Creecy asks RAF to let go of its legal challenge against the AG

Minister of Transport Barbara Creecy has written to the Road Accident Fund (RAF) board and asked it not to continue with its legal challenge of the Auditor-General (AG) disclaimer of the fund’s 2020/2021 annual financial results.

During a Parliamentary Standing Committee on Public Accounts (Scopa) meeting last week, Creecy also provided some insight into what is happening with regard to the review of the components of the petrol price, particularly the fuel levy and its funding of the RAF.

The AG issued a disclaimer to the RAF 2020/2021 financial results because the fund had unilaterally 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.

“We have written to the board and asked them not to continue with the legal work,” said Creecy.

“When I have a reply to that letter, I will know what I do next.”

She added that if an entity wishes to change the accounting standards it uses, the Accounting Standards Board (ASB) must agree to the new accounting standards.

“So there is no problem in principle with the RAF approaching the ASB and saying: ‘In our view, we want to use these accounting standards, not those accounting standards’.

“Should they get that permission, that is fine,” she said.

“The issue at stake here is that they do not have that permission and this resulted in ongoing litigation between themselves and the AG.”

Creecy said the RAF has lost the third court case and the question is not whether it should have launched the litigation in the first place, but if it should continue with this litigation.

“My view is that we should not – and I guess I am the shareholder,” she said.

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Transport SOEs

Creecy was asked about her confidence in the leadership of the state-owned entities (SOEs) that were the focus of the Scopa meeting, which included South African Airways (SAA), Transnet and the Passenger Rail Agency of South Africa (Prasa).

Creecy specifically said she has confidence in the leadership of Transnet, Prasa and SAA but did not mention the RAF.

Deputy Minister of Transport Mkhuleko Hlengwa told Scopa earlier this month it remains the position of the Transport Ministry that it will be “reckless and irresponsible and not in the collective interests of the RAF” for it to continue on its path of court appeals against the AG.

RAF head of corporate communications McIntosh Polela declined to comment on the letter from Creecy or the board’s response.

“The RAF has no comment. The fund is not going to communicate with the office of the Minister of Transport through the media,” he said.

The RAF previously ignored directives from both Scopa and the Department of Transport not to continue with its litigation against the AG.

Hlengwa, when he was chair of Scopa, said in March 2024 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 for the failure by the new board to reverse the decision of the previous board to institute litigation against the AG and its rejection of directives not to proceed with this litigation.

RAF CEO Collins Letsoalo told Scopa earlier this month it had spent R10.7 million on legal costs in its dispute with the AG but stressed this was not fruitless expenditure because the fund must have clarity on how it must account.

ALSO READ: RAF board faces delinquency threat amid auditor-general dispute

The ‘hated’ fuel levy

Scopa chair Songezo Zibi, who is the leader of Rise Mzansi, told Creecy that South Africans “hate the fuel levy” because of the increase in the cost of living, and that by implication means South Africans “do not want the RAF to get any money”.

Zibi said if the fuel levy is not retained, it will “kill the RAF” because it does not have any other source of revenue.

He referred to Creecy mentioning the possibility of reducing the fuel levy but indicated it appeared to him that from a policy perspective there is an internal conflict about how to fund the RAF and wanted to know if cabinet has a similar difficulty.

Creecy responded that cabinet has a sub-committee that is looking into the fuel levy and confirmed that her interest is to secure a financing stream for the RAF.

“If cabinet is of the opinion that it shouldn’t be the fuel levy, they will have to tell me what it will be but I have an interest in the financing of the RAF and that is why I suppose I’m in that sub-committee,” she said.

Finance Minister Enoch Godongwana in February 2022 said he agreed with then minister of energy and mineral resources Gwede Mantashe that a review of all aspects of the fuel price is needed and their teams had “already begun to engage on this critical work”.

Little further was heard until President Cyril Ramaphosa announced a review of the fuel price in his opening of parliament address on July 18 2024.

Mantashe told an Africa Oil Week conference earlier this month that discussions are taking place in cabinet about how to reduce the fuel price because of its impact on the cost of living and that he is engaging with National Treasury to assess the impact the fuel levy, which funds the RAF and general road improvements, has on the fuel price.

Mantashe said petrol and diesel should cost R14 per litre, with an additional about R6 for the fuel levy.

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Should foreign nationals benefit?

Creecy last week also addressed the issue of whether or not foreign nationals should benefit from the RAF fund.

She said this is supposedly a taxation issue because the way the taxation works on this particular fund is that motorists pay a fuel levy.

“So if you are buying fuel and you are driving in South Africa, I guess by virtue of the fact that you are paying tax, you are entitled to be compensated.

“But the real question is whether or not we should [be] putting a limit on the benefits and my view is that we do need to have a scale of benefits and we do need to be putting that limit on the scale of benefits,” she said.

“I also think that having a no-fault inclusion in the legislation would mean that it would not be such an appetising playground for those who might be in the legal profession.”

This article was republished from Moneyweb. Read the original here.