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Minister of Transport, Fikile Mbalula, on the appointment of the Group Chief Executive Officer of PRASA

 

27 February 2021

 

Today, we turn a new leaf as we close an old chapter and open a new one as we make strides in rebuilding and strengthening
the Passenger Rail Agency of South Africa. Today, the new is born, but the old chapter cannot be closed until we have stabilised corporate governance, management, commuter rail operations and resume the course towards modernising
passenger rail in the country.


PRASA has not had a Group CEO since the departure of Lucky Montana in 2015. Since then, PRASA has had 10 Acting Group
CEO’s in 6 years.

 

In the 12 years of its existence, PRASA has experienced many challenges that became pronounced in 2015/16. Irregular expenditure stood at R4.1 billion alongside fruitless and wasteful expenditure of R541 million. This period was also characterized by dissonance at the highest levels of the organization, characterized by tensions between the Board and management.

 

The Public Protector also released her report on PRASA titled “Derailed”, which highlighted serious lapses of
corporate governance. The Directorate of Priority Crime Investigation (“the Hawks”) had also initiated investigations on a number of issues referred by PRASA.

 

The downward spiral continued in 2016/17 where PRASA had 2 Boards in a single financial year. The relationship between the Minister at the time and the Board reached an all-time low, resulting in the Minister dismissing the Board, replacing it with an Interim Board in March 2017, which was short-lived.

 

Irregular expenditure stood at R19.6 billion, an increase from 14.8 billion in 2015/16. The AG reflected that instability in the entity, “including the board of control, negatively contributed to the decline in the financial management, performance reporting and compliance processes and the overall collapse of the internal controls within the public entity as a result of inadequate and ineffective oversight.” Fruitless and Wasteful expenditure escalated to R181 million.

 

In 2017/18, PRASA had 4 Boards in a single financial year. This perpetuated the instability. Irregular expenditure stood at R23.4 billion, an increase from R19.6 billion the previous year. Similarly, fruitless and wasteful expenditure escalated to R1
billion, up from R988 million the previous year. Once again, the Auditor-General sharply raised the concern about instability at
PRASA.

 

During the latter part of 2019, we conducted a review on the performance of the Board and of the entity as a whole. This assessment followed the Government Technical Advisory Centre (GTAC) assessment report. Based on this report and other considerations, we arrived at a conclusion that PRASA had deep-rooted challenges that required decisive interventions at leadership and management levels.

 

It became glaringly obvious that merely replacing an interim Board with a permanent Board would not address the deeprooted
fault lines at PRASA. It was on that basis that we dismissed the Board and appointed Mr Mpondo who served as both the Acting Group CEO and the Accounting Authority.

 

He made significant strides in stabilising what we characterised as a broken organisation. The onset of the COVID-19 pandemic had a major disruptive effect to the interventions and slowed the pace of implementing our programmes. I must thank Mr Mpondo for his commitment, sacrifice and the diligent work he put into executing the mandate we had given him under trying circumstances. He made significant progress in addressing critical challenges. When the court set aside his appointment, we accepted the ruling and proceeded with the process of appointing a permanent Board. Our determination to build a new PRASA out of the ashes of the
old, have never wavered.

 

Like a phoenix rising out of the ashes, we have laid down firm foundations for a PRASA that is able to rise to the occasion and deliver a passenger rail service that is the backbone of our public transport system.

 

When we appointed a permanent Board, led by a veteran in the transport sector, in the person of Mr Leonard Ramatlakane, we severed the umbilical cord with the old and have ushered a new era. An era that places ethics and corporate governance as its lodestar. The King IV Code on Corporate Governance constitute the guiding principles that inform the day to day functioning of the Board. The Shareholder Compact we have concluded with the Board place strong emphasis on corporate governance, ethics and consequences management.

 

It equally gives the Board ambitious targets to turn PRASA around. One of those targets is the appointment of a Group Chief Executive Officer. As a Shareholder, we have to give the Board the space to exercise its mandate and uphold its fiduciary obligations in line with the governance prescripts. We have raised the bar in this regard and will hold the Board to
extremely high standards in the execution of its mandate.

 

The Shareholder Compact enjoins the Board to deliver, amongst others, the following key outcomes:
• improving operational performance.
• expedite implementation of the modernisation programme, with priority focus on fencing, signalling, perway and station upgrades.
• ensure security interventions across all corridors.
• urgently develop capacity to manage PRASA’s capital programme, working with other state entities in the short term. building capacity to support interventions aimed at recovering the system by establishing requisite supplier panels through competitive bidding or other means permissible in law.
• ensure that effective consequence management is prioritised and provide support to investigations currently underway by law enforcement authorities.
• review PRASA’s organisational design and business model, and upon consultation and the approval by the Minister make the necessary and suitable changes to the structure and model of the Group.

 

When we took the decision to shut down the rail service as a response to the COVID-19 pandemic, we were painfully aware that due to overcrowding in our trains these would have served as super spreaders. The challenges loom large and our commuter rail infrastructure has been completely run down as a result of theft and vandalism.


The most urgent task confronting us is to get trains back in service. We are under no illusion about the huge economic impact on the working class and low income households affected by non-operation of our services. Corridors such as Soweto, Ekurhuleni, Mabopane, Germiston, Tembisa and Central line remain our priorities in restoring the service. Security remains a serious challenge and we have been hard at work in ensuring that the security plan developed in partnership with relevant authorities yields results in the shortest possible space of time.

 

The re-imagined safety strategy is built on the foundation of a seamlessly integrated value chain that incorporates all the law enforcement and prosecution authorities and takes a holistic view of safety across modes. These include SAPS, the Hawks, the National Prosecuting Authority, Metro Police and the Railway Safety Regulator. The prevalence of crime in our rail environment has reached alarming levels. Theft and vandalism of critical infrastructure in our railways not only place the lives and livelihoods of those who rely on trains in danger, but also have dire consequences on the economy.

 

We inherited a broken organization from years of poor performance, rampant corruption and poor culture of accountability. The interventions we put in place were decisive and provided a forward momentum towards rebuilding PRASA, being an important part of our commitment to providing a public transport system that is safe, efficient, reliable and most importantly, affordable. These may sound like the opposite of the attributes that currently characterize PRASA, save for affordable. This is precisely the course we have set on, and remain steadfast in realizing our goals.

 

In the 2021/22 budget, PRASA has been allocated R4.7 billion subsidy for Metrorail, a decrease from R6.6 billion in 2020/21. A further R1.2 billion has been allocated for the Mainline Passenger Service (Shosholoza Meyl), an increase from R1.1 billion in 2020/21. An additional R925 million for maintenance and inventories, a marginal increase from R912 million in 2020/21. PRASA’s capital expenditure allocation includes R4.8 billion for the rolling stock fleet renewal programme, R1.9 billion for signaling, R1.3 billion for refurbishment of Metrorail coaches, R155 million for refurbishment of Mainline services coaches and R1.4 billion for other capital programmes which include station modernization.

 

I am pleased to announce that following tireless efforts of the Board, this week, Cabinet approved the appointment of a permanent Group Chief Executive Officer of the Passenger Rail Agency of South Africa (PRASA). PRASA has not had a permanent Group CEO since 2015, before the appointment of last one in 2018, who unfortunately left within a year. Mr Zolani Kgosie Matthews has been appointed as the Group Chief Executive Officer of PRASA. He is a seasoned professional, with a robust understanding of international and domestic business strategy who has operated in dynamic, complex and agile organisations. His professional track record of over 30 years bears witness to his focus on corporate governance, transparency and value-based organisations.

 

He holds a Master’s degree in Public Administration from Harvard University. He is currently employed a full-time Councillor of the Independent Communications Authority of South Africa (ICASA). He also serves as the Chairperson of the Ports Regulator of South Africa. His appointment means he will relinquish both these roles to assume his new position on a full-time basis. We have no doubt that the appointment of Mr Matthews heralds the beginning of a new era that will turn PRASA’s fortunes and place it on a steady footing to deliver on its mandate.

 

 

 




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