Prasa locomotive. Picture: PRASA
Prasa locomotive. Picture: PRASA

Dire financial challenges at the Passenger Rail Agency of SA (Prasa) have resulted in the embattled state-owned enterprise (SOE) failing to make payments to its employees’ retirement fund in the past two months.

Prasa announced in March that it was going through a “debilitating cash flow crunch” that has depleted its operational budget and further led to it failing to pay suppliers and creditors.

The SOE, which has had five turnaround strategies since its creation, has been dogged by governance failures, irregular expenditure,  and allegations of state capture. The president estimated in October 2019 that state capture possibly cost the country R500bn​.

Prasa received a disclaimer from the auditor-general last year. Transport minister Fikile Mbalula, who has described Prasa as a broken organisation, placed the agency under administrator Bongisizwe Mpondo in December 2019.

The United National Transport Union (Untu), which represents about 49% of company workforce, said the money due to the fund amounts to R23m and that it is a criminal offence to withhold it.

Untu deputy general secretary Steve Harris said it has laid charges of fraud, theft and contravention of the Transnet Pension Fund Act against Mpondo in his capacity as the Prasa administrator. He said the Act is clear that Prasa must transfer the contributions within seven days after the end of a calendar month.

“Untu received confirmation from the funds and from Prasa that the contributions have not been paid. Prasa’s excuse is that it is experiencing cash-flow problems. This is no excuse to use the hard-earned money of its employees without their knowledge. It is a criminal offence,” said Harris.

Harris said the Pension Funds Act was amended in 2014 to make controlling shareholders, members of close corporations, company MDs, trustees and partners personally liable for an employer’s failure to pay contributions. “They can be fined up to R10m or imprisoned for up to 10 years.”

When contacted for comment, Mpondo referred questions to Prasa spokesperson Makhosini Mgitywa.

In a statement, Mgitywa said Untu is being alarmist, but admitted that for the past few months the rail agency had failed  to meet a number of its financial commitments due to cash-flow challenges. He said it has been transparent with all stakeholders, such as employees, unions, commuters and service providers, about this.

“One of the consequences of the stated financial challenges is that it has not been able to make payments to the retirement fund for the employees of the rail operations division, for the months of February and March 2020. At no stage did Prasa admit to committing any unlawful actions,” said Mgitywa.

“In compliance with the relevant act, Prasa is in constant communication with the fund administrators with a view to resolving this matter and will, in due course, give an update to its interested stakeholders, in particular employees and recognised trade unions.”

Mgitywa added that Prasa is aware of the implications of non-payment of contributions to the retirement fund and is acting with “urgency to address the matter and ensure that the interests of its employees are protected”.

In March, Prasa loaned its troubled subsidiary and bus operator Autopax R20.9m to enable it to pay its 1,071 workers the balance of their salaries after they received only 25% of them at the end of February.

mkentanel@businesslive.co.za

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