In a statement she cited the recent spat between the board and former acting group chief executive Collins Letsoalo and the lack of corporate governance as reasons for her decision. Letsoalo was seconded from Peters' department last year, followed by the termination of his secondment by the board on February 27, this year amid claims his annual salary package had increased 350 percent to R5.9 million. The minister then requested a full report from the board and Letsoalo.
"In considering prudently what would be in the best interest of Prasa and the public, and in accordance with Section 24(1) of the Legal Succession to the South African Transport Services Act, Act 9 of 1989, Minister Peters resolved to dissolve the Board of Prasa with immediate effect," she said in a statement.
"It is the Minister’s contention that her pronouncement to dissolve the Board is a necessary step to bring this unfortunate situation to an end as well as to ensure that she restores good corporate governance, stability and ensure continued service deliver to the South African public by Prasa."
The board's term would have ended in July this year. The closing date for nominations for a new permanent board has expired, said Peters.
"The Minister intends to appoint an interim board that will oversee the affairs of the entity until July 2017 when the appointment of the new anticipated Board will be finalised."
The announcement came hot on the heels of five people being nominated to serve on an interim South African Broadcasting Corporation (SABC) board on Wednesday.
The SABC is another state-owned company where governance has failed, according to MPs. The nomination of people to serve on the SABC board follows a parliamentary inquiry which MPs said should be replicated at other troubled state owned entities.
It appears the transport portfolio committee had been listening as it on Wednesday, also resolved to establish an inquiry into the problems at Prasa, which it says has not been delivering on its mandate to provide adequate services to commuters.
"After two days of deliberations, the Committee still did not have a sense of whether Prasa will be saved. It is important that Prasa works if we are to grow the economy and deliver on the mandate to get poor South Africans to work," committee chairwoman Dikeledi Magadzi said in a statement.
"As things are now, there is no sense that the board is in control of anything. It does not seem that there are controls at the entity to ensure good governance in line with legislation. That said, the Committee is of the view that the entity could still be saved."
The statement followed a heated two days of hearings with transport officials, the board and Letsoalo. Letsoalo denied he had hiked his own salary and complained that he was now being called "Mr 350 percent", insisting he had been told the salary was what he was entitled to. Board members differed and the two sides accused each other of being lying. He claimed he was removed from Prasa because he began questioning board decisions.
MPs were not impressed, given that Prasa was the single biggest contributor to irregular expenditure in South Africa. Last year, the auditor-general said the state owned rail company had incurred irregular expenditure to the tune of R13.9 billion.
ANC and EFF MPs blamed the board for the financial mess at Prasa. They went as far as calling board members corrupt and saying the "board must fall".
Magadzi on Wednesday said the committee would decide on the terms of reference and composition of the inquiry.
"Representatives and officials should at all times seek to be of use to the poor people we are meant to serve. Prasa is spending public funds resolving disputes and fighting among officials and, in the meantime, delivery to the people is suffering," she said.