#188 Rescuing a common carrier: PRASA under administration

“IN THE BLUR”– A vision of a Metrorail train in the distant horizon toward Mabopane, in Gauteng. As the train rolls by, and between sprawling neighbourhoods, it is parallel to an urban road which hosts the commutes of various users. On the darkest and brightest days, many communities on road or rail attempt to access their desires, commitments and ambitions. Will placing the Passenger Rail Agency of South Africa (PRASA) under administration clear the sense?

To lead organisations is a difficult task. At the heart of PRASA’s modernisation campaign was the need to expand infrastructure, systems and operational efficiencies. This is largely to enable improvements in capacity; but this can not go without the complementary changes in organisational behaviour and alignment.

“The Committee highlighted that the minutes were meant to reflect the resolutions that had been taken. Without credible minutes, these resolutions could not be tracked or authenticated. Such poor administration delegitimised the Board’s functionality and did not inspire confidence in the Board’s competence for an institution of PRASA’s magnitude.”SCOPA minutes, 20 November 2019.

Last week’s meeting at the SCOPA, did not go well for PRASA, with members tearing at the Board’s reporting and governance practices; stagnant audit results; increasingly unusual expenditure patterns; and visibly deteriorating service offering. This is in addition to the broad complexity of the developments in the passenger transport market which are by-and-large symptomatic of a tectonic shift under the State Owned Enterprise. With subsidiaries in long-distance buses (TransLux, and City to City); real estate (Intersite and CRES); and passenger rail (Metrorail and Shosholoza-Myel) the value propositions for each of these divisions has been challenged by changing passenger needs and increasingly competent competitors– making the importance of customer orientation crucial. As a result, the organisational instability at executive level, in particular, has in many ways exacerbated the entity’s ability to respond to changing markets. 

PRASA declines in performance

Over the past few years, passenger volumes for rail transport under PRASA’s sole responsibility have declined at an increasing rate— month-by-month. Furthermore, the subsidies per passenger have risen disproportionately between it’s passenger divisions, with Metrorail increasing its subsidies per passenger at a slower rate than Shosholoza-Meyl— which is the most subsidised (per passenger journey). Autopax is confronted with a smaller market share as competition begins to rise, meanwhile its subsidy base may for the first time begin to increase as losses creep in faster than before. The management of high-quality infrastructure at newly upgraded terminals is also under significant threat as vandalism surfaced after the much needed security contracts fell through. Meanwhile, the ticketing technology and other systems which were aimed at enabling the rail and long-distance road markets to evolve seem to have dwindled without implementation. With the availability of mobile and fixed line technology complementarity opportunities for customer service, and operational performance, respectively— there’s certainly room for significant improvement (particularly with access to Transnet Ltd.). 

Being under administration is a deeply symbolic policy

Placing PRASA under administration means a lot to many commuters and labour unions who’ve pleaded for the organisation to enter into a state in which it is reformed, and reflects a service offering for the lowest and even highest income earning households. As a backbone of the country’s transportation network during the apartheid years, it now seems to have become an iron giant of loot and inefficiency.

The Chairperson rejected the Acting CEO’s input. The Board had been in office for the whole of 2018/19 and the Committee was more interested in hearing about the action steps that were taken by the Board during the year; the process of stabilising the entity was secondary to the meeting agendaSCOPA meeting minutes, 20 November, 2019

However, within the policy system of then, the operational inefficiencies were justified by the political economy of the time and various levies enabled continuous operations within an artificial policy framework. In our circumstances, complex township development decisions need to be made and many of them have been in the hands of both Intersite and CRES, with significant moves toward station upgrades but not necessarily Transit Oriented Development (TOD). One step further are the customer service platforms for commuters who are not interacting with the service via the internet— but in person on a day-to-day: the recapitalisation programme included an asset protection scheme in the form of a transport policing service to safeguard customers, property and rolling stock as assets in PRASA’s books. Furthermore, integrating a domestic manufacturing plant and new rolling stock meant streamlining industrial objectives with operational sequencing for the entry of new trains into the existing network.

By placing PRASA under administration, Minister Fikile Mbalula responds to SCOPA’s comments through facilitating organisational stability in terms of people, talent, strategy and execution that is supplemented by long-term relationships, agreements and partnerships with stakeholders who will enable implementation. 

The relationship between PRASA’s “common carrier” administration  and SAA’s “commercial” rescue

Given its common carrier status, PRASA is placed under administration in a similar strategic language as South Africa Airways (SAA). Which by implication places the Administrator (organisational reform) is in many ways similar to Business Rescue Practitioner (financial resuscitation), Bongisizwe Mpondo the appointed Administrator at PRASA is an expert in transport planning, project management, strategic development and has a long-standing footprint in the transport industry. Les Matuson, the Business Rescue Practitioner for SAA enters the reform process with experience in reforming traditional retail companies into agile companies which endured a tough period. The primary difference here is that SAA comes with a fundamentally linear competitive business framework (within its own mode specific complexities), whereas PRASA reflects a more monopoly and social-service element in which the public welfare in mobility and access are a priority. PRASA however is confronted with a bigger transition on the horizon: the separation of operations from infrastructure in Transnet Ltd. and the potential for new entrants participating in the urban and regional rail networks. SAA is faced with a different type of beast: the implementation of the Yamoussoukro Decision through the Single Aviation Market and the Continental Free-trade Agreement’s impact on high-value and perishable goods; in addition to free movement of people and ideas on a regional level. Both require a degree of restructuring to reflect emerging shifts in competition, market access and demographic changes— however, more of this will come. 

Leadership, measurement and administration

What should matter, at least analytically are the measures used to evaluate the performance of these two distinct entities: both serve as key security assets; while they provide platforms for industrial development. However, there is much to do at a policy level to enable deep reforms that bring meaning to the next 12 months of change. Look at Maria Ramos’ work on Transnet Ltd., she practically took it as a typical SOE under the common carrier brand, and turned into a an corporate entity. In Mr Mpondo’s spirit, his closing statement is that we need to reform PRASA to serve the customer, our people, and we must serve our country and the investments it has made in us through the opportunities it hands us. This is compelling, and is a reminder again of Mr Jarana’s (former CEO of SAA) sentiments when he took the helm in a 2017 interview, yet he was disappointed by the political economy itself. Beyond the space of “hope”, Mr Mpondo is not the CEO– much more, he’s the administrator. This is explained in some detail in the closing segments of the video. Essentially, the core functional role of the administrator is to accelerate the organisation within governance and political economy; while under rescue the organisation is a ship that is close the sinking (already sunk) and needs to be reformed in order to asses the probability of least survival.

The Minister reiterated that the entity was in calamity; the Ministry had full appreciation of the AG’s material findings. What was most astonishing about the hearing was the Board’s failure to account for its basic processes and to respond to the questions regarding irregular expenditure for FY2018/19. He assured the Committee that there would be severe consequences imposed in order to realise a turnaround of the entity for the better. He would not prevaricate and condone ineptness because the officials were professionals and were expected to demonstrate competence. When they appear before SCOPA they must account. Closing Remarks by the Minister, at SCOPA, 20 November 2019.

It is such a pleasure to serve these insights, how they pile up from the last few years’ work of paying attention. Thank you for reading this one, once more– and for the researchers out there: yes, yes, there are few empirical studies on these topics which you’ll have an opportunity to scrutinise. Neverhtheless, thank you.

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