Same old, same old – PRASA murky deal

The acting chief executive of SA’s cash-strapped train operator Prasa, Nkosinathi Sishi, is on the verge of signing an agreement that not only flouts all statutes governing the utility, but will also expose the firm to almost R5-billion of unauthorised and irregular expenditure.

Nkosinathi Sishi, who was seconded from the department of transport to take over the Passenger Rail Agency of SA (Prasa) from yet another departed interim chief executive, Sibusiso Sithole, in February 2019, immediately hit the ground running. He unilaterally and secretly negotiated an agreement that allows the Development Bank of Southern Africa (DBSA) to extract management fees in excess of R400-million for proposing and developing infrastructure projects for Prasa.

The board and the train operator’s executive committee seem to be in the dark about the project, the need for it and how it was developed. Insiders question the need for the project, and why Sishi, a newcomer with only two months at the company at the time, would commit a cash-strapped Prasa to such expenditure.

Not only is the Prasa’s agreement with DBSA in breach of the governance statutes regulating the train agency and all state-owned entities, but it specifically violates the most basic requirements of the Public Finance Management Act (PFMA), which insists on a competitive tender process for all major expenditures. The budgeted expenditure under the contract is three times the annual revenue of Prasa. Not only does that amount exceed the delegated authority of the CEO, but it also requires a resolution of the board of directors, which Sishi ignored.

In a letter to Patrick Dlamini, the DBSA chief executive officer, in April, Sishi writes that, “Following interactions with your organisation regarding the planning, implementation and delivery of infrastructure programmes for Prasa, we are pleased to advise you of your appointment as programme implementing agent for the 2019/20 and MET [medium expenditure term] period”. That covers the financial years ending in March 2022.

DBSA will be allocated billions for its help in “asset protection, fencing programme, station upgrade programme, depot modernisation, station improvement, and renewable energy programme.” The budgeted expenditure will be R1.17-billion in the first year ending March 2020, R1.65-billion the following year and R1.95-billion in financial 2022.

A separate memorandum drafted by Sishi on behalf of Prasa, and by Chuene Ramphele, DBSA’s executive for infrastructure delivery, shows DBSA will charge a minimum of R200-million on “funds under management”, which will increase to more than R400-million, or 9% of the total budget, according to a draft agreement seen by Daily Maverick.

Among other red flags, the agreement allows DBSA to propose investment projects, and then execute them for a fee, inducing fears of a conflict of interest. There is no oversight mechanism spelt out in the contract, which exposes Prasa to runaway expenditure. Other than mentioning “improvements” to 135 train stations, it is not clear what exactly is the need for the agreement.

Source: Daily Maverick

 

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