Coronavirus deepens Prasa’s financial woes, revenue loss estimated at R757m

When South Africa began its lockdown period at the end of March, state-owned utilities that were already on the back-foot because of years of maladministration and weak economy were expected to come crippling pressures, with the Passenger Rail Agency of South Africa being a case in point. Already in business rescue, the agency on Thursday said it expects revenue loss for the year around R757 million.

For the month of April and May alone, the administrator of the agency, Bongisizwe Mpondo, said it had incurred losses of R199 million due to the lockdown. He was appointed as administrator on 9 December 2019.

Prasa had run into deep financial difficulties over the years, reporting billions in irregular as well as fruitless and wasteful expenditure due to non-compliance with supply chain management policies. Transport Minister Fikile Mbalula dissolved the interim board last year and placed the entity under administration to address the “deep-rooted fault lines”. Over the past 10 years, Prasa was only able to turn a profit in 2014.

However, the Covid-19 pandemic has proved to be a spanner in the works for the administrator’s plans. The lockdown period has resulted in further cash constraints on an already strained financial situation, said Mpondo.

“The impact of projected losses is dire,” said Mpondo. Prasa is engaging with Treasury and its shareholder, the Department of Transport, to get the assistance it needs to “cushion the blow” as it stand, its current operating subsidy will not cover costs.

Earlier this week Fin24 reported that Prasa had proposed voluntary severance packages (VSP) to union members, given the deteriorating financial position of the entity which has been exacerbated by the Covid-19 pandemic.

“The further financial constraints that have arisen as a result of this pandemic have caused us to closely re-examine Prasa’s situation,” Mpondo said in a letter addressed to the National Union of Metalworkers of South Africa, general secretary Irvin Jim.

The South African Transport and Allied Workers Union, however, in a statement issued on Wednesday, accused Prasa for using Covid-19 as a scapegoat. Prasa should instead be working to bring “corrupt managers to book,” and introducing efficiencies and effectiveness, the union said.

“Offering workers voluntary severance packages will not address the issue of cable theft, vandalism, lack of infrastructure and building commuter confidence.”

Satawu will meet with Prasa on 8 May where it will raise these issues.

Mpondo confirmed that Prasa will meet with unions over the next two days and next week. “What we have issued to unions is an invitation to consult on VSPs. We have not instituted VSPs yet,” Mpondo said.

Prasa may look at getting those over the age of 55 to take early retirement, these are about 2029 workers. Prasa is also considering those who do not have critical positions. But all of this is yet to be determined in discussions with unions. Mpondo could not give a definite figure on how much the VSPs would cost, but a preliminary figure is R869 million.

Delayed projects

Covid-19 will also have implications for Prasa’s project timelines, and capital intervention programmes. Those negatively affected include the Central Line in Cape Town and Mabopane Corridor in Tshwane. Prasa did not advertise any bids during the lockdown period, nor were closed bids evaluated, Mpondo said. Planned maintenance was also interrupted.

Train operations will only resume under Level 3 of lockdown. Prasa has made submissions to Cabinet and may need R170 million to gear up for Covid-19. Mpondo said additional marshals will be needed for crowd control and to provide sanitisers. Prasa is also awaiting feedback from the UIF, on its application for financial assistance through the Temporary Employer/Employee Relief Scheme.

Prasa said that it is working with the Department of Health to set up screening and testing stations. Furthermore, crowd management and social distancing measures will be put in place, commuters will have to wear masks and no eating and drinking will be allowed on trains. Prasa has implemented deep cleaning at its depots and stations, its trains are being disinfected and it is in the process of sourcing sanitation booths, said Mpondo. Prasa is considering resuming corridor operations gradually.


There are 27 matters currently under investigation by the Special Investigating Unit. “We have instituted charges and suspended 12 senior managers who are undergoing disciplinary action,” Mpondo said. Where issues of corruption arise, the matter will be handed over to the National prosecuting Authority, he added.

The Hawks are working on 23 Prasa matters. On 5 May, 2020, the Hawks had sent 16 matters to the NPA Specialised Commercial Crime Court. Two more matters will be sent to the NPA Specialised Commercial Crime Court on Friday.

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