Popo Molefe: No response to repeated requests for comment. Picture: GALLO IMAGES/FOTO24/DEANNE VIVIER

Popo Molefe: No response to repeated requests for comment. Picture: GALLO IMAGES/FOTO24/DEANNE VIVIER

LUCKY Montana has officially stepped down as group CEO of the Passenger Rail Agency of SA (Prasa) and is serving a six-month notice period as of June 1. Both transport minister Dipuo Peters and Prasa chairman Popo Molefe have accepted his resignation.

His departure is directly linked to his relationship with his new board and his toxic relationship with Molefe.

The funny thing is, though, that despite this very public break, no-one — not even Montana — knows whether he is really going to leave or not, as powerful political voices could convince him to stay.

At risk is management stability of one of the country’s most strategically important industrial programmes — to manufacture and deliver modern trains to millions of rail commuters.

Montana has been central to driving through the procurement process for this programme, which has earned plaudits globally and locally. So his departure (by December 1, apparently) just as the localisation and delivery of the new rolling stock are due to start is not ideal.

Stability and competence at the agency are crucial: Prasa is to invest R175bn in new infrastructure over the next 10 years but the management of these programmes has come under attack. And the attack has come from inside the boardroom — an all-too-familiar pattern in SA’s state-owned companies, notably Eskom and SAA — and has soured the atmosphere at employee level.

Over the past seven months relations between the board, which was installed in August, and the executive have been strained to breaking point. Montana has officially ended his contract sooner than scheduled. (It had been extended to March 2016.)

Though he has been CEO for almost a decade, the April announcement of his imminent departure ahead of schedule came as a shock and sparked a flurry of intense behind-the-scenes meetings in government, parliament, labour and within Prasa itself, to rescue the situation.

In reaction to the lack of success in finding a political solution to the problem, the SA Transport & Allied Workers Union (Satawu) took the streets of Pretoria last month to protest against the situation at Prasa.

The union said it would “demand a forensic investigation into corruption and nepotism” at the agency. “We have noted with concern that certain board members were appointed outside of the nomination process that involved members of the public,” a union statement dated May 27 says.

Satawu, the majority union at Prasa, alleges that “certain board members have criminal records and are not eligible” to serve in terms of governance regulations and the Companies Act.

In an e-mail to the Financial Mail, Satawu says there are three directors it claims were “inserted on to the board” — Molefe, Zodwa Manase and William Steenkamp, and that these names did not appear on any of the nominations lists seen by Satawu members or department of transport officials.

The union demanded the new board be dissolved and that Peters do all she could to retain Montana.

The previous board was purged in July 2014. The removal of the board is understood to have been part of Montana’s “punishment” for his unwillingness to influence the outcome of the R54bn bid for new trains in favour of Chinese companies.

Montana faced enormous political pressure before and after Gibela, the Alstom-led consortium, was selected as the preferred bidder.

Peters ignored questions sent to her office regarding the contents of documents (seen by the Financial Mail) relating to the issues raised by Montana for his unhappiness and decision to leave, and Satawu’s call for the dissolution of the “illegal” board.

The minister’s spokesman, Ishmael Mnisi, in a text response on May 29 to our query about Montana’s position, says: “The board chairperson informed the minister about the CEO’s letter [of resignation]. The minister is still considering the implications, whereafter [she] will communicate with the board.” This despite Peters’ earlier reported acceptance of Montana’s resignation.

Mnisi confirms this is the only response we’ll get to the question of what action the minister is taking and what her role has been in the Montana drama playing itself out at Prasa. “The consultation process is still on course,” Mnisi said on June 10.

It is not clear who the minister is consulting. Montana says the minister has not discussed his departure with him, and nor has the CEO’s position been advertised.

Molefe has made no statement or response to repeated requests for comment. Steenkamp declines to comment on the allegations, saying only that the board has decided Molefe will answer all questions. He did however say: “The board is united; [it] doesn’t matter what you read, this board is solid.”

The success of the rail modernisation programme is vital to SA’s dream of revitalising the heavy industry sector, which has stagnated, and could help the state launch the “100 black industrialists” it wants.

The timelines on this project have always been tight, even before national treasury inexplicably delayed the final go-ahead of the transaction.

The principal worries for Prasa are ensuring the agency and its infrastructure are ready to bring the new commuter trains into service by next June and that it has the capacity to manage the programme over the coming decade.

As it is there is already infrastructure, such as depots, that will not be ready for the new trains because of the slow pace of Prasa’s procurement of infrastructure.

The board is the biggest threat to the agency meeting its deadlines, says the frank-speaking Montana. “We have the required skills but I am not convinced that the board will be able to act in the best interests of Prasa under the chairmanship of Popo Molefe and his modus operandi of interfering with the business of Prasa,” he adds.

This became apparent to Montana after his return from leave at the end of January. He had worked himself to the point of collapse and was urged to take six weeks off.

This unusually long break created an opportunity, he says, for Molefe to begin an “underground” investigation of him.
Revamp in Numbers
His prolonged absence also stoked rumours that he had been suspended for some kind of impropriety.

Stephen Sangweni, president of the SA Commuter Organisation (Saco), which works closely with Prasa, says he called Molefe to hear if it was true that Montana had been suspended and was told it was not true. But Sangweni says Molefe implied there had been something questionable about a multibillion-rand tender to build a depot in Braamfontein, which the board withdrew at the last minute.

Montana says he noticed after his break that the atmosphere at Prasa had changed. He began to hear that Molefe had set up a meeting with Prasa’s attorneys, Webber Wentzel, which drafted the contracts for the new train tender with one of Prasa’s executives without Montana’s knowledge.

Montana says he was also contacted by Marc Granger, the MD of Gibela Rail (which is building the new trains and the local factory), who asked about the agenda of a meeting with the board that Montana knew nothing about. As CEO, Montana is a member of the board and should at the very least have known about, if not arranged, such a meeting.

Gibela has confirmed the meeting took place. “The meeting was to brief Mr Molefe and some of his board members about the Rolling Stock Fleet Renewal Project and on the progress made so far,” Gibela official Pam Radebe said in an e-mailed response to questions.

Montana says the board has been briefed thoroughly on the rolling stock programme, and for the chairman to seek information on the project behind his back indicates a lack of trust.

“He does not believe his own executives who have briefed him and the board many times,” Montana says.

Accounts of such interference and rumours of growing discontent at Prasa have reached parliament, where ANC MPs have started to ask awkward questions.

Timeline

A briefing note on the goings on in Prasa — undated, unsigned but with the ring of authority — was delivered to parliament in about March and talks of the agency being “torn apart”. The four-page missive (seen by the Financial Mail) says that six months into the term of the new board, fault was being found “at every turn and level of the organisation”. The board, it goes on, is “not focused on the key mandate of Prasa” and has been “searching for fault, corruption and investigating every aspect of the business”. The board had convened many meetings “as a pretext to get involved in the day-to-day operations of the business”.

The final straw for Montana came at the end of February. This was when Prasa held a two-day board meeting.

“When I left at the end of that board meeting on February 27 I said to the company secretary, ‘this is the day I left Prasa’. I made up my mind that day,” Montana says.

The first half of the meeting was held without any executives present while the whole agenda was discussed, which is highly irregular. Then in the afternoon session new proposals — not on the agenda — were put to the executives.

Montana says a radical proposal to completely restructure the functioning of Prasa was presented. The board, which appeared to be united in the decision, wanted to move the spending responsibilities out of the corporate structure of Prasa and into the operating units such as Rail Operations, specifically the multibillion-rand rolling stock procurement programme.

According to Montana, there is no capacity to manage a programme of that complexity within the rail operation units, and importantly the money from treasury cannot be transferred to be spent by Metrorail and Shosholoza Meyl as they do not exist in law. The only legal entity is Prasa.

A “pointless” fight ensued for more than three hours. “All they want to do is to reallocate the resources without any proper process. You can’t do that on a whim, with no proper process,” he says.

The board, Montana says, also kept expressing concern about his “delegation of authority”, which enables him to approve tenders up to a value of R100m.

Montana says it is not unusual for a CEO of a company as large as Prasa is to have this discretion.

A board member who spoke on condition of anonymity said the concerns over how much money Montana could spend were related not only to how big his discretion was but also to the fact that it was meant to apply only to decisions he needed to make to meet transport planning targets for the 2010 Fifa World Cup hosted by SA.

This board member also suggested, without being specific, that Montana might be too close to certain Prasa service vendors, particularly security companies. The board was working “discreetly” with the auditor-general’s office to ensure there was nothing untoward in these contracts. Asked why an independent forensic investigation was not called for to address board concerns, the director said there was concern this could poison the atmosphere and prompt other managers to leave, which would create more instability at Prasa.

The director intimated that Satawu’s support of Montana was motivated by business interests the union had with Prasa and which Montana might be protecting — a suggestion Montana rejects with contempt.

A source close to the board and the executive committee says some of the board’s “strained” behaviour towards the CEO began after they received a letter from Peters at the beginning of the year. Instead of commenting on Prasa’s second-quarter performance as expected, the letter raised a number of other issues which had never appeared in previous letters.

This is confirmed in the briefing note that was sent to a handful of ANC MPs.

Curiously, the minister’s January letter questioned historical decisions made by Prasa, particularly the total (severance) cost of executives fired since 2009, an issue that had already come up in the November board meeting.

“The letter was very strange,” the source says, implying that it was sinister.

Increasingly Prasa executives, disturbed by being called to meetings with board members without the group CEO present, complained to Montana they were being compromised and threatened by the board.

According to the anonymous note to some MPs, the minister’s January letter became the “agenda” around which the board mobilised to act against Montana.

The note outlines three “big lies” it claims are being used to discredit Montana, which are that:

• Montana is leaving after an almost three-year-long investigation by the public protector has found him guilty of corruption (the report is not final and the correspondence seen by the Financial Mail does not suggest this finding);
• Montana tried to steal or redirect R2,5bn related to a depot contract; and
• Molefe offered Montana a “lucrative” three-year contract which he declined.

In April, in an effort to manage the growing crisis, Steenkamp sent an e-mail to the entire board to organise a meeting. In it he identified two issues of “grave concern” to him as the director responsible for health and safety. The first, he said in the e-mail, emanated from the acceptance by the board of the early resignation of Montana and the perhaps haphazard communication of Montana’s departure to “all relevant parties”. This “innocent oversight” by the board, Steenkamp said, had been creating its own “interpretation” and “resulting in unnecessary confusion and speculation breeding animosity, tension and even hostility within and outside the company”. Fixing this was urgent, he said.

The second urgent issue was the “rise of very personal, vindictive campaigns being launched by some of our stakeholders” specifically against the chairman and the minister.

The meeting was held a month later with no resolution. Montana says he took time to go through all the instances of interference he experienced at the meeting.

He says there was a growing appreciation among some of the board members for the reasons for his unhappiness.

“Last year was not good,” Montana says. “My health was not good. I was exhausted. 2025 is when the last train will be delivered. I cannot stay that long. I planned to leave but Molefe said [before he took a break] I must stay because there are some major risks over the next two to three years.”

Asked if he will stay on he says: “If I stay it can only be for a short time and there must be a proper hand-over to the new CEO.”

But whether Montana stays or not will largely depend on what happens to the leadership of the board.

It seems clear that if Molefe stays, Montana will go.

“The water has been muddied, especially with the investigation against me by the chairman and the smear campaign that he is running in the media against me,” Montana says, referring to a series of articles which he has referred to the press ombudsman.

With a cabinet reshuffle imminent it is unlikely any minister would make a decision that could harm his or her prospects.

In the meantime, the delivery date for the new trains rushes ever closer. As it is, the depots for the new trains and the testing tracks are not going to be ready in time.

There is also the crucial work that needs to be put to tender for the upgrade of tracks to handle speeds of 120km/h. Commuter trains now travel little faster than 90km/h because track infrastructure has not been upgraded in decades.

Implementing the huge passenger rail upgrade programme should be the main preoccupation of Prasa’s board, executive committees and staff. Not strike threats, boardroom-engineered intrigues and a CEO who has one foot in the office and other outside.

If SA is to reap the full benefit of this programme, action must be taken. So far the silence is being broken only by the production line in Brazil, where the body shells of the SA’s first two new trains have already been completed.