Simon Nare
Two senior Road Accident Fund (RAF) finance executives were grilled by Parliament’s Standing Committee on Public Accounts (SCOPA) this week as hearings into the RAF’s finances and governance continued.
Committee chair Songezo Zibi repeatedly pressed the pair on the fund’s financial reporting and strategy.
MPs tore into the testimony of chief investment officer Sefotle Modiba and acting chief financial officer Bernice Potgieter, accusing them of misleading the committee and dragging the RAF into financial ruin.
Committee members held Modiba and Potgieter personally liable for the financial mess that the RAF is in, and the R500 billion hole the fund is facing.
Modiba and Potgieter are the latest RAF heavyweights to appear before SCOPA to account for their roles in the ongoing enquiry into procurement and governance affairs. The enquiry has entered its third week.
MPs accused Modiba and Potgieter of disrespecting the committee and being evasive.
Committee chairman Songezo Zibi often became visibly irritated with the answers from the two financial managers, and specifically accused Modiba of performing duties that were not in line with his position.
He accused Modiba of trying to establish an internal structure based on a law that didn’t exist.
Further, Zibi told Modiba that as an investment officer, he never carried out any work that was investment-related, as there was nothing to invest at the RAF.
Modiba conceded that the RAF did not have an investment portfolio or an investment-related manager in its employ.
Said Zibi: “You constructed a structure and presented it to the board on the basis of a law that didn’t exist. I am asking whether imminently, in the next six or 12 months, you were expecting a massive cash injection from the fiscus such that you have spare funds to invest?”
Modiba replied in the negative.
Zibi continued: “So you constructed it out of nothing. No law, not cash injection from the fiscus imminent. So, you guys were intending to borrow the capital from the market, basically. This entire scheme of changing the accounting policy at the end of the year was designed to create a balance sheet that would enable you to access the debt market externally. That is what it was.”
Modiba disagreed but got tangled as he tried to wiggle himself out of the situation, saying the structure was meant to deal with any scenario.
He added that the structure, as designed, was going to withstand the scenario of either going to the market to borrow money or not.
Modiba got himself into more trouble when again he tried to change his answer about not intending to go to the market to borrow between R15 and R20 billion to settle debts.
“Mr. Modiba, can I remind you, you know, when Ms Ebrahim (parliament legal advisor Fatima Ebrahim) swore you in, we were serious. We had a specific discussion in the committee about people misleading the committee, and normally when executives come here, we don’t ask them to take an oath, but in your case as RAF, we took a particular decision to make you swear.
“Specifically, because it is the Road Accident Fund and historically you have misled us before and you are doing it here, you are denying things you said minutes ago,” warned Zibi.
Potgieter wasn’t spared either: Zibi said she used flowery language to reinterpret the court’s ruling on the RAF’s accounting policy.
He said Potgieter was trying to mislead the committee by incorrectly saying the judgment was solely based on the challenge by RAF to Auditor-General Advocate Tsakane Maluleka.
Zibi said Potgieter was being disingenuous because she knew quite well that the court relied heavily on the accounting policy to traverse Maluleka’s report.
ActionSA’s Alan David Beesley went a step further and accused Potgieter of having put the chartered accounting profession in disrepute by not detecting some of the financial irregularities that took place under her watch, and as a result, the entity was in serious debt.
Beesley put it to Potgieter that she had acted in a manner that was not consistent with the profession. She denied this.
Said Beesley: “Being a CFO of a company that has a disclaimer and adverse audit reports for five years, five years! You are the CFO, you are the CA, and you don’t think it’s a problem. For the record you have brought the CA profession into disrepute by what you have said and by your action.
“You have overseen financial reports for five years with disclaimer and adverse findings and you are sitting here as if it’s all rosy. It is not. Five years of disclaimers. Auditors have audited these reports and they said they cannot be reliable…” said Beesley.
He pointed to the Special Investigating Unit, which flagged unfair procurement practices, bank statements that could not be reconciled as well as bank details that had been changed and money being directed to a different account.
Both of the executives are expected to appear before the committee again, at a later date.
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