State passenger rail agency Prasa’s multibillion-rand modernisation programme faces another delay amid a court battle over its newly awarded R7.5bn general overhaul contract to refurbish broken and vandalised trains.
Businesswoman Pulane Kingston has taken on Prasa which has dished out overhaul contracts to five companies, one which previously allegedly defrauded the rail company and another, a Russian company hit hard by EU and US sanctions for which the Prasa contract could prove a lifeline.
Kingston said that the two companies, local firm YNF Engineering and Russia-backed TMH Africa, lacked experience and should have been disqualified for failing to meet the bid requirements.
The companies were among five contracted to refurbish about 400 Metrorail and Shosholoza Meyl coaches in Gauteng, KwaZulu-Natal, the Eastern Cape and the Western Cape. The other companies include Armature Technology, CTE Investment and Karabo Nhlamolo Projects.
In court papers lodged last month, Kingston said that Prasa acted unlawfully and prejudiced her company, Naledi Rail Engineering, in excluding it from the group of successful bidders. The matter will be heard on September 14.
Last year Kingston, the daughter of former health minister Manto Tshabalala-Msimang and ANC stalwart Mendi Msimang, bought Naledi out of a business rescue process.
In her affidavit, Kingston said TMH Africa went into business rescue on May 4, five days after being awarded the contract on April 29. She further alleged the company misrepresented its financials and failed to inform Prasa of its precarious financial position.
“It is quite clear that TMH considers its contract with Prasa as a means to possibly escape its own financial difficulties,” she said.
But in responding papers, TMH Africa’s business rescue practitioner Juanito Damons dismisses Kingston’s claim that they misrepresented their financials, saying that when the company got the contract it was not in business rescue. He said that the company’s financial problems were directly linked to sanctions imposed on Russia by the US and EU.
“As negative as the influence of the geopolitical circumstances were on the business of TMH, [it] received continued financial support from its Swiss-based shareholder ... TMH was therefore not financially distressed during the time that its bid was being considered or awarded by Prasa,” he said.
In her affidavit, Prasa’s acting legal head Thato Tsautse said TMH could not be disqualified because it went into business rescue only after being awarded the contract. However, she said Prasa would have disqualified Naledi had it known the company had been placed in business rescue during last year's evaluation process.
In court papers, Kingston said YNF Engineering should have been criminally investigated and blacklisted from doing business with the state after allegations of fraud and corruption were uncovered by an internal Prasa investigation in 2018.
Attached to her affidavit is Prasa’s protection investigation team’s findings that YNF be charged for defrauding it of R1.7m for polishing seven traction motors instead of rewinding them.
Prasa ... through its unlawful decision has thrown the entire general overhaul programme into disarray
— Pulane Kingston
“Prasa needs to consider reviewing the contract ... for submitting invoices to say for payment and accepting payment for work they have never done. Management needs to consider opening a criminal case for implicated rolling stock management and service provider YNF Engineering,” the findings stated.
However, a criminal case wasn't opened and Prasa continued doing business with YNF. In its court papers, Prasa said the allegations were “too vague for a meaningful response” and based on an unsigned report.
Asked for clarity this week, Prasa spokesperson Andiswa Makhanda said she could not comment because the matter was sub judice.
Kingston added that YNF lacked experience and should have been disqualified because it moved to new premises after Prasa evaluated its old ones as part of the bid adjudication process. In its papers, Prasa said it had no problem with that and Tsautse said YNF’s relocation was “irrelevant”.
In court papers, YNF general manager Neil August said Kingston’s allegations were baseless and should be dismissed, and that her company should tell the court how it got its hands on a confidential internal Prasa document.
“At no stage was any sanctions in any form, criminal or otherwise, imposed against YNF ... The report constitutes hearsay and as such is inadmissible and must be struck out,” he said.
Kingston also said in court papers that out of the five contractors Prasa appointed, four had no experience in general overhaul.
Prasa admitted this to MPs from the National Council of Provinces’ select committee on transport in June after it raised concerns.
DA MP Timothy Brauteseth said: “I am very concerned that five contractors were appointed to do this work but four of the contractors appointed are new entrants ... I am concerned that we have new entrants in the refurbishment market and then you will report to us in years to come that these new entrants didn’t have the skills and the know-how to do the refurbishments and as a result we have lost more money.”
In court papers, Kingston also alleged that Prasa acted unlawfully when it failed to inform Naledi whether its bid was successful, and her representatives were called to a meeting with Prasa’s acting CEO David Mphelo the day the contracts were awarded to “impose conditions”.
Kingston said her company and Prasa were in talks to settle a dispute over a separate contract, and Mphelo indicated that once Naledi withdrew its litigation, which it did, they would be on board with the general overhaul contract.
“I reiterate that Naledi is faced with a situation created by Prasa which has through its unlawful decision thrown the entire GO (general overhaul) programme into disarray. It has seemingly appointed contractors of the Gauteng region who are inter alia either not financially stable or do not have the requisite compliant premises to undertake the work,” she said.
But Tsautse denied Mphelo had said any such thing or that Prasa was unfair to Naledi. However, she said the unresolved issues were important and “threatened to jeopardise the implementation and ultimate success of the GO programme”.
Prasa’s operations have been in decline for several years because of the rampant theft of railway infrastructure and overhead cables. Passenger numbers have dropped by 80% since 2013, according to the National Household Travel Survey compiled by Stats SA last year. In 2020, Prasa had 147-million paid trips in contrast with 646-million in 2008.
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