RAF's R25bn deficit and legal disputes draw parliamentary scrutiny

As the ongoing scrutiny of the Road Accident Fund (RAF) intensifies, a significant divergence of opinion has emerged among parliamentarians regarding the entity's right to pursue litigation over the disputed accounting methodology it uses for its finances.

This emerged when the Office of the Auditor-General briefed the standing committee on public accounts (Scopa) on RAF’s audit outcome for the 2023/24 financial year.

Nicholas Mokwena, the deputy business unit leader at A-G’s office, told Scopa that the RAF received an adverse opinion for the second consecutive year.

“This is due to the use of the principles of the accounting standard (IPSAS 42) that is not allowed,” Mokwena said.

He also said the RAF reported a deficit of R1.5 billion for the 2023/24 financial year, an improvement from the R8.4 billion recorded in the prior year.

“The entity has an accumulated deficit of R25.5 billion, with total liabilities exceeding total assets. These factors are indicators that RAF has financial difficulties and may not be able to pay liabilities as they fall due.”

Mokwena added that a material uncertainty ongoing concern was reported as the entity has solvency challenges with liabilities exceeding assets.

The A-G found no material findings in the annual performance report submitted by RAF for auditing.

The entity achieved 85% of its planned annual performance plan targets in 2023/24 and exceeded its 10% target of processing claims within 120 days by 11%.

However, it did not achieve the target relating to the reduction of three-year-old open claims.

The RAF also did not meet the target for the rollout of the Integrated Claims Management System.

Mokwena said they found that the closing balance for irregular expenditure was “quite high” at R440m.

He ascribed the amount to R362m irregular expenditure that was under investigation and R78m that was under determination.

In his update on the litigation by RAF over the accounting methods, Mokwena said: “We are awaiting the outcome of the president of the SCA to make a decision.”

RAF instituted litigating in December 2021 to interdict and refrain the A-G from publishing the report and set aside the disclaimer but has been losing the cases in the high court and the Supreme Court of Appeal (SCA).

ActionSA’s Alan Beesley raised concern about litigation involving state institutions against each other.

“It is crazy that government takes government to court and it is the taxpayer that pays,” Beesley said.

DA MP Farhat Essack said: “I don’t comprehend what RAF tries to achieve through this court case by taking the state to court. It is just ridiculous.”

ANC MP Gijimani Skosana said they respected the RAF's right to litigate, but it was quite worrying as it continued to litigate even when advised there was no prospect of success.

“We are unlikely to see a change in the audit outcome because of this particular matter (change in accounting method). There is a need for us to meet with them and try to persuade them to look at the matter from a different angle,” Skosana said.

He said there were costs involved in the litigation, and public money was being used.

MK Party’s David Skosana said it was a constitutional right of the RAF to take any case to the highest court in the land.

“Why should we suffocate the RAF if they are not happy with some decisions? Why are we obsessed because it is like RAF has committed a crime by going to court,” Skosana said.

He maintained that losing a court case was not an issue as courts arrived at different opinions.

“As you know, a court decision is a matter of opinion, and that is why the SCA is able to overturn some of the high court decisions, and even the Constitutional Court overturns the SCA cases.”

Skosana could not understand why the RAF was stopped from going to court at all costs just because they lost one or more cases.

“It is in the Constitution. They are within their right. There is nothing wrong,” he added.

mayibongwe.maqhina@inl.co.za