‘Road Accident Fund is in ICU with one foot in the grave,’ says Scopa chairperson

The National Assembly’s Standing Committee on Public Accounts (Scopa) has told the Ministry of Transport to investigate the “the reign of terror” at the Road Accident Fund (RAF) after members of the committee visited the fund’s claims office in Menlyn, Pretoria, on 23 June.

The RAF, which is funded by a levy on fuel sales and compensates road accident victims, is technically insolvent.

Friday’s visit seems to have been the final straw in the already-sour relationship between the committee and the RAF board, and Scopa chairperson Mkhuleko Hlengwa (IFP) expressed his displeasure at the lack of action by the Ministry of Transport.

Hlengwa told Deputy Minister of Transport Lisa Mangcu it would be an understatement to say the committee was “horrified” by what it found. “Clearly, this institution is in trouble.”

During the briefing, Hlengwa referred to the situation at the RAF as “dire”, “a crisis”, “a horror story”, “a car wreck”, and “a national disaster”.

“My observation is that RAF is in ICU with one foot in the grave. Its saving grace is a staff complement that just maybe wants to try. Other than that, it’s leaderless, it’s directionless. Systems are literally being made on the go to try and hold things together,” he said.

“The greatest risk to RAF is RAF itself,” Hlengwa said.

Describing what MPs had seen during their visit, DA MP Benedicta van Minnen said: “There are literally desks constructed out of boxes of files with pieces of wood on top where people are attempting to do their jobs.”

Furniture at RAF offices is regularly attached by the sheriff as claimants approach the courts over unpaid claims.

ANC MP Sakhumzi Somyo said an employee told him she feared her desk would be gone next week because it has been tagged by the sheriff. Another staff member had brought a chair from home and was using her own computer.

The RAF has resorted to hiring computers so they cannot be seized by the sheriff.

The lack of desks has forced some staff to work from home, creating the risk of files being stolen, Somyo said.

“How people process a claim completely escapes me. You cannot find documents and files and work efficiently in this system that we’re seeing,” Van Minnen said.

EFF MP Mzwanele Manyi said: “There’re boxes everywhere. There’s filing under the tables. There’s filing on top of the tables. There’s filing on the passages. There’s filing in the basement. There’s not even place for cars to park. In my whole life, I’ve never seen such a mess.”

Another EFF MP, Constance Mkhonto, said the building was an “occupational health hazard”, while Hlengwa said he shuddered to think of the consequences if a fire broke out at what he called the “paper mill”.

The office visited by Scopa handles claims from Limpopo, Mpumalanga, the North West and Pretoria in Gauteng and has been the subject of numerous complaints.

‘Toxic’ work environment

MPs said employees had appealed to them for something to be done about the “toxic” work environment, referring not only to the building but, more importantly, to the relationship between management and staff.

They said the RAF board and executive should get out of head office and see for themselves what was happening on the ground.

Amid the “chaos”, staff were having their performance assessed and were receiving written warnings if their output was low, even though “they can’t make the work happen any faster than they are. But none of what is happening out there is being taken into account,” Van Minnen said.

Hlengwa said the appeal for help from employees was an echo of the cry for help from claimants.

He said the committee would visit other RAF offices around the country.

‘Some kind of Stalingrad’

The MPs said they had been shadowed by security in a bid to intimidate them. Management allegedly tried to dissuade employees from engaging with the MPs.

Management’s attempts to deny Scopa access to the building (“pretending they can build some kind of Stalingrad here”) should show the Ministry of Transport the lengths to which “this cabal in office” was prepared to go, Hlengwa said, adding that attempting to prevent Parliament from doing its job was a violation of the Constitution.

He said what the committee saw and heard during its visit did not come as a surprise, because its interactions with the RAF board and executive “have not been positive”.

Dispute with the Auditor General

When the RAF appeared before Scopa in April, the committee gave Transport Minister Lydia Chikunga 30 days to submit a report as to why the RAF board should not be removed. The report has not been submitted.

Scopa called for the dismissal of the RAF board to resolve a dispute between it and the Auditor General.

In April 2021, the RAF changed the accounting standard used to compile its annual financial statements from International Financial Reporting Standards (IFRS) 4 to International Public Sector Accounting Standards (IPSAS) 42. IFRS 4 gives guidance on accounting for insurance contracts, while IPSAS 42 provides guidance on accounting for social benefits expenditure. The change in accounting practice caused the RAF’s liability to drop by more than 90%.

When treated as an insurer, the RAF’s liability, which includes all contingent claims, would be R577 billion this year. But when treated as a social security fund in which only the claims that have been approved and have merit are counted but are not yet paid, the liability is R11bn.

The Auditor General, Tsakani Maluleke, said the use of IPSAS 42 by a public entity such as the RAF was inappropriate and did not accurately reflect its contingent liability for outstanding and future claims. She said using the accounting standard would result in non-compliance with the Public Finance Management Act.

The switch in accounting standards resulted in the RAF receiving a disclaimer – the worst audit opinion – from the Auditor General for its 2021/22 financial statements. A disclaimer means the entity could not provide sufficient evidence on which to base an audit opinion.

At the same meeting, the Special Investigating Unit told Scopa it was looking into allegations of corruption and maladministration at the RAF, including duplicate claim payments, tender irregularities, possibly inflated invoices, and fraudulent claims.

High litigation costs

DA MP Alf Lees said the RAF was bankrupt “no matter how the books are fiddled to decide when liability does or doesn’t arise. In the end, the taxpayer will have to come in and bail out the RAF.”

The RAF’s high legal costs were exacerbated by the lack of attempts to deal with submitted claims, resulting in thousands of default judgments with cost orders, he said.

There may be cases of legal practitioners overclaiming, but if the administration did its job properly, those would largely be identified and eliminated, Lees said.

In April, Scopa instructed the board to produce a comprehensive list of default judgments within two weeks, but no attempt had been made to provide the committee with the information, he said.

Van Minnen said the RAF has “a reputation” of preferring litigation to dealing timeously with accident matters. “There seems to be a prevailing viewpoint that all claims are partly fraudulent, so there is this default into litigation.”

She said the RAF’s decision in 2020 to dismiss its panel of attorneys has resulted in default judgments followed by writs to attach whatever assets could be attached. “The system is completely moribund.”

Ministry of Transport told to act

The term of office of the RAF board expired earlier this year, and its term has not been extended, nor has a replacement board appointed.

Scopa did not want to engage with the RAF board because doing so would be “aiding and abetting an illegal structure”, Hlengwa said.

He said appointing a board consistent with the legislation was non-negotiable, and he instructed deputy minister Mangcu to communicate to the minister that this was now “a compliance matter”.

If the transport ministry allowed the situation to continue, Scopa would be forced to conclude that it was complicit, Hlengwa said.

“We are past the point of negotiations and requests.”

The ministry must make it a priority to investigate “the reign of terror” at the RAF.

Hlengwa said it might be necessary for a “full-scale forensic investigation” because the financial management was “inconsistent” with legislation and because of the poor human resources procedures, with staff being suspended “willy-nilly without due process”.

He gave the Ministry of Transport 30 days to provide it with a detailed response to the issues raised in April and during Friday’s briefing.

Mangcu apologised for the ministry’s failure to respond to the request made in April and for the way in which the MPs had been treated during their visit. He undertook to ensure the ministry responded to all the matters raised by Scopa.