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South Africa puts state rail company under government administration

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Christian Fernsby ▼ | December 10, 2019
Minister of Transport Fikile Mbalula announced his decision to put the troubled Passenger Rail Agency of South Africa (PRASA) under administration and dissolve its Interim Board due to "the magnitude of challenges facing this entity."
Passenger Rail Agency of South Africa
South Africa business   Passenger Rail Agency of South Africa
"The continued decline of the quality of service PRASA provides to the commuting public requires urgency in the interventions we put in place," Mbalula said.

Topics: South Africa rail administration

The urgency of addressing PRASA's turn-around cannot be overemphasized, and tangible results that people can see must be realized in the shortest possible time, the minister said.

He appointed Bongisizwe Mpondo as administrator of PRASA with immediate effect.

PRASA has been gripped by serious governance breaches, particularly in the supply chain management, with irregular expenditure standing at 19.6 billion rand (about 1.34 billion U.S. dollars) in the 2017/18 financial year, an increase from 14.8 billion in 2015/16, while fruitless and wasteful expenditure escalating to 23.4 billion rand, an increase from 19.6 billion rand the previous year.

The government intervention will continue for 12 months, after which a permanent board will be appointed to run the affairs of PRASA, Mbalula said.

"We will ensure that the process to recruit a permanent board is initiated at least six months into the tenure of the administrator to ensure a seamless transition at the end of the intervention," he said.

The dire situation at PRASA highlights the seriousness of state-owned enterprises (SOEs) in the country, many of which are in heavy debt and are in desperate need of government bailouts.

But President Cyril Ramaphosa said on Monday the dependence of SOEs on bailouts and guarantees from the government must be reduced.

"An immediate challenge was to end state capture and tackle the corruption that had crippled a number of our state owned companies," said Ramaphosa.