“The RAF was not going to change its mind, it had adopted a stance and was impervious to persuasion that it was wrong.”
This is what judge Graham Girdwood said when delivering a scathing judgment against the Road Accident Fund in its audacious review application against the Auditor-General of South Africa (Agsa).
The RAF approached the high court seeking a legal review of Auditor-General Tsakani Maluleke’s disclaimer audit opinion she issued against the fund for the 2020/21 financial year.
This was after the RAF had in 2020 elected to use a model, rejected by the Accounting Standards Board (ASB), which made its books look good and reflected a R3.2bn surplus instead of liabilities of R300bn.
Maluleke’s office was of the view that the RAF should not apply the standard (IPSAS 42) but should rather maintain the status quo, while the ASB develops a standard specifically tailored for the South African environment. Girdwood said a fair and exhaustive process was followed in which the RAF was given several chances to respond to Maluleke’s views.
“It remains very clear that no matter how much more engagement there was to be, no matter the fact that the Agsa, the ASB and the OAG (Ombud Auditor-General) were speaking from one mouth, the RAF was not going to change its mind,” said Girdwood.
Maluleke’s spokesperson Harold Maloka said Agsa was happy with the judgment.
“The AG Tsakani Maluleke welcomes this judgment and says it affirms the Agsa constitutional mandate to audit and report which must be exercised without fear, favour and prejudice,” said Maloka.
In a statement issued by spokesperson McIntosh Polela, the RAF said it was disappointed with the judgment because the court “misapplied and misdirected itself”.
“Furthermore, it remains the contention of the RAF that the impugned decision fails to meet the constitutional standards of rationality and legality. To this the RAF had raised 17 grounds of review which were supposed to be addressed in this judgment. Nowhere in the judgment does one find the 17 grounds traversed by the court. Therefore, having read the judgment, we are taking legal counsel with a view to launch our leave to appeal,” said Polela.
The fund, which has the second-highest financial exposure for South Africa’s fiscus after Eskom’s R480bn contingent liability, is a state-supported insurance fund that compensates victims of road accidents. It is funded through a special levy, currently R2.18 a litre added to the fuel price, from which it receives about R3.8bn a month.
On advice from audit firm PriceWaterhouseCoopers, the RAF decided in 2021 to adopt a new accounting standard, a social benefit standard that was not approved by the ASB and not supported by the National Treasury. After adopting it, former transport minister Fikile Mbalula, the fund’s CEO Collins Letsoalo and its now former board chair Thembi Msibi announced in July 2021 that the RAF had turned a corner and now had a surplus of R3.2bn.
The adoption of that standard saw the RAF writing off more than R300bn in liabilities, an amount that is said to reflect the cost of every car accident recorded in South Africa.
This put the RAF on a collision course with the AG, which issued it with a disclaimer. The RAF took the AG to court to interdict her from making the disclaimer public, but lost with costs.
The RAF has for two financial years failed to table its annual reports to parliament and has been issued with two disclaimers by Maluleke, her office’s worst possible finding. This means that the RAF has failed to provide sufficient evidence — including documents and financial statements — to prove how it spent taxpayers’ money.
In 2022 Scopa took Letsoalo and the RAF’s board to task over its failure to account for RAF funds, its judicial review application and its continued spat with the AG’s office over its findings.
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