The Auditor-General said Prasa achieved an unqualified audit opinion with findings, an important step up from the disclaimed opinions that persisted until the 2021/22 financial year.
Image: Jacques Naude/Independent Newspapers
Banele Ginindza
The Passenger Rail Agency of South Africa (Prasa) has recorded a notable improvement in its audit outcome, but the milestone is being eclipsed by entrenched financial mismanagement, including R19 billion in irregular and fruitless expenditure, according to the Auditor-General.
Briefing Parliament on the entity’s 2024/25 audit results on Wednesday, AG's business unit leader Ilze Dieppenaar said Prasa achieved an unqualified audit opinion with findings, an important step up from the disclaimed opinions that persisted until the 2021/22 financial year.
However, she cautioned that the agency’s underlying financial position remains precarious, with “material uncertainty” over its ability to continue as a going concern.
"The main reason for raising this material uncertainty was the operating deficit. Importantly, this deficit excludes government funding, even though 88% of total revenue, including capital grants, still comes from the government," Dippenaar said.
The audit also flagged significant losses tied to asset management failures. During the year under review, Prasa wrote off assets worth R1.3bn, while idle rolling stock resulted in a further R2.6bn impairment, highlighting severe underutilisation of critical infrastructure.
A major contributor to the ballooning irregular expenditure is linked to two multi-year signalling contracts valued at R11.2 billion and R6.3 billion respectively.
"Although these matters were audited in 2023-2024 when awarded, increased risks—which were also reported in the media—prompted a re-examination in 2024/25 in conjunction with contract management," she said.
"During the audit process, we detected certain irregularities, which led us to then communicate to Prasa that these contracts were irregular from our perspective."
Beyond procurement failures, the audit exposed persistent governance weaknesses, including a dysfunctional contracts register, a “ghost payroll” with inadequate consequence management, and questionable investments in refurbishing near-obsolete rolling stock.
Dieppenaar noted that no updated feasibility assessment had been conducted for refurbishing old train coaches, a decision made prior to the Covid-19 pandemic, despite the ongoing rollout of newer, safer train sets.
She noted that no accounting authority reviewed whether the need for refurbishing these coaches still existed, pointing out that the refurbished fleet is being eclipsed by modern trains currently under manufacture.
The agency’s capital expansion programme has itself come under scrutiny. Despite investing heavily in new rolling stock, 146 trains at a cumulative cost of R19.4 billion as of 2022/23, these assets remain significantly underutilised.
While some improvement was noted in 2024/25, the AG found that the issue had not been fully resolved by year-end.
Prasa’s historical irregular expenditure remains another major concern. Although changes to the Public Finance Management Act (PFMA) reporting framework now require disclosure of only annual figures, the agency previously accumulated irregular expenditure totalling R33bn.
Many of these legacy issues remain unresolved, with the AG warning that proper consequence management is still lacking.
“Some of these matters date back many years and must be dealt with in line with legislation,” Dieppenaar said.
"Prasa, in essence, could have avoided reporting irregular expenditure amounting to R4.9bn in 2022/24, and R4.8bn in 2024/25, respectively, had those matters been dealt with when they arose."
Investigations by independent forensic firms have also revealed systemic weaknesses in financial controls. These include payment processing failures, lack of data encryption, incorrect payments to service providers, and potential fraud.
Additional probes into supply chain management and fleet operations covering the 2021–2023 period have since been concluded.
Despite these challenges, the AG acknowledged that Prasa has made meaningful progress in rebuilding its financial reporting systems.
Central to this has been the reconstruction of its contracts register and a multi-year audit action plan aimed at addressing longstanding deficiencies in asset and infrastructure management.
However, Dieppenaar stressed that sustaining these gains will depend on consistent oversight and accountability.
“Due to the magnitude of these balances, there is still a long way to go to catch up and to ensure that all of these items and matters that were included over the various years,” she said.
BUSINESS REPORT