Wednesday, January 19

International investors in South Africa’s rail sector threaten to divest


International investors in South Africa’s rail sector have threatened to divest in the country due to the “mess” at the South African Passenger Rail Agency (Prasa).

Transport Minister Fikile Mbalula said on Friday that industry captains in the rail sector have raised problems with him and said “we are closing the store.”

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“We are packing up and going, and these are the top companies, international investors threatening to leave. Why? Because Prasa is a disaster, ”he said on the sidelines of a briefing on the state of transport entities in Johannesburg.

In addition to Prasa’s inability to issue contracts related to its modernization program and other programs, Mbalula highlighted other issues at the agency, including successive adverse Auditor General audits, irregular and wasteful spending, lines and railway stations not working, no – payments to service providers and problems with Prasa’s board of directors and executive management team in the implementation of its strategy.

Mbalula did not identify the companies that have threatened to divest, except to indicate that they are companies that have invested in the “overhaul contracts”, but Prasa is not awarding contracts “so our business must withdraw and go.”

“These are companies with great capacity and they are huge investments in South Africa,” he said.

Mbalula said that companies are also not paid on time. “I have many complaints. A lot. People who got contracts, got jobs, served in Prasa but were not paid.

“How will a company sustain itself if it is in the rail sector and it is not being paid for its services?” These are some of the challenges that we must address in Prasa, ”he said.

Mbalula stressed that these international investors have not given the government any ultimatum or deadline to issue contracts.

“We have addressed that and the issuance of those contracts will happen very soon. That is what Prasa promised us, so that this matter is really addressed, ”he said.

Delays

“The overhaul program, aimed at maintaining current trains, has experienced long delays over time due to procurement delays.

“However, the acquisition process for this program is nearing completion.

“This will contribute significantly to stimulating local job creation in the sector and achieving faster response times to return damaged coaches to service,” he said.

Mbalula added that Prasa must bring the contracts back to life and show that Gibela is not closing.

This is a reference to the Gibela Rail Transport Consortium, a black economic empowerment company formed in 2013 by the French railway company Alstom and South Africa’s Ubumbano Rail.

Gibela received a R51 billion contract from the South African government to manufacture 600 trains for Prasa, with the scope of the contract including train maintenance, technical support and the manufacture and supply of spare parts.

Mbalula said that if Gibela closes now “it is the biggest scandal in this country and I can see that all the signs are there.”

He stressed that Prasa has an address and a board of directors “and we have human beings who are employed to do this work.”

“I put plans in place, those plans must be implemented. We need the return trains. People are suffering, ”he said.

‘Changes must happen’

Mbalula stressed that Prasa now has the support of the cabinet and the minister and “must move, changes must occur.”

“In Prasa there are ghost workers, people who are not qualified and who are in the system and are not doing anything about it.

“Things have just slowed down. We have plans … modernization that is supposed to be implemented.

“We have billions of rand that we cannot spend because we are not building capacity in Prasa,” he said.

Mbalula added that there are also no consequences in Prasa for poor work. He referred to a R2 billion station modernization contract that was processed by Prasa officials and the board and sent to him for signature, but which he had to return because it contained irregularities.

Mbalula said he expects the Prasa lines, such as the Tembisa line in Gauteng, many rail corridors in Soweto, and lines in Mabopane and the Central line, to be operational again by the middle of next year.

“We have to go. We have the money, we have the support, we have the political will and everything in between. I don’t understand why people are holding back.

“I have had weekly meetings to get progress reports from the president and CEO of the group for a period of time in Prasa until I left them alone because when people are appointed to executive and board positions they are expected to move.

“When you are the CEO of a group and a member of the board, it is not a learning curve. You have to start working and doing things and changing the business.

“That is why part [some] of the captains of the industry in the railway sector gave me problems to tell me: ‘Minister we are closing shop’ ”, he said.

Mbalula said that transfers to Prasa in the rail transport program represent about 27.2% or R57 billion of the department’s budget over the coming medium-term period.

Stagnant modernization program

However, he said that Prasa has struggled for many years to implement its modernization program, which is aimed at improving the reliability of services and increasing the number of passengers.

The modernization program involves spending focused on repairs and maintenance as part of the agency’s rolling stock fleet renewal program, as well as increased safety.

Mbalula said delays in the rolling stock fleet renewal program, coupled with low spending on rail infrastructure and the effects of the Covid-19 pandemic, specifically lockdown restrictions, required a reprioritization of funds to support to other entities in the transport sector.

He said that after a prolonged period of instability, the government recently appointed a permanent control board, which is leading the intensified implementation of the Prasa modernization program.

Mbalula said that capital transfers to Prasa are expected to increase in the medium term at an average annual rate of 164.3%, from R700 million in 2020/21 to R12.9 billion in 2023/24.

He said the group has spent 32% or R62.2 billion of its budgeted capital to date.

While Prasa is struggling to spend its capital budget on the one hand, it faces a cash flow crisis relative to its operating budget, he said.


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