Dodgy tender awards and settlement agreement have delayed upgrades
- One of PRASA's most vital capital contracts - to upgrade its depots to accommodate its new blue trains - has been delayed by irregularities.
- Dozens of new blue trains have been left to stand idle.
- A settlement agreement between a failed tenderer and the contract award winner may be against procurement rules.
New blue trains, which promised a renewal in commuter rail for the country, keep coming out of the Gibela factory in Dunnottar, but the depots of the Passenger Rail Agency of South Africa (PRASA) are not ready to receive them.
The tenders for upgrading engineering services have run into obstacles, and a subsequent settlement agreement may be against the law.
On 26 August 2021, Acting Judge Stuart Wilson, in the Johannesburg High Court, issued an interim interdict against PRASA, stopping it from implementing an over-priced tender for engineering consulting on upgrades to the Salt River and Springfield depots.
The tenders for these depots were won by the GladAfrica Group, which also trades as GladAfrica Consulting Engineering. The sole director of GladAfrica is Noel Mashaba, who is the younger brother of Auswell Mashaba, of the Swifambo too-tall trains fiasco.
But GIBB, a losing bidder, cried foul. Not only was GIBB's bid almost R350-million less than GladAfrica's, but GIBB had been disqualified for trivial reasons - references in the wrong place and a thinly-supported claim that their designs were too generic.
GladAfrica's bid was also defective. Most notably, they had boasted of an agreement with Deutsche Bahn engineers. But by the time of the award, Deutsche Bahn was no longer involved.
Soon after the interdict, on 8 September 2021, PRASA's then-CEO Zolani Kgosie Matthews told Parliament that the process that PRASA followed in awarding the bid to GladAfrica was in fact compliant with the provisions of the Public Finance Management Act, and that PRASA was to take the court decision on review.
This commitment to review the interdict was abandoned, because GladAfrica did not take up the fight, and decided instead to enter into a settlement agreement with GIBB.
GroundUp has seen two settlement agreements, for the upgrading of Salt River and Springfield depots.
In terms of the Springfield depot tender, GladAfrica would cede "its right, title and interest in and to the Contract" and "all warranties and representations given to PRASA by GladAfrica in terms of the Contract shall be deemed to have been given by GIBB". In exchange, GIBB would withdraw its review application.
GladAfrica would be paid for the work that it had already done, and PRASA would be liable for all the legal costs. The agreement binds the parties to strict confidentiality clauses, including that "GIBB shall not publish any articles or provide any comment to any member of the media or any other third party whatsoever regarding GladAfrica's performance in terms of the Contract".
This might explain why GroundUp has not even received a recognition of receipt from PRASA, GIBB or GladAfrica in response to our questions.
Unlawful cession agreement?
A cession agreement transfers a claim for money from one party to another. Such an agreement is also the subject of controversy.
A 25 March 2022 letter from David Mphelo, then-Acting CEO of PRASA, to GladAfrica, says that "PRASA hereby grants you conditional consent that one of the projects be ceded ... Kindly provide PRASA with a Final Cession Agreement, to which PRASA will then grant its final consent."
A month later, GIBB sent an anxious letter to PRASA, demanding that they sign the final settlement agreement. GroundUp has not been able to confirm what has followed this letter of demand.
But it is not clear that cession agreements are even permissible.
An August 2020 legal opinion for the Office of the State Attorney, written by advocates RPA Ramawele and KF Magano, regarding the legality of cession agreements, found that, where organs of state or state-owned companies are concerned, cession agreements between successful tenderers and third parties should not be permitted. If a company cannot fulfil its obligations, then "provisions of the breach of contract" should be invoked, instead of permitting cession agreements.
Depot problems
In recent years, PRASA has been seized by internal chaos, and it has neglected to attend to essential infrastructure upgrades.
The new blue trains - the EMUs (electrical modular units) - require specialised storage and maintenance infrastructure. At present, most depots are at their capacity for new trains. With more trains coming off the factory floor, the depot upgrades are urgent.
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According to the Auditor General's (AGSA) management report from September 2022, "PRASA's stations and depots are clearly not prepared and do not have the required capacity to receive and operate all these new trains."
PRASA should have built additional space to house 186 EMUs, but built none, the AG found.
Congestion at the Wolmerton depot in Pretoria has already led to an accident that damaged one of the EMUs.
In KwaZulu-Natal, the depot only has space for ten new trains and has already received nine.
According to the AG, 47 trains are in "dynamic storage" at Wolmerton, waiting for PRASA depots to catch up.
GroundUp repeatedly requested comment and answers to questions regarding the cession agreement from PRASA, GIBB, GladAfrica, and Deutsche Bahn. None have responded.
