisation’s operating deficit (before loss on disposal of assets and fair value adjustments) had reached unacceptable levels at R1.8 billion, as depicted by the graph below:

Read: We will not allow any state-owned enterprises to fail: Ramaphosa

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Another South African state company collapses – placed into administration