South African state-owned giant spent 5 years chasing ghosts

The Passenger Rail Agency of South Africa (PRASA) has spent the past five years trying to track down “ghost” employees working at the utility, even pulling in the help of the Special Investigating Unit (SIU).

PRASA has faced significant issues related to ghost employees, with a 2021 audit revealing thousands of workers at the utility who could not be physically verified.

The Auditor General of South Africa (AGSA) warned that this suspected fraud is likely to result in a material financial loss for PRASA, due to payments made to fictitious employees for no value.

However, it said this matter is no longer being pursued through AGSA’s material irregularity process.

This was revealed in AGSA’s recent presentation to the Standing Committee on Public Accounts (SCOPA), related to PRASA’s latest financial audit outcomes.

AGSA senior manager Ilze Dippenaar praised the progress PRASA has made in addressing past audit findings, with the passenger rail utility achieving an unqualified audit opinion for the 2024/25 financial year, its first in nine years.

One material irregularity AGSA flagged was suspected fraud involving ghost employees at the utility.

Dippenaar explained that, during its audit of the financial year ended 31 March 2021, it performed data analytics and subsequent substantive procedures on PRASA’s employee database and employee-related costs. 

This process identified exceptions, which potentially indicated fictitious “ghost” employees that were on the utility’s payroll. 

“At the time, PRASA responded to indicate that the entity was in the process of physically verifying all employees on the payroll as part of Project Ziveze,” Dippenaar explained.

Project Ziveze (translating to “show yourself”) was launched by PRASA in November 2021 and aimed to verify all of the utility’s employees.

This project would lead to PRASA exposing widespread issues across its employee base, with hundreds of ghost workers potentially identified.

Project Ziveze

During phase 1 of Project Ziveze, all PRASA employees were invited, on a voluntary basis, to come forward for verification, with copies of their IDs, qualifications, and the Human Capital Management (HCM) Employee Data forms.

Out of the 17,268 recorded employees on PRASA’s payroll system at the time, only 14,268 employees presented themselves for verification. During the same period, 1,159 employees resigned. 

“Failure by 3,000 employees to come forward for physical verification led to suspicions that there could be a number of ghost employees at PRASA,” then-Transport Minister Fikile Mbalula said in November 2022.

Following this finding, PRASA commissioned the services of an independent service provider to establish if these were indeed ghost employees and to identify weaknesses in its system.

The provider was also tasked with identifying culpable officials who may have colluded with unscrupulous people to create ghost employees.

The investigation flagged 2,143 employees, who fell in one of the following categories – possible ghost employees, workers masquerading as somebody else, fraudulent qualifications, or employees with serious criminal offences.

“The preliminary investigation revealed that 1 480 employees either cannot be physically verified, or their files or documentation are non-existent,” Mbalula said. 

“The investigation also revealed a number of instances where ID photos do not match the faces of employees. This has triggered further investigations.”

“Through Project Ziveze, we have been able to save PRASA approximately R200 million since the inception of the project in November 2021.” 

AG told SCOPA that PRASA’s audit for the financial year ended 31 March 2022 included further audit procedures to address the risk of potential “ghost” employees.

The audit also considered that, at the time, the ongoing Project Ziveze indicated that several officials in the PRASA employee database could not be physically verified.

However, Dippenaar said the investigation hit a snag due to PRASA’s inability to provide critical documentation and the fact that the officials in question could not be physically verified, as their employment was terminated during the 2021/22 financial year.

This, she said, showed a reasonable possibility of misrepresentation, resulting in suspected fraud warranting further investigation. 

“The suspected fraud is likely to result in a material financial loss for PRASA, due to suspected payments made to fictitious ‘ghost’ employees for no value in return,” Dippenaar said.

SIU takes over

Aside from the independent forensic firm PRASA commissioned to review its HCM systems, it also requested the SIU to investigate the matter.

A Presidential proclamation was gazetted on 16 February 2024, wherein the President referred the matter to the SIU.

At the same time, Dippenaar explained that PRASA implemented several internal controls, including standardised onboarding forms, mandatory integrity vetting, and monthly payroll verification. 

“However, due to remaining internal control deficiencies in the HCM environment, we determined that appropriate action was not being taken to address material irregularities,” it said. 

“This was confirmed by the forensic report issued in September 2024.”

However, the SIU continues to investigate the suspected fraud, and, thus, AGSA decided not to pursue the matter any further under its material irregularity process.

“The SIU will take the appropriate actions within its mandate, powers and functions on finalisation of the investigation,” Dippenaar said. “We will monitor the progress on this investigation as part of the normal audit process.”

Following AGSA’s SCOPA presentation, EFF MP Ntombovuyo Mente asked if AGSA was satisfied with the progress of the investigation, especially given that two years had already passed.

In response, AGSA deputy business unit leader Sizwe Nxumalo explained that internal controls were not yet enhanced to address the issue.

He said that since the SIU was conducting a deeper investigation into the matter, and to avoid duplicating efforts, it identified the SIU as the appropriate body to pursue the matter further.

However, Nxumalo noted that AGSA receives status updates and follows up on a regular basis, and there is no outcome as yet.