RAF’s crash course in governance

Road Accident Fund (RAF) CEO Collins Letsoalo’s term of office at South Africa’s effectively bankrupt state-controlled third-party motor insurance system, described alternately as “chaotic”, “disastrous” and “potentially corrupt”, has been put on hold after he was placed on “special leave” on Tuesday.

The decision of the RAF board to place Letsoalo on “special leave” with full pay and benefits was sparked by his decision to not attend a meeting of parliament’s standing committee on public accounts (Scopa) on Wednesday to answer allegations previously made by the Special Investigating Unit (SIU) into a range of questionable practices by the fund.

The fund administers R47bn a year in payments to innocent road accident victims, funded by an 11% levy on the petrol price.  

Letsoalo also forbade members of the executive from attending the function. However, other members of the RAF executive effectively defied his decision and did appear before Scopa, along with board chair Zanele Francois and deputy transport minister Mkhuleko Hlengwa.

The members of the executive and board were given an extraordinary tongue-lashing by the committee, the brunt of which was shouldered by Phathutshedzo Lukhwareni, who has been appointed acting CEO.

Members of the committee were particularly suspicious about the timing of the decision, which followed a frantic exchange of lawyers’ letters between the committee, Helengwa, Francois and committee chair Songezo Zibi over the past week. 

Francois claimed during the meeting that Letsoalo’s decision to resist attending the meeting was the main reason for the board’s decision, but she added “there were other contributing factors as well”. 

“We felt it was necessary to give him time off to address personal conflicts related to this process, to reflect on his role, and to ensure the organisation is not brought into disrepute. The board also needs to show its support for parliamentary oversight structures.”

Under investigation

The SIU has been investigating a host of management and corruption issues at the RAF, some of which occurred prior to Letsoalo’s term of office, which is due to end in August. But one of the issues does involve Letsoalo personally, and that is a R79m lease for a Joburg building with Mowana Properties. Letsoalo approved the contract against a bid evaluation committee’s recommendation.

However, the lease issue is just one of an extraordinary array of contentious issues concerning the RAF, which has racked up huge lawyers’ bills in an attempt to manipulate its accounting system to suggest the organisation is not as bankrupt as it actually is.

Repeated legal cases to achieve this end, criticised by the auditor-general and by the transport ministry, have been turned down by the courts, culminating in an instruction from the ministry to cease and desist. In defiance of this instruction, Letsoalo has applied to the Constitutional Court to have judicial decisions that refuse to allow appeals on the topic reversed.

The most consequential investigation by the SIU concerns the decision of the RAF to scrap its long-established system of appointing private sector lawyers to adjudication boards to help speed up third-party insurance claims. The allegation was that the RAF scrapped this system without having an alternative in place, which resulted in a huge quantity of default judgments and higher payouts due to accumulating interest charges and lawyers’ fees.

Zibi pointed out to the committee that Gauteng deputy judge president Roland Sutherland has expressed significant concern over the overwhelming number of RAF cases burdening the Gauteng high court system. They constitute about 57% of the cases before the courts, to the extent that some RAF cases have been scheduled for trial as far ahead as April 2029.

The RAF’s refusal to settle cases has resulted in a huge number of default judgments, and has simultaneously prevented large numbers of car accident victims from being compensated. At the meeting, Francois asked for the statistics to be provided, and Hlengwa said the department was looking at ways to intervene, which could include mandatory mediation. 

The RAF board said its suspension of Letsoalo was a precautionary measure and did not constitute disciplinary action or presumption of guilt. This decision incensed members of the portfolio committee who wanted to know whether the decision to suspend Letsoalo was effectively a method of protecting him. Francois denied the allegation. 

The committee repeatedly asked about the precise terms of Letsoalo’s “special leave”, and the board asked for permission to respond in writing, which Zibi ultimately granted, as long as it is done expeditiously. 

_{Top image: Rawpixel/Currency collage. Pictures: Gallo Images/Sowetan/Kabelo Mokoena.}