The State-owned Passenger Rail Agency of South Africa (PRASA) is in dispute with a former supplier over alleged outstanding payments of R4-million and the cancellation of a R43-million contract.

Electrical engineering firm Tshireletso Business Engineering (TBE) insists the contract was wrongfully terminated in December 2013 and reports that it has instituted legal action against PRASA.

TBE MD Bongani Mankewu claims that it executed work to the value of R10.5-million on the project before the contract was terminated and that PRASA still owed the company for work performed and materials bought.

TBE, he says, issued several letters to PRASA enquiring about payment, it received a response in June stating that the rail operator had no intentional of settling the account.

PRASA spokesperson Moffet Mofokeng said the group had not yet been notified of any legal proceedings having been instituted and denied that TBE’s services had been wrongfully terminated.

“After accommodating TBE several times, it became clear to PRASA that TBE did not have the capacity to deliver on a contract of this value and, in the interest of the project and to mitigate losses, PRASA followed the termination clause in the agreement and duly terminated the agreement in December 2013,” he stated.

Mankewu said PRASA’s reason for termination was with regard to an alleged payment delay by TBE to one of its suppliers, which subsequently obtained a court order to recover material delivered to TBE.

“We took full responsibility by paying the supplier after we were paid and we also paid all the legal costs. Part of the material was returned to site and, unfortunately, we were approaching the year-end shutdown, so the rest was to be delivered in early 2014. “As we were unable to stop the orders already made, the material was delivered after we had received the termination notice on December 20, 2013,” he stated.

Mofokeng said that TBE initially indicated that it would contest the termination, but later withdrew in favour of a remedial plan designed to salvage the contract.

As part of the plan, which was allegedly presented to PRASA in January, TBE unveiled the identity of a third-party investor, which reportedly had the technical capacity to deliver on the work that was still outstanding. A nine-month contract extension was also proposed.

However, Mofokeng said PRASA later received a letter from the potential investor stating that it had withdrawn from the bid with TBE, which led the rail agency to proceed with the contract termination.

Mankewu stated that TBE presented two parallel solutions; a credit facility of R22-million, which was over the required credit to complete the project. He alleged that there was also an investor that was interested in TBE as a business, but pulled out because of the delay on the side of PRASA to decide on the status of the project while the costs were accumulating. “We were only notified of PRASA’s decision after six months, on June 18, 2014, while we proposed a nine-month programme from January 2014, at our cost. “As a result of this termination, TBE had to lay off 115 employees and close a national certificate vacation programme, specialising in electrical engineering, with one of the further education and training colleges that had accommodated about three learners a year,” Mankewu stated.