Four companies, including a controversial entity linked to a known benefactor of former president Jacob Zuma, were set to score billions from the Passenger Rail Agency of SA (Prasa) in a secret deal cooked up by a top official in the department of transport.
The plot to strong-arm Prasa into settling outstanding claims worth R6bn "before the new administration is appointed" raises serious questions about the involvement of the department and its former minister, Blade Nzimande.
It is revealed in leaked minutes of a meeting between Prasa, the acting director-general of the department of transport, Chris Hlabisa, and four service providers involved in protracted legal battles with the rail entity.
According to the minutes, Hlabisa tried to force Prasa to settle with the four companies, including those whose contracts are under investigation by the Special Investigating Unit (SIU).
There was strong opposition from executives of the passenger rail agency. Two senior executives who cautioned that settling the disputed claims would be illegal were later placed on suspension.
A Prasa insider said the rail entity's acting group CEO, Nkosinathi Sishi - who is in favour of settling with the companies - was warned of the consequences of such action. "They told him 'If you pay this you are going to jail'," said the Prasa official, who asked not to be named.
If you pay this you are going to jail
— Prasa official on warning acting group CEO Nkosinathi Sishi received if he were to settle with companies
One of the companies that Hlabisa and Sishi wanted Prasa to settle with is Siyangena Technologies, which clinched tenders worth R4bn between 2011 and 2014 to install security cameras, access gates and other security features at Prasa stations across SA.
In 2017, former Prasa board chair Popo Molefe approached the high court in Pretoria to have a Siyangena tender set aside amid allegations of irregularities in its awarding. Former public protector Thuli Madonsela, in a report on financial management at Prasa, found that a contract awarded to Siyangena was improperly extended beyond its original scope.
News24 also reported that the company made mysterious payments amounting to R550m to companies linked to Roy Moodley, a close associate of Zuma. Moodley was outed by a South African Revenue Service official for making payments of R1m a month to the former president.
The other three companies are Siyaya Consulting Engineers, whose contracts were also terminated by Prasa amid corruption allegations; Bagale Consulting; and Nkambule & Associates Consulting Engineers.
On April 25, Hlabisa - who said he was acting on the instructions of Nzimande - arranged a meeting at department of transport offices. It was attended by Sishi as well as the acting chief financial officer at Prasa and a senior finance manager. The head of legal, who is overseeing litigation against the four companies, was not invited.
The four companies, represented by their directors, were invited to make presentations. In its presentation, Siyaya Consulting said it was awarded a contract as transaction advisers for signalling and depot modernisation. The company said it was owed R1.5bn by Prasa and had had to apply for voluntary liquidation due to the "financial devastation of nonpayment".
According to the minutes, the department of transport berated Prasa - which is opposing Siyaya's financial claims after flagging them for possible corruption - for "unnecessarily losing money through the litigation process" and ordered it to settle out of court.
"The chair [Hlabisa] mentioned that there may be a need to pay the debts and part ways with some companies," reads a summary of the leaked minutes.
Siyangena Technologies, which claims it is owed R4bn by Prasa, said it "believes that politics interfered with nonpayment of their invoices because of changes in the then Prasa board", the leaked minutes read.
Hlabisa again instructed Prasa to settle out of court.
The DG emphasised that he would not want government money to be wasted on litigation
— Leaked minutes
"The DG emphasised that he would not want government money to be wasted on litigation … which would only benefit lawyers and not government."
The meeting concluded that a report would be compiled for Nzimande, recommending that Prasa settle with the companies out of court.
Contacted for comment, Hlabisa said he was within his rights as an accounting officer to interrogate issues of nonpayment of service providers by entities that report to the department.
"As caring government, we have to find out whether these allegations are correct or not. If an entity of the state is not paying people within the prescribed timeline, the state must come in."
He said he had instructed that Prasa only enter into out-of-court settlements on matters that were not under investigation. "I said in the meeting that SIU issues must be pursued. But if there are no issues, why can't you settle them? That is what I said."
Hlabisa denied that he tried to rush Prasa into settling the claims before the end of the political term. "There is no such. I'm an administrator, we look into the financial year and not the administrative term. It's not correct."
Sishi too said that Prasa had a duty to hear out the department on the issue of nonpayment of service providers.
"This was a meeting of the DG on operational matters that involve Prasa. It is my core business to deal with operational matters of the business. I was invited because there are a lot of service providers that are complaining that Prasa owes them."
Asked why the head of legal at Prasa was not present at the meeting, Sishi said there was no need for that executive to be there.
"They don't need to be there. This was not a legal issue," he said. Sishi also denied there was a rush to complete the claims before the next political administration took office.
Commenting on behalf of Nzimande, his spokesperson at the department of higher education, Ismail Mnisi, said matters relating to Nzimande's former deployment should be directed to that department. "The minister acted in his official capacity as the minister of transport given the relevant legislative framework," Mnisi said.
Right of reply
Bagale entered into arms-length agreements with Prasa during 2007 in terms of which Bagale performed program management services for Prasa's 2010 railway station upgrade project.
Upon completion of Bagale’s services in terms of its contracts, it was not fully remunerated by Prasa. Bagale obtained a High Court judgment and an arbitration award in its favour. Bagale was never due to receive billions from Prasa.
It however remains due fees from Prasa for services rendered. Bagale’s contract ran its full two-year course and was never terminated amid any corruption allegations. During April 2019 Bagale was invited by the department to a meeting.
Bagale attended purely to pursue bona fide settlement options in circumstances where Bagale’s claim against Prasa has already been proven in a legal forum. The intention of the department, as confirmed to Bagale, was to be to avoid Prasa from embarking on unnecessary and costly further litigation.
No settlement has been reached in the dispute as yet. We trust that the above absolves Bagale from any perceived implication of any wrongdoing. - Neo Tladenyane (Director Bagale Consulting), Johannesburg
* This article has been amended to include the right of reply.
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