R14.6-million in petrol money linked to dodgy contract in South Africa

The Road Accident Fund (RAF) allegedly took advantage of the chaos from a 2021 ransomware attack to irregularly appoint an IT contractor, even though another form was already working on system recovery.

The RAF is a state-owned entity that receives R2.18 from every litre of fuel sold in South Africa via the Road Accident Fund Levy.

This money is then used to compensate victims involved in motoring-related incidents for injuries and a loss of income.

Even though it took place four years ago, little is known about the 2021 ransomware attack, as few details have been disclosed to the public.

The RAF’s annual reports and performance plans to not mention a specific attack.

Instead, they only discuss an emphasis on cybersecurity in the wake of an increase in online threats in South Africa.

The RAF ransomware has only been briefly touched on in Parliamentary committee meetings, and the law firm Adams & Adams mentioned the attack in passing in a March 2022 article.

“The Department of Justice had a major cyberattack, which led to loss of data; the Road Accident Fund was also hit by a similar attack,” it reads.

On Sunday, City Press reported that the RAF appointed the cybersecurity firm Mitigate using emergency protocols, following 2021’s ransomware attack.

A few days later, former RAF CEO Collins Letsoalo issued a instruction to hire a second company called RedM Professional Services.

Vusi Magagula was the head of RedM Professional Services at the time, having served as CEO from January 2021 to December 2022.

According to the report, Magagula was an associate of Letsoalo’s.

RedM initially charged R5.6 million, but the scope of the contract was later extended by R9 million through a variation order, ending in a new total of R14.6 million.

However, the reported noted that RedM delivered no services as Mitigate was already taking care of the recovery of the RAF’s systems following the cyber attack.

It also appears that the RAF has refused to pay RedM, as the company has subsequently taken the agency to court for non-payment of R9.1 million.

Our sister publication MyBroadband contacted RedM and Vusi Magagula for comment, but they have not responded as of the time of publication.

Collins Letsoalo could not be reached for comment.

RedM told City Press that it had rejected suggestions that its 2021 appointment was irregular or influenced by personal agendas.

It also stated that it was duly and lawfully appointed on an emergency basis and that the RAF never disputed its invoices based on non-performance.

Magagula also denied allegations of impropriety, saying it was “factually incorrect” that Letsoalo introduced him.

RAF under investigation

The RAF has been under a Special Investigation Uni (SIU) investigation since 2021 for serious maladministration and irregular, improper or unlawful conduct.

While the agency has previously claimed that its financial issues are the result of unscrupulous lawyers, lengthy court battles, and criminal syndicates attempting to exploit the find, recent discoveries have made it apparent that a lot of its problems stem from mismanagement.

The RAF has been technically insolvent since at least 2001 and has posted substantial losses in the past five years.

In the 2019/20 financial year, it reported a deficit of R6.3 billion. This was followed by a R1.8 billion and R428 million surplus in the following years.

However, in 2022/23 and 2023/24, it reported deficits of R8.4 billion and R1.6 billion, respectively.

Over the same period, the RAF went from a clean audit in 2019/20 to disclaimed audits in 2021 and 2022 and adverse audit findings in 2023 and 2024.

The SUI is currently investigating fraudulent claims, double payments, and inflated invoices.

It is also investigating fruitless and wasteful expenditure at the RAF.

At least eight contracts were awarded to service providers through questionable procurement processes, some of which have been flagged by the Auditor General.

In one case, the RAF cancelled a contract consisting of the panel of attorneys who represented them in court disputes.

Subsequently, from 2018 until the second quarter of 2023, R4.78 billion was issued against the RAF in default judgments.

According to MyBroadband, other tender allegations that the SIU investigated included:

• Fleet services that were not delivered
• A R1.8 million SAP license contract that the RAF is not using
• Awarding an expired tender for cleaning and security services
• A R36 million office furniture contract (that escalated to R40 million)
• Incorrect procurement process in acquiring the Johannesburg office building
• Due process was not followed in the procurement of the head office building
• A budgeted R742 million underperforming claims backlog contract that finished early, with R312.6 million being spent and R530,000 used for travel and accommodation

Songezo Zibi, the chairman of the Parliamentary Standing Committee on Public Accounts, highlighted how the RAF’s performance has deteriorated in recent years.

“Four years ago, the RAF used to finalise about 250,000 claims per year. By 2023/24, they only finalised 63,000 claims — a reduction of more than 90%,” said Zibi.

At the same time, the average payment per claim has gone through the roof, with the RAF’s spending remaining the same despite processing fewer claims with a smaller workforce.