/ 20 April 2023

RAF board ‘not fit for purpose’, must be dismissed, Scopa chair says

Mkhuleko Hlengwa said his visit to state-owned entities reinforced what he has learned over seven years as an IFP MP.
Scopa chairperson Mkhuleko Hlengwa slammed its board as “unadvisable” and “not fit for its purpose”. (Delwyn Verasamy/M&G)

Parliament’s standing committee on public accounts (Scopa) chairperson believes that dismissing the Road Accident Fund (RAF) board will solve an ongoing dispute with the auditor general and have the fund revert to the accounting standards it used before.

When the RAF appeared before the parliamentary committee on Wednesday, Scopa chairperson Mkhuleko Hlengwa slammed its board as “unadvisable” and “not fit for its purpose”.

Hlengwa said: “We sit here every time, and we are subjected to this painful exercise of arrogance when the things are very simple, when everybody is telling you ‘this is wrong, go and change it’.”

In April 2021, the RAF resolved to switch the accounting standard applicable to the compilation of its annual financial statements since 2014 from the IFRS4 standard to the IPSAS 42 standard, which resulted in a difference of some R300 billion in its contingent liability position while its insolvency position improved from 3% to 54%. The IPSAS 42 provides guidance on accounting for social benefits expenditure while the IFRAS4 gives guidance on accounting for insurance contracts

But the auditor general said the use of the IPSAS42 standard by a public entity such as the RAF was inappropriate and did not fairly and accurately reflect its contingent liability for outstanding and future claims. The auditor general, Tsakani Maluleke, added that the use of the accounting standard would result in non-compliance with the Public Finance Management Act.

Scopa compelled the RAF to drop legal action it had constituted against the auditor general over the issue.

This week, Hlengwa said the tussle between the two had left the taxpayer as the victim.

“We would have long been past this point if RAF had accepted at the beginning that there was an error. But, no, you must abuse all of us,” he said.

RAF chief executive Collins Letsoalo told Scopa that a resolution meeting with the auditor general had been set for 16 May. The fund’s board chairperson, Thembi Msibi, said should the RAF and the auditor general not reach agreement at the meeting, the RAF would continue with its legal action set to happen in October.

Hlengwa said the RAF wanted to continue to disrespect the auditor general, adding: “It is our outlook that this board is not fit for purpose.”

He said Transport Minister Lydia Sindisiwe Chikunga should submit a report to Scopa as to why the RAF board should not be removed. 

“If this board is going to remain in place, she must explain to us why these individuals should stay in place, along with a full-scale assessment of their competence. This disdain towards public funds is exactly why this country finds itself in trouble,” Hlengwa said.

Letsoalo said the RAF board believed that it was correct in its interpretation of the accounting standards.

The RAF is funded by a portion of the fuel levy and provides insurance to road users, including pedestrians, in the event of a vehicle accident. The fund has built up huge liabilities, which are not funded.

The Special Investigating Unit (SIU) told Scopa that it was looking closely into allegations of corruption and maladministration at the RAF, including duplicate claim payments, tender irregularities, possibly inflated invoices and fraudulent claims.

“We are investigating 10 contracts the auditor general flagged for possible irregularities, as well as fruitless and wasteful expenditure. Four contracts to the value of approximately R837 million have been identified for review and possible cancellation,” said SIU spokesperson Kaizer Kganyago.