Executives at the scandal-ridden Passenger Rail Agency of South Africa (Prasa) engaged in a chaotic procurement frenzy for almost a decade, awarding irregular contracts worth R2.8bn in blatant violation of tender rules, according to a report by the Special Investigating Unit (SIU).
Yet almost three years after the SIU asked the National Prosecuting Authority (NPA) to press charges against the rail bosses, and six years after President Cyril Ramaphosa ordered the SIU probe by proclamation in 2019, not one of the executives has been called to account.
The hard-hitting report, finalised in December 2023, has been kept under wraps until now and is being made public for the first time by the Sunday Times.
The SIU report lays the blame for the irregular contracts on Prasa’s former CEOs or acting CEOs:
- Lucky Montana;
- Nkosinathi Khena;
- Collins Letsoalo;
- Lindikaya Zide;
- Sibusiso Sithole; and
- Nkosinathi Sishi.
The dossier reveals how between 2010 and 2019, under the watch of the six former senior executives, Prasa not only handpicked and appointed a series of service providers without any tender processes but also approved payments totalling R2.8b to the companies.
In October 2022, during the course of its investigation, the SIU asked the NPA to press criminal charges against Montana, Letsoalo, Zide, Sithole and Sishi for contravening section 86 (2) of the Public Finance Management Act (PFMA) in respect to the R2.8bn. Section 86 (2) makes failing to prevent irregular, unauthorised, fruitless or wasteful expenditure a criminal offence.
The NPA’s spokesman Bulelwa Makeke said by law, the SIU has an obligation to refer matters to the NPA if it comes across evidence of criminality.
After receiving referrals from the SIU, the NPA passes such matters to the Hawks to open dockets and conduct further investigations.
“The investigations undertaken by the SIU do not satisfy criminal standards for prosecutions and the referrals are not trial-ready. Therefore, the NPA must work with investigators in the DPCI & SAPS to conduct criminal investigations and ensure that the evidence meets the requisite criminal prosecution standards. ”
She did not say if the NPA has asked the Hawks to investigate Montana, Letsoalo, Khena, Sithole and Sishi.
Among the key beneficiaries of Prasa’s irregular contracts are security firms. According to the report, during the nine years in question Prasa appointed six security companies and paid them close to a total of R1.6bn. The security companies are:
- Royal Security (R579m);
- Chuma Security Services (R332m);
- Sechaba Protection Services (R293m);
- Vimtsire Protection Services (R181m);
- Moz Gold trading as Ilanga Security Services (R119m); and
- Advanced Detachment Security Force (R84.5m).
Royal Security is owned by Durban businessman Roy Moodley, a benefactor of former president Jacob Zuma. According to evidence at the Zondo inquiry into state capture, Moodley paid a monthly salary of R64,000 to Zuma through Royal Security. The payments, which began sometime in 2007 and stopped shortly after Zuma became president in 2009, totalled R1.5m.
At all relevant times, the appointed group CEOs failed to ensure that Prasa followed a competitive procurement process in the appointment of the security service provider
— SIU report
Moodley did not respond to requests for comment. Of Royal’s appointment, the SIU dossier says: “The SIU established that for the period January 1 2010 to September 2019, a total amount of R578,899,422.66 (VAT inclusive) was paid by Prasa to Royal Security.”
Royal was appointed through a single-source procurement “confinement process” and the contract was extended on numerous occasions, says the report. “At all relevant times, the appointed group CEOs failed to ensure that Prasa followed a competitive procurement process in the appointment of the security service provider.”
In 2015 an investigation by the public protector into allegations of maladministration and corruption at Prasa found that in 2009, the parastatal had terminated a separate security contract awarded to Royal Security due to poor performance.
Montana was CEO from July 2006 to July 2015. Prasa’s board, led by former chair Popo Molefe, axed him before his contract expired after Rapport newspaper reported that the parastatal had spent more than R2.5bn on Spanish-built locomotives that were not compatible with local rail infrastructure. He was succeeded by Khena, who acted in the position between August 2015 and June 2016.
In July 2016 Khena returned to his position as Prasa’s COO, making way for Letsoalo, who acted as CEO between July 2016 and March 2017. Letsoalo was succeeded by Zide, who acted until May 2018. Sithole replaced Zide, while Sishi took over from Sithole and acted between March and September 2019.
The report shows that in March 2011 Prasa officials handpicked and handed Chuma, Royal, Sechaba and Ilanga 12-month contracts. Vimtsire and Advanced Detachment were handed 12-month contracts, also without any procurement processes, in March 2010 and April 2012 respectively.
In January 2013, the report shows, Prasa’s procurement officials requested approval for all the security firms’ contracts to be extended by eight months. Montana approved a 12-month contract extension for all the companies. In April 2014 Joseph Phungula, who was Prasa’s chief procurement officer at the time, requested another seven-month contract extension for all the security contractors. Again, Montana approved a 12-month extension.
In March 2015, Phungula asked Montana to approve the appointment of all the security contractors on a month-to-month basis. He argued that this was necessary as Prasa was still finalising a national security tender.
Of Royal Security’s month-to-month extension, the report says: “On March 26 2015, Dr Phungula sought approval from Mr Montana for the extension of the contract concluded with Royal Security on a month-to-month basis pending the finalisation of the national security tenders.”
Approached for comment, Phungula said he could not be expected to respond comprehensively without access to all the relevant documents. “There’s a recommendation report (submission) for each and every contract I ever handled during my tenure. In each recommendation report comprehensive motivation is provided, backed by business needs. Without you furnishing me with submission (recommendation) report per line item I cannot help you.”
The SIU’s investigators found that sometime in 2012, a Prasa official gave Vimtsire a verbal instruction to provide the parastatal with 80 additional guards. The additional security guards cost Prasa R11.3m, which investigators concluded was irregular as there was no written contract between Prasa and Vimtsire for these additional guards. In addition, Vimtsire billed Prasa R122,094 for 14 guards whom it did not assign to the rail agency.
Vimtsire director Patrick Nemutandani agreed that the company should not have been paid the R122,094.
Over and above the security contracts, the SIU report says, Prasa officials handpicked and appointed a host of other contractors, at a cost of R1.2bn, also without tender processes, for the provision of services ranging from ad hoc repair and maintenance of coaches to forensic investigation and prevention of cable theft
The SIU report says: “On February 14 2022, Mr Nemutandani signed an acknowledgement of debt and agreed to pay to the SIU an amount of R40,000 a month, from February 28, until such time that the amount of R122,094 was repaid in full. As at the end of June 2023, an amount of R40,000 been paid to the SIU by Vimtsire.”
A previous investigation by the public protector found that Prasa should not have appointed Vimtsire as the company did not meet the contract’s minimum requirement.
The SIU dossier reveals that Ilanga Security Services charged VAT using another company’s VAT number and did not pay the tax to the South African Revenue Sercive as it should have.
Nemutandani said: “The SIU has dealt with this matter and concluded it. Please contact them.”
Lusaphokazi Ngcwangu, MD of Phuhlani Bafazi Construction, which trades as Chuma Security Services, said “the matter between my company and Prasa is sub judice” and “unfortunately” she could not discuss it.
Ilanga’s Mary-Jane Madiba declined to comment.
Adiel de Bruyns, MD of Sechaba Protection Services, did not respond to requests for comment.
The directors of Advanced Detachment could not be reached.
Sithole said: “I don’t have sight of any of the things mentioned in the report. I wasn’t even consulted. Rather talk to Prasa.”
Khena said he could not comment as he had not seen the SIU report and had never been contacted by investigators.
Montana said in an e-mail: “The Sunday Times may take itself serious (sic) but I do not. Thank you.”
Letsoalo, Zide and Sishi also did not respond to requests for comment.
Over and above the security contracts, the SIU report says, Prasa officials handpicked and appointed a host of other contractors, at a cost of R1.2bn, also without tender processes, for the provision of services ranging from ad hoc repair and maintenance of coaches to forensic investigation and prevention of cable theft.
SIU spokesperson Kaizer Kganyago had not responded to questions by the time of publication.
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