The Standing Committee on Public Accounts convened in Parliament to hear the response of the Road Accident Fund (RAF) to the Auditor-General of South Africa's (AGSA's) audit outcomes, and to provide a response to the Committee’s findings that had resulted from oversight visits.
From the outset, the Committee was frustrated by the RAF's use of generalisations, and throughout the meeting, Members requested more detailed or specific information. One of its concerns was regarding the list of attorneys and firms the RAF had provided regarding duplicate payments. The Committee requested a more comprehensive list.
The Committee was also concerned about the non-payment of medical experts due to a technicality. Medical experts were not being paid, as the RAF was of the view that it had no relationship with these experts. It said the experts had a relationship with the RAF's former panel of attorneys, and implied that they should seek payment from this panel.
Expressing concern about the RAF's employees, the Committee highlighted a culture of fear within the organisation. It felt that the staff surveys that had been conducted, but did not represent an accurate measure of the staff’s perspective, because they would have likely responded with a bias out of fear. There was also concern that employees had little to no interaction with the executive team. The RAF responded that there was a psychological support system within the entity for employees, but the Committee felt that more had to be done to address this issue.
The Committee highlighted the case of 200 employees suspended in Menlyn. The RAF was unclear on the matter, and indicated that there had been 152 disciplinary matters across the country. The Committee countered that the Chief Executive Officer had informed it about the poor state of the Menlyn office, and had indicated that there had been 200 suspensions. The RAF was asked to provide a more detailed list to address this discrepancy. The Committee was extremely concerned about the state of the Menlyn office, and referred to it as a ‘crime scene.’
The Committee addressed the significant issue of the backlog of claims. Members indicated that on the oversight visits, boxes of unlogged or unprocessed claims could be found in the offices, some dating back to 2013. This was perceived as impacting the projections made by the RAF. They felt that neglecting these claims would impact the RAFs perceived successes.
The Committee inquired about the entity's vetting process and the status of the executive team. The RAF responded that the executives had been submitted for vetting, but it was unclear if a response had been received from the vetting agency. Because of the lack of clarity, the Committee requested that this information be provided.
The court case involving the Auditor-General over the RAF's accounting policy was also discussed. The RAF indicated that it had been instructed to resolve the matter outside of the courts, but had been unable to do so. The issue was therefore still before the courts.
The Chairperson welcomed the Committee Members, the Deputy Minister of Transport, Mr Lisa Mangcu, and the Road Accident Fund (RAF) officials. He noted the apologies from the Chairperson of the RAF board and the Chief Executive Officer (CEO) of RAF.
The Chairperson said the meeting was a follow-up to two previous meetings and two oversight visits. There had been some discussion following the oversight visits, but this meeting aimed to give the RAF an opportunity to provide a response to issues observed by the Committee. The RAF had been given time to consolidate information and formulate a response to the Committee. He described its response to the Committee as a ‘paper dump.’ He also commented on the late submission of its response, and said that the Committee had reviewed it.
He requested the RAF to skip over items such as the ‘genesis of RAF.’ Focus would be given to the ‘Responses to SCOPA’ presentation -- the information request submissions. The RAF transformation survey results should be taken as read. The RAF could highlight their business operating model process. The two main focuses were the ‘Response to SCOPA’ and the information request submissions.
The Chairperson indicated that the meeting would proceed with opening remarks and introductions by the Deputy Minister. The Committee wanted the situation at the RAF to improve and change for the better. Progress had been noted in the 2021/22 annual report, but it indicated that there were still outstanding matters in the outer years. The Committee maintained its position regarding the accounting standard, and had not changed its position regarding the court action.
Deputy Minister’s introductory remarks
Deputy Minister Mangcu thanked the Committee for the opportunity to present and provide a follow-up to the previous meetings and the oversight visits in Parktown and Centurion. The Ministry felt that some progress had been made, because there had been an opportunity for RAF to present their case on the state of affairs. The Ministry was committed to the turnaround of the RAF and to see things improve, and would do everything within its power to ensure that this was achieved.
One aspect that would make this intention clear was the process of legislation. This process had been kick-started through the presentation of amendments to the current Road Accident Fund Act. It was believed that this would assist in resolving the current issues the RAF was grappling with. A discussion would ensue regarding whether the Bill would be re-tabled by the next administration or not. Positive change would not be achieved through talking -- critical amendments needed to be made to the Bill to enable RAF to do what it needed to do.
The Deputy Minister highlighted the issue of the 2021/22 annual report. The Minister had written to RAF and set a deadline of 28 April to submit. This submission had been made, but certain matters had to be dealt with between the RAF and the Department. He felt comfortable to share that the 2021/22 annual report would be submitted to Parliament.
Deputy Minister Mangcu referred to the issue of the courts. The former Minister had clearly communicated that the RAF had to seek alternative means to resolve the matter outside of the courts. He had noted the Chairperson’s comment, and highlighted the commitment to resolve the issue, saying that the issue needed to be confronted -- it would not simply go away.
He handed over to Dr Nomonde Mabuya-Molele, Deputy Chairperson of the RAF board, to proceed with the presentation and introduce the board members and other officials who were present. The guideline regarding focus areas was accepted.
The Chairperson indicated that the Special Investigating Unit (SIU) and Auditor-General of South Africa (AGSA) were present in the meeting.
Road Accident Fund presentation
Dr Mabuya-Molele introduced several members of the board who were in attendance, including Mr Hilmi Daniels, Chair of the Audit and Risk Committee; Ms Lorraine Francois, Audit Committee; Mr Khotso Mothobi, Audit Committee; Mr Moses Nyama; Adv Nontutuzelo Njeza, a new board member; and Mr Phathutshedzo Lukhwareni, Chief Strategy and Transformation Officer, and Acting chief executive officer (CEO).
The Chairperson noted that RAF had a new board member. He requested clarification from Mr Mancu on the status of the board.
The Deputy Minister responded that SCOPA's position and view on the board had been very clear. The Department had continued to honour what would have been the extension of the existing board while the Minister concluded the process. The RAF had been faced with a situation where there was no quorum. The Minister had therefore exercised her right to add a member to the board to ensure a quorum. The matter would come before Cabinet later that afternoon.
Mr Phathutshedzo Lukhwareni, Acting CEO, introduced the RAF team of executives in attendance. These included: Ms Bernice Potgieter, Chief Financial Officer (CFO); Mr Ian Barriel, Chief Human Capital Officer; Mr Sefotle Modiba, Acting Executive responsible for Treasury and Investment; and Mr T Tamsanga, the Chief Internal Audit Executive.
Mr Lukhwareni referred to the claims backlog, and explained that if the RAF had continued on the previous trajectory, the Requested but Not Yet Paid (RNYP) would increase to over R51 billion, exceeding the annual revenue income.
The RAF's strategy was anchored in two pillars:
- the reversal of the previous strategy of settling claims within five years, and reducing this timeline to 120 days; and
- to move the organisation away from the target of spending on legal costs, and reducing it by 75%.
The R9.7 billion still owed to claimants was indicative of an organisation in trouble, but the RAF felt that it was on a recovery trajectory. Slide 14 depicted the claims expenditure, and indicated that the RAF had been able to increase the amount paid to claimants. It was comfortable that it could meet its financial obligations, but acknowledged that there was a long way to go to get it on a financially sustainable path.
He indicated that they had abandoned the litigation approach. The RAF has reported increased legal costs since 1997. Legal costs would have exceeded the annual fuel levy income if this trajectory continued. He highlighted the introduction of the RAF Contact Centre to streamline the claims process.
He provided insight into matters of fraud and corruption. A breakdown of the suspensions and dismissals was provided.
Regarding employee engagement, he said transformation surveys were used to assess the perceptions and experiences of employees regarding the RAF's transformation journey.
He indicated that the RAF would be making a significant move towards digitisation. This would enable a more efficient and effective claims process, and ensure that the process was being completed as it should.
See attached for full presentation
The Chairperson referred to SCOPA's visit to the RAF two weeks prior to the meeting. The National Union of Mineworkers of South Africa (NUMSA) had arrived as the meeting began to raise issues with SCOPA regarding challenges experienced with the RAF, and had been blocked from entering. SCOPA had engaged with NUMSA and advised the union to make a written submission ahead of the current meeting. The Committee would provide an opportunity for it to engage on the basis of the submission. He said NUMSA had not made the submission. He felt it was important to address this, to avoid the presumption that SCOPA was ignoring the people who had concerns and were raising issues. NUMSA had indicated that they would make a submission, but had not done this. Once the written submission was received, the Committee would make the RAF aware of this. He clarified this issue because it emerged from the oversight visit.
The Chairperson invited Members to share any questions or concerns.
Mr A Lees (DA) asked if the discussion could be handled in a hearing format.
The Chairperson responded that this was appropriate, and that he would alert Mr Lees when it was time for the other Members to begin to share their questions.
Mr Lees said that the overload of information had been somewhat clarified through the focused response. He had several questions, and some follow-up questions, and would appreciate the RAF's openness and willingness to respond.
Attorneys reported to SAPS or LPC
Mr Lees said that the number of attorneys reported to the South African Police Service (SAPS) or Legal Practice Council (LPC) indicated in the presentation was 102, but the list that had previously been sent out indicated 246 cases. The names of some attorneys had been repeated. It seemed that some attorneys were reported on more than one occasion. Was this correct?
Mr Lukhwareni responded that the 102 firms were the correct number of firms reported.
Mr Lees asked if any firms had been reported on more than one occasion. He indicated the example of Frans Schutte Attorneys, listed eight times. Was this firm reported eight times?
Mr Lukhwareni denied that the firm had been reported eight times. The 102 firms may have been reported on multiple, duplicate payments. The 102 firms were all reported regarding issues of duplicate payments. He suggested that the 102 should be used concerning firms reported to the LPC to avoid confusion.
Mr Lees indicated that clarity was needed on whether firms were reported multiple times. It was important that this was clarified, because the RAF had previously said they were not satisfied by the LPC and the SAPS reaction. In an instance where a firm was reported multiple times, the lack of response seemed to be more appalling/egregious. He requested clarity as to whether a legal firm had been reported once or multiple times.
Mr Lukhwareni said that RAF could provide different types of reports to the LPC, rather than focusing solely on duplicate payments. It focused on the 102 firms reported on issues of duplicate payments. There would be other firms against whom different charges and reports would have been made regarding other matters such as fraud, that were not included in the 102 focal area of duplicate payments. He noted that the Special Investigating Unit (SIU) was also investigating the 102 cases as part of the duplicate payments investigation. The RAF could provide a specific list of firms that had potentially been reported for multiple different matters. Such firms did exist.
Mr Lees said that names had already been included in the list provided more than once. He thought it would be a simple answer, because it was the list that the RAF had provided. Was this a list of reports to the various authorities, or was it a list of the cases, some of which had been combined and reported only once? He said it was a very simple question, but it seemed that the Committee would not get a response.
Mr Lukhwareni said that he was confirming that there were instances where there were firms that would have been reported to the LPC on multiple matters.
Mr Lees asked if it was one report covering multiple matters, or multiple reports covering multiple matters.
Mr Lukhwareni said that he was confirming that there were instances where one firm was reported to the LPC on multiple (different) matters.
Mr Lees indicated that he had been looking for this clarity.
The Chairperson said that the 102 cases were only regarding duplicate payments. He requested that the RAF provide clarity on how many times particular firms were reported to the LPC, in order to understand the LPC's turnaround time and response.
Mr Lees asked how many of these multiple reports had had a ‘positive’ outcome from the LPC or SAPS – one which confirmed the RAF's view on a particular firm/attorney. Out of the 246 cases, how many had had a positive response from the LPC or SAPS? How many attorneys had been disbarred, or had any action taken against them?
Mr Lukhwareni said that very few attorneys had had action taken against them.
Mr Lees emphasised that he needed a clear response, and would appreciate knowing the number.
Mr Lukhwareni said he did not know the specific number, but it could be provided. He reiterated that very few attorneys had been met with disciplinary action.
Mr Lees noted his request for the specific number of attorneys who had had action taken against them. He was frustrated with the RAF's use of generalisations, without specifics. Generalisations were made about attorneys, but only a few were met with action. Either the RAF was not providing a good case, or there were delinquents within the LPC or SAPS authority system. He proposed that the Committee call the LPC to provide a report on why the RAF was not getting the responses they thought they should be.
Mr Lees indicated that he had raised the Frans Schutte Attorneys specifically, because he was curious about why it was listed as ‘Frans Schutte.’ Officially, the firm was FSMP – Frans Schutte Matthews Phosa Attorneys.
Payment of medical experts
Mr Lees noted that the RAF's chief financial officer (CFO) was in attendance. On 12 July, National Treasury had written to the CFO to request an intervention on the payment to a particular firm of psychologists. Why was it necessary for Treasury to do this?
Ms Potgieter responded that a number of medical experts had previously been appointed by the RAF's former panel of attorneys. Regarding the RAF's service level agreement (SLA) with the former panel of attorneys, there was prior approval required by the RAF to appoint any medical experts. At the time, it had a panel of medical experts and in the event that there was insufficient representation in a certain area or an unavailability of medical experts, the former panel had required prior approval from the RAF to appoint medical experts. This matter had been discussed at length with the Public Protector, the RAF board and National Treasury. The RAF's view was that in many instances where the panel appointed medical experts, the RAF granted no prior approval. This meant that the relationship to settle the bills for the medical experts existed between the former panel and the medical experts.
Mr Lees asked if the CFO had responded to the Treasury.
Ms Potgieter said that there was a particular process of responding to Treasury. She did not have the details that Mr Lees had. She requested that Mr Lees provide her with the details.
Mr Lees indicated that he would provide the CFO with the details on the matter and would appreciate a response once details had been shared.
Mr Lees referred to the issue of prior approval for the appointment of medical experts. He noted that a medical service had been provided to a claimant of the RAF, but the RAF would not pay because there had been no prior approval. He asked if this understanding was correct.
Ms Potgieter said that there was no existing relationship between the medical experts and the RAF. The Public Finance Management Act (PFMA) required the RAF to perform procedures to acquire different services. If there was insufficient medical expertise, a process had to be followed to appoint the medical experts. This process had been included in the SLA with the former panel of attorneys to ensure that the proper processes regarding the PFMA and Treasury regulations were followed. The RAF's view was that the payment of the outstanding bills would result in irregular expenditure, and they did not want to put themselves in a position where they were condoning irregular expenditure, that had not been taken in line with the SLA. The medical experts had an existing relationship with the former panel; any outstanding bills should be claimed from them.
Mr Lees said this meant that the claimant had received the medical service from the medical experts, and if the RAF had appointed the expert, it would cover the cost. However, the medical expert was not receiving payment due to a technicality.
Employee surveys & voluntary severance packages (VSPs)
Mr Lees described the surveys that the RAF had done as strange. On the oversight visit to the RAF offices, he had not spoken to a single employee who felt that things were okay, and that the process had been well handled. He considered the survey results to be suspicious. There was a culture of fear within the RAF. If a survey was done under this culture of fear, the people being surveyed would try to answer in a way that they thought would be expected of them.
Mr Lees indicated that the RAF had not mentioned the voluntary severance packages (VSPs). Why was the RAF asking people to leave?
Mr Lukhwareni acknowledged that there were challenges with the surveys. The RAF's intent was not to have employees respond to questions in a way that framed the organisation positively or depicted its preferred answers. He indicated that this could be achieved only through an objective test. He felt that the RAF had done this. He was aware of the issues and noted that the entity was experiencing big changes in a short period of time, which would create anxieties on the part of the employees. The number of disciplinary hearings and consequence management that had been effected had been a culture shock to the consequence management history of the RAF. In previous years, despite the culture of corruption at the RAF, there had been few instances of disciplinary action or consequences. He said that subjecting 115 employees to disciplinary hearings in three to four years had resulted in a great deal of anxiety, and the RAF acknowledged this. The lessons taken from the surveys were most important, as they had highlighted the complexity of the changes within the RAF and the need to understand the implications thereof. They had done the first survey internally, and thereafter had felt that acquiring an independent body to conduct the surveys would enable the RAF to improve the process. It was not naïve to the challenges of ‘people issues.’ It was continually considering ways to improve within these areas.
Mr Lukhwareni responded to the concerns regarding VSPs. The RAF had responded to these concerns in the previous engagement with SCOPA. It was undergoing a transformation to a new organisational structure and had conducted a skills audit, and would require a different skill set moving forward in terms of employees that it would need to acquire. Some employees would be retrained and repurposed, and some who may have wanted VSPs had been given the opportunity to apply for VSPs, and many had taken this opportunity. The initial phase of the VSPs had focused on employees over 50-55, and those with health issues. He emphasised that this was a voluntary process. The RAF was not approving VSPs for employees who had critical skills the organisation required. He emphasised that no one was being forced to leave and that it was a voluntary process that the employee undertook. He reiterated that there were process to retrain employees, particularly in terms of digitisation.
The Chairperson indicated that Mr Lees had time for one more question before he would allow other Members the opportunity to share questions.
Mr Lees indicated that he would be turning 71 in the next month, and felt that the suggestion regarding employees over the age of 50 was ageist. He noted the statement that the VSPs were voluntary, and said they should be made available to all employees who felt that they were unable to attain or develop the new skills required. Why were VSPs being targeted to people over the age of 50?
Mr Lees requested confirmation from the Auditor-General on what was happening with the RAF's 2020/21 and 2022/23 reports.
The Chairperson requested a response from the RAF Audit Committee.
Ms Lorraine Francois, RAF Baord Member, responded to the concerns regarding the VSPs. VSPs had been introduced by a sub-committee of the RAF board responsible for human resources (HR). At the start of the transformation journey, the intention had not been to retrench staff members. The board had tried to ensure that management would be careful about this matter and encouraged the retraining of people to prepare them for the new journey. Things shifted when management was ‘pressured' to go through the Section 189 process. This included the factor that people over 50-55 should be offered VSPs as an option. The option was available to these employees at their own discretion. VSPs had never been imposed on anyone. The availability of other measures to keep these employees in the organisation has always been the main objective. It was a mechanism to ensure that employees were not simply discarded due to the new processes.
There was an insistence that there had to be independent people and experts to continually assess the paths of the staff – it had not been a once-off culture survey. Surveys were done continually. The RAF was determined to understand whether employees were being left behind, if they were being taken on the new journey, and if issues were being resolved and cleared up. It had received quarterly reports on these issues and felt that employees understood the reasons behind the changes and were buying into them, and no longer felt that the changes were being imposed by management. The surveys had been performed throughout the three years to provide oversight and assurance that people were on board with the process and understood the VSPs and retraining initiatives.
The Chairperson asked at whose insistence Section 189 had emerged.
Ms Francois responded that it had emerged from the negotiating discussions with the union.
The Chairperson asked if it had been introduced by the RAF or by the unions.
Mr Barriel, Chief Human Capital Officer, RAF, responded that Section 189 had resulted from the request and insistence from organised labour. The RAF had declared a Section 189 process under the auspices of the Commission for Conciliation, Mediation and Arbitration (CCMA) as a result of the insistence by organised labour. The process had been concluded successfully under the auspices of the CCMA. Section 189 had resulted in the option of VSPs for employees 55 years and older, and a subsequent request from organised labour for the RAF to offer VSPs to employees to consider as an option. He reiterated that Section 189 came from the insistence of NUMSA.
Ms A Beukes (ANC) said that when visiting the Menlyn and Pretoria offices, the anxiety of employees was concerning. The presentation indicated that a series of leader-led initiatives had been introduced through various employee engagement platforms, and that the executive team had conducted quarterly and annual engagements. During the oversight visit, she had spoken to more than ten employees who had never seen or interacted with the CEO. She noted that this may seem like a small issue, but it had been included in the presentation. The Committee could not engage with the RAF on different issues.
She asked about the RAF's ‘promotions policy,’ and noted the statement that it was following the approved appointment process, in line with the resourcing policy. How effective was this process?
Mr Lukhwareni referred back to his previous response to the issue of the anxiety of employees. Employee anxiety and people issues were accepted as a result of the complex nature of the changes being implemented over a short period of time. What had been included in the presentation were the actual engagements that had taken place. The survey outcomes and recommendations indicated room for further engagement, particularly from a leadership perspective. The RAF would continue to build on this. He assured the Committee that the specific engagements indicated in the presentation had taken place.
Responding to the question regarding the promotion policy, he indicated that the RAF did not have a promotions policy -- it made use of a resourcing policy. He felt that it was an effective policy, as it addressed issues of human resources and consequence management, which the AGSA also considered. The RAF was able to recruit the skills it required. It indicated the individuals it had been able to recruit through the resourcing policy – there was a list of over 86 people who had been recruited. It was satisfied with the effectiveness of the policy. He reiterated that it was not a promotions policy, but a resourcing policy.
Dr Mabuya-Molele referred to the issue of employee anxiety. The RAF had an employee assistance programme described as a psychological support system for employees. Whenever employees went through any change in the management process, it was important for them to have support due to the complexity of the changes. The nature of the changes meant that some people did not fully understand due to worries about their jobs. The RAF had engaged the assistance of a service provider who focused on the mental burden that accompanied a complex transformation process. It had received statistics on the process, which provided insight into how the interaction progressed.
Ms Beukes expressed her appreciation of the support programme, but indicated that the anxiety resulted from employee fear. How would the RAF identify which employees needed the support?
She disagreed with the recruitment process. The presentation indicated that there were employees that the RAF had employed for over 20 years. She felt that these employees would be fearful. In the recruitment process, how were these long-term employees being included in the promotion process? She noted that in one unit, she had spoken to five people who had been employed for between 16 to 20 years, and they had reflected concerns over their roles and the implications of the changes being made. She emphasised her disagreement with the process.
Employee dismissals and suspensions
Ms Beukes referred to page 26/27 of the presentation, which dealt with suspensions and dismissals. It would have been beneficial to see the percentages, especially on the issue of colluding and the solicitation of bribes. It would have been useful to have insight into the nature of the charges referred to in the presentation. She noted that there were 11 cases where suspensions had been lifted. She asked if the presentation had been based on the oversight visits to Menlyn and Parktown. She noted that there had been a suspension of more than 200 officials in Menlyn, and asked if this would be reflected in the next presentation.
Mr Lukhwareni referred to Mr Barriel for a response regarding the number of suspensions in Menlyn. The RAF could provide the clarity requested on the nature of the charges so that the Committee could gain further insights into them.
Mr Barriel responded that the 200 referred to were not suspensions, but were referred rather to ‘identified matters.’ Identified matters went through a process of investigation, and only after investigations had been concluded, decisions regarding suspensions would be made. The suspensions were largely related to the loading of court orders and dereliction of duty. The suspensions related to the loading of court orders were taken very seriously. Employees under investigation were placed under suspension as deemed necessary, to prevent the manipulation of any data on the system. Following this, a disciplinary process would begin. In cases where employees could prove that the issue was not their fault, or they were found not guilty, the suspension would be lifted, as was reflected in the presentation.
Ms Beukes asked why the presentation did not reflect the 200 cases indicated in Menlyn.
Mr Barriel indicated that the ‘200’ referred to matters identified. Currently, 152 of these matters are open across the organisation. Some matters had been settled, where some employees had resigned, and others had been dismissed.
The Chairperson asked if RAF was confirming that 152 was the official number.
Ms Beukes asked if the 152 were all located in Menlyn. She reiterated the 200 suspensions that had been indicated in Menlyn.
Mr Lukhwareni stated that the 152 were not only in Menlyn -- they spanned across the organisation.
Ms Beukes emphasised that she was referring to, and looking for, the 200 suspensions referred to in Menlyn. Where were the 200 included? In Pretoria, there had been discussions regarding the anxieties experienced in Menlyn, and the CEO had reported that there had been 200 suspensions at Menlyn. Where were the 200 Menlyn cases in the report?
Mr Barriel reiterated that these were matters identified across the country. The 200 matters were subject to internal investigation processes, where employees were asked to respond to the allegations regarding not loading court orders for payments.
The Chairperson said the CEO had been categoric that there had been 200 suspensions in Menlyn. It was not described as 'matters.' Was this statement being retracted? If this was the case, it should be made clear. When the Committee had been in Pretoria, the Committee had been told that Menlyn was a ‘crime scene,’ and if individuals had contacts at Menlyn, their claims would be prioritised. It was stated that this had resulted in the suspension of 200 people. The staff members had made it clear that there were prolonged suspensions, where, in some cases, individuals were forgotten. He indicated that the Committee would go back to the notes on the oversight visit. He said that Ms Beukes was correct in her understanding regarding the 200 suspensions.
Ms Beukes asked where the people who were suspended were.
Mr Lukhwareni said that after consolidating all disciplinary matters, the RAF confirmed that 152 suspensions had occurred. He indicated that the RAF had a list of names and offences that had been brought to disciplinary hearings. He requested that the 152 should be placed on record.
Ms Beukes disagreed. She reiterated that she was interested in the 200 suspensions, and where these people were.
The Chairperson said that RAF was trying to place the 152 cases on record without providing an explanation of the 200 suspensions. He had an issue with this. In a Parliamentary meeting, it had been stated that there had been 200 suspensions, but the RAF was now trying to confirm 152 cases. Why should the Committee believe anything that the RAF said? He emphasised that the 200 cases referred to had occurred in Menlyn – the ‘crime scene.’ He said RAF should not feed into the issue of the trust deficit.
Dr Mabuya-Molele noted the statement regarding the 200 matters identified. She requested an opportunity for the RAF to provide the list specifically regarding Menlyn.
Ms Beukes said that the 200 referred to in Menlyn was not in reference to 'matters,' but had referred to 200 employees.
Dr Mabuya-Molele said that she understood this, and indicated that it was possible that this report still had to be provided to the Committee.
Mr Lees said that this again reflected the generalisations made by the RAF.
Mr Nyama asked to provide clarification and assistance regarding the numbers, to avoid many different numbers being quoted,
The Chairperson said that the issue of suspensions had been raised. He referred to his comment at the time that some of the suspensions had been malicious. The Committee had been told that Menlyn was a crime scene, which resulted in the suspension of approximately 200 people. He agreed with Dr Mabuya-Molele that the RAF should go back and consolidate the numbers, with a focus on Menlyn. It had claimed that the 152 was a ‘global figure’ -- referring to cases across the organisation -- but this was not possible if one branch, Menlyn, had 200 suspensions. He said that this was the concern of Ms Beukes. The proposed global figure of 152 should be over 200, because Menlyn alone had 200 suspensions. He noted that it had been said that the suspensions had resulted from payments being prioritised based on connections the claimants had within the RAF. Dr Mabuya-Molele was correct in her understanding of the Committee’s concerns and the consolidation and clarification of suspensions, particularly in Menlyn, was important.
The Chairperson said the Committee Secretary had gone back to the Committee’s notes from the Menlyn visit. He read: “The RAF officers in Menlyn, Pretoria, have been linked to historical issues of corruption. 200 employees have been suspended due to refusing to capture claims.”
Ms Beukes commended the RAF for the introduction of the Contact Centre. When was the Contact Centre established? She asked RAF to rate the impact of the Centre, and indicated that it could be a game-changer for RAF.
Mr Lukhwareni said that the Contact Centre had been established only recently, and was only in phase one of its implementation. Thus far, the impact has been positive, particularly in dealing with first level queries and assisting the RAF in generating tickets, to ensure that tickets were tracked and escalated. Other levels would be added on, particularly those related to issues of payment and litigation. These things would all be centralised in the Contact Centre. Once it was fully functional, it would consist of 300 young graduates who would man the Contact Centre. It had not yet been officially launched, but it was already operational.
Ms Beukes asked what was meant by ‘recently.’ What was the exact date?
Mr Lukhwareni said that it had been established in July.
Price evaluation of tenders – status of employees
Ms Beukes highlighted the issue of eight employees and the price evaluation of tenders in 2013/14. Four officials had resigned. What was the status of the remaining four officials? This had been indicated in the Auditor-General’s report on the price evaluation of tenders in 2013/14. Did the RAF still employ these four officials?
Mr Lukhwareni said that he was not aware of this issue. He would look into it and provide further insight.
Medical expenses investigation
Ms Beukes noted the previous questions regarding the medical expenses investigation. What was the outcome of the investigation into the medical expenses? What was the amount paid?
Mr Lukhwareni said that he would look into the matter.
Progress of the Board
Ms Beukes said that in 2020/21, the RAF was technically insolvent, according to the annual report. In the appointment of the new board, one of the mandates had been to turn the organisation around. She asked the Deputy-Chairperson if the new board had succeeded in turning it around. What was the biggest challenge that had to be addressed?
Dr Mabuya-Molele responded that the board had done its best to reverse a 47-year legacy/history. The period from 1945 to 1965 accounted for 21 years where there was compulsory medical insurance running at the RAF, and a period where claims could not be paid. There had been an amendment that came into effect from 1965 to 1997, where agents were being used. This introduced the issue of the generation of claimants. At this point, there had been almost 140 000 claims, and the system had been abandoned because it had not yielded positive outcomes. The current board had become involved after the period of 1997 to 2019. She said that if the current board had not abandoned the litigation strategy, the RNYP on 31 March would be approximately R51 billion. The board had been able to turn this around and the trajectory was going down. She said the fact that claims were being paid was a major success.
The RAF had paid R48 billion in claims. This year had been deemed ‘the year of the claimants.’ This was the first time the RAF had achieved this, which was indicative of the strategy and the service model adopted by the board. She felt the board was on the right trajectory.
Dr Mabuya-Molele said that the RAF had not received a fuel levy or requested a bail-out from government. The improvements and progress resulted from a focus on cost-effective and cost-containment measures, getting rid of collusion and corruption and elements in the RAF that were creating high operational costs.
She noted that the elimination of the panel of attorney’s had resulted in saving approximately R17 billion per annum. This money went directly to paying claimants.
Responding to the question of challenges, she said that the amendment of legislation was critical to addressing the big deficiencies in the RAF. It was still operating in a very manual environment. Health care was very complex and had to keep up with the speed of digitisation and transformation in the healthcare sector. It was therefore appealing for the prioritisation of the amendment of the legislation. It needed to be digitised. Since this gap had been identified, it was a focus of the RAF to digitise the environment. She noted that long-term employees should be taken along on this new journey. This was evidenced by the offer to retrain and re-skill, and the performance of a skills audit to ensure no employee was marginalised.
Mr S Somyo (ANC) commended the RAF and expressed his appreciation for the journey to arrive at a transformed environment. Its objective was based on an emotive factor, and matters were subjective. Those who were affected had gone through traumatic experiences. The environment of the RAF had an emotive aspect that affected the lives of the public. The actual trajectory that RAF had arrived at, had to be appreciated in this sense.
Claims backlog and concerns
Mr Somyo said that claimants had to travel to the RAF offices to drop forms to place a claim, and whether that form was captured on not captured was a serious issue. Upon arrival at an RAF office, Mr Somyo had an upsetting experience. On a desk, he had seen a claims form dated '2013' in a receipt tray and nothing had been done about it -- it had not been filed/logged. This led him to believe that there were likely other forms like this that were ‘lying somewhere,’ and a claimant waiting for a response. Emotionally, this depicted that RAF did not care about claimants and that it was an organisation that had critical areas of failure that needed to be addressed. It might go into a situation where a claimant was in hospital, and would have made a choice on what forms and journey they should take. He asked about the litigation processes, and the financial losses that were a result of the litigation processes. At some stage, direct claimants were pushed into a situation where their only solution would be to engage lawyers and take the matter further. This issue needed urgent attention.
He said that he had met a man at the gym who indicated he was a lawyer working for the RAF. The man had indicated that the offices were no longer operational, and the morale of staff was very low. In East London, there was an office that was practically no longer active and was threatened by the imminent closure of the office. Why was this the case? Was this a result of standardisation? If this was the case, where should the employees who had worked in these offices go? The man he had met had highlighted the risk of investigating and looking into this matter. There were many cases of default judgments, some of which resulted from a failure to be represented because no one was looking into these cases. This had been confirmed by the report presented, because the RAF was not aware of some of the cases and dates.
Mr Somyo said that there was a gap in the transformation. The recipients would be affected by the issues he had referred to previously. The RAF should ensure that the changes it was implementing did not have a negative effect on its recipients.
He said the report on the survey of the employees had been done by the RAF, and was not the actual statistics provided by the independent company. He would have appreciated seeing the original reports from the independent company.
Claims liability projections
Mr Somyo highlighted the presentation’s use of the RAF's claims liability projections, and referred to the last paragraph of this section. He noted that these were projected figures, not actual figures, and asked the RAF to confirm this. Did this refer to the projected risk of exposure? If it was a projected risk of exposure, was it a standard form of the RAF's acceptance that if nothing was done or changed, this was the potential risk or exposure? Would this potential risk or exposure form a risk to the RAF's functions?
Ms Potgieter clarified that the projections presented had been made in 2019. At the time, the accounting policy was linked to International Financial Reporting Standards (IFRS) 4, an insurance-based accounting policy. The claims liability provision projection followed this accounting principle. She said the accounting policy had been changed in 2021, but the projection was still on the basis of IFRS 4.
Mr Somyo said this was not acceptable. The Office of the Accountant General or the Auditor-General did not accept the accounting policy. RAF's accounting policy was a matter of contempt. The application of the standard was not acceptable.
Ms Potgieter said the 2019 projection had been based on certain assumptions at the time. She clarified that there were no assumptions included in the measurement of RNYP, as this was an accrual basis of accounting and was based on the actual settlements, so there were no estimations or uncertainties. At the time, the projection of RNYP in 2023 was R51 billion. Even if the accounting policy had not been changed, the projection of the provision on the basis of IFRS 4 – which the RAF now strongly believed was inappropriate – would also have to change, because the assumptions used in the projection and the changes in the operating model would have had an effect on altering the provision that had been calculated on the same basis.
Mr Somyo said he had highlighted this point to depict the danger of influencing the decision on the RAF's exposure potential. He agreed fully, based on what he had seen regarding RAF's current payments and assessments, which referred to the actual figures. The projection depicted a prediction of where things would be at the current point. He expressed his agreement based on the actual figures he had seen. The projection for 2023 was R537.9 billion. This had been based on the previous standard, not the current standard and approach.
Mr Lukhwareni said that this was correct. The presentation focused on the RNYP. On slide 14, the RAF had indicated the contrast. It was trying to stay away from the accumulated provision, because it was part of the dispute with the Auditor-General. The biggest indicator of the RAF's financial health was the amount owed to claimants at a particular point in time, and the RNYP represented this.
Mr Somyo said there were boxes and files with claims dating back to 2013. This might prove that there was potentially exposure with the RAF over a period of time. The last line presented this fairly -- if this type of note was included, it was indicative of the understating of exposure, and that this provided more danger for the RAF. This moved into the issue of the RAF's journey and transformation. The facts and figures presented clearly indicated its journey. It was its failure that they had focused on captured claims, but ignored the uncaptured claims.
He reiterated that the RAF was dealing with emotive issues. For many claimants, it represented hope to cope with their losses. Despite the size of the claims, it remained a potential liability for the RAF. He appreciated that the Auditor-General would be confronted by the boxes of information and claimants who had not been captured in the system, or acknowledged. He acknowledged that the RAF recognised this problem and had indicated that employees often chose not to capture claims, or would choose to capture specific claims, and that some of these employees had faced various consequences. He said the RAF was confronted with several serious issues and had evolved as an organisation to confront them. He used an analogy of soccer, and said that a striker’s focus was the goalpost. The goal area could not be extended or reduced in order to be able to achieve it. The figures were scary, and if they were changed now, the RAF was its own problem. He asked the CFO if this was a concerning issue that had to be attended to.
Ms Potgieter replied that the basis of the change in the accounting policy had been supported by the fact that even in the investigations of open files, the RAF had discovered that many of them did not have sufficient information in order for it to settle the claims. She noted that the claims backlog had been reduced to approximately 300 000 open claims. She clarified that the projected figures included these unfiled claims and also included projections for accidents where no claims had been made -- incurred but not reported (IBNR). The RAF could not project or account for a liability it did not know about. There were cases where accidents occurred, but there was no liability for the RAF. In sections 17, 24 and 25 of the RAF Act, instances were referred to where the liability of the RAF was limited. It felt that the R537 billion was not a true reflection of the RAFs exposure, and that its exposure was much lower. She agreed that there were claims that had been received that had not yet been addressed, and acknowledged that there was a significant backlog. There was a process for attending to and settling these claims. The RAF had performed an audit on these claims and attempted to trace them, obtain outstanding information, and make offers. She believed these attempts would be successful, and the RAF would deal only with new claims going forward.
The Chairperson indicated that another member of the RAF's board wanted to make a comment.
Mr Hilmi Daniels, Chair of the Audit and Risk Committee, said that the Committee should think deeply about liability, and exactly what a claim was. No institution paid claims -- they only paid valid claims. The RAF would not pay claims simply because they had been filed. It was a financial risk management institution, and previously, it did not have all the tools necessary to function, which was why lawyers were working on the claims.
The Chairperson said that the Committee understood the difference between claims and valid claims, and this should instead be explained to the lawyers. The Committee understood that valid claims had to be paid. The board member should not try to create the perception that the Committee did not understand that a valid claim had to be paid. The Committee understood this. He noted that the tightening up of processes was being done to arrive at the point of paying valid claims.
Mr Daniels clarified that he was not presuming that the Committee did not understand. He noted that Mr Somyo had referred to East London. The data on the loss of support and income reflected that East London had a high ranking in this regard. Why did East London rank higher than Cape Town or Menlyn? When oversight was done, questions were raised on why this was happening because this should not be the case economically. These risks were assessed and underwritten, so they made sense economically. The RAF had put processes in place to guide against these abuses of the system. The RNYP was in line with the processes put in place. It reflected an actual number, not a presumptive number. It had enforced processes and tools that had brought the number down.
While the numbers may look positive, the RAF was facing a risk in terms of revenue. The matching or balancing of assets and liabilities was skewed. He emphasised that the RAF did not operate in isolation, and whatever happened at ESKOM affected the RAF and the revenue it was able to collect. He commented that some companies bought substantial amounts of diesel to sustain their businesses, but were frustrated that the state was taking their profits/funds through the RAF, and would request rebates. Going forward, the decline in RAF revenue would be evident. The board did interrogate these types of questions, but needed support in terms of legislation. What was being foreseen was that revenue was decreasing. He reiterated that RAF had not seen an increase in the RAF levy for the past two or three years due to the introduction of operational efficiencies. The RAF was not immune to the ESKOM issue, and its revenue would decrease. This was why it kept going to Parliament to request that the legislation amendments be speedily addressed. The suffering of ordinary people would become a reality, because the RAF would not have the revenue to pay claimants.
The Chairperson said that the issues of legislation were with the Department. The Department needed to follow the necessary processes of submission to Cabinet and taking the legislation to Parliament to complete the parliamentary process necessary for amendments.
The Chairperson referred to the argument regarding revenue over the past two to three years because of COVID-19. The flipside of this argument was that a decrease in revenue was likely, because there had been a decreased movement of people and subsequently, a decrease in fuel consumption. The RAF could not expect the COVID-19 years to compensate for the outer years. COVID-19 had presented a disruption to the economy. The question was about the RAF's agility to adjust and respond to the dynamics and prevail. The issues of ESKOM impacted everyone. SCOPA had met with ESKOM more than any other entity to deal with the governance issue. The issue was the RAF's agility and its ability to persevere under these constraints.
He pointed out that legislative amendments took a long time. Elections would occur next year, and the amendments may have to be introduced in the next Parliament. He encouraged the RAF to stretch its parameters to cope. If there was another fuel increase, there would be public uprisings. Fuel was expensive, and the public was struggling. He understood the RAF's point of view, but indicated counter-arguments to its arguments. It had to be agile within the parameters of the legislation.
He stressed that the Committee was aligned with the Auditor-General regarding the accounting policy. It would be worthwhile to engage with Treasury to discuss the issues of the rebates that had been raised. He felt this was a valid point, but warned against opening a can of worms because people who were purchasing fuel for the purposes of not being on the road (such as for use in generators) could be enticed to claim rebates. This important issue needed to be discussed, and had significant implications. Why were people paying levies on fuel not used for road transportation or movement? He suggested that this needed to be addressed.
Mr Somyo felt that Mr Daniels had missed the point. He had no issue regarding what was due to claimants.
He referred to the high sense of deficiency within the RAF. It would fail to meet the accounting standards if it did not respond to this high sense of deficiency. Even if a different accounting policy was chosen, these issues were cumulative. If there was a failure to make applicants aware of missing information at the time of making the claim, these issues would persist. If individuals were not aware of the necessary forms and documents needed, the issue of backlogs and unlogged claims would continue. These unlogged claims still had the potential to be a liability for the RAF. He said that justified and valid claims should be paid. Up until the claim was finalised, there was a potential liability. The accounting standard had to answer to this effect. The issue of accountability when handling large sums of money, had to be taken seriously. If people had questions, they should be taken seriously. If the RAF failed to inform people that it was not liable for certain claims, it was the RAF's failure and should be addressed. This would get rid of the cumulative potential, and make the RAF's actuals believable.
When considering RAF's actuals, the same questions of boxes of unlogged/unprocessed claims could be asked. He felt that the Auditor-General was correct to note these potential liabilities. He said there had previously been a service where RAF employees were stationed in hospitals to assist potential claimants. He emphasised that in terms of unresolved matters, the RAF was liable. He recommended that it needed to reconsider its accounting policy and operating practices.
He added that he had requested information regarding the supply chain and areas of procurement. This had not been received.
The RAF responded that this had been included in the documents submitted to the Committee. It was section 6 in the file.
The Chairperson said there had been an issue in printing the documents, but noted that the document had been submitted to the Committee.
Mr Lukhwareni said that the issues raised were critical. Regarding the backlogs, the RAF was dealing with a strategy legacy of settling claims in 1 400 days. This had occurred over a period of two decades. It had a two-pronged approach to address the backlog. The backlog needed to be dealt with, and then the root cause of the accumulation needed to be addressed. The way claims had been lodged over the years had been problematic, and had allowed for three years to lodge a claim. The logic behind this was that there would be enough time for claimants to gather the necessary information and documents, so when the claim was lodged, the RAF would be able to make an offer within 120 days. Over the years, the RAF had targeted settling claims within 1 400 days. Lodgements were not necessarily an issue -- they needed to be refined, and this was done through the RAF 1 form. As a result, rather than providing a pile of documents, claimants needed to provide a competent claim with a minimum of documents needed to settle the claim. He agreed that the reason for focusing on the backlog was because of the significant impact it had on the claimants. The move to 120 days was a significant step.
He agreed that the RAF could not sit and wait for legislative changes; it had to work within the available framework to achieve as much as possible. In 2019, RAF conducted a political, economic, social/cultural, technological and legal (PESTEL) analysis of the economic environment, and it was clear that it would not be rational for RAF to expect any support from Treasury. It therefore needed to find ways to make things work within its means. It had made inflationary adjustments to the fuel levy income which had not occurred, but due to the resilience built by the RAF it had been able to reduce its dependence. It had to simplify the claims process to a level so that claiming from the RAF did not require legal representation and assistance. He noted that legislation would assist in this. Previously, it had been aggressive in its approach and encouraged people to get lawyers, and accepted that this was the wrong approach. The correct approach was for the RAF to focus on its systems and to simplify them, and this was where Project Bokamoso would be helpful.
Dr Mabuya-Molele said that the RAF was dealing with people who were emotionally anxious in a very charged environment. The products of the RAF were emotive in nature – the loss of income, general damages, the loss of support and death. This was one of the reasons why it had inherited a switchboard that was meant to be a contact centre, as the RAF had recognised that deficiency. This resulted in the shift to a contact centre, enabling officials to interact with claimants, resolve matters and track any issues. This was a reflection of the RAF trying to be agile. She said that RAF had identified several of the issues raised and was trying to be agile in its responses. In terms of the Contact Centre, roles had been separated. This meant that the Contact Centre agent dealt with claimant issues, whereas in the past, the process had been muddled and confusing, with several different officials playing some part in processing the claims. The RAF hoped to report on this in the future in terms of the impact it had had.
Vetting of executives
The Chairperson asked how many executives there were at the RAF.
Mr Barriel indicated a list of six executives: the CEO, the CFO, the Chief Investment Officer, the Chief of Strategy and Transformation Officer; the Corporate Support Executive; and the Chief Claims Officer.
The Chairperson asked if the executive team had been vetted.
Mr Barriel responded that the executive had been vetted through the RAF's security department, via the National Intelligence Agency (NIA).
The Chairperson asked if all of the executives had been vetted.
Mr Barriel confirmed that all of the executives had been vetted. They had undergone a double vetting process through the State Security Agency (SSA) and the managed integrity evaluation (MIE) vetting process.
The Chairperson requested a timeline or schedule of the vetting process, and when it had been concluded. He commented that the SSA was experiencing a backlog nationally, and he found it interesting that it could conclude RAF vetting when there was a backlog everywhere else in the country.
Mr Barriel indicated that he could provide the dates that the executives had been submitted to the SSA for vetting.
The Chairperson asked if the RAF had received a response from SSA.
Mr Barriel replied that this would need to be confirmed with the head of security.
The Chairperson said that the executives had not been vetted if there had been no response from the SSA. Until a response was provided, the executives were not vetted. He clarified that the submission and vetting were different.
Mr Barriel responded that he would have to confirm the SSA response with the head of the RAF's security.
The Chairperson felt that the vetting of the six executives should be clear. When was the submission to the SSA made?
Mr Barriel said that the vetting process included the MIE process. This included criminal and credit checks.
The Chairperson was aware of this. He reiterated his question of when the vetting was submitted.
Mr Barriel said this would have been done at the point when the executives were appointed.
The Chairperson asked when this had been. When were the executives present in the meeting appointed, and thus submitted for vetting?
Mr Barriel replied that this had occurred in the last year.
The Chairperson asked if this meant that the executives were not vetted up to the current point. The process had not been completed. He said he would not accept this response, and suggested that Mr Barriel consult with the necessary people before the meeting concluded and provide a more comprehensive answer. He would not accept that this information was not available. There was a 2014 Cabinet decision that persons in senior management and executive positions had to be vetted. This was a continuous struggle with state-owned entities (SOEs). If the SSA had provided no response, SCOPA could follow-up on why the process had not been concluded. It was incorrect to say that the executives had been vetted when the process had not been concluded. He felt this spoke to the issue of generalisations provided by the RAF. This did not inspire confidence.
Fraudulent court orders
The Chairperson referred to the statement regarding fraudulent court orders. This reminded him of the issue with the former Mayor of Tswane. He requested clarity on this. What interventions had been developed with the Office of the Chief Justice in dealing with this issue? This issue could not be overlooked. How prevalent was this issue?
Mr Lukhwareni said that the RAF, through its forensic investigation division, had worked closely with the Department of Justice (DoJ) on the matter as soon as cases had been picked up. The investigations on some of the cases had been done and some officials – some on the side of the DoJ – had been subjected to disciplinary action. The RAF's approach was to subject court orders to due diligence before payments were made. As orders were picked up, they were referred to the forensic investigation department for further investigation.
Mr Lees requested a list of these cases.
The Chairperson noted the need for specifics. The presentation titled, ‘SCOPA Information request submission’ on slide 7 referred to suspensions and dismissals. He asked if the RAF's point of view was that this was not RAF staff, but was rather what it had received.
Mr Lukhwareni agreed that this was mostly external.
The Chairperson asked if an internal investigation had been done to determine if it had any effect on internal operations. He felt this was a fundamental risk to the RAF because of its patron nature.
Mr Lukhwareni agreed. Where these cases arose, they were registered for investigation.
The Chairperson asked if any internal investigation in terms of collusion had been done.
Mr Lukhwareni said that this was done if it referred to an internal employee. In terms of prevalence, the issue was largely external, and was therefore referred to the SAPS for investigation.
The Chairperson said he had highlighted this issue because employees were prioritising payments in Menlyn. This meant that the RAF had the dilemma of fraudulent court orders and people colluding on payments. Did it see no need to consider these areas as an area of collusion and risk to the RAF?
Mr Lukhwareni responded that once a criminal investigation was opened, it was comprehensive in its observations and investigations, whether or not the issue was born out of internal collusion by RAF or DoJ officials. The outcomes of these investigations would make this clear.
The Chairperson asked if this meant there were no outcomes that pointed toward the RAF.
Mr Lukhwareni replied that this was not what he meant.
The Chairperson clarified that he was referring to matters that had been concluded, unless no matters had been concluded regarding fraudulent court orders.
Mr Lukhwareni said some matters had been concluded. He referred to his previous example, where disciplinary actions were taken in the DoJ. The RAF could provide some details, if the Committee required, on matters where disciplinary actions were taken concerning court orders.
The Chairperson asked, in terms of the matter that had been concluded, if any of the outcomes indicated that RAF officials were involved.
Mr Lukhwareni said that he could not provide this detail -- it could be provided only in a submission. He could only confirm that there were criminal cases that had been opened.
The Chairperson asked if there were any disciplinary processes insofar as RAF employees were concerned in fraudulent court orders.
Mr Lukhwareni said he could not make this confirmation.
The Chairperson asked how the RAF could make confirmations for the DoJ, but not for itself.
Mr Lukhwareni said that he had referenced a specific case.
The Chairperson said that he was requesting specifics, and expressed his frustrations with the generalised responses of the RAF. He reiterated his question. He noted the submission of cases and suspensions and the categorisations. He felt that this was a key feature that enabled the prioritisation of cases occurring in Menlyn.
Mr Lukhwareni clarified that the main issue regarding Menlyn was where firms had to pay to have payments processed and considered. This was not related to fraudulent court orders, but to claims that had already been settled that needed to be paid.
The Chairperson noted this clarity. Regarding fraudulent court orders, Mr Lukhwareni had brought the issue up. The Chairperson felt this would not have been brought up without the necessary information. Were fraudulent court cases being investigated at the RAF, or was the assumption that the court orders came from other entities, and the RAF had no issues? If the matter was in litigation, it needed to be indicated.
Mr Lukhwareni said there were instances where the RAF received fraudulent court orders. As part of the due diligence process, it referred these cases for criminal investigation with the SAPS. It worked closely with the DoJ to manage the risk of these court orders.
The Chairperson asked if the matters that had been taken to the DoJ and SAPS had been concluded. Had any of the outcomes indicated the involvement of RAF officials if they had been concluded?
Mr Lukhwareni said a detailed submission would be provided.
The Chairperson had an issue with this. He felt that Mr Lukhwareni was speaking with a sense of certainty, but was unable to provide further information. Did the issue extend into the RAF? He had deliberately prolonged this issue to prove that the RAF had not engaged. SCOPA had to pull information out of the entity. The RAF had a selective output and made significant use of generalisations, and the default response was that a written submission would be provided. This then became a paper dump, and when certain aspects were zoomed in on, the RAF struggled to respond.
Mr Lukhwareni responded that in the categorisation provided in terms of matters related to fraud and corruption, fraudulent court orders would fall into this category to the extent that they were present. The RAF could not currently provide the specific nature of the corruption. A list of employees subjected to disciplinary action had been provided, and it had been indicated that specific percentages of the various charges would be provided. If the Committee wanted further information or specifics on the issue of court orders, the RAF would provide it.
The Chairperson asked how many fraudulent court orders had been received. How many cases were at the RAF, and how many cases had been referred to the SAPS?
Mr Lukhwareni replied that he did not have that information available.
Court case with the Auditor-General
The Chairperson asked if the RAF was still in court regarding the matters related to the Auditor-General.
Dr Mabuya-Molele responded that RAF had engaged the Auditor-General, as had been instructed by the previous Minister. The entities had engaged, but the issues could not be resolved. The RAF had been explicitly instructed to follow alternative methods, which would be less confrontational than going to court. The meeting had happened in May. At this point, the matters had not been resolved.
The Chairperson asked if this meant the matter was still in court.
Dr Mabuya-Molele responded that the matter would likely end up back in court, because it had not been resolved.
The Chairperson asked if the RAF had pulled out of the court proceedings when instructed by the former Minister.
Dr Mabuya-Molele replied that it had pulled out of the proceedings in Bloemfontein. This had been done to provide an opportunity to consider alternative means of resolving the issue. It needed to resolve all the disputes related to the Auditor-General, but these issues had not been resolved.
The Chairperson asked if there was currently a matter before court between the RAF and the Auditor-General.
Dr Mabuya-Molele confirmed that there was.
The Chairperson said that despite the instructions of the last meeting, the RAF was still in court. Was this the outcome of all the interventions that had occurred? The Auditor-General was expected to audit the RAF in the current financial year on the basis of the accounting standard that the RAF had changed to. What did this mean for the RAF? He would assume that it would want to resolve the court issue due to all the other challenges the entity was facing. He asked for clarity on the matter from AGSA.
Mr Nicholas Mokwena, Deputy Business Unit Leader, AGSA, referred to the 2021/22 audit. This audit had been concluded, and a disclaimer opinion had been released. AGSA's report was shared with the Speaker of Parliament on 26 May, after it was found that the annual report had not been submitted. AGSA had published the annual report from its side.
He said the 2022/23 audit was currently in progress, and AGSA was in the process of finalising it. The RAF and AGSA still had a difference of opinion on the accounting policy used by the RAF -- International Public Sector Accounting Standards 42 (IPSAS 42) – which was a serious area of disagreement.
Mr Mokwena confirmed that the litigation was ongoing. The RAF had not withdrawn and therefore the matter had to proceed.
The Chairperson said that National Treasury, the Accounting Standards Board and AGSA all agreed that the accounting policy used by RAF was wrong, but the RAF was adamant that they were correct. He said that this had all the makings of ‘Matilda,’ where Ms Trunchbull says, “I’m big, you’re small. I’m right, you’re wrong, and there’s nothing you can do about it!” The RAF had a ministerial directive to stay out of court, but this was not being done. He was unsure about how to proceed with RAF's stubbornness. In the presence of the RAF, the previous entities did not agree with its position. It seemed that the issue was back to square one. This was very problematic, unless the RAF could convince SCOPA otherwise. Other entities were prepared to subject themselves to the process. It seemed that unless the RAF got the outcome it wanted, not the one that arose out of the process, there would be no movement. In the view of the Treasury, AGSA, the Accounting Standards board and SCOPA, the RAF should not use the accounting policy that it was using. This was a simple issue.
The Chairperson said that Parliament was expected to speed up the RAF's proposed legislative amendments, and everyone else was expected to do something, except for the RAF. Why should SCOPA make a motivation to the Portfolio Committee on Transport to expedite the RAF's legislation?
Dr Mabuya-Molele said that the RAF's classification as an entity had been that it was a social benefit fund. It was not the only entity that was classified like this. It has been classified as such since 2016, and the issue of the accounting policy has been an issue since then. It should not be seen as stubborn or arrogant. It had felt that because of this classification, it had to engage on the change of the accounting policy. The RAF was not an insurer; it was a social benefit fund. The current board was the first board to request that the classification be revisited.
The Chairperson said RAF had put the cart before the horse. This should have been asked for before the change in the accounting policy was made. It was a situation of "damned if you do, damned if you don’t," because the responses the RAF was getting were not favourable to the course of action that had been taken.
The Chairperson asked if human resources (HR) had the information regarding the vetting of the executives.
Mr Barriel requested time to gather the information and make a submission to the Committee.
The Chairperson said he had asked Mr Barriel to get the information during the course of the meeting. He felt that there was sufficient time in the meeting for him to email someone to get the necessary information. It had only been a question regarding when the submissions to the SSA had been made. The issue of vetting went to the heart of how things played out. Were the right people in these offices? He did not understand the difficulty in obtaining this information.
The Chairperson asked if the CFO had been a consultant or an advisor before taking up the office of CFO at the RAF.
Ms Potgieter responded that she had not been a consultant or advisor. She has been employed by the RAF since 2010.
Mr Somyo asked if Mr Lukhwareni had been a consultant or advisor.
Mr Lukhwareni responded that he had never been a consultant.
Mr Somyo said that when the Committee had been in Pretoria, Mr Lukhwareni had spoken to the Committee about working in forensics as a consultant before his appointment at the RAF.
Mr Lukhwareni confirmed that he had never been a consultant. He joined RAF in June 2018 as a general manager for risk management. He now held the position of Chief Strategy and Transformation Officer.
Mr Lees said that while Mr Lukhwareni was in the position of risk manager, there had been a risk report that was generated and meant to be presented to the board, but was not. Why was it not presented?
Mr Lukhwareni said he was not aware of the report referred to.
Mr Lees asked if Mr Lukhwareni had done a comprehensive risk report during his time as risk manager.
Mr Lukhwareni asked what report.
Mr Lees asked if Mr Lukhwareni had done a risk report in his position as risk manager – any report.
Mr Lukhwareni said that annual risk assessment reports were conducted.
Mr Lees asked if these had been presented to the board.
Mr Lukhwareni confirmed this.
Mr Lees asked if all the reports had been presented to the board.
Mr Lukhwareni confirmed that all of the reports had been presented.
Mr Lees noted that all of the reports had been presented to the board.
The Chairperson asked how many CFOs the RAF had had in the past ten years.
Dr Mabuya-Molele was unable to confirm this, indicating that she had been appointed only in 2019.
The Chairperson asked how many CFOs Dr Mabuya-Molele had engaged with during her time at the RAF.
Dr Mabuya-Molele said that an acting CFO had left, and then the current CFO, Ms Potgieter.
The Chairperson asked about this before.
Dr Mabuya-Molele responded that there may have been an official who had left the RAF and had joined another SOE. This was the only other CFO she was aware of.
The Chairperson requested that this information be submitted to the Committee. SCOPA needed to gauge a timeline regarding the instability in the office of the CFO.
Mr Lees referred to the report he had previously highlighted. It had been a report highlighting the risk of doing away with the panel of attorneys. Apparently, this had not been presented, but had been amended before it had been presented.
Mr Nyama said that a CFO had previously been the Chief Internal Auditor, and had become the CFO around 2018/19. The board had a forensic report that this CFO had manipulated the job specification, and the board had decided to suspend him and perform investigations. Within this period, the CFO resigned and joined another SOE.
The Chairperson said that this was helpful. He was interested in gaining clarity on what had happened after this. There had been many cases of acting officials and appointments and dismissals – clarity was necessary on this issue. The process of how the RAF arrived at the point of appointing a CFO was a matter of interest. He would submit a request for this information in writing to the RAF, and expected its response to include the dates of officials, and the reasons for dismissals for all appointments until the permanent appointment was made.
The Chairperson referred to the formal processes in place regarding mental health, and found this to be very progressive. Based on the engagement in Pretoria, it was evident that RAF staff feared the executive. There was a culture of fear within the entity. This was the reason why SCOPA was concerned about the validity of the employee survey. SCOPA was concerned about whether employees would be honest in their responses. The work environment in the RAF was problematic. During the oversight visit, security was close by to hear what was being discussed with staff members and encouraged RAF employees not to talk to the Members. Employees did not feel comfortable talking to the Members, and had written notes instead.
A culture of intimidation at the RAF needed to be addressed. Its biggest asset was its staff. It needed to review the suspensions. He reiterated that, in some cases, suspensions were malicious. SCOPA had received correspondence since the oversight visits from staff complaining. Another issue was that the staff did not know the executives, and never had the opportunity to engage with them. There was a disconnect between the leadership of the RAF and the staff, which created an opportunity for staff intimidation. This issue needed to be prioritised. The surveys should be taken with a pinch of salt.
The Chairperson felt that the RAF was resistant to oversight. SCOPA would ensure that Parliament prioritised the Committee’s report. The RAF was defining itself outside of the collective regarding oversight and accountability. The issue of waving political muscle over the staff and the processes of the RAF would undermine any efforts to turn things around at the entity. If people would boldly say that they were untouchable because they had political proximity, the outcomes of such an attitude did not end well. SCOPA was aware of the attitude the RAF held towards the Committee, but was not bothered by how it viewed them. This informed how decisions and recommendations were made. Outside of seeing the RAF function effectively, SCOPA had no vested interest in the entity. This resistance to oversight indicated that the Committee was doing something right. The SIU needed to assist the Committee with this and prioritise RAF matters. The Committee was fundamentally worried and concerned about the RAF. Something had to give, and it had to come from the RAF. The board needed to assert its authority at every level, including the CEO.
The Chairperson said that the Committee would conclude on the report within the next two weeks. The draft had already been developed, but the current engagement was necessary. The written submissions needed to be submitted by the end of business on Friday, 8 September. These submissions needed to be considered and included in the report where necessary. The Committee would communicate with the RAF if any further information was needed.
Mr Somyo agreed with the Chairperson’s emphasis on accountability. The RAF was modelled around financial accountability. It was fair to expect it to act against corruption. He recommended that the RAF needed to move away from generalisations in their responses. It should try to be as clear and specific as possible. In the latest South African Reserve Bank (SARB) report, the reference made to the RAF was not a reclassification, modelled for the fact of accountability. This report would go to the International Monetary Fund for the SARB's accountability. It was not fair to say that because of this note by the SARB regarding the RAF's classification, the RAF should change its accounting policy. It would be positive to take a new look into this. When trying to find a path to take, it should be the path that guarantees some degree of improvement.
Mr Somyo said he had received the procurement plan, and the majority of the areas were related to information technology (IT). He expected the move to digitisation would consist of a well-integrated model to improve functionality. He would provide further comments after reviewing the plan. He supported the motion of remodelling, but was hopeful that no employees would be left behind.
Mr Lees said that the status of the RAF was concerning. He was hopeful that progress would be seen in further engagements with the RAF. He noted that it had an executive responsible for treasury and investment. He requested a report on the amount invested at the end of every month for the past 12 months, and where the money had been invested.
Dr Mabuya-Molele thanked the Committee for the opportunity to respond after the two oversight visits. She acknowledged the staff issues, specifically that the survey did not relate to the fears of the staff. The RAF needed to ensure that it was with the staff in terms of the transformation journey. She had noted the concerns regarding the intimidation of staff, and said that the executive team would consider ways to address this. Employees could not work in a fearful environment. Regarding the staff not knowing or interacting with the leadership, it would look into how staff engagement could be improved.
She had noted the issues regarding acting against corruption. She acknowledged that the RAF was too general in their statements and did not provide specifics or substantiate statements. It would work to address this. It would provide the specifics regarding the fraudulent court cases. She acknowledged the issue of the 200 employees at Menlyn, and said the RAF would provide a report on this matter. She accepted that generalisations were very harmful. The RAF needed to be specific on cases, and had to be careful not to unnecessarily damage the reputation of professionals.
She noted the SARB report regarding how the board had to apply itself – the board had to interpret this according to its environment. The RAF was committed to ensuring that the reports that had been requested would be submitted by close of business on 8 September.
As the RAF was remodelled, it would not be an easy journey – change was not easy. Based on the comments received, what it was doing was not good enough. It had to remodel with a focus on the people it was working with, and should do this with humility and empathy, mindful of the hostile environment in which it functions.
The Chairperson thanked the Deputy Chairperson for her candour. He said this was a breath of fresh air in terms of the RAF.
Deputy Minister’s closing remarks
Deputy Minister Mangcu said he noted the summaries of the Chairperson, and expressed his agreement. The dissatisfaction at the responses provided by the RAF had been very clear. He was hopeful that the RAF teams would introspect honestly and objectively on these issues. He wanted to see a RAF that was working well and doing what it was meant to. The intention of the Committee was to make difficult decisions so that progress could be made. He appealed to the RAF to do introspection, ask if they had provided good responses, and consider how this could be improved.
Deputy Minister Mangcu referred to the issue of the court case with the Auditor-General. When she was appointed, the Minister had written to the RAF to confirm the communication made by the previous Minister that it should seek alternative dispute resolution. This resulted in the 16 May meeting with AGSA. The Auditor-General had explicitly stated that asking AGSA to re-open the 2021 finding would result in subjecting the processes to scrutiny, despite the processes being correct. It had been indicated that AGSA would only change its opinion if a court of law dictated it. He was hopeful that this matter would be resolved, and said that the issue would be prioritised. The Department was committed to seeing the RAF function well, and would work to ensure that the legislation could assist its functioning.
A representative from AGSA referred to the 16 May meeting. The Auditor-General’s comment had been that as long as the RAF continued with the litigation, AGSA would also be compelled to continue with the litigation. It was not her directive to say that the re-opening of the audit was subject to the court process. An internal assessment had confirmed that there were no grounds for re-opening the audit.
The Chairperson indicated that next Tuesday, the Committee would meet with the SIU regarding investigations at Transnet. On Wednesday, it would meet with National Treasury regarding Special Note 4 of 2022/23 regarding the exemption of SOEs on reporting irregular expenditure.
The Chairperson asked the AGSA and SIU representatives to see him after the meeting.
The meeting was adjourned.
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