Written by Roy Cokayne | Published on 18 July 2024
Adopting a different accounting standard saw the fund’s liabilities for outstanding claims plummet from R331bn to R34bn – and led to the AG issuing a disclaimer to its financial results.
The Road Accident Fund (RAF) has been advised by new Deputy Minister of Transport Mkhuleko Hlengwa to use legislative reforms rather than “arbitrary changes in accounting standards” to achieve the necessary changes required by the fund.
This was a reference to the governance issues facing the RAF related to its 2020/2021 annual financial results.
The Auditor-General (AG) issued a disclaimer to these financial results because the RAF had adopted a different accounting standard, resulting in the fund’s liabilities for outstanding claims plummeting to R34 billion in 2022/23 from R331 billion in 2019/20.
An application to the High Court in Pretoria to review and set aside the AG’s disclaimer and to declare the disclaimer invalid and unlawful was dismissed with costs in April this year.
Ongoing dialogue
Hlengwa said in a Department of Transport (DoT) budget vote speech earlier this week that in his past and recent experiences in parliament, they have grappled with addressing accounting standards related to the RAF.
He said there has been ongoing dialogue between the RAF, the AG, parliament and even the courts.
“At the Department of Transport, we firmly believe that the RAF Board must promptly find a resolution to this matter and not let it be an instruction by other government institutions to it,” he said.
“The necessary changes required at the RAF must be achieved through legislative reforms and not through arbitrary changes in accounting standards.”
Parliament’s Standing Committee on Public Accounts (Scopa) previously issued directives to the RAF not to proceed with litigation against the AG about the appropriate accounting standard to be used, but a previous RAF board rejected these directives.
This led to an obviously peeved Hlengwa, then Scopa chair, stating in February this year: “There is a strong basis for charging the RAF board of directors, including the CEO, with dereliction of duty and declaring them delinquent directors under the Companies Act.”
Hlengwa was in a more conciliatory mood this week and stressed that while the DoT commits to preventing crashes and losses of life or limb, it also commits to ensuring effective and responsive post-crash assistance to those affected and these services are carried out by the RAF.
Strategy to address major challenges
He said the RAF has been implementing the turnaround 2020-25 RAF strategy for the last four years as developed to address the fund’s major challenges, which included, among others:
- Increasing liability;
- Long settlement turnaround times for claims;
- Unsustainable funding model;
- Governance and leadership instability;
- Manual and litigious operating model;
- Non-compliant claims lodged; and
- Fraud and corruption culture.
Hlengwa said this strategy has focused on reducing administrative costs, introducing efficiencies to address the manual and litigious model, managing and reducing the RAF’s liability, digital transformation, prioritising claimants’ compensation, managing claims’ risk, reducing the claims backlog, and expediting claims settlements.
“The strategy’s interventions have resulted in the cumulative reduction of legal costs by 75%, and a cumulative legal cost savings of just over R23 billion in the three years of implementing the strategy,” he said.
“The introduction and implementation of RAF medical tariffs and treatment protocols has resulted in the reduction of medical costs from R3.6 billion in the 2019/20 financial year to R2.1 billion in the 2023/24 financial year.”
Medical experts demand payment
However, medical experts who have compiled and provided medico-legal reports to help the RAF and the courts determine appropriate compensation for claimants injured in motor vehicle accidents recently renewed their efforts to get payment from the RAF for these reports.
Mariëtte Minnie, whose firm processes and administers the accounts of some of these medical experts, claims the RAF has owed these experts hundreds of millions of rand since 2015, and this had contributed to the reduction in the RAF’s medical costs.
Minnie also questioned how it is possible that the RAF reduced its legal costs by 75% when the high courts have issued so many cost orders against it.
Illegal foreigners cases
An example of this is a judgment handed down by Judge Mandlenkosi Motha last Thursday in the High Court in Pretoria, which involved 13 foreign nationals who lodged claims, issued summons and obtained court orders against the RAF.
Despite having received writs of execution, the RAF refused to effect payment and argued that the plaintiffs were illegal foreigners.
The RAF requested that the planned sales in execution of its assets be suspended pending the outcome of an application for leave to appeal in another case involving illegal foreigners and the RAF.
Judge Norman Davis, in a judgment handed down last Tuesday in that case, dismissed with costs the RAF’s application for leave to appeal a judgment that declared invalid a DoT regulation and RAF management directive that excluded illegal foreigners from submitting claims against the RAF.
Judge Motha said in his judgment that he was bound by that judgment and had come to the conclusion that the RAF “fails on all fronts”.
“It [the RAF] is simply playing for time.
“This application is unmeritorious and only serves to waste the taxpayer’s money on some wild goose chase,” he said.
Medical aid claims
The RAF is also facing legal challenges to its decision not to pay the past medical expenses of fund claimants.
It has argued that it should not be liable for past medical expenses of claimants where the injured person is a member of a medical scheme but has been unsuccessful in convincing the courts to accept this argument in several high court judgments on this issue.
This led to Discovery Health serving a contempt of court application on the RAF and its CEO, Collins Letsoalo, in November 2023.
This application, which is being opposed by the RAF and Letsoalo, was heard by a full court of the High Court in Pretoria in June of this year, but a judgment has not yet been handed down.
Medical tariffs challenge
The RAF and DoT are also facing a challenge to medical tariffs promulgated by the Minister of Transport on 19 August 2022, which allegedly limits the liability of the RAF to pay the private medical costs of road accident victims.
The National Council of and for Persons with Disabilities (NCPD) and the Law Society of South Africa (LSSA) have launched an application to review and set aside these tariffs.
They have argued that the tariffs are unlawful because they are so low that road accident victims will no longer be able to obtain the care they need in the private sector.
They further contend the public sector cannot provide this care, either at all or at a sufficient quality or urgency, which, if these tariffs are implemented, will result in many thousands of road accident victims dying or being permanently disabled.
Judge Ingrid Opperman, in a judgment handed down in May 2023, ordered the RAF to provide certain documents to the NCDP and LSSA that they require to review the medical tariffs in Part B of their main application.
She was scathing about the RAF’s conduct, stating the fund was “not only discourteous and unprofessional, but also the very opposite of rule-abiding”.
Opperman instructed Letsoalo and RAF board chair Thembelihle Msibi to file affidavits when the application is finally heard explaining why they should not be personally held liable for the costs.