The auditor-general has called on the board of the Passenger Rail Agency SA (Prasa), which spent R3.8bn on irregular expenditure, to fast-track its infrastructure modernisation programme to ensure effective deployment of new trains to improve service delivery.
In its briefing notes to the standing committee on public accounts (Scopa) in parliament on Tuesday, regarding Prasa’s audit outcomes for the 2022/23 financial year, a team from the auditor-general’s office said the Prasa board should urgently stabilise the executive management by filling key vacant positions with permanent appointments.
Some of the vacant executive posts include that of group CFO, chief information officer, CEO for Prasa Rail and CEO for Prasa corporate real estate solutions.
Prasa is one of the many state-owned enterprises hollowed out by years of corruption and mismanagement linked to state capture. It announced in May 2020 that it was facing a debilitating cash-flow crunch after failing to pay R23m to employees’ retirement fund benefits for two months.
From 2018/19 to 2021/2022 the auditor-general issued a disclaimer on the parastatal’s financial statements. A disclaimer signifies the company’s accounts cannot be relied on and often suggests the company is in a serious financial state.
Prasa received government subsidies from the department of transport amounting to R7.2bn for operations and R12.3bn for capital expenditure during 2022/23. In addition, the parastatal generated revenue of R119m in the form of fare revenue, operating lease rental income of R620mn, other income of R181m and interest received of R1.7bn.
Prasa, which received a qualified audit opinion in 2022/23, has been grappling with a debilitating vandalism and theft of its infrastructure, which has had a knock-on effect on the struggling economy as goods and commodities cannot reach the ports on time for exports.
In its presentation in parliament on Tuesday, the auditor-general team said progress should be provided on the steps taken to investigate all reported irregular and fruitless and wasteful expenditure and the implementation of consequence management in respect of implicated officials.
Prasa’s fruitless and wasteful expenditure declined year on year from R302m in 2021/22 to R179m in 2022/23. The reasons for fruitless and wasteful expenditure pertained to interest and penalties (R94m), employee costs where suspensions exceeded six months (R36m), losses due to cybersecurity attacks (R14m), loss due to embezzlement by employee subsequently dismissed (R21m), IT system procured but never used (R11m), and other R269,154.
The auditor-general found that irregular expenditure incurred during the year increased from R3.3bn in 2021/22 to R3.8bn in 2022/23 due to noncompliance with supply chain management processes.
“Historically, Prasa did not implement appropriate consequence management, which resulted in a culture of impunity towards transgressions of laws and regulations. Therefore, Prasa continued to incur unacceptable levels of irregular, fruitless and wasteful expenditure,” according to the auditor-general.
The auditor-general said Prasa performed a comprehensive asset (property, plant and equipment) verification process and reconstructed its asset registers and this resulted in a write-off of assets amounting to R3.4bn. This was due to assets being in the register but could not be verified, among other factors.
“The assets written off were procured/capitalised in financial years up to 2020/21 and we were unable to obtain sufficient appropriate audit evidence to substantiate the R3.4bn write-off ... and this was consequently qualified.”
“For the financial year ending 31 March 2023, [train manufacturer] Gibela has delivered and Prasa has provisionally accepted a total of 146 trains that were destined for operational purposes with a total cumulative value of R22.9bn.
“The new trains, however, remained vastly underutilised and not all the trains could be fully operationalised while Prasa’s rail recovery effort is under way, a matter of significant concern given the magnitude of capital investment into the new trains,” the auditor-general said.
The Chapter 9 institution noted the inability of Prasa to provide sufficient rail commuter services as well as long-haul passenger rail and bus services that meet the needs of citizens “has a detrimental effect on the citizens of SA and the economy at large”.
It resulted in increased transport costs for citizens, as they took more expensive alternative forms of transport, “resulting in less expendable income for other necessities. Furthermore, it is time-consuming for workers to get to work, as rail travel, especially over longer distances and during peak travelling hours, is quicker than travelling by road. Additionally, it has a negative impact on people being able to access work opportunities easily and affordably.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.