Response by Transport Minister Jeff Radebe - Mg - Mail & Guardian

Response from Transport Minister Jeff Radebe
The Mail & Guardian has learned that you terminated the contracts of SARCC
board members Zukile Nomvete and Nonku Tshombe in September last year. This
came after these two members queried the handling of the Metrorail fleet
recapitalisation program by the SARCC and its CEO Tshepo Lucky Montana.
1. Why did you terminate the contracts of Nomvete and Tshombe?
The board members concerned served the organisation well during the last two years, but
the skills and experience required of the board had to be reviewed in light of the
challenges facing the organisation.
2. The M&G is in possession of correspondence between Mr Nomvete, Adv
Tshombe and Mr Montana preceding the termination of their contracts. In it Mr
Nomvete queries the approval of the fleet recapitalisation program by the board. In
her response, Adv Tshombe confirms that the procurement committee never
discussed or approved a decision on fleet recapitalisation. Were you aware that the
SARCC’s board had not yet approved a business case for the Metrorail
recapitalisation when you announced this process during your May 20 2008 budget
speech?
The need for the recapitalisation of passenger rail fleet is part of the government’s
strategic plan for the socio-economic development of South Africa, and was included in
the president’s State of the Nation address in 2008. The business case for the fleet
renewal was discussed between my department and the SARCC, and was necessarily
included as one of the priorities of the department of transport in my budget speech in
May 2008.
3. If so, why did you announce the completion of a business case when you knew the
SARCC’s board had not yet approved it?
My announcement in my budget speech was in line with government priorities.
4. Who, according to your information, developed a business program and plan for
the recapitalisation of the fleet and what is the current status of that process?
All the relevant stakeholders were consulted, and will continue to work together in
developing a plan for the recapitalisation of the fleet.
5. You announced in May 2008 that you would’ve presented the business case for
the recapitalisation of Metrorail to Cabinet for consideration. Have you done this
and, if so, what was the outcome?
Once the Cabinet has decided to proceed with the recapitalisation of the rail fleet, an
announcement will necessarily be made.
6. What is your response to an allegation that no business case existed when you
announced the recapitalisation of Metrorail in your May 20 2008 budget speech?

A business case for the recapitalisation of SARCC has been developed in consultation
with all stakeholders, in line with the national priorities identified by the government of
South Africa.
7. The M&G has reliable information that the Metrorail recapitalisation program
was never managed in the SARCC, but “somewhere else”. What is your comment to
this?
All the relevant stakeholders are involved in the recapitalisation of SARCC.
8. The timing of their removal from the SARCC board suggests that the criticism by
Nomvete and Tshombe of the recapitalisation process was directly linked to your
decision to terminate their contracts. Is this so? Did their correspondence with Mr
Montana two weeks prior to their removal influence your decision?
This inference is incorrect. Please refer to my comments under point 1.
Response from SARCC CEO Lucky Montana
1. Why were the contracts of board members Zukile Nomvete (chair) and Nonku
Tshombe (chair of procurement committee) terminated in September 2008?
The decision to appoint and remove board members of the SARCC rests and is the
responsibility of the minister of transport. The board appointments were made by the
minister with the concurrence of Cabinet.
2. Did Mr Montana have any role to play in the removal of these two board
members? Please elaborate.
No, the CEO is not involved in the appointment of board members. The CEO raised on
various occasions to the board and the shareholder (minister of transport) concerns about
board effectiveness/leadership and poor governance practices in some instances. The
board also set up a governance committee to address these challenges. The CEO hoped
that the governance challenges that the board was aware of would be resolved by the new
board.
3. Was Mr Montana in support of the removal of these two board members from the
SARCC board? If so, why?
The CEO accepted the decision of the shareholder [Radebe] to reconstitute the board,
obviously it being the prerogative of the shareholder. Also refer to the above response
(question 2).
4. The M&G is in possession of correspondence between Mr Nomvete, Adv
Tshombe and Mr Montana preceding the termination of their contracts. In it Mr
Nomvete queries the approval of the fleet recapitalisation program by the board. In
her response, Adv Tshombe confirms that the procurement committee never
discussed or approved a decision on fleet recapitalisation. Why did the SARCC
develop a business case for the recapitalisation of the Metrorail fleet – that was
presented to Cabinet by the minister – without board approval?

On 9 February 2007 the president of South Africa in his state of the nation address stated,
our program in the social sector for this year will also include (among other things):
Speeding up the implementation of the taxi recapitalisation project, implementing
detailed plans for passenger rail and road transport including the Bus Rapid Transit
System in the Metros and recapitalisation of Metrorail.
In part this pronouncement was based on a National Rail Plan accepted by Cabinet on 7
December 2007. Following a Cabinet meeting on 7 December 2007, the meeting received
a report on the Interim National Passenger Rail Plan, which identifies priority corridors,
rail recovery initiatives and so on. The essence of the plan was approved, and work is
meant to start soon on regional business plans, including transport needs outside of the
congested areas.
In a quarterly report by the CEO submitted to the board for the 30 July 2008 meeting and
discussed on 31 August 2008 it was stated: “The SARCC is assisting the department of
transport put together a comprehensive business case for the acquisition of a new
generation of rolling stock fleet for submission to Cabinet. The chief executive officer of
the SARCC had extensive discussions with the Directors General of the department of
transport, national treasury and the department of trade and industry, as is required by
government and Cabinet processes in particular, in the period of the compilation of the
Cabinet Memorandum.
Part of the recommendations were that an intergovernmental team be formed, chaired by
the department of transport to implement a fleet acquisition strategy for Metrorail (with
SARCC represented in the team).
On page 27 of the SARCC business plan approved by the board in February 2008 it was
stated: “An analysis of the age profile of the current fleet indicates that the refurbishment
and upgrading of the fleet could address the current problem of train set availability. As
indicated in 2007/08, the refurbishment of coaches does not hold the future prospect for
the company.
“The shortage of rolling stock is already undermining the delivery of efficient and
reliable passenger services. The SARCC will therefore embark on the initiative to
recapitalise its fleet in order to meet current and future demands. It is important that a
long-term perspective is adopted which begin to address challenges on how the company
will meet its obligations under the Legal Succession Act and adequately meet future
passenger demands.
“Projections that take into account population growth, economic growth, government’s
transport policy objectives aimed at promoting public transport over private car use, the
costs associated with congestion and emergence of new residential settlements as well as
new demands for public transport and rail services indicate that future demands for rail
services would increase significantly.
“Technical and operational specifications for the new rolling stock fleet were finalised
and a tender for the new fleet developed during the 2007/08 financial year. Procurement
processes for the acquisition of new rolling stock fleet tend to be most intense and the
corporation will invite bidders early in the financial year to submit proposals for the
manufacture and supply of new generation Rolling Stock.
“Whilst the SARCC, in consultation with the DOT, is finalising private finance options
of rail infrastructure, the strategic nature of rail requires that government plays the
leading role in financing of Rolling Stock and rail infrastructure.”

To the knowledge of the SARCC the fleet recapitalisation tender has not been presented
to Cabinet.
5. Who developed a business program and plan for the recapitalisation of the fleet
and what is the current status of that process?
For point questions 5 and 6 please refer to answers in question 4.
6. What is your response to the allegation that no business case existed when
minister Radebe announced the recapitalisation of Metrorail in his May 20 2008
budget speech?
For point questions 5 and 6 please refer to answers in question 4.
7. The M&G has reliable information that the Metrorail recapitalisation program
was never managed in the SARCC, but “somewhere else”. What is your comment to
this?
The case for recapitalisation was developed by the SARCC and the DOT, also included
in the National Rail Plan presented to cabinet.
8. Is the termination of Nomvete and Tshombe’s contracts in any way related to
their criticism of the way the recapitalisation of Metrorail and its business case was
handled by the SARCC?
No.
9. If not, how should their criticism of the program a mere two weeks before their
removal be interpreted?
The department of transport can provide reasons for the removal of board members. The
process to appoint board members takes more than two weeks as a memo starts with the
department of transport, gets approval from the minister of transport and then submitted
to a Cabinet committee (governance), and finally to the Cabinet secretariat for
distribution to various ministries before a Cabinet meeting (this process can not take two
weeks).
10. Has a tender been issued for the recapitalisation of Metrorail? If so, what is the
current status of this tender process? If not, when does the SARCC plan to advertise
the tender?
To the knowledge of the SARCC no tender has been issued for the fleet acquisition for
Metrorail. The decision to go on tender and final awarding of the tender on the
acquisition of the Metrorail fleet will be taken by Cabinet.