Transport minister Fikile Mbalula has instructed the Road Accident Fund’s board and CEO Collins Letsoalo to withdraw court action against auditor-general Tsakani Maluleke, which has seen the fund not fully accounting for about R80bn of taxpayers’ money for two years.
This comes after parliament’s standing committee on public accounts (Scopa) asked Mbalula whether he had directed Letsoalo to change the fund’s accounting model, which has put it at loggerheads with Maluleke’s office since 2020.
The RAF had elected to use a model, rejected by the Accounting Standards Board (ASB), which made its books look good and reflected a R3.2bn surplus instead of liabilities of R300bn.
Scopa chair Mkhuleko Hlengwa received Mbalula’s response confirming the instruction last week.
“The response is favourable to the process we are undertaking of trying to resolve the court action to ensure the institutions of state are working together. It is also to ensure that the matters raised by the AG [auditor-general] and the ASB are resolved. The minister has given a deadline,” said Hlengwa.
Letsoalo said the RAF would use other means to resolve the dispute with the AG. “The minister instructed the board to withdraw the case against the AG and pursue less confrontational avenues. The way forward is to engage in an alternative dispute resolution process and possible mediation by a mutually acceptable mediator.”
Last month Scopa took Letsoalo and the RAF’s board, led by Thembelihle Msibi, to task over its failure to account for RAF funds, its judicial review application and its continued spat with the AG’s office over its findings. The RAF has for the past two financial years failed to table its annual reports to parliament and has been issued with two disclaimers by Maluleke, her office’s worst possible finding. This means that the RAF has failed to provide sufficient evidence — including documents and financial statements — to prove how it spent taxpayers’ money.
The RAF’s two court attempts to interdict Maluleke’s office from making its findings public were dismissed by the courts.
This month, Mbalula wrote to parliamentary speaker Nosiviwe Mapisa-Nqakula to ask for yet another extension to table the RAF’s annual reports, citing “unforeseen challenges in the finalisation of the 2021/22 audited financial statements and annual report”.
“This is mainly due to a dispute process on the 2020/21 annual financial statements which resulted in a judicial review against the auditor-general. The outcome of the judicial review will have an impact on the 2021/22 annual financial statements and annual report which has invariably led to both the RAF and AGSA needing additional time to finalise the 2021/22 audit,” Mbalula wrote.
A senior government official with knowledge of the dispute and the audit of the RAF’s finances said there was no reason for it not to table its annual reports and tell parliament that it disagreed with the AG’s findings.
“What this has created is a situation where RAF’s financials for two years have not been properly accounted for. Even if they submit their financials to the AG now it’s going to be a long process,” the official said.
The fund, which has the second-highest financial exposure for South Africa’s fiscus after Eskom’s R480bn contingent liability, is a state-supported insurance fund that compensates victims of road accidents. It is funded through a special levy, currently R2.18 a litre added to the fuel price, from which it receives about R3,8bn a month.
On advice from audit firm PriceWaterhouseCoopers (PwC), the RAF decided in 2021 to adopt a new accounting standard, a social benefit standard that was not approved by the Accounting Standards Board and not supported by the National Treasury. After adopting it, Mbalula, Letsoalo and Msibi announced in July last year that the RAF had turned a corner and now had a surplus of R3.2bn.
The adoption of that standard saw the RAF writing off more than R300bn in liabilities, an amount that is said to reflect the cost of every car accident recorded in South Africa.
This put the RAF on a collision course with the AG, which issued it with a disclaimer. The RAF took the AG to court to interdict her from making the disclaimer public but lost with costs.
The minister instructed the board to withdraw the case against the AG and pursue less confrontational avenues
The RAF’s actions angered Scopa members who demanded written answers from Mbalula about his stance on the matter.
The fund has experienced a tumultuous two years and has struggled to pay claimants. This has resulted in several court attachment orders being issued against it for properties and bank accounts. However, Letsoalo managed to secure some relief last year when the courts suspended hundreds of warrants of execution and attachments brought against it by unpaid victims.
The court granted the RAF permission to pay claims within 180 days and this was recently extended for another six months. Letsoalo told the courts that since April last year R51bn had been paid out, and that in this financial year R2.3bn had been paid.
“We have money and we are paying claims within 180 days. There are delays in some payments because we have to do verifications in some instances because there were duplicate payments, but we are paying within 180 days,” Letsoalo told the Sunday Times.
The RAF is also facing an inquiry in the Mpumalanga High Court over its affairs after judge president Francis Legodi said that the RAF’s conduct in administering claims should be investigated and asked for submissions from the Law Society of South Africa and others.
Letsoalo has questioned the authority of Legodi and the court to do so.
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