The Road Accident Fund (RAF) held billions of rand in unspecified investment accounts, delaying payments to hundreds of car accident victims and raising questions that it may have breached rules that require investments to be lodged with the Corporation for Public Deposits.
The state-run compensation fund kept billions in an account, bolstering its investment income more than two-fold to R677m while accident victims clogged court rolls, challenging unpaid claims, its 2023/24 annual report shows.
Alongside allegations of governance breakdowns and procurement irregularities, the question at the centre of financial reporting failures in the inquiry by parliament’s standing committee on public accounts (Scopa) — chaired by MP Songezo Zibi — is whether the RAF cash management practices amount to maladministration or breached its legal mandate.
Legally, state entities have to invest surplus funds with the Corporation for Public Deposits (CPD), a statutory body that takes short-term deposits from public sector entities and places them in government-backed money-market instruments and special Treasury bills. The money earned from interest is payable on demand, preserving liquidity.
But the National Treasury may permit exemptions to the CPD requirement. According to the Treasury, the RAF is not among the entities exempted from investing with CPD.
Former RAF CEO Collins Letsoalo told MPs in March that the fund kept the money in its call account and gained interest. He said the fund used the money in investments but refused to disclose further information on the investments to parliament, saying claimants’ lawyers owed by the RAF would want to attach the investments.
RAF spokesperson McIntosh Polela told Business Day the RAF complied with all legal requirements regarding how the fund dealt with its cash and cash equivalents.
Scopa will write a report to the National Assembly about the performance of the fund and recommend whether there is a need for legislative reforms at the fund after concluding the inquiry.
Letsoalo is likely to appear before the committee because its terms of reference state it will focus on the 2020/21 to 2024/25 financial years, which cover the former CEO’s tenure.
Legal Practice Council deputy chair Llewelyn Curlewis described the inquiry into the RAF as the most important for South Africans.
It is a much-needed inquiry. In comparison to other commissions of inquiry, this one touches the pocket of every South African citizen.
— Llewelyn Curlewis
Legal Practice Council deputy chair
The fund receives an average of about R50bn yearly from the SA Revenue Service (Sars) and is funded by motorists through the fuel levy system. That pales in comparison to more than R300bn in unpaid claims, making it technically insolvent.
“It is a much-needed inquiry. In comparison to other commissions of inquiry, this one touches the pocket of every South African citizen. It is in everybody’s interest to have clarity and analysis of RAF finances,” Curlewis said.
Solving governance issues at the RAF could also be a relief to the justice system, he said.
The Pretoria and Johannesburg high court rolls are burdened by RAF cases. The fund’s many cases lack legal representation, delaying the finalisation of court cases and resulting in default judgments.
“If we can get rid of the issues of the RAF matters, all of a sudden the justice system will start functioning better.”
Nkosana Mvundlela, president of the Black Lawyers Association (BLA), called the RAF a risk to the rule of law because it failed to honour court orders.
“The justice system must be seen to be working and must be seen to be yielding results. When ordinary people in the country do not get their court orders honoured by the RAF, that creates a risk to the rule of law. People start losing confidence in the court system and they may easily not trust the rule of law,” he said.
He said the inquiry would hopefully benefit members of the public by improving access to RAF claims systems.
Depending on the committee’s findings, the legislators might have to decide whether the RAF systems should be overhauled.
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