The Road Accident Fund (RAF) splurged a staggering R35.4bn on claim settlements in a single financial year, with an estimated R14bn directly attributed to “operational inefficiencies” and a disastrous new operating model.
This has been revealed by current and former employees who blew the whistle, alleging that the ambitious plans of RAF’s former CEO, Collins Letsoalo, and his adviser, Sefotle Modiba, to secure a dubious multibillion-rand debt facility crippled the fund, denying victims justice.
Letsoalo, whose contract ended this month, introduced a new accounting standard at RAF in 2021. This set him on a collision course with auditor-general Tsakani Maluleke, costing taxpayers about R10m in endless, lost court battles. The new standard, which was not approved by the Accounting Standards Board (ASB), reduced RAF’s liability from R332.39bn to R31.496bn in 2021.
Since then Letsoalo — who recently said in a TV interview that “no-one in South Africa and globally, by the way, can do this thing [being CEO of RAF] better than me” — has been boasting publicly that he saved the fund and taxpayers R50bn.
However, documents submitted to a standing committee on public accounts (Scopa) inquiry into RAF expose how the new standard allegedly led to a R49.4bn loss in three years, while delaying compensation to more than 250,000 accident victims.
The same information was requested by and sent to Scopa. RAF wishes to not engage the media about this information until Scopa makes it available to the public.
— McIntosh Polela, RAF spokesperson
“The fund should have spent R21.5bn on claims in 2020/21 by operating optimally with sufficient staff and attorneys to avoid default judgments and inflated claims. Instead, due to operational inefficiencies from the new model, RAF spent R35.4bn on the same number of settlements,” a whistleblower said in a report to Scopa. RAF this week declined to comment on the allegations.
“The same information was requested by and sent to Scopa. RAF wishes to not engage the media about this information until Scopa makes it available to the public,” said RAF spokesperson McIntosh Polela.
Meanwhile, Letsoalo, after receiving questions from the Sunday Times, said: “LOL! You must be kidding me!”
The report, which contains detailed financial analysis of RAF’s finances, shows that the fund suffered the R49.4bn loss because it could not effectively attend to default judgments and inflated claim settlements. RAF is facing scrutiny following Scopa chair Songezo Zibi announcing in July an inquiry focusing on allegations of financial mismanagement, governance failures and misuse of public funds from 2021 to 2025.
RAF 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 into the fuel price. Letsoalo changed the accounting standard, arguing that the RAF should be able to invest and seek debt facilities from the private sector.
The decision resulted in Maluleke giving RAF adverse audit outcomes for three consecutive years because of the new standard, which was adopted following advice from PwC. The change, which was also not supported by the National Treasury, understated claims liabilities and expenditure, despite RAF receiving prior advice from Morar Incorporated in April 2021 against changing its accounting policy until the ASB developed an appropriate standard.
By last year, RAF had lost multimillion-rand court battles against Maluleke over its controversial new accounting standard.
“The controversial IPSAS 42 standard ‘magically reduced’ RAF’s liability from R332.39bn to R31.496bn by March 2021, a R300bn drop, to help Mr Modiba raise a debt facility. Millions in taxpayer money were spent on this ‘expeditious project’ by Letsoalo and Modiba,” a whistleblower said in a report to Scopa.
This, according to sources and the report to Scopa, led to staggering waste, directly contradicting RAF board and Letsoalo’s self-congratulatory claims of “legal cost savings” and exposes a deliberate campaign of misinformation.
“Billions of rands were wasted through default judgments and inflated claim settlements costs as Mr Letsoalo dug in and refused to correct RAF’s operational challenges which emanated from the termination of RAF’s panel of attorneys and the shortage of staff due to suspensions and dismissals without replacement,” according to a whistleblower.
It is alleged that RAF’s claimed success in reducing legal expenditure by more than 50% is a “smoke screen”. Whistleblowers told Scopa that operational inefficiency, inflated claim settlements and severe dereliction of duty are the true issues.
RAF’s termination of its panel of attorneys and suspension of about 300 claims handlers (see the story of Zamaswazi Hlophe) crippled its capacity, leading to a surge in default judgments and inflated settlements. Claim costs soared by 70.4% in 2020/21, far exceeding the 3.8% inflation rate.
“Instead, payments of claims to all those deserving claimants were delayed due to shortages of funds, when in actual fact the government had already provided the money; it was just wasted by the entity. It is likely that some became permanently disabled due to delayed treatments, and others could even have died. The claimants’ rights to dignity were trampled by Mr Modiba and Mr Letsoalo in their pursuit of early retirement,” one whistleblower alleged to Scopa.
According to the report to Scopa, in the 2020/21 financial year alone, RAF paid out R35.5bn to 151,176 claims, when, based on normal inflation and efficient operations, it should have spent only R21.5bn. This translates to a R14bn loss — enough to have settled 98,411 claims.
The pattern of wastage continued unabated, because by March 2023 RAF’s actual average claim costs had surged by a “whopping 90%” from 2020, while consumer price inflation for the same period stood at a modest 17%. The cumulative financial loss due to operational inefficiencies over the 2021-2023 period reached an eye-watering R49.4bn in inflated claim settlements and default judgments.
Before his contract expired, Letsoalo was placed on special leave for allegedly refusing to attend a Scopa meeting. He was at loggerheads with Scopa over operations and the Special Investigating Unit’s (SIU's) preliminary findings into RAF, which implicated him in a R79m property lease deal, an accusation he vehemently denied.
The whistleblowers allege that RAF attempted to mask its colossal financial losses in public by highlighting “legal cost savings” instead of conducting a thorough cost-benefit analysis. It was alleged to Scopa that reports to RAF board, minister of transport and external stakeholders were filtered to conceal the fund’s true financial state. This deliberate withholding of critical information, from 2022 to 2025, was seemingly orchestrated to create a “good turnaround story” to appeal to private market funders and facilitate Modiba’s debt loan project.
About 29 claimants represented by attorney Kabelo Malao of Malao Inc, who are owed a combined R29m, have been waiting for five years to be compensated. One KwaZulu-Natal-based unemployed mother of two daughters, who were involved in a car accident where only one child was compensated, has been waiting for a R5m payout. The claim has now doubled to more than R9m due to compounding interest.
The mother told the Sunday Times: “My child is struggling and requires extra classes after the accident, and I need to pay for school fees. I feel they are gambling with my child’s life because five years is a very long time, and the child is growing.”
Malao told the Sunday Times his clients were being victimised by RAF because he reported RAF to law enforcement and other authorities.
“My case is clear victimisation, and these people ran this campaign against me because they know that I’m the one who reported them to the SIU and Scopa,” he said. “They have lied about paying the money — as a result I have had to also open a criminal case because of fraud and the siphoning of claimants’ funds.”
RAF refused to comment.
According to a police report from the economic crimes unit seen by the Sunday Times, a RAF employee lied, saying the mother’s compensation was paid in 2023 to the sheriff to pay Malao.
“Fictitious information was sent to the minister of transport with the intention to defraud K Malao. Warrant of arrest to be submitted [against an RAF official] to the senior public prosecutor and senior magistrate to be authorised,” the police said in a letter to RAF. The SIU said it had found no reasons for Malao not to be paid.
“The SIU can confirm that, during the course of its investigation, it identified K Malao Inc as one of the entities that were involved with claims and/or claimants. We can further confirm that there are no adverse findings against K Malao Inc at this stage,” said SIU spokesperson Kaizer Kganyago.
The SIU, in its preliminary report, also found that there was an executive at RAF “who was possibly paid monies” by the attorneys who were given more work.
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