Broke RAF splurges millions on chairs

EDITOR'S NOTE: In the original version of this article‚ we incorrectly stated that RAF had a contract with Gxakwes Projects. We also incorrectly stated that National Treasury had red-flagged the deal between Gxakwes Projects and Eskom. This was incorrect, as we discovered when new information came to light. This article has been amended to reflect these facts. We apologise for the errors.

The bankrupt Road Accident Fund is renting office chairs at R1666 per chair per month.

The proposed deal for the rental of 300 chairs at almost R500000 a month follows a bid to push through an even more audacious five-year, R60-million furniture rental contract. That plan did not go ahead.

The extravagance will be a bitter pill for cash-strapped motorists who face yet another petrol price increase next week that will put the cost in most parts of the country up to R16 a litre. The RAF, which is technically insolvent with contingent liabilities of close to R190-billion, pockets R1.93 for every litre of petrol sold.

The fund’s financials have been a mess for years. Last year it suffered a R34.7-billion loss. It collected R33.3-billion last year in revenue — nearly all from taxpayers’ fuel levies — but spent R68-billion.

It said yesterday that although renting furniture was expensive and “not the best option”, it had chosen this because of the fund’s inability “to settle claims immediately, resulting in a creditors book of about R8-billion”.

The fund has been struggling to pay road accident victims. This has been blamed mainly on a failure of leadership.

This week Transport Minister Blade Nzimande dissolved the fund’s board because of “serious divisions” and dysfunction.

The contract for the 300 chairs for the fund’s Menlyn office was allegedly motivated by acting chief operating officer Dineo Dlamini, chief financial officer Rodney Gounden and acting CEO Lindelwa Jabavu without a tender procedure. The board found out about the deal in April, after it had been finalised.

Dlamini is the former regional manager for the fund’s Menlyn office in Pretoria.

The proposed five-year deal involves Gxakwes Projects, a firm based in Gauteng. The Sunday Times reported last year how sources within National Treasury said it raised questions over a deal between the company and Eskom.    

Eskom wanted R24-million to buy 9217 “operator and visitor chairs”. Treasury conducted an inspection of Eskom’s offices and power stations countrywide. It found that only 500 chairs were needed, said sources.

Mzwakhe Gxakwe, CEO of Gxakwes Projects, previously told Sunday Times he could not give details of his contract with Eskom.

However, he explained that the 500 chairs were for Gauteng only.

“We are not involved in any of the internal processes that involves Eskom and the National Treasury ...Chairs ordered have to be approved by senior managers. There’s no one who can create a purchase order unless it goes through the whole process. One office may order one chair and another two. Another may say we need 200 or 300 chairs.”

At the RAF, the Sunday Times has learnt, the board took a “round-robin resolution” in March to award Gxakwes Project the R60-million contract without a tender.

Some concerned board members blew the whistle on the deal because they suspected the “process is fraught with legal concerns”.

One former board member, Terrence Kommal, in an e-mail to fellow board members, questioned how the fund would “want to rent furniture for R60-million, so we will own nothing from this”.

He wrote: “[The] RAF Act and PFMA [Public Finance Management Act] do not allow for procurement by round robin.”

Sources with knowledge of the deal claim Dlamini, Gounden and Jabavu motivated it.

“As board members we were shocked when we were informed on April 26 this year that RAF was renting 300 chairs for its Menlyn office at R500000 per month,” a former board member said.

The Sunday Times has seen a round-robin resolution of the fund’s board meeting, dated March 1 2018. In it, board members “approve the award to Gxakwes Project CC, to provide rental of office furniture to all RAF offices for a period of five years at a cost of R2-million per annum, per region including RAF head office”.

The fund has regional offices in Pretoria, Johannesburg, Durban, East London and Cape Town, and customer service centres in Bloemfontein, Mahikeng, Kimberley, Polokwane and Nelspruit. These employ 2676 people.

“The company’s furniture is below average, yet someone from the RAF board was pushing us to award them a multimillion-rand contract,” a board member said.

Gxakwe referred all queries on the proposed RAF deal to the RAF.

“They have all the answers to your questions,” he said.

The fund yesterday failed to answer specific questions. However, chief marketing officer Phumelela Dhlomo said in a statement that the fund was renting or leasing furniture instead of buying it because of its inability “to settle claims immediately, resulting in a creditors book of about R8-billion”.

He said: “Creditors are generally paid within 150 days of settlement. It is for these matters that attorneys don’t want to wait and they issue writs. The sheriff would then present these writs and attach our assets, as we don’t have cash to pay the writs. Consequently, our movable assets like furniture, computers and printers are removed by the sheriff and sold.

“Since the last attachment by the sheriff 12 months ago at our Menlyn branch, we have been leasing furniture and computer equipment.”

Dhlomo admitted leasing wasn’t the best option.

“While the leasing option is more expensive, it does enable us to manage attachments.”

He said: “These challenges are not of [the fund’s] own making but that of the legislative framework which it is required to administer, a reality RAF has spoken openly about.”

In a letter to RAF board members this week, Nzimande said divisions in the board could be gleaned from “the irregular or flawed recruitment process of the CEO”, as well as “the briefings received from the board, wherein I was advised that there was an existence of mistrust among board members such that the board was unable to hold subcommittee meetings”.

He also mentioned “correspondence received from the executive management seeking my intervention on the leaking of information by the board” and “the differences that played themselves [out] in the meeting in the portfolio committee on transport on 18 April 2018, which was embarrassing to me”.

The auditor-general warned that there was doubt over “the public entity’s ability to continue as a going concern”.