Prasa wants its R2.6bn paid back
The rail agency is also demanding that the 13 locomotives already delivered be sent back
The company at the centre of one of the biggest tender scandals in the country is pleading poverty in the face of a R2.6-billion lawsuit.
The embattled state rail agency, Prasa, this week filed a civil claim against Swifambo Rail Leasing and its holding company to recoup the money it has paid so far for 70 new locomotives to replace the country’s ageing fleet. It wants the company to pay back the money and to take back the unsuitable Afro 4000 trains it provided to Prasa.
The lawsuit is the second salvo fired against Swifambo; Prasa has also brought a high court application to review and cancel the initial R3.5-billion contract. The matter is pending.
Papers filed at the high court in Johannesburg on Monday detail how Prasa has paid the company 10 tranches, amounts ranging from R64-million to R460-million, over a two-year period.
Although Swifambo is yet to file papers in response to the civil claim, the company has laid bare its tough financial position in a separate response to the review application. An affidavit filed on June 6 by Swifambo’s group chief executive officer, Felice Massaro, describes the company as “an innocent tenderer” that is “technically insolvent due to the current non-payment of invoices by Prasa”. He claims that, if the contract is set aside, Swifambo “will be rendered commercially insolvent and be liquidated”.
He says Prasa owes the company another R2.8-billion, and that it has already paid its Spanish partner, manufacturer Vossloh España, an amount of R1.8-billion, which will be lost if their contract is set aside.
Swifambo has supplied 13 of the 70 locomotives but Prasa does not want to keep them. Tests run on the initial batch delivered found them to be too high and unsuitable for use in South Africa.
At the heart of Prasa’s civil claim is its insistence that the contract with Swifambo, signed in March 2013, should never have been activated because the company failed to meet a key condition. According to the summons, the purchase agreement was subject to Swifambo producing a R350-million performance bond within 28 days of signing the contract. The company failed to do so, rendering the initial agreement null and void, Prasa argues. Instead, it produced nine different performance bonds, totalling R307million, three
months later.
Prasa wants the court to review and cancel the contract because of findings of “alleged fraud, corruption and gross irregularities” by the auditor general and the public protector regarding the transaction.
Prasa used the findings as part of its argument in its bid to invalidate the initial R3.5-billion contract, arguing that the deal was rigged from the start to favour Swifambo.
The decision to award the tender to it was “taken in bad faith” and for the “ulterior purpose or motive of favouring Swifambo”, Prasa’s board chairperson, Popo Molefe, says in papers submitted for the review application.
The locomotive scandal, exposed last year, saw the departure of Prasa’s chief executive officer, Lucky Montana, and chief
“engineer”, Daniel Mtimkulu, whom Molefe described in proceedings as the alleged masterminds of the fraud.
Mtimkulu was exposed for having faked his engineering qualifications. He and Montana have previously denied any wrongdoing. A criminal investigation has been launched.
Massaro denies any wrongdoing on the part of Swifambo, claiming the company had “no knowledge” of Prasa’s bid procedures.
Furthermore, he insists that Prasa is relying on impermissible hearsay to “paint a picture of a fraudulent or dishonest relationship” between Montana and Mtimkulu and to “implicate Swifambo in dishonest conduct by association”.
He says the company will not take back the 13 locomotives because they have done a total of about 73 000km
since being delivered, and have not been maintained, resulting in a “considerably reduced” value.
One of the locomotives was damaged in a derailment and Prasa failed to conduct or to allow Swifambo to carry out the necessary scheduled maintenance, Massaro claims.
In a statement in response to questions from the Mail & Guardian, Prasa said its new board, chaired by Molefe, has made it a priority to clarify the state of affairs that led to the adverse findings by the public protector and the auditor general. As a result of various investigations, Prasa has laid criminal complaints with the Hawks to ensure those responsible are brought to book for abusing public funds.
Swifambo has until mid-July to file its response to the lawsuit.