The standing committee on public accounts (Scopa) has confirmed that the Road Accident Fund (RAF) understated its claims liability by more than R300bn in its 2020/21 financial statements, Scopa heard on Wednesday.
This followed a voluntary change in accounting policy that was neither approved by the Accounting Standards Board (ASB) nor accepted by the auditor-general of SA.
The RAF’s adoption of Ipsas 42, a standard intended for social benefit schemes, resulted in the exclusion of incurred-but-not-reported and outstanding registered claims from its annual financial statements, despite actuarial estimates placing total liabilities at R341.2bn as of March 31 2021.
The auditor-general issued a disclaimer audit opinion for the 2020/21 financial year, citing material misstatements and noncompliance with the prescribed financial reporting framework under the Public Finance Management Act (PFMA).
The RAF subsequently sought to interdict the auditor-general from publishing its audit findings, but the Gauteng high court dismissed the application with costs.
The court found that the RAF’s financial statements failed to reflect its statutory obligations to compensate road accident victims and that the accounting change had removed billions in liabilities from the balance sheet without any corresponding change in underlying risk.
Testimony from former RAF finance officials, including Victor Songelwa and Itayi Charakupa, confirmed that the accounting shift coincided with a proposed debt restructuring facility of R15bn-R20bn, which was abandoned after the disclaimer opinion rendered the RAF’s financial statements unreliable to external lenders.
Songelwa stated under oath that the policy change was intended to “improve the financial position for the RAF to obtain loans at favourable interest rates”, a motive later acknowledged in the RAF’s own court filings.
The ASB, in correspondence tabled before Scopa, confirmed that Ipsas 42 had not been approved for domestic use and that liabilities arise when eligibility criteria are met, not only at the point of settlement.
Operational decisions taken in parallel with the accounting change exacerbated the fund’s financial and legal exposure.
The RAF terminated its panel of attorneys in mid-2020, eliminating a network of more than 500 legal professionals from 100 firms who had previously assisted in defending claims. This decision, taken without an alternative legal strategy, led to a sharp decline in claims finalisation from 258,382 in 2019/20 to 107,193 in 2020/21 and a corresponding increase in average claim cost from R138,010 to R235,141.
The fund accumulated R4.78bn in default judgments between 2018 and mid-2023, according to the Special Investigating Unit (SIU), which described the abandonment of legal representation as “reckless” and in contravention of section 51 of the PFMA.
The SIU’s forensic briefing to Scopa on October 10 revealed further irregularities, including R141.8m in unauthorised payments to corporate attorneys, R66.1m spent on a Joburg office through a flawed procurement process, and R5.2m in vehicles handed to a service provider without compensation.
SIU principal investigator Msubu Maseko confirmed that “some company has been gifted vehicles to the value of R5.2m”.
The SIU also disclosed that RAF management issued directives requiring staff to route legal responses through executive channels, a practice described by SIU head Andy Mothibi as “unacceptable” and potentially constituting interference with a statutory investigation.
Additional findings include duplicate payments totalling R340m due to failures in bank reconciliation, unauthorised bank accounts under investigation by the National Prosecuting Authority, and transfers of public funds to family trusts linked to RAF executives.
The SIU has opened criminal proceedings against a senior RAF official for noncompliance with a lawful subpoena and continues to pursue disciplinary referrals and systemic reforms.
Governance failures were found to extend to the RAF board, which ratified contracts post facto to “legitimise” audit compliance rather than correct procurement irregularities.
Maseko testified that “the board chair was aware of what had been done”, and that oversight committees lacked independence and capacity. The prolonged noncooperation of the former RAF CEO, who has evaded SIU hearings since June 2024, further underscores the breakdown in accountability.
Scopa chair Songezo Zibi confirmed that the committee will summon the RAF board to account for its fiduciary responsibilities.
MPs from across the political spectrum expressed concern over the fund’s administrative collapse.
ActionSA’s Alan Beesley described a prior RAF appearance as “the most shambolic meeting I had attended in my life”, while the DA’s Farhat Essack called for a full performance audit, citing “an entire staff complement which was derelict and unable to perform basic tasks”.
Road accident victims now wait more than 180 days for payment after settlement, with no legislative reform or funding adjustment in sight. The fuel levy, which funds the RAF, has remained flat at 218c/litre since 2021/22, despite actuarial warnings and the Treasury’s prior practice of adjusting the levy in response to liability growth.
