New Prasa scandals on Buthelezi’s watch
Forensic reports find dodgy contracts worth over R1bn
AS South Africa reels under the weight of recession and a fresh ratings downgrade, the new deputy finance minister has been accused of severe dereliction of duty in a previous job.
Just two months after his appointment as deputy minister, it has emerged Sfiso Buthelezi turned a blind eye to wasteful expenditure and financial irregularities amounting to more than R1-billion during his sixyear term as chairman of the Passenger Rail Agency of South Africa.
This comes in the same week that Buthelezi and his brother Nkanyiso have been accused of benefiting from lucrative Prasa contracts said to be worth at least R150-million. Buthelezi dismissed those allegations.
Today the Sunday Times can reveal the findings of forensic investigations conducted by at least 10 auditing firms into Prasa contracts dating as far back as 2010.
The auditors recommended that Prasa pursue criminal charges and institute disciplinary action against the employees involved in many of the contracts.
The Public Finance Management Act states that board members guilty of gross negligence can be fined or sentenced to jail terms.
The forensic probes paint a grim picture of a state-owned company in financial crisis as Buthelezi and his board, as well as the executives of Prasa, failed to carry out their fiduciary duties.
The probes were commissioned by the National Treasury last year on the instructions of the then public protector Thuli Madonsela, when Pravin Gordhan and Mcebisi Jonas were still at their posts as finance minister and deputy minister.
But President Jacob Zuma’s cabinet reshuffle in March means that responsibility for acting on the results of the investigation now falls to Finance Minister Malusi Gigaba and Buthelezi himself.
As deputy finance minister, Buthelezi now also heads the country’s biggest fund manager, the Public Investment Corporation, which, on behalf of government employees, owns shares in multiple sectors of the economy.
The Prasa revelations raise questions over the suitability of Buthelezi to be the political head of the PIC, which manages assets worth more than R1-trillion.
The forensic audit firms reviewed more than 100 contracts at Prasa at the instigation of the Treasury following Madonsela’s recommendations in her 2015 report titled Derailed.
The investigations were conducted last year during Gordhan’s tenure and were handed over to the Treasury this year.
After reviewing one contract worth R15 155 048, auditing firm Deloitte & Touche recommended that the board at the time be held accountable for contravening of section 50(1)(a) of the Public Finance Management Act because it “failed to ensure reasonable protection of procurement and financial records”.
This was after Prasa could not provide any documents relating to payments to a supplier that it had appointed irregularly.
According to that section of the act, the accounting authority for a public entity must “exercise the duty of utmost care to ensure reasonable protection of the assets and records of the public entity” and “act with fidelity, honesty, integrity and in the best interests of the public entity in managing the financial affairs”.
Financial negligence and wasteful expenditure is further detailed in 11 contracts worth more than R86-million that were investigated by Strategic Investigations and Seminars. The board was found to have violated its fiduciary duties and general responsibilities.
In one instance a company contracted in 2012 for three years to clean and maintain railway stations was overpaid by R18 397 365 from a contract that was valued at R37.9-million. Prasa has to recover these overpayments through litigation.
It has also been recommended that Prasa recover about R21.3million from another company that was contracted to maintain overhead electrical equipment from 2010 to 2013.
Auditors could not find any supporting documents relating to the appointment of the company or invoices for the “improper” payments.
The rail agency has long been in turmoil over its finances as the current board chairman, Popo Molefe, instituted investigations, laid criminal charges and took legal action against many companies to recover billions of rands.
Earlier this year the board was disbanded by the then transport minister Dipuo Peters, but that decision was overturned in court.
The newly appointed minister, Joe Maswanganyi, has also sent Molefe a notice to terminate the board.
In his letter this month, Maswanganyi said his decision was based on the fact that irregularities flagged by the public protector had continued and that irregular appointments had been made.
But Molefe has defended his board and also brought legal proceedings against the Hawks, accusing them of dragging their feet for two years in investigating corruption charges emanating from the same contracts that have been flagged as irregular.
“These irregularities and misappropriations [came to light as a result] of the forensic investigations instituted by the Prasa board,” Molefe said in a statement.
“The R14-billion irregularities point to something far more sinister than a mistake or failure of systems. As investigations by the board have shown, there were deliberate breakdowns of the operational, administrative
Auditors could not find any supporting documents or invoices The R14bn irregularities point to something far more sinister
and financial management systems,” he said.
“The criminal investigations and possible criminal prosecutions should establish the real reasons behind the deliberate breakdown of these systems.”
Molefe said the public should be concerned that “to date, no one has been criminally charged for any of this, nor has there been any meaningful indication of our law-enforcement agencies having acted on any of these matters”.
In response to queries on the forensic reports, Treasury spokesman Mayihlome Tshwete said: “The department has not briefed the minister on that particular issue, nor has it asked him to act.”
At the time of going to press, Buthelezi, who served as Zuma’s adviser when he was economic development MEC in KwaZulu-Natal, had not responded to questions sent via national Treasury.
Previously Buthelezi dismissed the allegations about his brother and himself, saying there was never a conflict of interest.