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MPs shocked as shameful state of Prasa’s affairs laid bare

"We have problem in Prasa. We're sorting it out. It's not an overnight thing. I've been in Prasa for five months, it's difficult&when systems collapse, they really collapse," acting Prasa CEO Collins Letsoalo told MPs. File picture: Phill Magakoe/Independent Media

"We have problem in Prasa. We're sorting it out. It's not an overnight thing. I've been in Prasa for five months, it's difficult&when systems collapse, they really collapse," acting Prasa CEO Collins Letsoalo told MPs. File picture: Phill Magakoe/Independent Media

Published Nov 30, 2016

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Parliament – The scope of a forensic audit into the embattled Passenger Rail Agency of South Africa (Prasa) has been widened and now includes probes into R24 billion in contracts, the rail company’s acting chief executive Collins Letsoalo told MPs on Wednesday.

Letsoalo, Prasa board chairman Popo Molefe, and other members of the state-owned company’s executive were called to Parliament’s standing committee on public accounts to answer questions on R13.9 billion in irregular expenditure identified by the Auditor-General and another R255 million in fruitless and wasteful expenditure.

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Letsoalo and Molefe could do no more than admit to collapsing systems, specifically with regard to procurement practices, placing most of the blame on former board and executive members.

There were many suspect deals involving more than just the R13.9 billion identified by the AG being probed by Werksmans Attorneys which has been contracted to conduct the probe for Prasa.

“We have problem in Prasa. We’re sorting it out. It’s not an overnight thing. I’ve been in Prasa for five months, it’s difficult…when systems collapse, they really collapse,” said Letsoalo.

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“The R24 bln is contracts under investigation, not the ones found to have something.”

In at least four cases “elements of criminality” were identified, said Letsoalo, adding they’ve been handed over to the Hawks.

MPs pushed hard for answers on why Prasa had weak internal controls, with ANC MP Nthabiseng Khunou calling Prasa “a sinking ship”. Letsoalo had no choice but to admit that risk mitigation strategies were either absent or very weak.

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“It’s something we’re working on. We believe there’s not been a lot of work in doing that functions…and it has been compromising various areas,” he said.

Letsoalo said the irregularities were as a result of a combination of factors, conceding everything was not “hunky-dory” at the state-owned rail agency.

“Policy was there and it was not adhered to in most instances.”

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He said in some instances they were also plugging policy gaps.

“In areas where internal controls have collapsed….the effectiveness of internal audit becomes compromised, and yes it was compromised. I don’t want to create impression everything is going well.”

Lesoalo said most of the irregular expenditure incurred this past financial year was as a result of contracts signed as far back as 2012 while former chief executive officer Lucky Montana was still CEO.

Montana was fired last year after it was revealed that a massive contract with Swifambo Rail to provide 70 new locomotives to Prasa was irregular as the trains were not suitable for South Africa’s rail network. Prasa has lodged a lawsuit claiming back R2.6 million already paid to the company.

Molefe told MPs that there were attempts to destroy documents to prevent investigators from finding a paper trail.

“In our detailed investigations we will show there was in the past an attempt to destroy documents. They were actually destroyed, some of them hidden before…,” said Molefe.

“I must hasten to say we identified a serious weakness and or information management within the organisation and it is one of the challenges as we deal with internal controls and internal systems we are dealing with.”

Economic Freedom Fighters MP Ntombovuyo Mente said Prasa was being used as “a vehicle for corruption”.

“It’s corruption. Either people are ballooning prices or giving tenders to their friends…who signs the cheque out? Is there value for money?”

Letsoalo said while they were trying to regularise irregular expenditure, it would not be an overnight process. He said the sluggish response to irregular, wasteful and fruitless expenditure by the previous executive had led to people getting away with signing contract not in line with the law or treasury regulations.

“There was a slow response from management in terms of consequences and in terms of implementing the PFMA [Public Finance Management Act].”

Letsoalo said they’ve instructed Werksmans to complete the forensic audit within the next six months.

African News Agency

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