DERAILED
A report on an investigation into allegations of maladministration relating to financial mismanagement, tender irregularities and appointment irregularities against the Passenger Rail Agency of South Africa (PRASA)
Report no. 3 of 2015/16
Executive Summary
(i) “Derailed” is my report as Public Protector issued in terms of section 182(1) (b) of the Constitution of the Republic of South Africa, 1996 and section 8(1) of the Public Protector Act 23 of 1994.
(ii) The report communicates my findings and the appropriate remedial action I am taking in terms of the remedial power given by section 182 (1) (c) of the Constitution, following the investigation of 37 complaints initially lodged by the South African Transport and Allied Workers Union (SATAWU) in 2012 and later pursued by the National Transport Movement (NTM), alleging maladministration and related improper conduct involving procurement irregularities, conflict of interest, nepotism and human resources mismanagement, including victimization of whistle-blowers, by the Group Chief Executive Officer (Mr Montana) and other functionaries at the Passenger Rail Agency of South Africa (PRASA). PRASA is an important and, I believe, strategic organ of state. Its handling of public finances and procurement of goods and services has implications for efficient and effective public transport delivery in compliance with section 195 of the Constitution. Section 195 of the Constitution provides, among others, a requirement that:
(iii) “Public administration must be governed by the democratic values and principles enshrined in the Constitution, including the following principles:
a. A high standard of professional ethics must be promoted and maintained.
b. Efficient, economic and effective use of resources must be promoted….”
(iv) As a public infrastructure provider, PRASA also has implications for the economy. A state owned enterprise with an estimated total net value of assets over R19 billion as at 2010/2011, PRASA is an organ of state listed as a National Government Business Enterprise in terms of Schedule 3B of the Public Finance Management Act 1 of 1999 (PFMA). PRASA has four subsidiaries, namely: Metrorail, operating commuter rail services in urban areas; Shosholoza Meyl operating regional and intercity rail services; Autopax, operating regional and intercity coach services; and Intersite, managing the corporate property portfolio. PRASA reported an accumulated loss of R4.4 billion for 2010/12.
(v) PRASA reported an accumulated loss of R1 billion for 2014/2015 financial year. The budget allocation from Government for PRASA for the MTEF period 2015/2016 to 2017/2018 is R17.2 billion. The 37 cases reported by the Complainant mostly deal with alleged procurement irregularities with the amount involved being more than R2.8 billion. As the report was being finalized further allegations of procurement irregularities at PRASA were reported.
(vi) I must indicate upfront that SATAWU’s attempt to withdraw its complaint is discomforting particularly because PRASA management was initially reluctant to cooperate, using the withdrawal as a basis for questioning this office’s continuation with the investigation. Allegations of victimisation of whistle-blowers, though not yet adjudicated, do add to the concern. There is an indication, for example, that Mr Craig Nte may have suffered an occupational detriment after whistle-blowing, while a member of the Executive of SATAWU which was later deposed followed by SATAWU’s inexplicable attempt to withdraw the matter. His matter is dealt with in the part of this report dealing with Human Resources (HR) complaints relating to arbitrary suspensions and dismissals.
(vii) During the course of the investigations various allegations regarding victimisation of current and former employees of PRASA were raised by the Complainant and some Executives. I have however decided to defer this issue to be adjudicated upon in volume 2 of this report.
(viii) PRASA is controlled by a PRASA Board of Control (PRASA Board), chaired by a Non- Executive Chairman, and which in terms of section 49(2) (b) of the PFMA is its Accounting Authority. The Group Chief Executive Officer (GCEO) has delegated authority in terms of PRASA Powers and Authority of the Board and Delegation of Authority.
(ix) The essence of the complaints was that Mr. Montana, then Group Chief Executive Officer (GCEO) of PRASA, and/ or PRASA, improperly awarded tenders; appointed service providers without following proper tender processes and allowed maladministration, corruption, conflict of interest and financial mismanagement, in the procurement of goods and services and managed human resources irregularly, including nepotism and the improper handling of whistle-blowers. NTM (the Complainant) specifically alleged that:
1. PRASA improperly cancelled all contracts for cleaning services on 15 March 2012, and subsequently improperly appointed Reakgona Commercial and Industry Hygiene and Katanga Cleaning Services on a contract valued above the R500 000 threshold without advertising and in contravention of the Treasury Regulations and Supply Chain Management (SCM) Policies of PRASA;
2. Reakgona Commercial and Industry Hygiene was awarded a contract due to its association with the GCEO’s close business associate, Mr. Isaac Modiselle;
3. PRASA appointed Sidas Security Company improperly at a higher rate on tender 525/2010/GAU/PS to replace National Force Security on the instructions of the GCEO but improperly terminated the contract 9 months after its appointment;
4. Proper procurement processes were not followed in the appointment of Vimtsire Security Services Company which allegedly failed to meet the minimum requirements for appointment. Royal Security was also allegedly appointed on the same tender in 2009 and allegedly billed PRASA R2. 8 million instead of the agreed amount of R2. 5 million per month;
5. The appointment of Royal Security on the tender concerned was irregular, as its original contract WM/FIN/CA/7/24/06 was terminated by PRASA due to its underperformance;
6. An amount of R600 000, alleged to have been improperly authorised by PRASA’s Head: Corporate Services, was improperly paid in advance to Enlightened Security for a contract for the Tshwane Region prior to its appointment on tender TSH/RISK/436/10/2008;
7. A Dark Fibre and Integrated Communication Systems tender amounting to R800 million was improperly awarded to Siemens nationally during the financial year 2009/2010 whereas the advertisement was for a narrower reach;
8. A tender for the installation of high speed passenger gates worth R800 million was awarded to a certain contractor in 2009/2010 for the Doornfontein station but it was later improperly extended to other stations nationally without following proper tender processes;
9. PRASA improperly incurred an upfront payment, to a developer of the City Mall for the construction of an underground train station (Bridge City Project), without going on a bidding process and without proper authorisation during the periods 2008 to 2010;
10. PRASA improperly appointed a media company to produce Hambanathi during 2008/2009;
11. A PRASA Board member, Mr Vusi Twala, was improperly awarded a tender by Intersite, a subsidiary of PRASA, to provide CCTV cameras;
12. A Change Management Consultant, Mr Ezra Ndwandwe, was appointed at a cost of R2 million without following proper procurement processes during 2008/2009;
13. The GCEO improperly awarded a tender amounting to an estimated R10 million to the erstwhile CEO of the South African Rail Commuters Corporation (SARCC), Mr Edwin Lekota, for the development of a contingency emergency preparedness programme for Metrorail without following proper procurement processes;
14. Umjanji Consortium, a company formed and incorporated after the closing date for submission of tenders on tender HO/CA/739/02/2010, was improperly awarded a tender on Media Advertising and Broadcasting Concession Agreement in March 2011 without following proper procurement processes in contravention of the PRASA Supply Chain Management Policies;
15. The GCEO improperly awarded a contract for the provision of professional advisory service on the signalling project to a friend, Mr Makhensa Mabunda of Siyaya DB, who did not possess the necessary skills and experience and without following proper procurement processes;
16. A tender amounting to R22 million for the Park Station Development Framework was allegedly not advertised but recommended for approval to be awarded to a contractor named ARUP, which was associated with Dr Gasa, a member of the PRASA Board, during November 2009;
17. Between the years 2008 and 2010, PRASA engaged construction companies in the 2010 Soccer World Cup Station Building Project, the Capex Project and renovation of existing stations without following proper procurement processes and an overspending of R2 billion amounting to fruitless and wasteful expenditure was incurred in addition to the budgeted amount of R3 billion;
18. During January 2010, Autopax, a subsidiary of PRASA, lost buses during theft and PRASA failed to pursue an investigation into the matter but instead replaced the buses at a cost of R2.8 million;
19. In April 2010, Autopax concluded an irregular security contract with Futuris Guarding (PTY) amounting to R54 337.20 per month;
20. PRASA was delaying to pay Rasakanya Builders, the service provider to PRASA Corporate Real Estate Solutions (PRASA Cres), and has improperly served a notice of termination of the contract, thereby leaving 36 employees of Rasakanya Builders without pay for services rendered;
21. The GCEO/PRASA incurred irregular and/or fruitless and wasteful expenditure relating to the following transactions: upfront payment of an amount of R80 million for the FIFA World Cup sponsorship without proper approval; budget and/or allocated funds which resulted in fruitless and wasteful expenditure; and to this end, the GCEO invested funds with FIFA based on the agreement that PRASA would recoup the expenditure through the sales of tickets to commuters/soccer fans and it is asserted that the money was never recovered;
22. Brand Leadership was awarded the new PRASA branding contract to the value of R9 million. However, the contract amount was improperly inflated to R19 million, thereby resulting in irregular/fruitless and wasteful expenditure of R10 million;
23. During the period 2009/2010, the GCEO allegedly requested R1 billion funding from the National Treasury on the pretext that it would be used during the taking over of operations of Shosholoza Meyl. It is alleged that National Treasury paid R500 million, and nevertheless, the funds were never used for their intended purpose;
24. PRASA Operational Expenditure (OPEX) budget was improperly overspent by R2.2 billion without the approval of the PRASA Board during the period 2009/2010;
25. PRASA Head Office staff vacated its Offices at Jorissen Building 14 months before the expiry of the lease agreement but PRASA continued to pay rental, which constituted fruitless and wasteful expenditure;
26. After vacating Jorissen Building, PRASA acquired Umjantshi House Building to accommodate its Head Office staff without following proper procurement processes and without a proper budget approval;
27. The GCEO instructed PRASA Management at the Intersite Building in Woodmead to vacate the premises 20 months prior to the expiry of the lease agreement, but continued to pay for the lease, thereby constituting fruitless and wasteful expenditure;
28. The GCEO dismissed five Senior Executives unlawfully during the years 2008 and 2011 and the CCMA ordered their reinstatement, which he rejected and instead compensated them with an estimated R5 million, which constituted fruitless and wasteful expenditure. The Group Executive HR was replaced improperly by the GCEO’s uncle, Mr Mphefo Ramutloa, without proper recruitment processes being followed;
29. During February 2010, an unlawful electronic funds transfer (EFT) was uncovered in a forensic report by Deloitte, in which R8.1 million was fraudulently transferred in the Durban and Tshwane Regions but no action was taken against those implicated in the transactions;
30. During the period 24 to 27 September 2009, Mr Montana undertook a leisure trip in a Blue Train to Cape Town together with 10 female companions and returned in a South African Airways (SAA) flight costing PRASA R17 000.00. The total cost of the trip was allegedly an estimated R170 000.00 which constituted fruitless and wasteful expenditure;
31. During 2008/2009, the Executive Corporate Affairs Manager, Mr P Mabe, allegedly received salaries from PRASA despite having left its service and Mr Montana allegedly misled the Exco and the PRASA Board that the employee was not on PRASA’s payroll.
32. PRASA disregards the labour relations processes and conditions of employment when dealing with labour issues thereby costing the entity enormous amounts of money that resulted in fruitless and wasteful expenditure. To this end it is alleged that:
a) Mr Stephen Ngobeni, Mr Montana’s cousin in the employment of PRASA, was improperly appointed as a Training Contractor to provide training services on the handling of People with Disability. He was later allegedly improperly transferred without a disciplinary process being instituted against him; and
b) Mr Montana unlawfully engages yearly in a series of suspending employees perpetually with payment of salaries costing PRASA an estimated R3.35 million in fruitless and wasteful expenditure.
33. The Complainant further raised allegations of conflict of interests relating to the following members of the PRASA Board:
a) A member of the PRASA Board, Dr Bridgette Gasa, who is also a Director of ARUP, a company alleged to be contracted to provide advisory services to PRASA, and a Director in another company that is also providing consultancy services to PRASA, is benefiting improperly as her involvement in these companies while serving as a member of the PRASA Board constitutes a conflict of interest;
b) The Chairman of the PRASA Board, Mr Sfiso Buthelezi is alleged to be the Chief Executive Officer of Makana, a subsidiary of Cadiz, a company allegedly providing advisory service to PRASA on the Rolling Stock Recapitalisation Project. His alleged involvement is asserted to constitute a conflict of interest; and
c) The wife of Mr Bushy Boshielo was appointed as a General Manager of Autopax without following proper recruitment processes during Mr Boshielo’s tenure as a member of PRASA Board.
34. During 2008/2009, Mr Montana improperly appointed Mr Chimanda as a Special Advisor at PRASA at a cost of R2 million, without following proper recruitment processes and in contravention of the PRASA Recruitment Policy.
35. About 17 tenders/contracts collectively exceeding R2.8 billion were specifically identified by the Complainant for investigation of supply chain irregularities, including non-competitive processes, cronyism, scope creep, cost overruns, overpayment and fruitless and wasteful expenditure.
(x) Despite each complaints being a distinct matter worthy of a separate investigation, the 37 complaints were investigated collectively thus forming one systemic investigation. The following issues were identified in respect of each complaint with a view to focusing the investigation:
1. Did PRASA improperly extend, to other stations nationally, a tender for the installation of high speed passenger gates worth R800 million to Siyangena Technologies in 2009/2010 for the Doornfontein station which was later extended to other stations nationally?
2. Did PRASA improperly extend the appointment of Siemens tender for the Dark Fibre and Integrated Communication Systems amounting to R800 million to other stations nationally, during the financial year 2009/2010 when it was only advertised for Gauteng?
3. Did PRASA improperly terminate all contracts for cleaning services and was the subsequent appointment of Reakgona Commercial and Industry Hygiene and Katanga Cleaning Services improper?
4. Did PRASA improperly appoint Sidas Security on a security tender in replacement of National Force Security on the GCEO’s instruction?
5. Did PRASA improperly appoint of Vimtsire Security Services, which failed to meet the minimum requirements for appointment on tender number 525/2010/GAU/PS?
6. Did PRASA improperly appoint and pay Royal Security R2.8 million instead of R2.5 million for security services?
7. Did PRASA improperly advance a payment of R600.000.00 to Enlightened Security?
8. Did PRASA improperly appoint a media company to produce Hambanathi Magazine during 2008/2009?
9. Did PRASA improperly appoint Mr Ezra Ndwandwe, on a Change Management Consultancy at a cost of R2 million in 2008/2009?
10. Did PRASA improperly increase the scope and value of marketing and communications tender number HO/M&C/305/07/2009 awarded to Brand Leadership for R29 million?
11. Did the GCEO improperly appoint Mr Edwin Lekota on a tender amounting to R10 million for the development of a Contingency Emergency Preparedness Programme for Metrorail?
12. Did PRASA improperly award a tender to Umjanji Consortium, for the media, advertising and broadcasting concession agreement?
13. Did the GCEO improperly award a contract for the provision of professional advisory service on the signalling project to a friend, Mr Makhensa Mabunda of Siyaya DB, who did not possess the necessary skills and experience and without following proper procurement processes?
14. Did PRASA improperly award a tender in the amount of R22 million for Park Station Development Framework to ARUP, a company associated with its board member?
15. Did PRASA improperly fail to investigate the theft of the buses of its subsidiary, Autopax?
16. Did PRASA improperly award a security services contract to Futuris Guarding in April 2010 at Autopax City to City for a total amount of R231 204.00?
17. Did PRASA improperly terminate the Rasakanya Builders contract on 1 November 2012?
18. Did the GCEO/PRASA improperly implement an upfront payment in the amount of R 80 million for the FIFA World Cup sponsorship without proper approval, budget and/or allocated funds thus constituting to fruitless and wasteful expenditure?
19. Did PRASA improperly incur an over expenditure of R2.2 billion on PRASA’s operations budget in 2009/2010 financial year?
20. Did PRASA fail to spend a subsidy of R500 million received for Shosholoza Meyl for the 2009/2010 period and not use it for its intended purpose?
21. Did PRASA incur rental expenditure for Jorissen Building after vacating it 20 months before the expiry of its lease resulting in fruitless and wasteful expenditure?
22. Did PRASA improperly incur rental expenditure on Intersite Building after vacating the building 10 months before the expiry of its lease resulting in fruitless and wasteful expenditure?
23. Did the GCEO improperly terminate contracts of Executives resulting in fruitless and wasteful expenditure amounting to an estimated R5 million?
24. Did the GCEO improperly suspend employees resulting in labour dispute settlements amounting to R3.35 million thus constituting fruitless and wasteful expenditure?
25. Did PRASA Board Chairman, Mr Sfiso Buthelezi, improperly fail to disclose and manage a conflict of interest arising from his interest in Makana, a subsidiary of Cadiz, a company allegedly providing advisory services to PRASA on the Rolling Stock Programme?
26. Did Dr Bridgette Gasa, a PRASA Board member improperly fail to disclose and manage a conflict of interest arising from her interest in ARUP and her directorship in another company providing consultancy services to PRASA?
27. Did the GCEO improperly appoint Mr Joel Chimanda at a cost of R2 million as a Special Advisor?
28. Did PRASA improperly replace the Group Executive HR with the GCEO’s uncle, Mr Mphefo Ramutloa without following proper recruitment process?
29. Did PRASA improperly fail to take disciplinary action against staff members allegedly involved in fraudulent Electronic Funds Transfers amounting to R8.1 million?
30. Did Mr. Montana improperly transfer Mr Stephen Ngobeni without disciplinary process being followed for his alleged irregular appointment of a Training Contractor to provide training services on the handling of People with Disability thereby amounting to maladministration?
31. Did PRASA improperly implement an upfront payment to a developer of the City Mall for the construction of an underground train station on the Bridge City Project without proper authorisation during the period 2008 to 2010?
32. Did PRASA improperly award a CCTV cameras tender to Mr Vusi Twala?
33. Did PRASA improperly engage various construction companies in respect of 2010 Soccer World Cup Projects?
34. Did PRASA improperly procure Umjantshi House from Transnet in September 2009 by flouting supply chain management prescripts?
35. Did PRASA improperly appoint Ms Shiela Boshielo, the wife of Mr. Bushy Boshielo, the former member of the PRASA Board as General Manager of Autopax?
36. Did Mr Montana improperly take a Blue Train trip to Cape Town together with 10 female companions during the period between 24 to 27 September 2009 and return by SAA flight at an estimated cost of R170 000.00 and did such amount to fruitless and wasteful expenditure?
37. Did PRASA improperly pay a salary to Mr Mabe, former Executive Corporate Affairs Manager during 2008/2009, after his resignation from PRASA amounting to fruitless and wasteful expenditure?
38. Although the investigation covered all abovementioned issues, the findings on seven (7) issues will be made in a follow up report due to failure by PRASA to provide certain requested documents and information.
(xi) The investigation included the sourcing and analysis of corporate documents pertaining to the impugned transactions, interviews and meetings with selected witnesses and research into the regulatory framework, which includes the Constitution, laws, Treasury Regulations and corporate policies.
(xii) In arriving at the findings, I have been guided by the standard approach adopted by the Public Protector South Africa as an institution, which simply involves asking: What happened? What should have happened? Is there a discrepancy between what happened and what should have happened? If there is a discrepancy, does the conduct amount to improper conduct or maladministration? If there was indeed improper conduct or maladministration, what would be the appropriate remedial action?
(xiii) As is customary, the “what happened” enquiry is a factual question settled on the assessment of evidence and making a determination on a balance of probabilities. To arrive at a finding on what happened, the investigation, like all others, relied on oral and documentary submissions by the Complainant and PRASA management, principally represented by the GCEO, Mr Montana. Interviews/meeting held primarily to clarify evidence already gathered, were also held with the Complainant, Mr Montana assisted by his lawyers and the PRASA Board. The question regarding what should have happened on the other hand, relates to the standard that the conduct in question should have complied with.
(xiv) In determining the standard that the GCEO and other functionaries at PRASA should have complied with, to avoid improper conduct or maladministration, I was guided, as is customary, by the Constitution, national legislation and applicable policies and guidelines, including corporate policies and related regulatory instruments. Key among corporate policies, that informed the investigation was the PRASA Procurement and Supply Chain Management Policy (SCM Policy) and the Delegation of Authority document. The SCM Policy approved in 2009 thus preceding the matters investigated, is very comprehensive. It commences with defining supply chain management and its purposes.
(xv) The SCM Policy affirms and commits to uphold section 217 of the Constitution setting the vision behind it and standards to be upheld in state procurement or Supply Chain Management (SCM) processes, which vision includes ensuring a fair, equitable, transparent, competitive and cost-effective public procurement system. The SCM Policy also roots itself in Treasury Regulations regulating SCM. It further outlines the steps to be taken in pursuit of the procurement of goods and services within PRASA covering Demand Management, Contract Administration, Material Management, Disposal Management, Procurement Strategy and Acquisition Management.
Also regulated are permissible deviations, which include urgency and single source providers. The policy also deals with management of conflict of interest. The investigation was also guided by Human Resources policies, to the extent that some allegations involved the appointment, promotion and termination of employees, including executives. In this regard section 195 of the Constitution setting a standard for all conduct in state affairs was relied on to a great extent. To the extent that there was an allusion to whistle-blower victimization, I took into account the provisions of the Protected Disclosures Act 26 of 2000.
(xvi) At the commencement of the investigation, the allegations were brought to the attention of PRASA management through the GCEO, Mr Montana, the Chairman of the PRASA Board and then former Board. Towards the final stages, the new Board was engaged, including sharing of provisional findings with it and enlisting its support with regard to missing or conflicting information in the management submissions.
(xvii) All information and evidence gathered during interactions with PRASA management and complainants were taken into account in an effort to reconstruct what happened and if what happened was in line with the rules. Parties implicated by the evidence gathered by the time a Provisional Report had been prepared, were sent notices under section 7(9) of the Public Protector Act alerting them of evidence implicating them and the possibility of adverse findings. A discretionary notice was also sent to the Complainant alerting them to allegations not supported by evidence. In all cases, responses were solicited and affected parties given an opportunity to provide further information and to engage via meetings.
(xviii) I must record that the investigation team and I had immense difficulty piecing together the truth as information had to be clawed out of PRASA management. When information was eventually provided, it came in drips and drabs and was incomplete. Despite the fact that the means used to obtain information and documents from PRASA included a subpoena issued in terms of section 7(4) of the Public Protector Act, many of the documents and information requested are still outstanding. Until about three weeks before issuing the report, PRASA was still being asked for outstanding documents and information on contracts awarded and some staff appointments.
(xix) I must also indicate that the authenticity of many of the documents submitted by PRASA management as evidence, principally relating to procurement, is doubtful. Many of the memoranda for approval of tenders and related documents submitted by PRASA management, were undated, unsigned and, at least in one case, incomplete. Examples in this regard include documents relating to the contracting of Vimtsire Security, ARUP and Enlightened Security Services. In some of the cases, had this been an audit, only a disclaimer would be a legitimate audit outcome.
(xx) After unsuccessfully asking the new PRASA Board and its Chairman to assist, I decided it would be in the public interest to proceed with the report and defer unanswered questions to second report. The second report has also been necessitated by further allegations of financial impropriety, corruption and tender irregularities at PRASA, which came too late to be investigated and incorporated in this report. The issues covered in the original 37 complaints that have been deferred to the second report are the following:
1. Did PRASA improperly implement an upfront payment to a developer of the City Mall for the construction of an underground train station on the Bridge City Project without proper authorisation during the period 2008 to 2010?
2. Did PRASA improperly award a CCTV cameras tender to Mr Vusi Twala?
3. Did PRASA improperly engage various construction companies in respect of 2010 Soccer World Cup projects?
4. Did PRASA improperly procure Umjantshi House from Transnet in September 2009 by flouting supply chain management prescripts?
5. Did PRASA improperly appoint Ms Shiela Boshielo, the wife of Mr. Bushy Boshielo, the former member of the PRASA Board as General Manager of Autopax?
6. Did Mr Montana improperly take a Blue Train trip to Cape Town together with 10 female companions during the period between 24 to 27 September 2009 and return by SAA flight at an estimated cost of R170 000 and did such amount to fruitless and wasteful expenditure?
7. Did PRASA improperly pay a salary to Mr Mabe, former Executive Corporate Affairs Manager during 2008/2009, after his resignation from PRASA amounting to fruitless and wasteful expenditure?
(xxi) What is encouraging is that both Mr Montana, and the Board have welcomed the Provisional Report which did not differ vastly from this final report and committed themselves to implementing the remedial action once the report is made final. For this, I am grateful as such conduct is line with the constitutional ideal regarding the relationship between the Public Protector and organs of state as envisaged in section 181 of the Constitution. Section 181 enjoins organs of state to assist, and protect the Public Protector and other institutions supporting constitutional democracy to ensure their effectiveness, among other things.
(xxii) After a careful examination of the evidence and information obtained during the investigation and the regulatory framework setting the standard that should have been upheld by PRASA , my findings are the following:
1. Regarding PRASA’s alleged improper extension to other stations nationally, a tender for the installation of high speed passenger gates worth R800 million to Siyangena Technologies in 2009/2010 initially advertised for the Doornfontein station, Gauteng:
a) The allegation that PRASA improperly extended the scope of a tender awarded to Siyangena Technologies for the supply and installation of high speed passenger gates at Doornfontein station to a national scope is substantiated. However, the total amount of the contract was R1.95 billion and not R800 million as alleged.
b) The scope of a tender for high speed passenger gates advertised for two train stations, Doornfontein and Nasrec in Gauteng was awarded by the PRASA Board to Siyangena Technologies, and later extended to cover additional stations, on the basis of a closed bidding process with those that had bid for the two Gauteng stations.
c) The extension of the tender scope beyond what had been advertised was in contravention of paragraph 11.3.2 of PRASA SCM Policy, section 38 of the PFMA, PPPFA and section 217 of the Constitution requiring fair, equitable, transparent, competitive and cost-effective bidding processes.
d) The extension of Siyangena Technologies’ contract to more stations than were specified in the tender advertisement accordingly constitutes maladministration and improper conduct.
2. Regarding PRASA’s alleged improper extension of a tender awarded to Siemens for the Dark Fibre and Integrated Communication Systems amounting to R800 million to additional stations nationally, during the financial year 2009/2010 when it was only advertised in Gauteng:
a) The allegation that PRASA improperly extended the scope and value of a tender awarded to Siemens for Dark Fibre and Integrated Communication Systems beyond what was advertised and approved by the Corporate Tender Procurement Committee (CTPC) with the effect of substantially increasing the contract price is substantiated. However, the total contract amount was R256 million and not R800 million as alleged.
b) PRASA improperly extended, to the Durban (KZN) and Western Cape regions, a tender for the design, supply and installation of the Dark Fibre and Integrated Communication Systems, which had been advertised and won by Siemens for the Wits and Pretoria region, without following an open and competitive tender process. This was in contravention of paragraph 11.3.7. of PRASA SCM Policy and section 217 of the Constitution, among others.
c) The extension of the scope and price of the design, supply and installation of the Dark Fibre and Integrated Communication Systems tender to other regions accordingly constitutes maladministration and improper conduct.
3. Regarding PRASA’s alleged improper termination of all contracts for cleaning services and subsequent irregular appointment of Reakgona Commercial and Industry Hygiene and Katanga Cleaning Services:
(a) The allegation that PRASA improperly terminated the contracts of seven (7) cleaning companies and improperly replaced them with Reakgona Commercial and Industry Hygiene (Reakgona) and Katanga Cleaning Services (Katanga), is substantiated.
(b) The contracts of 7 cleaning companies were summarily terminated by Mr Montana on 14 March 2012 in contravention of paragraph 13.1 of the contracts between PRASA and the cleaning companies, which prescribes a 48 hour notice to be given to the defaulting party to remedy a breach. He replaced them with Reakgona and Katanga on 15 March 2015, whose services were procured without a transparent and competitive process.
(c) The conduct of Mr. Montana with regard to the summary termination of the contracts of 7 cleaning companies is also inconsistent with the provisions of the PRASA SCM Policy, the PFMA, PPPFA and section 217 of the Constitution.
(d) PRASA’s summary termination of the contracts of 7 cleaning companies and their irregular replacement with Reakgona and Katanga, accordingly constitutes maladministration, abuse of power and improper conduct.
(e) The failure by Mr Montana to afford the 7 cleaning companies an opportunity to explain themselves and possibly remedy the breach cannot be considered to be in line with section 33 of the Constitution and the provisions of PAJA.
4. Regarding PRASA’s alleged improper appointment of Sidas Security on a security tender in replacement of National Force Security on the GCEO’s instruction:
a) The allegation that Sidas Security was improperly appointed to replace National Force Security is substantiated. However, no evidence could be found to prove that the improper appointment was done on Mr Montana’s instructions.
b) The month to month contract of National Force Security was terminated on 15 April 2009 and awarded to Sidas Security for R3 711 197.72, by Mr Chris Moloi without a tender process or competitive quotations being sought.
c) The appointment was in contravention of paragraph 11.3.5 of the PRASA SCM Policy and paragraph 4.7.5.1 of the National Treasury SCM Guidelines of 2004.
d) PRASA’s failure to take action against the authorised official, who approved the submission for the appointment of Sidas Security, constitutes maladminstration and improper conduct.
5. Regarding PRASA’s alleged improper appointment of Vimtsire Security Services, which failed to meet the minimum requirements for appointment on tender number 525/2010/GAU/PS:
a) The allegation that Vimtsire Security Services was improperly appointed while not meeting the requirements is substantiated.
b) PRASA appointed Vimtsire Security Services on two contracts for tender 525/2010/GAU/PS without an advertisement or competitive quotations. The first contract was signed on 23 February 2010 without specifying the period of the contract for an amount of R4 596 480.00 and the second contract was signed on 29 May 2010 for the period 13 March 2010 to 13 August 2010 for the amount of R7 537 680.00. The contract was further extended by PRASA from 1 January 2011 to 31 December 2011 for an amount of R14 441 976.00, without a competitive process.
c) The appointment and extension of the contract of Vimtsire Security amounting to R26 576 136 00.00 were unlawful, in contravention of paragraph 11.3.1 of the PRASA SCM Policy read with the Delegation of Authority, section 217 of the Constitution, among others.
d) The conduct of PRASA in appointing and extending the contract of Vimtsire Security Services irregularly accordingly constitutes maladministration and improper conduct.
6. Regarding PRASA’s alleged improper appointment and payment of Royal Security for an amount of R2.8 million for security services:
a) The allegation that Royal Security was paid R2.8 million instead of R2.5 million stipulated in the contracts, was not substantiated.
b) Documentary evidence shows that the amount paid by PRASA to Royal Security was R2.5 million.
7. Regarding PRASA’s alleged improper advance payment of R600.000.00 to Enlightened Security:
a) The allegation that Enlightened Security was irregularly given an advance payment of about R600.000.00 is substantiated.
b) PRASA made a first payment of R684.720.00 to Enlightened Security for security services at Mabopane station on 22 October 2008 which was preceded by an invoice dated 19 September 2008 before the signing of the contract and the issuing of a Notice to Proceed, which followed on 17 October 2008.
c) Mr Joe Ngcobo’s conduct in making advance payments to Enlightened Security accordingly constitutes maladministration and improper conduct.
d) PRASA management became aware of this violation but took no disciplinary steps against the manager responsible, Mr Joe Ngcobo, despite initially commencing a disciplinary process. This conduct is in violation of the accounting officer’s responsibility under section 38 of the PFMA and is accordingly irregular and constitutes maladministration and improper conduct.
8. Regarding PRASA’s alleged improper appointment of a media company to produce Hambanathi Magazine during 2008/2009:
a) The allegation that PRASA improperly appointed a media company to produce
Hambanathi is substantiated.
b) PRASA entered into a contract (referred by it as a partnership) with KG Media providing for the publication and distribution of PRASA information to its commuters and stakeholders, through Kwela Express, which used to be a corporate magazine of Metrorail (subsidiary of PRASA, using the name Hambanathi when Mr Pule Mabe, the then owner of Kwela Express, was employed there).
c) The contract was from 1 April 2012 to 1 April 2015 (a period of 3 years) for the amount of R465 669.75 per month which translates to R5 588 000.37 per annum and a total contract amount of R16 764 111.00 without a competitive and transparent bid process. Mr Montana extended the contract in March 2015 for a further 3 years R16 764 111.00 despite a forewarning through a notice issued in terms of section 7(9) of the Public Protector Act, that the arrangement was likely to be determined to be unlawful. Effectively, PRASA is renting space on Hambanathi/Kwela for the price of about R465 669.75 a month.
d) Considering the fact that PRASA created Hambanathi/Kwela and simply failed to register it as a patent, I find the arrangement with Mr Mabe’s company, KG Media, rather bizzare.
e) The appointment of KG Media, without a competitive process did not comply with requirements for single sourcing or any of the permissible procurement processes prescribed in the PRASA SCM Policy as production of a corporate newsletter is not an exclusive skills area or product for KG Media and paragraph 11.3.3 of the PRASA SCM Policy prohibits unsolicited bids.
f) PRASA’s appointment and extension of the contracts with KG Media for the Hambanathi totalling an amount of R 33 528 222.00 is unlawful, a flagrant contravention of PRASA’s own SCM Policy, Treasury Regulations, the PFMA and section 217 of the Constitution and constitutes maladministration and improper conduct.
g) Mr Montana’s recent extension of the Hambanathi contract while being aware contract of an impending finding of maladministration regarding the Hambanathi while having asked for time extension to respond to the section 7(9) notice, is an act of bad faith, which is inconsistent with his responsibilities under section 195 of the Constitution, requiring a high standard of professional ethics and, which, according to the Constitutional Court, in Khumalo versus MEC for Education KwaZulu Natal, imposes a duty on him to correct an irregularity once his attention has been drawn to it. His actions in this regard, constitute gross maladministration and improper conduct. Such conduct is not only unlawful but also displays diconserting disregard for the rule of law.
9. Regarding PRASA’s alleged improper appointment of Mr Ezra Ndwandwe, on a Change Management Consultancy at a cost of R2 million in 2008/2009:
a) The allegation that Mr Montana improperly appointed Mr. Ezra Ndwandwe, is substantiated. However, it is the Consultancy and not the person that was appointed and the amount involved was R10 833. 774. 00 for 12 months.
b) Ndwandwe Consultancy was appointed by Mr. Montana for the Value Creation and Culture Change process at PRASA on 14 June 2008 for the amount of R6 220 800.00 without requiring three quotations from suppliers in the PRASA database as prescribed in paragraph 11.3.1.1 of the PRASA SCM Policy. The contract was extended for a further 6 months with the contract amount variation of R4 612 974.00 exceeding 40%.
c) The appointment of Ndwandwe Consultancy by Mr Montana was unlawful, in contravention of PRASA’s own SCM Policy, Treasury Regulations on procurements, the PFMA and section 217 of the Constitution and accordingly constitutes improper conduct and maladministration.
d) From the evidence it is clear that Mr Ndwandwe’s consultancy’s appointment was triggered by an existing relationship, which had included an excursion that took place immediately before the impugned contract was initiated. It is also clear that no process was followed to establish if any other agency offered similar services. More importantly, no demand management exercise preceded the engagement. Unfortunately, the investigation did not examine what the excursion mentioned in the procurement memorandum dated 16 September 2008 was for, whether or not PRASA paid for it and how Mr Ndwandwe’s consultancy had been procured it as the impugned engagement apparently flows from that excursion. This constitutes improper conduct and maladministration.
10. Regarding PRASA’s alleged improper increase of the scope and value of a marketing and communications tender number HO/M&C/305/07/2009 awarded to Brand Leadership:
a) The allegation that PRASA improperly increased the scope and price of a marketing and communications tender awarded to Brand Leadership, is substantiated. However the tender price and price variation amount were actually higher than alleged.
b) The scope of a tender recommended by the PRASA Bid Adjudication Committee (BAC) at the value of R12.000.000.00 was increased beyond the advertised scope to R29. 528. 000.00 by PRASA’s CTPC, when it awarded it without the Accounting Officer’s approval. The project timeline was also stretched, by an additional 6 months. It originally ran from October 2009 to September 2010 and was extended to March 2011.
c) In increasing the scope and price of the advertising tender in excess of what was advertised and without approval by the GCEO, the conduct of the PRASA CTPC was in contravention of the PRASA SCM Policy, National Treasury SCM Guidelines 5.16.1.1.1 of 2004 setting out a proper process for demand management and the process to be followed in extending the scope of a contract. The conduct of PRASA was improper and constitutes maladministration.
11. Regarding the GCEO’s alleged improper appointment of Mr Edwin Lekota on a tender amounting to R10 million for the development of a Contingency Emergency Preparedness Programme for Metrorail:
a) The allegation that PRASA improperly appointed Mr Edwin Lekota on a tender is substantiated.
b) Mr Lekota’s Lekga Investment Holdings, was appointed directly by PRASA for the ISO 9001: 2000 compliance work without a competitive process.
c) I am unable to accept Mr Montana’s submission that the appointment of Mr Edwin Lekota, former CEO of SARCC, the predecessor of PRASA on a panel with, Dr Chris Dutton and Mr Friedel Mulke as part of the Board of Inquiry in terms of his powers. The evidence shows that Carundell was indeed awarded a contract to deal with the emergency arsing from the burning of trains in Soshanguve, City of Tshwane, Gauteng. The same evidence shows that Mr Lekota was subcontracted by Carundel to deal with the burning of the trains.
d) However, I am encouraged by Mr Montana’s undertaking in his response to the provisional findings, to ensure that such experts are, in future, invited to be part of an existing panel of experts in the PRASA database.
12. Regarding PRASA’s alleged improper award of a tender to Umjanji Consortium, for the media, advertising and broadcasting concession agreement:
a) I have deferred my findings on this complaint as PRASA is yet to submit some of the bid documents, key being the tender documents submitted by Umjanji Consortium, which need to be subjected to a forensic examination. Evidence uncovered so far confirms that:
i. On 31 January 2011, Mr Montana awarded the Media and Broadcasting Services tender HO/CA739/02/2010 to Umjanji Consortium, an entity led by Provantage Media, which is apparently the only constituent part of Umjanji Consortium that attended the compulsory briefing session for the tender on 22 February, 2010.
ii. Umjanji Consortium was not in existence at the time of closure of the tender on 11 March 2010.
13. Regarding the GCEO’s alleged improper awarding of a contract for the provision of professional advisory service on the signalling project to a friend,
Mr Makhensa Mabunda of Siyaya DB
a) No evidence was found substantiating that Mr Mabunda was or is Mr Montana’s friend and that such friendship informed his company’s appointment.
b) Mr Montana did appoint Siyaya DB, which scored slightly lower than Mott Macdonald, on tender HO/INF/203/06/2010 for rendering of technical assistance and supervision for the national signalling project, following an open and competitive tender process.
c) I have accepted these reasons given being that the highest bidder failed to meet PRSASA’s requirements relating to pricing certainty and BEEE compliance as both cogent and rational
d) I am accordingly unable to find that the award of the tender to Siyaya DB by Mr Montana and/ or PRASA constitutes maladministration or improper conduct.
14. Regarding PRASA’s alleged improper awarding of a tender in the amount of R22 million for Park Station Development Framework to ARUP, a company associated with its board member.
a) The allegation that ARUP was improperly awarded a tender for the Park Station Development Framework is substantiated. However, the amount involved was much less than the alleged R22 million, it was R3 898 940.00 which did not require Board approval.
b) PRASA conceded that a proper procurement process was not followed in the appointment of ARUP and took action against the persons implicated in the appointment concerned.
c) I accordingly do not see the need to make a finding of maladministration or improper conduct. The aspect relating to a board member’s alleged involvement is addressed separately.
15. Regarding PRASA’s alleged failure to investigate the theft of buses of its subsidiary, Autopax:
a) The allegation that PRASA improperly failed to investigate the theft of buses of its subsidiary, Autopax, is not substantiated.
b) Records show that PRASA conducted an investigation and internal disciplinary hearings regarding the theft of the Autopax buses leading into the suspension of one employee and dismissal of another. Furthermore, cases were registered with the SAPS in respect of the theft of the buses and there were regular follow up activities.
16. Regarding PRASA’s alleged improper awarding of a security services contract to Futuris Guarding in April 2010 at Autopax City to City for a total amount of R231 204.00:
a) The allegation that Futuris Guarding was improperly appointed is substantiated. However, the amount involved was higher than alleged as it was about R10.6 million for a six month contract.
b) Although security unarguably involves danger as envisaged in urgency provisions of paragraph 11.3.5 of the PRASA SCM Policy, the implementation of urgency procurement failed to comply with the procedure laid out in the PRASA SCM policy in that the deviation was not ratified and approved by the GCEO, a deviation I consider material.
c) The actions of Mr Joe Buthelezi, Acting Supply Chain Manager in the appointment of Futuris Guarding on a security contract on confinement, without the GCEOs approval constitutes maladministration and improper conduct.
d) PRASA’s failure to take disciplinary action Mr Buthelezi for the appointment of Futuris Guarding constitutes improper conduct and maladministration.
17. Regarding PRASA’s alleged improper termination of the Rasakanya Builders contract on 1 November 2012:
a) The allegation that PRASA improperly terminated the contract of Rasakanya Builders is not substantiated.
b) PRASA terminated its month to month contract with Rasakanya Builders on 28September 2012, with effect from 01november, 2012, giving it a month’s notice.
c) I could not find any impropriety with the termination and accordingly am unable to find that PRASA’s conduct constitutes maladministration or improper conduct.
18. Regarding the GCEO/PRASA’s alleged improper implementation of an advance payment in the amount of R 80 million for the FIFA World Cup sponsorship without proper approval, budget and/or allocated funds thus constituting to fruitless and wasteful expenditure:
a) The allegation that PRASA made an advance payment in the amount of R80 million to FIFA without proper approval, budget or allocated funds which resulted in fruitless and wasteful expenditure is not substantiated.
19. Regarding PRASA’s alleged improper incurring of an over expenditure of R2.2 billion on PRASA’s operations budget in 2009/2010 financial year:
a) The allegation that PRASA improperly incurred an over expenditure is substantiated. However, the amount involved was far less than alleged. It was R523 792 767.00
b) PRASA exceeded its budget by R523 792 767.00 for the 2009/2010 financial year.
20. Regarding PRASA’s alleged failure to spend a subsidy of R500 million received for Shosholoza Meyl for the 2009/2010 period and not use it for its intended purpose:
a) The allegation that PRASA failed to spend the subsidy received for Shosholoza Meyl for 2009/2010 financial year is not substantiated.
b) PRASA received a government subsidy of R450.00.00 for the year 2009/10 for Shosholoza Meyl.
c) I am unable to confirm if the subsidy was indeed used for its intended purpose as the operational expenditure for Shosholoza Meyl was not reflected separately in the overall budget of PRASA.
21. Regarding PRASA’s alleged incurring of rental expenditure for Jorissen Building after vacating it 20 months before the expiry of its lease resulting in fruitless and wasteful expenditure:
a) The allegation that PRASA improperly incurred rental expenditure which constitutes fruitless and wasteful expenditure due to vacating of the Jorissen Building before the expiry of its lease agreement is substantiated.
b) On the authority of Mr Montana, PRASA (SARCC) paid rental for a vacant office property number 66 Jorissen Street, Braamfontein, Johannesburg, for 20 months after vacating it prior to the expiry of its lease agreement and without exercising its option of subletting.
c) The hasty vacation of Jorissen’s Place Building resulting in continued full payment of rent for unused lettable space for 20 months. This cannot be consistent with the efficiency and cost effective dictates expected in state affairs under section 195 of the Constitution and the standards set for proper handling of public funds under the PFMA, particularly section 51 thereof.
d) The actions of PRASA management and its Board regarding the move to Umjantshi House and payment for vacant premises, for about 20 months and failing to mitigate the loss by subletting the premises, amounts to fruitless and wasteful expenditure.
22. Regarding PRASA’s alleged improper incurring of rental expenditure on Intersite Building after vacating the building 10 months before the expiry of its lease resulting in fruitless and wasteful expenditure:
a) The allegation that PRASA improperly incurred rental expenditure and the consequent fruitless and wasteful expenditure, due to vacating Intersite Building before the expiry of its lease, is substantiated.
b) PRASA vacated the Intersite building about 10 months before the lease expiry date and continued with rental payments for the building for the vacant building until the expiry of the lease.
c) The conduct of PRASA accordingly constitutes maladministration and improper conduct.
23. Regarding the GCEO’s improper termination of contracts of Executives resulting in fruitless and wasteful expenditure amounting to an estimated R5 million:
a) The allegation that Mr Montana improperly terminated the services of 5 of its Executives mentioned in paragraph 6.27.2.1 of this report is substantiated.
b) Mr Montana terminated the services of five Executives during 2008-2013 without following proper procedure as provided for in paragraph 4.4 of PRASA’s Disciplinary Code and Procedure. This resulted in the CCMA overturning some of the terminations and others being settled out of court at cost to PRASA.
c) PRASA subsequently paid labour dispute settlements amounting to R3 816 735.32, principally due to procedural irregularities in the disciplinary steps taken against involved officials, which payments can be said to constitute fruitless and wasteful expenditure as envisaged in section 38(1)(c)(ii) of the PFMA.
d) Failure by PRASA to follow its corporate disciplinary procedures and labour laws relating to procedural fairness constitutes maladministration and improper conduct.
24. Regarding the GCEO’s alleged improper suspension of employees resulting in labour dispute settlements amounting to R3.35 million thus constituting fruitless and wasteful expenditure:
a) The allegation that the GCEO suspended employees without following proper disciplinary procedures is substantiated in respect of some of the employees as others were not suspended by him.
b) PRASA suspended 7 employees without following proper procedure as provided for in the Labour Relations Act and paragraph 11 of its Disciplinary Code and Procedure, leading to loss of approximately of R2 million in wages during their suspension period.
c) The case studies regarding the seven (7) officials mentioned in paragraph
6.28.2.3 of the report support the conclusion of a pattern of habitual suspensions for periods exceeding thirty(30) days without following proper procedure.
d) The conduct of PRASA in habitually suspending employees was in contravention of paragraph 11.1 of its Disciplinary Code and Procedure which provides that the employer has the right to suspend an employee with pay for a period not exceeding thirty (30) calendar days and also in contravention of paragraph 4.4 of PRASA Disciplinary Code and Procedure and Schedule 1 Part VII of the Basic Conditions of Employment Act which provides that employment practices shall ensure employment fairness.
e) It is not unreasonable to draw a nexus between the payment of salaries for staff sitting at home with pay for long periods of time and failure to manage employment relations appropriately, and the conclusion that the payment of salaries without any value derived therefrom is irregular and constitutes fruitless and wasteful expenditure.
f) PRASA’s conduct in this regard amounts to fruitless and wasteful expenditure in contravention of the provisions of section 38(1) (c) (ii) read with section 51(b)(ii) of the PFMA while being at odds with the financial prudence and efficiency requirements of section 195 of the Constitution.
g) The conduct of PRASA regarding improper suspension of employees accordingly constitutes maladministration and improper conduct.
25. Regarding PRASA Board Chairman, Mr Sfiso Buthelezi’s alleged failure to disclose and manage a conflict of interest arising from his interest in Makana, a subsidiary of Cadiz, a company allegedly providing advisory services to PRASA on the Rolling Stock Programme:
a) The evidence regarding the allegation that Mr Buthelezi, former Chairman of the PRASA Board, improperly failed to disclose and manage a conflict of interest arising from his interest in Makana, a subsidiary of Cadiz, a company alleged to be providing advisory services to PRASA is inconclusive.
b) The documents have not been provided by PRASA, whose GCEO only offered an explanation disputing the allegation and providing the names of companies involved in the said advisory services.
c) Accordingly, I have deferred my findings on this allegation and will be dealt with in the second report.
26. Regarding Dr Bridgette Gasa’s, a PRASA Board member’s alleged failure to disclose and manage a conflict of interest arising from her interest in ARUP and her directorship in another company providing consultancy services to PRASA:
a) The allegation that the then PRASA Board Member, Dr Bridgette Gasa, failed to disclose and manage a conflict of interest arising from her appointment to the Board while two companies she had an interest in provided services to PRASA, is not substantiated.
b) Whilst Dr Gasa was indeed a Director at ARUP from 09 February 2011, she made the necessary disclosure to PRASA on 20 July 2011, resigned on 15 May 2012 and when making her disclosure on 10 October 2012, excluded ARUP, as she no longer was a board member.
c) ARUP SA (Pty) Ltd was indeed awarded a contract by PRASA for the Park Station Development Framework on 21 June 2011; however the contract was for R3.8 million which would not have required Board approval.
27. Regarding PRASA’s alleged improper appointment of Ms Shiela Boshielo, wife of then Board Member, Mr. Bushy Boshielo, as the General Manager of Autopax:
a) I have deferred my finding on the alleged nepotism regarding the appointment of Ms Boshielo as PRASA has failed to provide the selection and appointment memoranda and some of the relevant documents.
b) In its initial response Mr Montana stated on behalf of PRASA that Ms Boshielo was appointed on 06 April 2010 through a headhunting process. Later, in response to the provisional findings, Mr Montana turned around to state that the submission was a mistake as Ms Boshielo was appointed through a recruitment and selection process and was selected from amongst other candidates but repeatedly failed to honour requests to provide the recruitment and selection documents to substantiate the assertion.
28. Regarding the GCEO’s alleged improper appointment of Mr Joel Chimanda at a cost of R2 million as a Special Advisor:
a) The allegation that Mr. Montana improperly appointed Mr Chimanda for advisory services is substantiated.
b) However, it was Mr. Chimanda’s company, AR Chimanda Consulting that was contracted for R1 999.750.00 on a monthly retainer of R150 000.00, which makes the appointment a procurement contract and not an employment contract. As juristic person cannot be an employee, the contract is incapable of being defended under the GGEO’s powers to appoint special advisors, as attempted by Mr Montana in his submissions.
c) The appointment of Mr. Chimanda’s company was not preceded by a competitive bid process, nor is he offering exclusive specialised services entitling him to be the sole provider in terms of the provisions of the PRASA SCM Policy
d) The conduct of Mr Montana, in appointing AR Chimanada Consulting, is accordingly in contravention of the SCM policy, the PFMA, PPPFA aand sction 217 of the Constitution.
e) The conduct of Mr Montana accordingly constitutes maladministration and improper conduct.
29. Regarding PRASA’s alleged improper replacement of the Group Executive HR with the GCEO’s uncle, Mr Mphefo Ramutloa, without following proper recruitment process:
a) The allegation that Mr. Mphefo Ramutloa was improperly appointed in replacement of Group Executive HR by PRASA is not substantiated.
b) No evidence could be found to support the allegation that Mr. Mphefo Ramutloa is Mr Montana’s uncle.
30. Regarding PRASA’s alleged failure to take disciplinary action against staff members allegedly involved in fraudulent Electronic Funds Transfers amounting to R8.1 million:
a) The allegation that PRASA failed to take disciplinary action against employees involved in the fraudulent electronic financial transfers of its funds, from its corporate bank accounts, is partially substantiated.
b) Action was taken against one of the six (6) employees found responsible by a Deloitte forensic investigation, for security lapses that led to the fraudulent electronic transfer of PRASA funds amounting to R8.1million in its KwaZulu Natal and Gauteng bank accounts.
c) PRASA took action against Ms Pallaiyiah but inexplicably failed to take disciplinary action against the other six individuals recommended for possible disciplinary action as mentioned in paragraph 13.3 of the Deloitte Report of 26 February 2010.
d) The conduct of Mr Montana regarding failure to take disciplinary action against the other five (5) employees constitutes maladministration and improper conduct.
31. Regarding Mr Montana’s alleged improper taking of a Blue Train trip to Cape Town together with 10 female companions during the period between 24 to 27 September 2009 and return by SAA flight at an estimated cost of R170 000 and possible fruitless and wasteful expenditure:
(a) The evidence regarding this issue is inconclusive. While the photographic evidence received from the Complainant apparently places Mr Montana on the train and a hotel with women companions, he he has denied the allegation but referred to a different trip.
(b) I have deferred my finding on this allegation and will be dealt with in the second report.
32. Regarding Mr Montana’s alleged improper transferring of Mr Stephen Ngobeni without a disciplinary process being followed for his alleged irregular appointment of a Training Contractor to provide training services on the handling of People with Disability:
a) I have deferred my finding on the alleged failure by Mr Montana to take disciplinary action against Mr Stephen Ngobeni as PRASA has failed to provide the necessary documents relating to the issue.
b) No evidence was found in support of the allegation that Mr Ngobeni is Mr Montana’s cousin.
c) I have deferred my findings on this allegation and will be dealt with in the second report.
33. General observations
33.1 The transactions investigated and related findings reveal a culture of systemic failure to comply with the SCM policy, particularly involving failure to plan for bulk procurement, test the market appropriately for competitive pricing and to manage contracts, which culture may have cost PRASA millions in avoidable expenditure and preventable disruption of services.
33.2 There also seems to be a culture of either poor information management or hiding of information that could provide evidence of maladministration and other forms of improper conduct. If the pattern is not arrested it has the potential to derail the effective and efficient procurement of goods and services to support PRASA operations and consequently service delivery by this important national asset. Poor financial management also has implications for the national revenue as it may mean frequent yet preventable rescue funding.
33.3 Regarding PRASA’s failure to provide information, it must be appreciated that public accountability via administrative bodies such as the Public Protector is not accountable to Complainants but to the public that entrusts public functionaries with public power and resources. It is, accordingly, not open to public functionaries to try and win a case by withholding or hiding information.
(xxiii) The remedial action I take in terms of section 182(1) (c) of the Constitution is to require:
(a) The Minister of Transport to:
1) Take cognizance of the findings regarding the unethical conduct and maladministration by PRASA relating to the irregularities mentioned in the report.
2) Ensure that the PRASA Board considers the report and, where appropriate, acts in terms of section 84 and as contemplated in section 85 of the PFMA.
3) Ensure that the PRASA Board considers the acts of maladministration and improper conduct referred to in paragraph 8 of this report and takes appropriate disciplinary action against the officials of PRASA in respect of their conduct referred to therein.
4) Include in her oversight activities with regard to PRASA as an State Owned Enterprise, the monitoring of implementation of remedial action taken in pursuit of the findings in terms of powers conferred under section 182(1)(c) of the Constitution.
(b) The Chairman of PRASA Board to ensure that:
1) The PRASA Board takes cognizance of the findings of maladministration and improper conduct by Mr Montana and other functionaries at PRASA and takes or ensures that appropriate disciplinary action is taken against the responsible officials, where it considers appropriate.
2) The PRASA Board evaluates the effectiveness of PRASA’s internal controls on Supply Chain Management and Human Resources processes to identify systemic deficiencies with a view to take corrective action to prevent a recurrence of the improprieties referred to in this report.
3) The PRASA Board reviews the PRASA SCM Policy regarding the R350 million. threshold value for competitive bidding process of procurement of goods and services
4) The PRASA Board reports to the National Treasury and the Auditor-General, particulars of the alleged financial misconduct and the steps taken in connection with such financial misconduct, as contemplated in section 85 of the PFMA.
5) To commission the National Treasury in conducting 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 and related improprieties in its procurement system.
(c) The Acting GCEO of PRASA:
1) Should ensure that PRASA adopts a monitoring system that ensures that proper procurement processes and HR processes are followed on appointing service providers and individuals.
2) To ensure PRASA reviews the existing policy or the policy provisions on managing conflict of interest to ensure there is no confusion regarding expectations from employees and Board Members.
3) Together with the Board, review the entire PRASA SCM Policy in particular clause
11.3 of the policy.
4) To ensure that prior to signing a formal contract or service level agreement with a contractor must ensure that such contracts or agreements are legally sound to avoid potential litigation and to minimise possible fraud and corruption. This must include legal vetting by at least the Legal Services of the agency. Such contracts or agreements must be actively managed in order to ensure that both the agency and the contractors meet their respective obligations.
5) To ensure that there is compliance with paragraph 11.1 of the Disciplinary Code and Procedure of Metrorail to avoid prolonged and costly suspensions of employees.
(d) The National Treasury’s Chief Procurement Officer:
1) In consultation with the PRASA Board, consider commissioning a forensic investigation on all PRASA contracts or tenders valued above R10 000 000.00 issued between 1 April 2012 and 30 June 2015.
2) The terms of reference to be approved by the Public Protector and to include a forensic examination of all suspected or alleged corrupt relationships.
3) The Public Protector to be kept abreast of the progress of the investigation and favoured with the final report.
Transcribed from PDF. The full report can be accessed here.
Issued by the Office of the Public Protector, August 24 2015
