By Simon Nare
The Road Accident Fund (RAF) is like the problem child of the family; everyone knows something is wrong, no one quite knows what to do, and you can’t simply wish them away.
There’s no formula that seems to work, and still, the bleeding continues.
That pretty much captures the ongoing financial and regulatory challenges that continue to plague RAF.
Since the dark days of apartheid, when it operated as the Multilateral Motor Vehicle Accidents Fund before taking on its current name in 1997 under the new Act, the Road Accident Fund has been posting deficits year after year – even as it draws millions, if not billions, from the fuel levy.
In fact, the entity was first declared insolvent in 1981, carrying a whopping annual deficit of more than R800 million.
Annual deficits, in other words, are nothing new.
However, the picture that is emerging at the Standing Committee on Public Accounts in the past two months during its enquiry into procurement and governance affairs will send shivers down your spine.
It’s a picture of hyenas and vultures in a feeding frenzy and taking advantage of a system that is so vulnerable to abuse.
This, while the custodians of the kitty are just violating regulations and cultivating fertile ground for greedy lawyers, while ignoring sound legal advice.
The SCOPA hearings have so far heard how the fund management refused to listen, issued unlawful management directives, and shot up the wasteful expenditure.
Although the “Big Boys,” such as former chief executive Collins Letsoalo, have yet to take the hot seat, the witnesses who have appeared before the committee so far have told gut-wrenching stories of a management so aloof it willingly broke the law in a misguided attempt to sweep the mess under the carpet.
Law Society of South Africa president Nkosana Francois Mavundlela told the committee in his recent testimony that management, aided by the board, had become a law unto themselves.
He described how, under Letsoalo’s leadership, the entity deliberately failed to pay settlements — even in the face of contempt-of-court findings — and offered no financial relief to claimants, leaving them destitute and without recourse.
“The current administration of the RAF failed to recognise and respect the separation of powers as defined in the Constitution and have attempted to usurp to themselves the role of parliament by issuing management directives in which they seek to change the existing law,” said Mavundlela.
Others who have so far appeared before the committee have spoken of the captain of the ship Letsoalo running the entity like a tyranny.
How he ruled with fear and intimidation: it was either his way or highway.
Of how he demanded security detail fit for a sitting president with nine bodyguards and an armoured vehicle.
Some, grown family men crying like abandoned babies before the committee, told of how they were systematically sidelined and eventually booted out when they stood up for what they believed was the right thing.
Letsoalo, for his part, has been giving the committee a run around when he was invited to come tell his side of his story.
SCOPA was then with no choice but to subpoena him. His date to appear is yet to be confirmed.
Testimony so far suggests the situation began to unravel after the introduction of a controversial accounting policy — one not even approved by the National Treasury. The policy allows the fund to report far lower liabilities by excluding claims still in progress. Critics have long warned that this dramatically understates the RAF’s true financial picture.
The Auditor-General, Adv. Tsakane Maluleke has reportedly disputed the policy and refused to sign off on the RAF’s finances.
Then there is the chaos triggered by the entity’s decision to disband its long-standing panel of private lawyers who defended claims. They were replaced by state attorneys who, witnesses told the committee, were already overburdened and whose conduct often bordered on incompetence.
Former CFO Victor Songelwa and former Senior Manager for Actuarial and Reinsurance, Itayi Walter Charakupa, testified that the system had become vulnerable to inflated and potentially fraudulent claims, driving up the total claims bill. Both agreed the rot began with the change in accounting policy, which opened the door to litigation, ballooning expenditure, and ultimately a R500 billion hole that now threatens to bring the entity to its knees.
MPs, along with former and current employees of the RAF, openly wondered how the fund could possibly be saved. There has been a unanimous call within the committee for a new model — and fast.
Committee chairperson Songezo Zibi put it bluntly: “Would I be wrong to say the current model and legislation of the RAF is a no-hope, given the extent of its obligations versus its funding model? I mean, those four hundred-and-some-odd thousand claims — even if RAF hired two thousand people to move them — there would be no money available for them.”
Like most MPs, Zibi has been left stunned by how brazen management has been, and how they managed to get away with it.
He, like his colleagues, is searching for answers — and so far, none have emerged.
With the Supreme Court of Appeal expected to rule on claims not registered under the new F1 form system, there are growing fears that an unfavourable judgment could push the already sinking ship even deeper underwater.
As Songelwa has put it: “Money that we get on a monthly basis is not enough to service the claims that we have to pay out. In other words, when you settle your claim, the claims that you settle are always more than the money coming in. That is not sustainable at all. The law must change soonest.”
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