Inside the herculean efforts to rehabilitate the operator of Johannesburg’s Rea Vaya bus system

28 Dec 2023

PioTrans, the operator of the Rea Vaya bus rapid transit system in Johannesburg, has been placed under business rescue. There have been several instances of mismanagement and maladministration at the company. Rea Vaya has confirmed that the bus service will continue to operate uninterrupted while its operating company is in the throes of business rescue.

“Ill health.” This is how Mahier Tayob, the newly appointed business rescue practitioner of PioTrans (the operator of the Rea Vaya bus rapid transit system in Johannesburg), described the operational, governance and financial affairs of the company in the few days that he has taken over the reins.

“For many years, there was no model for good business practices. The systems did not work. If systems were in place, they were violated. It was a recipe for disaster. The company’s previous board continued to treat the crisis as normal. They managed the affairs of the company in the hope that it will one day come right,” Tayob told Daily Maverick on Thursday.

Tayob took over the running of PioTrans last week after companies that are owed money by the company (known as creditors) were successful in their application at the Gauteng Division of the High Court in Johannesburg to have it placed under business rescue.

Business rescue, which is provided for by the Companies Act, is an attempt to rehabilitate financially distressed companies by restructuring their affairs. The objective is to enable a company to continue operating while being restructured, temporarily suspending payments to creditors and saving some jobs in the process.

Tayob and Rea Vaya have confirmed that the bus service will continue to operate uninterrupted while its operating company (PioTrans) is in the throes of business rescue.

Rea Vaya said in a media statement on Thursday: “The City’s Transport Department will work closely with the business rescue practitioner to ensure that uninterrupted bus services are rendered in the best interest of commuters.”

Tayob has already met with officials from the City of Johannesburg Metropolitan Municipality, the MMC for transport, Kenny Kunene and trade unions with an interest in Rea Vaya affairs — all parties that have expressed support for Tayob’s efforts to restructure the affairs of PioTrans.

Business rescue court proceedings

Creditors of PioTrans, which include a fuel supply firm and vehicle repair outlet that claim they are owed R500,000, did not ask the court to place the company under liquidation. A liquidation scenario would involve PioTrans’ doors being permanently closed, the company’s 332 workers losing their jobs and a fire sale of its assets to pay creditors.

More broadly, PioTrans would no longer be the operator of Rea Vaya, putting the bus service’s existence in jeopardy and possibly leaving thousands of Johannesburg residents stranded.

The City of Johannesburg launched the Rea Vaya bus service in 2010 shortly before the Fifa World Cup. However, it was only in 2011 that PioTrans entered into a 12-year contract with the city to operate the bus service. The Rea Vaya bus system has since been a crucial feature of Johannesburg’s transport system because, with its separate road lanes, its service is intended to cut through traffic congestion and get more people to use it to commute from Soweto to Johannesburg’s CBD.

Tayob said PioTrans taking the business rescue route was long overdue and he was dumbfounded that its management and board had not voluntarily embarked on the process earlier, as “the writing was the wall” that the company was on the brink of collapse.

Creditors of PioTrans have alleged that the company has been subject to mismanagement and maladministration. In the few days since Tayob has taken control of PioTrans, he has seen incidents of “bizarre” decisions made by the company’s previous board, which he has dissolved.

In one instance, Tayob said the previous PioTrans board commissioned an audit firm to conduct a risk assessment of factors that could negatively affect the company — an exercise that cost the company R350,000 a month. The PioTrans board signed a service-level agreement with the audit firm, but later terminated it for no reason. PioTrans was sued by the audit firm, which lodged a claim of R5.2-million for breach of contract.

In a second example, auditors of PioTrans have raised concerns about the company’s board paying dividend payouts despite the company owing money to creditors and facing financial difficulties that threaten its going concern status. The going concern test is one that companies must pass to secure a clean bill of health from their auditors.

In another example, Tayob said PioTrans failed to even update the Companies and Intellectual Property Commission (CIPC) about the changes in the make-up of its board — even after courts ruled that some individuals be removed from the company’s board. In other words, PioTrans flouted CIPC requirements, putting into question the company’s legal standing and compliance with laws.

Priorities for the business rescue practitioner

The governance, operational and financial crises came to a head two weeks ago when creditors wanted to attach the assets of Rea Vaya for sale. This resulted in Rea Vaya operating 15 buses to service the entire city of Johannesburg, which has a population of 5 million. By Thursday, 29 buses were operating, and Tayob has promised a fleet of 46 buses to operate and accommodate the return of passengers after the festive holiday season.

Tayob believes that PioTrans has reasonable prospects of success under business rescue. He said a fuel supplier for Rea Vaya, which had a contract with PioTrans that was cancelled by its board two years ago with no reason offered, contacted him about supplying fuel and gave a funding facility worth R14-million. The relationship of trust was being rebuilt with suppliers of Rea Vaya under business rescue, said Tayob.

His priorities over the next six to 12 months include auditing the claims of creditors to determine how much they are owed; instituting an independent audit of PioTrans’ financial statements; and concluding a forensic investigation of mismanagement and maladministration so that evidence can be provided to law enforcement authorities for possible prosecution.

Asked why he took on the job of rescuing PioTrans, Tayob said: “As a specialist forensic auditor, I am sworn to defend justice. And I would do that. I’m not a very popular business rescue practitioner with large companies that have superior debt. I will do my job the best way I can. It is an opportunity for me to make a difference.” DM

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Business rescue court proceedings

Priorities for the business rescue practitioner