WATCH | Auditor-general vs RAF clash continues as entity's deficit rises to R23.9bn

The Road Accident Fund's (RAF) finances continue to be in the red, with a R23.9bn deficit.

The auditor-general (AG), during a presentation in parliament on Wednesday, raised concerns about the fund, which received an adverse audit opinion for the 2022/23 financial year.

The AG official responsible for the RAF audit, Lwazi Kuse, appearing before the standing committee on public accounts (Scopa) on Wednesday, echoed concerns about the financial reporting standards of the entity.

“The overall audit outcome of the RAF is an adverse opinion for the 2022/23 financial year. It is therefore our opinion that the financial statements do not present fairly, in all material respects, the financial position of the RAF, and financial performance and cash flows in accordance with the standards of generally recognised accounting practice (GRAP),” the AG's report reads. 

The report details RAF accumulated deficit of R23.9bn, an increase from R15.5bn reported the previous financial year. The AG warned that the deficit could lead to the entity being unable to continue offering services.

“RAF reported a deficit of R8.4bn for the 2022/23 year. The entity has an accumulated deficit of R23.9bn and the total liabilities exceeded its total assets by R23.8bn. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern.”

Kuse described the RAF's financial statements as “not credible”. 

“They had a clean audit in 2019/20. Our adverse opinion [for 2022/23] is that the financial statements produced by RAF are not fairly stated. They are not credible. We want to emphasise that,” he said.

The RAF and the office of the AG have been engaged in a legal showdown for three years over accounting reporting methodology. In December 2021 the RAF launched an application for a review of 2020/21 audit outcomes.

The AG argued that the RAF during the 2021 financial year adopted an accounting methodology different to one used in previous years. The effect of this change in accounting methodology was that the RAF’s liabilities were reported as being significantly reduced, from R327bn in 2019/2020 to only R34bn in 2020/2021. 

The AG won the initial stages of legal battles, but the RAF took matters to the Supreme Court of Appeal. Kuse said the affidavits were filed by both the AG and RAF in August and September and they are awaiting the outcome of court processes. 

This week RAF CEO Collins Letsoalo said the fund was troubled by large payout claims made by foreigners over the years, some of whom are wealthy. Letsoalo mentioned a case of three Belgian nationals who each claimed social benefits of R151m from the fund. “The biggest payout was to a foreigner. That's a fact,” he said.

He expressed concerns about claims from individuals who may not have been in the country legally during their accidents.

“The amount on the RNYP [requests not yet paid] to foreigners is R1.5bn. Imagine what we can do with R1.5bn,” he said.

He said in 2008 the fund paid a Swiss billionaire more than R500,000 after losing two limbs in a motorcycle accident in Cape Town.

Despite pushback on claims from foreigners, the RAF previously lost a court battle to implement new regulations requiring foreigners to prove their legal status in South Africa at the time of their accidents. This decision stemmed from a case involving Adam Mudawo, a Zimbabwean man who sustained severe facial injuries but was unable to lodge a claim due to his lapsed asylum permit.

In March the Pretoria high court ordered the fund to provide compensation to all road users, regardless of immigration status.

“The Road Accident Fund provides compulsory cover to all users of South African roads, citizens and foreigners, against injuries sustained or death arising from accidents involving motor vehicles within the borders of South Africa,” Letsoalo said.

“We sit with legal costs of R3.8bn. You can see that when we started in 2020, that was sitting at R9.4bn. Through the new strategy we have saved about R24bn in legal costs.”

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