More unlawful Prasa security contracts exposed

The Passenger Rail Agency of South Africa (Prasa) appointed six security contractors and potentially channelled several billions of rands to them through an unlawful backroom procurement process. This took place despite repeated warnings from the auditor-general (AG) that the parastatal was barred from buying goods and services through “piggybacking”.

Last week, the Sunday Times exposed how Prasa channelled roughly R1bn to politically connected companies Reshebile Aviation and Protection Services and Reshebile Aviation Solutions through a controversial procurement process that piggybacked on a security panel established by the Airports Company South Africa (Acsa).

The two companies are controlled by the politically exposed Paul Langa, an ANC veteran who is also a former Robben Island prisoner. Langa spent years as head of security at Luthuli House and handled security arrangements for some of the party’s largest political gatherings.

Today, the Sunday Times can further reveal that the Reshebile contracts were part of a much bigger and more elaborate security procurement scandal. Documents show that Prasa ultimately appointed six of the seven companies on Acsa’s security panel, despite being warned three times by the AG that the Treasury regulation underpinning piggybacking arrangements did not apply to the rail agency.

We confirm that the Sunday Times article was enough for the ministry to act on this matter

—  - transport spokesperson Collen Msibi

Treasury regulations permit government departments and certain state-owned entities to bypass procurement processes and piggyback on contracts already awarded by other departments and parastatals. In terms of the regulations, these entities can appoint service providers without going through fresh tender processes of their own.

The Sunday Times exposé has forced the government’s hand, with transport minister Barbara Creecy ordering parallel investigations by Prasa and Acsa into the appointment of Reshebile Aviation and Protection Services and Reshebile Aviation Solutions. Prasa’s probe will extend beyond the Reshebile contracts to scrutinise all active security contracts across the rail agency.

“We confirm that the Sunday Times article was enough for the ministry to act on this matter,” transport spokesperson Collen Msibi said. “Consequently, earlier this week minister Creecy wrote to the chair of the Prasa board, Nosizwe Nokwe-Macamo, to request the appointment of a separate forensic company to undertake a forensic due diligence on all other active security contracts at Prasa.”

The company would look into the procurement processes, the legality of the contracts, and the contract administration processes, including governance and oversight of the contracts, Msibi said.

He added that Creecy had also written to the chair of the South African Civil Aviation Authority (SACAA) and the chair of Acsa requesting an independent forensic investigation into Reshebile Aviation and Protection Services’ appointment and the administration of the company’s contract, as well as governance and oversight of the process. SACAA’s board is chaired by advocate Mpati Lebakeng, while Acsa’s is chaired by Irvin Phenyane.

The Sunday Times trawled through Prasa’s past annual reports and discovered that on three separate occasions the AG had informed the embattled rail agency that the Public Finance Management Act prohibited it from buying goods and services through piggybacking.

The entity’s 2021/2022 report shows that in July 2019 the AG had already put Prasa’s management on notice that its decision to appoint a different security contractor through piggybacking was unlawful.

“In February 2018, a deviation in terms of Treasury regulation 16A.6.6 for the provision of security services to the value of R9.3m was approved for a period of six months. The regulation used as a basis to deviate from the competitive bidding process does not apply to Prasa as a schedule 3B entity, and the contracts were extended without obtaining the required approvals … ”

The accounting authority was notified of the material irregularity on July 18 2019, and in the response to the notification it committed to initiating an independent investigation into this material irregularity, the report states.

In Prasa’s 2022/2023 annual report, the AG reproduced almost word for word the concerns it had raised the previous year.

Last week, the Sunday Times reported that in July 2021 Acsa approved Prasa’s request to piggyback on its panel of security companies. Following the approval, Prasa appointed Reshebile Aviation and Protection Services from Acsa’s panel to provide security at its sites.

This means that exactly at the same time that Prasa’s executives were engaged in extensive interactions with the AG over the issue, the rail agency was in negotiations with Acsa to appoint security companies from its panel through piggybacking.

The AG’s finding that Prasa could not lawfully procure goods and services through piggybacking has now been emphatically endorsed by the National Treasury, which confirmed the regulation never applied to both the rail agency and Acsa.

“Treasury regulation 16A.6.6 does not … apply to Prasa as a public entity listed in Schedule 3B of the PFMA and Acsa as a Schedule 2 public entity,” the Treasury said.

Acsa did not respond to detailed questions, with a company spokesperson saying only: “The Acsa [supply chain management] procedure manual applicable at the time permitted Acsa to consider requests to participate from other organs of state. However, it did not prescribe the selection process of any service provider on its panel. Appointment, allocation and contracting in the Prasa environment was not for Acsa to determine.”

The Sunday Times can also reveal that Acsa’s security panel appears to have outlived its own expiry date. Established in 2018 for a five-year term, the panel should have come to an end in or about 2023. However, it remains operational, potentially continuing to channel billions of rands in public funds to the same seven private security companies. Acsa failed to explain why it did not terminate the panel at the end of its lifespan and embark on a fresh competitive procurement process to appoint new service providers.

Similarly, Prasa’s appointment of six security companies sourced from Acsa’s panel should, on the face of it, have come to an end when the underlying Acsa panel expired in 2023. Yet all six contractors remain active at the rail agency.

Sources told the Sunday Times that Prasa initiated a procurement process in 2024 to replace the security companies, but two years later the process remains incomplete. Both Acsa and Prasa did not disclose how much they have paid the security companies.

Furthermore, the Treasury also questioned the arrangement that led to Prasa piggybacking on Acsa’s panel, arguing that the regulations provide for participation in a specific existing contract with a named service provider, not the use of another government department or entity’s entire panel.

Prasa’s security procurement has been in chaos for years. A Sunday Times investigation last November revealed that a Special Investigating Unit probe found executives had flagrantly sidestepped competitive bidding processes between 2010 and 2019, funnelling contracts to favoured security firms and approving an eye-watering R2.8bn in payments.

Prasa spokesperson Andiswa Makanda declined to comment, saying the matter was being investigated.