PRASA: Probe seeks "millions" missing in rents

[Steve Appleton]

From Business Day, 27 June 2011. http://www.businessday.co.za/articles/C ... ?id=146858

Probe seeks ‘millions’ missing at rail agency
Passenger Rail Agency of SA’s property arm not receiving rents, tenants coerced into paying ‘fees’

NICKY SMITH
Published: 2011/06/27 06:37:18 AM

THE Passenger Rail Agency of SA (Prasa), the state-owned company that owns commuter rail service Metrorail, begins a national investigation today into corruption at its property unit that could involve as much as R600m.

An initial investigation into missing funds in the northern Gauteng region had revealed that as much as R100m was missing from Prasa, CEO Lucky Montana said on Friday.

"This is only in one region. We have investigated eight tenders in the Pretoria area. In Pretoria we are losing about R100m," Mr Montana said. The Pretoria region was not "even a big area for us. We have not touched Johannesburg. We don’t know how big it is, it could be five or six times " the amount lost to fraud in Pretoria, he said.

Last week, Prasa Corporate Real Estate Solutions (Cres) CEO Cromet Molepo was placed on special leave after an internal investigation uncovered "wide- spread fraud" by Prasa officials in collusion with private businesses, Mr Montana said. "We have tenants at the stations, yet when we look at the income at Prasa Cres it doesn’t show we are getting that income," he said. Prasa Cres is the unit that holds and manages Prasa’s 374 commuter stations and owns about 4200ha of land in Durban, Cape Town and Pretoria.

A "simultaneous national investigation" across all of Prasa’s properties and stations was being started today to ensure that no one escaped the net being cast across the business, Kabelo Mantsane, Prasa head of group corporate security, said on Friday. "We have six people who are investigators. On Monday, we will get more help and it will go national," he said.

Mr Montana said he had been approached by businesses that had failed to get retail space at Park Station in Johannesburg because they had refused to pay bribes to officials at the company. A retailer, whom he did not name, was asked to pay a fee and include some Prasa officials in the planned business at the station, Mr Montana said.

In other instances of corruption such as tender fraud, "we have had numerous companies where we have awarded the tender at a price for R1m, immediately after the award the Rlm becomes R3m, the prices escalate", Mr Montana said. "The other critical areas where we are experiencing similar practices (are) Park Station ... Cape Town and in Durban. We have got a lot of space there and lots of tenants that don’t correlate with the amount we are receiving."

Prasa is executing a fleet renewal programme worth R97bn over the next 18 years, as the average age of the commuter rolling stock is 37 years and much of the fleet has reached the end of its design life. Prasa was not in a position to use its own balance sheet to finance the 8600 coaches and 2000 wagons it needed, Mr Montana said. In future, it would need to improve the quality of its balance sheet to make it an attractive borrower. Being able to generate strong, consistent cash flow would make it easier for Prasa to borrow money, he said.

Mr Molepo was not being accused of impropriety, Mr Montana said. "I have put him on a special leave because I want an independent investigation instituted. These issues happened under his nose and so we can’t say he was involved or that he was not involved. And when I look at the payments and I look at Prasa Cres not making targets yet but operating costs went up, surely the CEO should have looked at those issues?" Mr Montana said.