One of the law firms appointed by the Road Accident Fund to its 2020 Corporate Panel was not even on the panel from which the firms were supposed to be selected. It was then allocated almost 90% of the work.
The finding comes from the draft report of Parliament’s Standing Committee on Public Accounts (SCOPA), which examined the RAF’s legal costs and the procurement and operation of its Corporate Panel as part of its broader inquiry into the Fund.
Before 2020, claims-related litigation was handled through the RAF’s panel of attorneys. In March 2020, the Fund decided to cancel that panel and move the work to the State Attorney, with the change presented as a more cost-effective way of handling claims. Separately, the RAF had a Corporate Panel for corporate legal services and other matters outside ordinary claims litigation.
The original Corporate Panel arrangement was supposed to last 10 months, with a R10-million budget. Neither proved to be much more than a ballpark figure. The RAF exceeded its budget within seven months and eventually extended the arrangement four times. Work was heavily concentrated in one firm, while the panel was also used for claims-related matters outside its original scope.
When a new Corporate Panel was finally appointed in December 2023, it was much larger – 43 firms – but payments remained heavily concentrated.
An existing government panel became the RAF’s temporary solution
In April 2020, rather than wait for its own Corporate Panel to be procured, the RAF board approved participation in an existing corporate legal services arrangement held by the Government Employees Pension Fund (GEPF).
The mechanism was permitted under Treasury Regulation 16A6.6, which allows a public entity to participate in a contract established through a competitive bidding process by another organ of state, subject to certain conditions. The RAF board approved participation on 29 April 2020.
The GEPF panel consisted of 19 law firms. Fourteen were approached about providing services to the RAF, and the RAF ultimately entered into agreements with 13 firms between May and June 2020. The arrangement was intended to cover 10 months while the RAF prepared its own procurement process.
But one of the 13 firms did not come from that panel.
Malatji & Co Inc was not a GEPF panel firm. SCOPA says it could not establish how the firm was procured. Four firms that were on the GEPF panel were also not invited to participate.
The committee found the appointment of Malatji & Co irregular because it departed from the RAF’s own motivation and the memorandum approved by the chief executive, which provided for the Fund to contract firms from the GEPF panel. It also questioned why the firm was included when the existing panel appeared large enough to meet the RAF’s needs.
R10 million became R26.6 million
The board had approved a R10m budget for the arrangement.
Within seven months, the RAF had incurred and paid R26.6m – R16.6m, or 166%, above the approved budget and the R10m limit on the CEO’s delegated authority under the RAF’s 2017 supply-chain-management policy.
SCOPA said the overspending undermined the RAF’s financial management and internal controls. It attributed responsibility to the then CEO, Collins Letsoalo, and officials involved in managing the legal-services budget for failing to prevent irregular expenditure and ensure that funds were managed efficiently.
The committee said procurement planning should have avoided gaps between competitive tender processes, ensured that budgets were reasonable and complied with, and provided for timely board approval and monitoring where expenditure was expected to increase.
Instead, the arrangement was extended four times: first for six months, then for one month, then for another six months, and finally for 16 months and 21 days. The last extension took it through to September 2023. According to evidence from the Special Investigating Unit (SIU) recorded by SCOPA, only the third extension had been approved by the board at the time.
A later ratification, on 28 October 2021, covered the original contract, expenditure above the delegated amount and the extensions. The SIU told SCOPA that this was an internal process associated with an audit and was not intended to ratify the procurement process itself.
The SIU also found no fair rotation or allocation of work among the firms, with Malatji & Co allocated almost 90%.
The Corporate Panel was also doing claims work
After the RAF cancelled its separate panel for claims-related litigation, firms on the Corporate Panel were called upon to represent the Fund in claims matters.
SCOPA’s report includes a sample of matters handled by three firms. AMMM Attorneys was instructed in the R Rietroff matter on 18 August 2020, six days before the 24 August set-down. S Pillay was instructed on 11 September, three days before the 14 September set-down.
Mpoyana Ledwaba was instructed in the KC Tomane matter on 13 January 2021, one day before the 14 January set-down. In the SC Murie matter, the instruction came on 17 May, with set-down the following day.
The table also records three matters handled by Sekati-Sekati, including one instructed and set down on the same day.
For the 2020 panel, this work fell outside the approved scope.
SCOPA said the short notice left attorneys with inadequate time to properly and fully represent the RAF, while the urgency may have resulted in additional costs. It described the practice as poor case management.
A new panel, but a familiar allocation pattern
By September 2023, the RAF was still bridging the gap to a new Corporate Panel.
Its Legal Administration and Mediation department proposed retaining seven of the 13 firms on the existing panel to continue work on current litigious matters while the new panel was being procured. Some of the 13 firms had elected not to extend their contracts, which left seven firms for the proposed extension.
The memorandum proposed keeping them for six months at an estimated cost of R80m. It did not provide details of the matters they were handling or explain how the estimate had been calculated.
The board subsequently approved the seven firms to continue with existing matters already allocated that were litigious in nature, on a month-to-month basis for up to 12 months, using the same R80m estimate.
The new Corporate Panel was appointed in December 2023 through a competitive bidding process.
This time there were 43 firms, appointed for five years, with a budget of R485m. The categories included public law, personal injury law, labour and employment law, privacy and information technology law, commercial law and cost consulting. All 13 firms from the 2020 panel were included.
The RAF told SCOPA that only 19 of the 43 firms had been briefed and paid during 2023 and 2024.
In 2023, R76.02m was paid to 13 firms. Malatji & Co received R36.85m, or 48.5%, while Mpoyana Ledwaba received R24.35m, or 32%. Only R3.61m of the total was paid under the new five-year contract, which had been established in December.
In 2024, payments rose to R104.08m across 15 firms – a 36.9% increase on the previous year. Malatji & Co received R55.88m, or 53.7%; Mpoyana Ledwaba received R30.75m, or 29.5%; and Madiba & Co Attorneys received R6.25m, or 6%.
The matters recorded for Malatji & Co included work involving Sunshine Hospital, the Auditor-General of South Africa, the Legal Practice Indemnity Insurance Fund, and Discovery Health. Mpoyana Ledwaba was paid for matters involving Discovery Health, Eskom, and the South African Revenue Service.
Together, Malatji & Co and Mpoyana Ledwaba accounted for 80.5% of Corporate Panel payments in 2023 and 83.2% in 2024.
SCOPA did not conclude that the concentration alone proved unfair allocation. But it said the concentration of payments between the two firms “warrants closer scrutiny of how work is allocated amongst members of the panel”. The RAF had not provided sufficient evidence to demonstrate that the allocation was fair, transparent and consistent.
The RAF’s bid document reserved the right to allocate work according to its own internal processes and frameworks. SCOPA said that did not remove the Fund’s constitutional responsibility to ensure that work was allocated in a fair, equitable, transparent, competitive, and cost-effective manner.
Why was personal-injury work on the Corporate Panel?
The RAF changed the scope of its Corporate Panel in 2023 to include personal-injury work, even though it had previously cancelled its separate panel for claims-related litigation and was using the State Attorney model for claim matters.
The tender described the personal-injury category as covering complex and/or exceptional matters affecting the RAF’s operations.
SCOPA noted that the State Attorney model did not prevent the RAF from briefing appropriate counsel where necessary. But it said the RAF had provided no evidence to justify adding personal-injury work to the Corporate Panel’s scope.
“It is not clear why, notwithstanding that the State Attorney model was being utilised and a decision was taken to handle claim matters internally, that the RAF still required other third-party attorneys to do claim related matters,” the committee said.
