The Road Accident Fund’s long-standing funding woes, compounded by a defiant board and new misconduct claims against its CEO, demand greater scrutiny.
By Vernon Wessels
South Africa is no stranger to state-owned enterprises hitting the wall. Eskom’s load-shedding, Transnet’s rail and port chaos, and SAA’s serial bailouts have cost the fiscus dearly – driving the economy to the brink, starving essential services and fuelling public despair.
But there’s another headed for a crash: the Road Accident Fund (RAF). Its outstanding liabilities to road accident victims stand at nearly R330bn, and yet its leadership appears more interested in hiding the problem than fixing it.
Just two weeks after losing a five-year legal battle over its flawed accounting practices, fresh allegations of procurement misconduct have now been levelled against the fund’s CEO, Collins Letsoalo.
For taxpayers and pension funds, it is a disturbing sign that poor governance remains at crisis levels in state-owned institutions, with no small chance that the RAF may end up having to be bailed out from the public purse.
The Department of Transport, which oversees the RAF, has publicly rebuked its board for pursuing a costly legal fight that sought to obscure the fund’s true financial state. But rather than grappling with the crisis, the RAF leadership has wasted money trying to defend an accounting illusion.
The root of this dispute stems from Letsoalo’s claim that the RAF is not an insurance company, but rather a social benefit scheme. This means, he says, that under International Public Sector Accounting Standards, the RAF should only record “approved claims” as liabilities, not all potential future obligations.
The upshot of this accounting sleight-of-hand is that its liabilities shrink from R327bn in 2020/21 to R34bn — even though this dramatically undercounts its true obligations to vehicle accident claimants.
The Auditor-General and Accounting Standards Board disagree with Letsoalo. They have said that, like insurers, the RAF’s obligations are legally binding and measurable, and must be accounted for upfront, regardless of when payments are made.
To be fair, the current board, appointed in 2023, didn’t initiate the change. But they chose to back it – and Letsoalo – all the way to the Supreme Court of Appeal (SCA), which declined to hear the case this month, effectively endorsing a ruling against the RAF in the Pretoria High Court a year ago.
Letsoalo, who was seconded from the Department of Transport and appointed to a five-year term as CEO in August 2020, oversaw the implementation of the dodgy accounting. And under his leadership, the RAF doubled down. even after clear legal and audit guidance to the contrary.
When he and his executives appeared before Parliament’s Standing Committee on Public Accounts (Scopa) in March, they fumbled their explanations. Their claim that the AG’s guidance was “grey” was contradicted by the high court ruling, which was crystal clear that Letsoalo’s accounting was wrong.
This week Letsoalo insisted that legal amendments have to happen to align accounting practices with the RAF’s “social mandate”. At a press conference, Letsoalo gave a rambling 90-minute monologue in which he also hotly rejected claims in the Sunday Times that he had overridden the fund’s bid committee to award a R79m lease to Mowana Properties – a losing bidder.
The newspaper cited preliminary findings from the Special Investigating Unit (SIU), which suggested misconduct in this lease deal.
Letsoalo argued that the RAF had obtained permission from National Treasury to deviate from the procurement rules, since Mowana already manages properties on behalf of the Government Employees Pension Fund. He added that the Auditor-General had found no irregularities in the lease, and justified the decision by citing the poor state of the RAF’s offices.
Instead, Letsoalo claimed he was the victim of a “sustained media campaign” orchestrated by lawyers, doctors, and actuaries furious with his efforts to save the fund R36bn in payouts. But scapegoating entire professional sectors while resisting oversight does little to bolster confidence in the fund.
Growing backlog
It’s not the first time Letsoalo has found himself in hot water. After he was axed from another poorly-performing state company, the Passenger Rail Authority of SA, in 2017, he claimed he was fired for exposing “looters” at the company, claiming the board was packed with “pathological liars”.
Back at the RAF, he shows no sign of stepping down. In fact, Letsoalo has said he’s willing to serve a second term and rated his reappointment chances as “very high”, claiming to have achieved 80% of the fund’s performance targets.
The facts suggest otherwise.
The RAF’s backlog reached nearly 360,000 claims at the end of March 2024. Some cases have been pushed out to 2030, while many successful claims aren’t paid out within 180 days as they should be — something Letsoalo attributes to incomplete documentation.
But according to legal experts like Gert Nel, the RAF’s decision to scrap its panel of attorneys, who defended claims, has contributed to the chaos. The result is that the court system is clogged-up with unrepresented RAF cases.
And the RAF board has shown little inclination to challenge Letsoalo, instead enabling his denial of any problem, and sanctioning spending the fund’s money fighting in court.
This is a fund that appears to wish its liabilities — including outstanding claims — would simply vanish. But burying them under a mountain of bad accounting won’t change the reality of the RAF’s problems.
If the government hopes to avoid a situation where taxpayers have to dig deeper into their pockets, transport minister Barbara Creecy needs to finally hold Letsoalo and the RAF’s supine board to account.
