The Passenger Rail Agency of SA (Prasa), which is a huge crime scene, is a good example of what’s wrong with the SA fiscal system. It receives more than R20bn from the government primarily to run commuter trains, a task that in recent years it has failed miserably to perform.
But the agency has become a money lender, lending to banks substantial portions of what it receives from the government to subsidise its operations and pay for capital expenditure. I describe the agency as a money lender because when you place your funds with a bank, those funds are a liability on the bank’s books. The banks transform that liability into an asset by lending the funds on to other customers.
Data compiled by the IMF on Prasa finances shows that in 2008-23, the agency received R130bn from the government. Since 2016, the agency has been lending substantial portions of this money to banks, as shown by its interest income.
Interest earned rose from R425m in financial 2016 to R1.65bn in 2023. This may look prudent, but it is rather indicative of two things. First, it shows Prasa’s weak capabilities in spending allocated funds to deliver on its core mandate. Second, it demonstrates a big problem with the management of government finances.
Prasa’s failures are well document by the auditor-general and the Government Technical Advisory Centre (GTAC). In the 2023/24 audit, the auditor-general noted that the agency “did not maintain adequate records of the contractual information used to determine and disclose commitments”, the effect of which was that not all commitments — read contracts — were disclosed in the financial statements.
Of the disclosed commitments (R23.4bn), Prasa could not provide the auditor-general “sufficient appropriate audit evidence” for these.
These are serious findings, given that Prasa funding is linked to these “commitments”. If Prasa can’t produce supporting documentation, why is the government continuing to fund the agency?
An assessment of Prasa by GTAC, which is quoted by the Competition Commission’s report on transport, flagged the collapse of internal systems and controls, dysfunctional supply chain management processes, hollowed-out project management capability, and a business model that requires urgent review.
Then there is theft and vandalism of infrastructure, some of which appears linked to Prasa tenders. The incentive is great to vandalise Prasa infrastructure when you are going to line up for a contract to fix or replace that infrastructure or get a cut of the new contract.
For almost 15 years, the government has used what the Public Policy Project at Southern Centre for Inequality Studies has described as a “lawnmower” method of uniform cuts across all budget items — widely recognised as the least efficient and most damaging to expenditure consolidation.
Lucky Prasa has been the blade of grass that has escaped the lawnmower. It has in fact benefited. In the doomed March 2025 budget, the National Treasury cut the SA National Roads Agency’s (Sanral’s) budget by R2.5bn in favour of Prasa. By most accounts, Sanral has done a far better job than Prasa in looking after the country’s roads.
The second problem is that the Treasury has since 2009 borrowed trillions of rand from the financial markets to fund institutions that are failing to live up to their mandate.
Illustrative of the ineffectiveness of Prasa, the Competition Commission noted that rail transport “does not seem to be responding to changes in settlement patterns”. This is because the capital subsidy Prasa has been receiving from the government “is not being utilised to expand or develop new railway lines to be closer to the settlements, resulting in the services offered not being optimal”.
• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.
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