Voluntary severance packages have been proposed to union members at the Passenger Rail Agency of South Africa, as the state-owned entity faces a rapidly deteriorating financial position during the coronavirus pandemic.

In a letter addressed to National Union of Metalworkers of South Africa general secretary Irvin Jim, which Fin24 has seen, the agency's administrator Bongisizwe Mpondo asks to consult on voluntary severance packages, citing the "deteriorating financial position over the last few years, exacerbated by the Covid-19 pandemic", which Mpondo adds "has presented significant challenges to the business operations".

"The further financial constraints that have arisen as a result of this pandemic have caused us to closely re-examine Prasa's situation," he says.

"Among other efforts that are being made to reduce our operating costs, we believe that a smaller workforce may be one step towards maintaining a viable entity in this uncertain economic climate." The state-owned rail and bus operator has about 17 000 employees.

Mpondo took office in December 2019, tasked with "ensuring effective consequence management and providing support to investigations currently underway by law enforcement authorities" Fin24 previously reported.

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In March, 12 senior officials were suspended from Prasa, amid allegations of misconduct. Mpondo said at the time that Prasa was working towards eliminating fruitless and wasteful expenditure, which he said had contributed to the agency's dire financial position.

Unfortunate

United Transport National Union (UNTU), which is a majority union at Prasa, confirmed the consultation notice issued by the administrator. Spokesperson Sonja Carstens said a meeting between unions and the agency had been set down for May 7.

"We were quite taken by surprise and disappointed by the letter, given that the administrator was brought in to stabilise Prasa, but it seems like jobs are now on the line. It is unfortunate," said Carstens.

She said Prasa's financial position had not taken a turn for the better since the appointment of the the administrator, adding that the union had expressed unhappiness over his appointment of a team of technical advisors, who come at an additional cost to the company.

"Turning around Prasa would require making use of the people who are already employed by the company, not by adding more pressure to finances," she said.

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Mpondo was given a 12-month period to steer the agency out of an operational and financial morass, which has seen a number of senior managers mired in allegations of corruption and mismanagement around the awarding of contracts, including the procurement of locomotives.

Transport Minister Fikile Mbalula once called Prasa a "broken organisation".

Transport economist Ofentse Mokwena said it would be premature for the company to attribute its woes to the Covid-19 economic downturn, as its challenges were prominent long before the pandemic hit.

According to Mokwena, the company still has some options at its disposal which could be used to sustain its operations over the short term.

"I would expect them to tap into their capital budget expenditure to cover some the costs and transfer funds to its operating budget... that would not come at an additional expense to Treasury and not affect their fiscal position," he said.

In March, Mpondo said the passenger rail operator's liabilities stood at a projected R9.7 billion, and this figure was expected to fluctuate.