PRASA Interim Board on challenges; ACSA & ATNS Amendment Bills: briefing

Meeting report

Afternoon session
The Chairperson welcomed the PRASA delegation and introduced the Committee to the new PRASA Board of Control and senior management. The Committee hoped that PRASA would present its long overdue Annual Report noting that it had had no joy in its engagement with PRASA in the past regarding it strategic and corporate plans. Such had been the situation that the Committee had decided to institute a parliamentary investigation into PRASA challenges. Those challenges ranged from commuter safety to human resource management and development, financial management and leadership stability in the State Owned Entity (SOE).

Some of the things were obviously not of PRASA’s making such as Shosholoza Meyl being an unfunded mandate when the public used it so much. The Committee in conversation with the Minister Nzimande had noted that it was not correct that PRASA had to pay rental fees to Transnet for use of the rail network of the country. The Committee hoped the new Board would be able to stabilize safety, reliability and stability of the Metrorail service as it did not affect only the economy of the country but also the social well being of commuters. Vandalism and destruction of PRASA infrastructure would have been something board members were aware of as an outcome of frustrations due to the unreliability of the Metrorail service.

Passenger Rail Agency of South Africa (PRASA) Board presentation
Ms Khanyisile Kweyama, PRASA Board Chairperson, apologised for the being unable to attend the 17 April 2018 PRASA appearance before the Committee as the Board had been appointed only a few days earlier and board members had had to clear their diaries. Those accompanying her had no interest in having their reputations damaged at PRASA and therefore they were assuring the Committee that the Board would be doing what is best for PRASA. They understood PRASA’s responsibility towards the passengers that used the train daily and who were represented by the Committee.

Staff morale had already been identified as amongst the biggest challenges in the SOE and top of the board’s agenda was ensuring that staff were content so they could do what is expected. It had just appointed Mr Sibusiso Sithole as PRASA Interim Group CEO to stabilize leadership first.

Governance and leadership instability
Ms Kweyama referred to the removal and re-appointment of Dr Popo Molefe and his board and there had been a periods of no board at PRASA or a non-quorate board which had a bearing on its instability and governance challenges. There had been five CEO changes over the past 34 months. This spoke to why major decisions, having been taken, had not been instituted and why particular projects had not been implemented. The PRASA Human Capital board committee had decided to advertise all senior management vacancies internally and externally so as to be able to appoint the best skills to bring stability back.

Non submission of annual financial statements
Mr Sango Ntsaluba, PRASA board member and Audit & Risk Committee (ARC) chairperson, said that the Audit Committee would meet to finalise the outstanding financial statements which had been internally adjusted as the Auditor-General South Africa (AGSA) had required them to be updated. After that the statements would be submitted to the Board for their final approval which would enable the 2016/17 Annual Report to be submitted to Parliament. AGSA had already given the audit management report to ARC which it would be considering to see what improvements were required. PRASA and the country could foresee that PRASA audit report would be qualified in many respects including matters of compliance and irregular expenditure.

Failure to spend on CAPEX
Mr Louis Wessie, PRASA board member and Finance, Capital Investment & Procurement Committee (FCIP) chairperson, said that it had been clear at the first meeting of the FCIP that the procurement policy which had been in use had been in contravention of National Treasury guidelines. The FCIP and the acting Chief Procurement Officer (CPO) had given themselves a timeline until the end of June 2018 to redraft the 2016 supply chain management (SCM) policy for internal circulation. That policy of course would have to abide by current Treasury regulations and guidelines.

Modernise the rail system through investment programme of R173 Billion
Mr Lindikhaya, Zide, PRASA Company Secretary, said that out of the 600 train sets procured, 18 train sets had already been delivered with two new train sets coming into the network by December 2018.

Depot modernisation
The 18 new train sets were currently held at Wolmerton Depot in Pretoria and the processing of tendering for the modernisation of Braamfontein, Springsfield and Salt River depots would follow suit.
 
Ms Kweyama said that the new PRASA Board would be meeting with Werksmans Attorneys that had been doing investigations at PRASA over the previous two to three years, to get the reports. The reports had never been given to PRASA before as there had been periods where there had been no quorate board. The Board would ensure that where wrongdoing had been identified, consequence management would be applied to its logical conclusion. The HR board committee had also requested management to provide the Board with a list of suspended employees as paying people facing disciplinary action was a big cost while paying those who were acting in the positions of those suspended.

Ms Kweyama apologised for the absence of board members Mr Nazir Ali and Mr Xolile George who were both travelling.

Discussion
Mr C Hunsinger (DA) said that since the beginning of the Fifth Parliament, Mr Xolile George had not attended any Transport Portfolio Committee briefings by PRASA and he was extending an invitation.

In 2008 2.7 million people had been using trains and that had declined to 1.2 million despite an increase in population and workforce. He was sensitizing the new Board to the reality that things were in a bad shape at PRASA even before 2015 when the Public Protector Derailed Report had come out. That was a 60% loss of support from commuters.

He acknowledged the vacancy of the Group CFO since June 2016 in light of the absence of the Annual Report which remained outstanding since 2017.

On PRASA now reverting to the 2009 supply chain management (SCM) policy that was nine years old, he asked the reasons for this and why PRASA had abandoned the approved 2016 SCM policy.

He would have been interested to see a rolling stock recovery plan for the 1 519 coaches vandalised and destroyed in 2015/16 and during what time period that would be planned for. It was very concerning that train delays had reached 182% together with 23% less security and protection of assets and passengers on trains compared to seven years ago.

Would the Board consider whether AutoPax remained a part of PRASA as a sub-entity because it was irreconcilable that PRASA operated a fleet of 518 buses of which 83% were stationary?

Where was the PRASA turnaround strategy? The Committee’s frustration with Metrorail was nothing compared to that of commuters. That was why PRASA had to have a contingency plan. Why did commuters need to be stranded when trains were cancelled when there were hundreds of busses stationary somewhere? Why could those busses not come closer to where experience had shown interruptions to be frequent?

Ms Kweyama replied that the Board had received a proposed turnaround strategy which it was still considering. It had questioned the time lapse in the strategy as it was about two year old and therefore required refreshing for newer realities. That strategy would not replace the current strategy as there was a one in place which asked how PRASA planned to retain and recover customers while gaining new business. Indeed the points raised by Mr Hunsinger spoke of the PRASA mandate for passenger rail. The Board had to focus on the issues raised by the Committee. When the Board was satisfied with that strategy, it would be presented to the Committee.

Mr Hunsinger asked when the strategy would be presented and what content it would contain.

Dr Sipho Sithole, Group Chief Strategy Officer, PRASA, replied that probably the strategy would be ready by end of July 2018.

Mr Zide added that at the 17 April 2018 meeting the Committee had indicated gaps in the PRASA corporate plan when it was presented. The Board had decided to interrogate the corporate plan and incorporate the Committee inputs from the April engagement.

Mr Wessie replied that when the Committee had earlier engaged PRASA, the 2009 SCM policy had already been abandoned. The PRASA CPO had developed and presented the 2016 SCM policy which the legal department had then deemed un-implementable as it was in contravention of Treasury directives. The 2016 SCM policy had not clarified how appointments would occur and what powers appointees would have. The FCIP had decide to shelf that policy reverting to the 2009 SCM policy until the forthcoming policy was concluded by the end of June 2018 with all the Treasury guidelines factored in.

Mr M De Freitas (DA) said he was underwhelmed as the entire presentation was about the problems and there was little on solutions. The Annual Report remained outstanding with no commitment to a date for tabling in Parliament.

He accepted what the new Board was saying but even under Mr Lucky Montana’s tenure as Group CEO when Metrorail had problems with trains, AutoPax was able to supplement movement of people to their destinations, and that was what commuters expected. There should be a shuttle service in the interim when trains were not operational. Why were AutoPax busses not being used to supplement the train whilst it still belonged to PRASA? He also did not understand why PRASA subsidiaries had their own separate boards with their own functions and different authorities. How did the AutoPax board fit into the PRASA equation? Had the new Board taken over everything and what were the functions of the subsidiary company boards?
What was being done to get people moving and on time?

The Chairperson asked if Mr De Freitas wanted the PRASA Board to return to the Committee to provide the content required to move the company forward.

Mr de Freitas replied in the affirmative. He required the Board to give the Committee an honest assessment because the Committee understood nothing would be fixed the following day. However, the Committee would appreciate if PRASA returned with a list of priorities it should start addressing now which would overlap with the permanent board in 12 months’ time.

The Chairperson commented that PRASA had indicated what would be happening with coaches, Shosholoza Meyl and what the deliverables would be within the financial year. Did Mr de Freitas perhaps want more detail on what would be done about AutoPax and other subsidiary companies? PRASA could respond in writing without appearing before the Committee. Would that satisfy Mr de Freitas?

Mr De Freitas replied in the affirmative.

Ms Kweyama said PRASA was committed to the end of July 2018 timeframe for its turnaround plan because to say it could be done sooner would be dishonest. The mandates of the various entities within PRASA had been discussed by the Board and how each fitted into the larger picture. As such, the Board had been cautious in approving the divisional strategies from the varied boards as the Board wanted to avoid duplication of function between the various entities within PRASA. She pleaded with the Committee to give the new Board the time required to familiarise itself with the work and to come at the end of July to detail a plan going forward. She repeated that half of the AutoPax fleet was stationary.

The Chairperson asked whether Mr de Freitas was comfortable that PRASA would submit short, medium and long term plans.

Mr Zide said that around 2015/16 the AutoPax fleet had been entered into commuter service when it was assisting the Mamelodi line and others. The reality was that the fleet was not suitable for commuter service as they were long distance busses; therefore maintenance problems emerged and the revenue generated in the commuter service had not been enough as PUTCO was running part of that commuter service with its set tariffs. The maintenance problems caused a lot of the busses to fail and become stationary. Its board was seized in finding a solution to bring ‘off the road’ busses back into service. AutoPax had exited the commuter space and it would focus on delivering on the mandate it had been established for.

The Chairperson asked requested PRASA to include the revitalisation of AutoPax in its written response.

Mr M Sibande (ANC) said that some of the challenges during the previous board tenure related to non-compliance and a non-existent internal audit. The previous board met more often than the mandated number of board meetings and charged board fees and he cautioned the new board against that. Cases were being investigated by the Hawks. The use of Werksmans Attorneys had also been problematic.

The Chairperson interjected that Ms Kweyama had spoken to the Werksmans Report which would still be processed by the new board.

Mr Sibande pleaded for indulgence from the Chairperson noting that at some point the regional PRASA in Western Cape had procured armoured vehicles to increase security presence but cable theft continued unabated together with the destruction of coaches. He wanted to know what that waste had been for if nothing had changed. The City of Cape Town and City of Johannesburg had train coach scrap yards as there were depots full of stationary trains needing repairs. There had been a report that the Western Cape region of PRASA security had been infiltrated by gangster and criminal elements which needed the Board’s attention. He proposed that PRASA had to hold a workshop on its operations to detail some of the challenges it had presented to the Committee. He applauded the presence of the Board and cautioned that in future he would not want to engage with junior officials but would expect the Board to come before the Committee.

Ms Kweyama said that at the outset of the presentation she had mentioned that the current Board intended to ensure compliance in all operations across PRASA and its subsidiaries and the boards thereof so that the ethics of good governance could be returned to the SOE. The Board was conscious of the concern about the number of board meetings. None of its directors were fulltime at PRASA as they had other external responsibilities. On the 7 and 8 June PRASA would be meeting Werksmans and Mkhabela attorneys to get the investigative reports. AGSA had already been engaging with Mr Ntsaluba as ARC chairperson on getting the financials up to speed. In June PRASA would meet with the Hawks to get updates on their investigations. After all that, the Board would update the Committee either in committee or via written responses.

Cable theft indeed was a bigger problem that did not only affect PRASA and required solutions at a higher level than the Board even though it would endeavour to deal with the theft directly affecting its infrastructure.

Mr Zide added that there were challenges which would be escalated to the Ministers of Transport and Police including what had been contained in their Memorandum of Understanding (MoU). Indeed at some point historically there had been about 16 000 plus security officials compared to the new complement which was about 3 000 personnel which was not directly allocated to PRASA.

Mr Ntsaluba said the ARC had received the annual report and annual plan from the internal audit function at PRASA and although that function was continuing its three year plan, it needed to be improved before approval. The ARC had rejected some of the recommendations of the internal audit function because the budget it had presented had escalated too much in comparison to the two preceding years. The proposed budget was about R55 million whereas previously it had been R30 million. The ARC wanted to interrogate that escalation. The audit plan would be approved by 12 June 2018 but in a streamlined and more efficient manner as although the ARC did not want to stifle the internal audit, it did want to channel its work properly.

Mr T Mpanza (ANC) said that there had been about R4 billion that DoT had not transferred to PRASA because it had been unable to spend its Capital Expenditure (CAPEX). He appreciated the new direction of involving stakeholders in PRASA business as public transport was a national issue. His sentiment about Werksmans echoed Mr Sibande as Werksmans seemed to be getting a lion’s share of PRASA business.

Ms Kweyama said that indeed the Minister had asked PRASA on a two month plan on how it would be spending its CAPEX. The social compacts had not only been focused in Gauteng as the Board had met stakeholders in the WC and the intention was to roll them out in all regions were Metrorail had operations.

Mr Ramatlakane said he agreed with a written response update by the end of July 2018 on all matters the Committee had raised with PRASA. He said that centralisation of function in a business like PRASA had not and would continue not to work going forward because the turnaround times when parts for replacement had to be ordered and delegations had to be executed were too long for a decision that had to be taken in Tshwane; and the Committee had raised the fact that regional managers could not be limited in their delegations because that affected operational function of Metrorail regional operation. He wondered if that needed the Committee to recommend which functions the Board needed to devolve to the regions; because the frustration led to the vandalisation and destruction of PRASA infrastructure?

What had the new PRASA Board agreed together with Mr Nzimande to deliver during its 12 month appointment? Minister Nzimande had told the Committee that the Board had provided curriculum vitae from which the Minister had made an assessment for the position of the Interim GCEO. However, the Committee was asking whose function was it to appoint the GCEO and to initiate the process to appoint? How long would the Interim GCEO be in this position and what is the difference between an Interim and Acting GCEO?

The Committee still required the fees Werksmans had charged PRASA for services rendered and in the Board’s long reply that had to be included. It had also asked for the scope of investigation which had been agreed to between PRASA and Werksmans as that had been long outstanding. If AutoPax cannot assist Metrorail when trains have been cancelled, could Golden Arrow bus service be a contingency plan?

Ms Kweyama replied that the difference between an Interim GCEO and Acting GCEO was that an Acting GCEO would have had to come from within PRASA’s current management. Mr Zide had held that position at times when there was instability. The new Board had appointed Mr Sithole as Interim GCEO based on PRASA’s current HR policy.

Ms Doris Tshepe, PRASA board member, said that Mr Sithole had been appointed by the Board in terms of the Legal Succession to the South African Transport Services Act and PRASA had used clause 22 of its recruitment policy which allowed the Board to appoint an employee on a fixed term contract and that had been in line with the recommendation from the executive authority.

Ms Kweyama said that Mr Sithole’s contract was for 12 months only. The 2017 shareholder compact had been signed between Minister Nzimande and the new Board Chairperson still had to sign for PRASA.

Mr Ramatlakane asked if the Interim Group CEO contract had been signed.

Ms Kweyama replied in the affirmative that concurrence had been received from the Minister and she had signed after receiving Board approval. Mr Sithole had been given a month to peruse the contract and to suggest any changes. However, he had already signed his letter of appointment. All that remained was for Mr Sithole to return to the Board without or with suggestions on what needed changing in his contract.

Mr Ramatlakane asked that the Committee be furnished with the shareholder compact.

Ms Kweyama replied that it would be provided to the Committee.

Mr Sibusiso Sithole, PRASA Interim Group CEO, said he was delighted with his appointment. In his engagement with PRASA management he had already alluded to the fact that the work was not to only identify core problems but to start postulating possible solutions so that clear plans could be developed on how to move forward with clear timeframes and delegation of responsibilities. He then outlined a check list already alluded to by Ms Kweyama as to his priorities. This included finalisation of a new SCM policy, standard operating procedures, delegation of authorities and a whole range of other pertinent issues. Indeed the policy would speak to thresholds of delegation of authority and what could be approved at regional and corporate level respectively.

Indeed PRASA was seized with the AutoPax challenges and would be meeting with the AutoPax Acting CEO and CFO to get to grips with the strategic challenges facing it. Mr Sithole said he was mindful that short-term could mean a week, medium term a month and long term three to six months for him. His experience with such situations was that the focus had to be on the opportunities to be exploited in driving the business forward. There was R173 billion CAPEX that still needed to be implemented on modernisation. PRASA had to start addressing its commuter service which had to be for the customers. No business could survive without addressing what delighted the customer and what dissatisfied them.

On the CAPEX he believed that PRASA had to be clear about project management maturity levels within its business; forward planning issues that needed attention so that a clear SCM plan would be able to specify when PRASA would be going out on tender and when the bids were expected to be concluded.
Indeed management had to take the staff on board on all issues pertinent to the business and review how appropriate the structures in place organisationally were assisting or impeding the work that had to be done.

The Chairperson said that PRASA had not replied on how the boards of its subsidiaries accounted to the PRASA Board. She requested a response to that question.

Ms Jenny Schreiner, PRASA board member and Safety, Health, Environment & Quality (SHEQ) committee chairperson, replied that for her the rolling stock and getting out-of-commission trains back into the service and the infrastructure related to security for passengers was the responsibility of all managers at PRASA and not only SHEQ managers.

Ms Mashila Matlala, PRASA board member and Human Capital Committee chairperson, said the Board had given each board committee responsibilities and her area of responsibility was the filling of the critical senior positions of a permanent Group CFO and Group HR Executive which if unfilled would hamper implementation and sustainability.

The Chairperson said that there had been an outcry from technicians during the Committee’s oversight visit of Park Station and Cape Town Central Station that they had to await approval for parts procurement for long periods as headquarters had to first approve and although small the parts could be the operations of repairing could be quite technical and required time. The Committee did not require an instant response but wanted the Board to take heed of the complaint and to address the devolvement of functions.

Ms Kweyama said that some tough decisions would have to be made in the coming months in the interest of saving costs.

The Chairpersons said that Minister Nzimande had perceived PRASA as having been used as an ATM and the Committee was placing its confidence in the Board to stop that practice and to return Metrorail to being a public rail service that was reliable. She outlined what remained outstanding that the Committee expected from PRASA.

Mr De Freitas reminded the Committee that it had agreed to deal with the terms of the parliamentary inquiry into PRASA.

The Chairperson replied that PRASA was aware that the Committee would be undertaking a parliamentary inquiry into PRASA. Although the Committee had planned to start that work in July, the programme of Parliament had been adjusted and the Management Committee (MANCO) was proposing to engage further the following day.

Mr Ramatlakane reminded the Committee that amongst many things PRASA still owed the Committee a signed off old 2016/17 audit report. He thought PRASA had said it would be discussing and finalising it on 12 June 2018. The Committee should be receiving whatever else would be left over at the end of July 2018 from the list of things that PRASA had to submit.

Mr Ntsaluba replied that once ARC signed off on that audit report on 12 June, it had asked the Board to process the audit report within 10 days so that the maximum of 14 days would be the time required for the Board to process it and sign-off.

The Chairperson clarified that the question was pertaining to the date of arrival in Parliament of that audit report, which included the Minister having sight of the report to sign-off as well before it was tabled to Parliament.

Mr Zide replied that as the matter was urgent, on 12 June the ARC would consider the report and the secretariat would arrange a board meeting soon after – which would be no more than a week later. The next step would be submitting that report to the Department of Transport (DOT). A realistic target for the submission of that report would be end of June 2018.

The Chairperson asked for a commitment from DoT as to when it planned to follow up on the PRASA audit report.

Mr De Villiers replied that he would follow with the Minister to ensure that the report would get signed off by the Minister and be submitted to the Committee.

The Chairperson requested that DoT try and submit the report by 26 June 2018.
 
The DoT acquiesced to the request.

Mr Zide replied that the Board had about five subcommittees and he listed them. The Governance subcommittee of the Board was comprised of the chairpersons of the five Board subcommittees, and the subsidiary boards were required to report on their performance quarterly to the Governance subcommittee of the Board as per the PRASA governance model. The Governance subcommittee would then make recommendations to the Board based on those quarterly reports from the subsidiary boards.

Mr Ramatlakane said that some subsidiary boards had complained to the Committee that the Board had been constraining progress and moving forward on the business of subsidiaries. Therefore he did not know whether the system worked and if the Committee would be required to intervene because there seemed to be a sentiment of being excluded and being outsiders in terms of the governance model that PRASA was currently using.

Mr Zide replied that the frustrations were warranted as the new Board Chairperson had in her first order of business sought to ensure that the intentions and plans of subsidiary boards would find expression in the Board to the extent that there would be a different working relationship between the Board and subsidiary board. To date both concerns of the subsidiary boards were being attended to.

Ms Kweyama said if the Committee approached those boards again certainly the mood would have changed because immediately after appointment of the new Board, the subsidiary boards had engaged with the Board about the challenges they faced and the Board had been sitting in with the boards to understand the matters and the lines of communication were more open to date although of course the Board had not solved all the problems so far. Certainly both the board chairpersons of AutoPax and Intersite were in regular communication with her. Indeed the challenges of the mandates of AutoPax and Intersite had to be attended to as the system had to be reworked.

The Chairperson said probably the Committee would want to engage both the Intersite and AutoPax boards and would communicate with the PRASA Board when that would be, including when the parliamentary inquiry would start and what the terms of reference would be.

Airports Company Amendment Bill & Air Traffic and Navigation Services Company Amendment Bill
Mr Levers Mabaso, DOT Acting Chief Director : Aviation Safety, Security, Environment and Search & Rescue, DoT said because the two bills were similar he would highlight the differences between the two bills. The two principal Acts established the two companies, Airports Company South Africa (ACSA) and the Air Traffic and Navigation Services (ATNS) in 1993 (see presentation). DOT had in the ATNS Bill inserted an enabler for ATNS to be able to do business outside the country as it was unable to do so currently.

Meeting adjourned.