The Road Accident Fund (RAF) has again come under fire after it emerged that a family member linked to a senior RAF executive was paid by one of the law firms appointed to the fund’s corporate panel of attorneys.
The same law firm also provided personal legal services to the executive, raising questions about conflict of interest and ethical governance at the troubled entity.
Appearing before parliament’s standing committee on public accounts (Scopa) on Friday, Special Investigating Unit (SIU) head, advocate Andy Mothibi, revealed that the irregular relationship came to light during a financial analysis, which included an examination of bank statements of law firms appointed to the RAF’s corporate panel.
Scopa adopted the terms of reference for its inquiry in July, focusing on the 2020/21 to 2024/25 financial years. However, the committee emphasised that earlier actions that may have contributed to the fund’s governance and financial crisis would also be scrutinised.
The inquiry will cover seven key areas with financial implications, including:
- governance failures and oversight by the minister and board;
- financial management and compliance with the Public Finance Management Act (PFMA);
- procurement and supply chain irregularities;
- legal and litigation expenditure;
- fraud, corruption and whistle-blower reports;
- automation and claims processing; and
- governance and human resource matters
Mothibi said the SIU had uncovered evidence that R26.6m was unlawfully paid to the law firms, thereby breaching internal financial controls and exceeding the delegated authority of the RAF accounting officer. The payments also surpassed the R10m threshold, exposing serious weaknesses in oversight and accountability.
The payments made to all law firms amounted to R26.6m, exceeding both the accounting officer’s delegated authority and the RAF’s approved budget of R10m
“The Government Employees Pension Fund (GEPF) had 19 law firms contracted with it but only sent emails to 14 firms informing them that the RAF was requesting to use their services for the corporate panel and seeking written consent,” Mothibi said.
“The RAF then entered into agreements with 13 law firms between May and June 2020 for 10 months.”
The RAF had previously sought assistance from the GEPF to help identify suitable law firms for its panel of attorneys.
Mothibi added that the contracts were extended four times, but only one of those extensions, for a period of six months, was formally approved by the RAF board.
“The payments made to all law firms amounted to R26.6m, exceeding both the accounting officer’s delegated authority and the RAF’s approved budget of R10m,” he said.
Ratification of both the contracts and the overspending only took place a year later, in August 2021, when the RAF board chairperson approved the ratification and a further six-month extension.
“According to interviews with RAF officials, the ratification was for internal processes and not meant to regularise the procurement process.”
The SIU also found that work was not fairly distributed among the appointed law firms. “One service provider received 90% of the workload, while others received minimal or no work.”
The value of that 90% work amounted to R164m.
He also revealed that some law firms on the corporate panel handled claims-related matters, even though their mandate was not related to claims, in a clear deviation from the terms of their appointment.
Systemic governance failures
Mothibi said the governance failures had created an environment that enabled maladministration, weak internal controls and escalating financial risks.
“These systemic deficiencies compromised the fund’s ability to deliver effectively on its mandate to compensate road accident victims.”
The total amount of default judgments issued against the RAF for costs and fees between 2018 and 2023 was R4.78bn. Among these default judgments are claims that may not have warranted substantial settlements if defended
— Mothibi
He added that the scrapping of the attorneys’ panel and lack of proper legal representation had resulted in a surge of default judgments against the RAF.
“The total amount of default judgments issued against the RAF for costs and fees between 2018 and 2023 was R4.78bn. Among these default judgments are claims that may not have warranted substantial settlements if defended.”
He disclosed that R141.8m was classified as an irregular payment, as there was no board or committee approval for the contracts or extensions when appointing the corporate panel of attorneys.
Another R66.1m paid for the Johannesburg regional office building also stemmed from a flawed procurement process, which may constitute irregular expenditure.
The SIU is investigating four other procurement contracts, including:
- a fleet contract valued at R53.1m;
- cleaning and security contracts worth R12.1m; and
- an SAP contract valued at R1.8m
CEO interference
Mothibi also told MPs that suspended RAF CEO Collins Letsoalo had interfered in procurement processes, authorising the re-evaluation of a bid already considered by the bid evaluation and bid adjudication committees, outside normal procurement procedures.
“The RAF’s supply chain management policy does not have a provision for such a process,” Mothibi said.
“The assigned RAF official failed to produce a due diligence report on her review of the tender documents and the findings that led to the cancellation of the tender.”
Letsoalo was suspended in June after being implicated in a separate investigation into a R79m Johannesburg office lease as well as allegations of financial mismanagement and corruption.
RAF’s financial crisis deepens
Further deepening the RAF’s woes, the auditor-general’s office reported this week that the fund remains mired in debt, having accumulated a deficit for more than a decade. On March 31 the deficit stood at R2.3bn.
The RAF has also failed to meet one of its key performance targets for five consecutive years - reducing the backlog of claims older than three years.
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