Transport minister Barbara Creecy has dissolved the Road Accident Fund (RAF) board of directors in the wake of persistent governance and operational challenges that have undermined its ability to function.
The board’s failure to discharge its fiduciary duties had resulted in the loss of confidence in its ability to run the entity effectively, the transport department said in a statement on Tuesday.
The 11 members of the board were notified by Creecy on June 5 of her intention to dissolve the board and gave them an opportunity to make representations, which were received and considered, but she decided to proceed with the dissolution.
The minister also requested that the National Treasury appoint an accounting authority in terms of the Public Finance Management Act to prevent a governance vacuum while a new board is being constituted. The process of appointing a new board is under way.
“To support the development of a sustainable operational and governance model, the minister has initiated the appointment of a panel of independent experts to review the RAF’s business processes and propose actionable recommendations. Members of the panel will be announced in due course,” the statement said.
The Special Investigating Unit has also been asked if the proclamation covering its current investigation covered the events of the past three months, and if not it will be asked to expand its scope to cover them.
Challenges
The department’s statement cited a host of challenges and concerns that were confirmed through internal oversight and regulatory engagements. They included the RAF’s protracted and costly litigation against the auditor-general’s office regarding the application of accounting standards, which the statement said had resulted in further strain on the fund's financial resources and capacity.
Additionally, there was “the inconsistent and, at times, reckless handling” of the suspension of CEO Collins Letsoalo that was challenged legally and created institutional uncertainty.
The RAF had frequently faced default judgments because of its failure to defend litigation, which had added to its contingent liabilities and weakened its financial sustainability.
Divisions
There were also deep divisions within the board itself, the department said. This was evident in its use of casting votes rather than achieving consensus, reflecting a lack of cohesion in critical decision-making processes.
Furthermore the board had failed to fill at least two executive positions, which are critical to the mandate of the fund, namely for the chief claims officer and head of legal.
Creecy reiterated her department’s commitment to restore institutional stability at the RAF and enhance its capacity to fulfil its statutory obligations. She said the department would finalise the Road Accident Benefit Scheme Bill that will introduce a no-fault system to make it easier for road accident victims to access the benefits without costly legal bills.
Allegations of maladministration, financial impropriety and misuse of public funds have prompted parliament’s standing committee on public accounts to launch an inquiry into the RAF focused on governance failures, financial mismanagement, procurement irregularities, legal expenditure, fraud and human resource problems.
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