Why Ramaphosa got stuck on a train

It is obvious why President Cyril Ramaphosa got stuck on a train in Cape Town a few weeks ago: Passenger Rail Agency of SA (Prasa) chair Khanyisile Kweyama states in one of the first paragraphs of its latest annual report that Prasa fails to fulfil its primary mandate of transporting passengers.

According to Kweyama, Prasa is “almost broken and is fraught with a myriad of issues and challenges ranging from its failure to deliver on its primary mandate, investigations arising out of allegations of maladministration and corruption, poor internal controls and the slow roll-out of the capital programme meant to transform rail travel”. She admits that the business is broken and near total collapse.

This is not new news – the annual report was published in September last year and presented to parliament, but it seems nobody bothered to read even Kweyama’s foreword to the report.

‘Lowest performance levels of all time’

Figures pertaining to Prasa’s operations show why people only use trains when they absolutely have no other choice. Both Kweyama and then CEO Sibusiso Sithole (who resigned in February), mention that commuter services are at their lowest performance levels of all time.

On average, 13% of all scheduled trains are cancelled and a massive 68% of trains operated on any given day are running late. The average delay during 2018 was 30 minutes. Only 50% of the trains running are full train sets with a minimum of 12 coaches each.

A quick calculation using these figures shows that Prasa is indeed not close to doing what it should. If Prasa schedules 1 000 trains, 130 will be cancelled. Of the 870 trains that run, 594 will be running late. That leaves 267 trains arriving at their destination on time – less than 27% of the original schedule. Only 50% of these will be complete sets with the required number of passenger coaches.

Thus, on average during the year to March 2018, only 138 trains out of every 1 000 achieved their objective. This performance makes a joke of what Prasa states is its “commitment to deliver public value to the poorest of the poor”.

Management blames the availability of running stock. “The unavailability and unreliability of rolling stock and infrastructure, which are key enablers to regular, reliable and on-time train services, can no longer guarantee that rail is the backbone of public transport,” says Kweyama.

Train set numbers dwindling fast

The availability of train sets decreased from 288 in the 2014 financial year to only 200 at the end of financial 2018, according to the annual report.

And the deterioration did not stop there. By the time the annual report was ready to go to print about six months later, the number of available train sets had decreased to 174 – of which only 50% were correctly configured with 12 coaches.

“This happened despite the general overhaul programme and repair interventions that amounted to billions of rands,” the chairperson wrote in the annual report, which was personally addressed to transport minister Blade Nzimande.

Government has committed a massive R173 billion to fix Prasa, with most of the money remaining unspent.

“Currently, Metrorail transports less than 700 000 passengers per week day, while the system is capable of transporting between 2.5 million and three million passengers daily.” In fact, Prasa did transport 2.6 million passengers in 2013.

Thousands more employees, billions more in wages

In contrast, the number of employees increased from 12 000 to 17 000 at the end of financial 2018 and the wage bill increased from R3.9 billion in 2013 to R5.4 billion. Meanwhile, passengers increasingly refuse to pay for train trips with management reporting that fare collection systems in Cape Town and Gauteng basically collapsed in the first quarter of the year under review.

Prasa did not respond to enquiries about the state of the payment system and its train operations, or if there has been any improvement in the organisation over the last 12 months to the end of its financial year to March 2019. We will have to wait for the annual report to see what happened over the last 12 months and if any of the urgent short-term interventions promised since 2013 have been realised. 

The financial statements confirm Kweyama’s conclusion that the business is close to collapse.

If Prasa was a private company, it would probably have filed for bankruptcy already, or the directors would have faced charges of trading while insolvent.

Prasa reported a loss before interest of R1.88 billion (2017: loss of R1.64 billion), mainly due to the decrease in fare revenue to less than R1.8 billion. Its biggest source of income is the R5.9 billion operating subsidy funded by taxpayers. The R968 million interest earned on cash earmarked for capital expenditure (R63 billion) reduced the loss after tax to R925 million.

The balance sheet shows that liabilities exceed assets by R882 million and that net equity comes to a negative R840 million. The individual items that make up the assets and liabilities indicate that things might be actually worse than the balance sheet suggests.

Listed as an asset is a prepayment of more than R1.9 billion in respect of the disaster surrounding the agreement in 2013 to acquire Spanish locomotives – which did not fit our railway tracks despite a redesign by Prasa’s chief engineer at the time (turns out he lied about his engineering qualifications and the locomotives were deemed dangerous).

This ‘asset’ is still the subject of court cases. How terrible the agreement was can also be seen in the condition that the supplier would have accepted the currency risk up to an exchange rate of R10.40, with Prasa taking responsibility for any worsening in the exchange rate thereafter.

Liabilities include possible claims from commuters injured in accidents to the value of R1.2 billion and a long list of contingent liabilities (totalling R979 million) arising from claims from suppliers. Trade creditors amounted to R6.1 billion.

A litany of shortcomings

The auditor-general issued a qualified report on the financial statements, noting that the statements were presented late, incomplete and lacked proper and complete supporting documentation. The auditor reported 10 pages worth of shortcomings, including the lack of information to substantiate fixed assets or income. He noted irregular expenditure of R23.4 billion and could not substantiate claims that Prasa met its measurable objectives to improve customer service. He also mentions material misstatements in the preparation of the financial reports.

Read: Prasa’s financial management out of control

The auditor-general says large losses and high debts – with the majority of cash reserves committed to capital expenditure – cast significant doubt on the group’s ability to continue as a going concern.

He also says that instability in leadership at Prasa has resulted in the decline in financial management and the total collapse of internal controls.

Prasa’s board of directors was changed five times during the year under review. It did not have a chairman or a board of directors for a period of nearly three months, while the latest CEO (Sithole, who was appointed soon after Nzimande took over as transport minister) resigned a few weeks ago after serving only nine months of his contract.

Add to these woes the ongoing theft, corruption and vandalism, and the chair’s remarks of an organisation struggling to survive look like a big understatement.

In addition, Prasa is still under investigation by the Public Protector, National Treasury and the Directorate for Priority Crimes Investigations (the Hawks).

It is a sorry state of affairs, and an appropriate conclusion to come to seems to be reflected in the question posed repeatedly in Ayn Rand’s Atlas Shrugged, published in 1957 – ‘Who is John Galt?’ The novel centres on a railway company trying to operate in an environment where economic decisions are replaced by a socialistic agenda and nobody takes responsibility for the consequences.