The acting chief investment officer of the Road Accident Fund (RAF), Sefotle Modiba, was charged with gross negligence, gross dishonesty and gross dereliction of duty by his previous employer, the City of Joburg (CoJ), for billions in unauthorised transfers to now defunct Gupta-linked financial manager Regiments Capital, court papers show.
The RAF has refused to answer any questions about Modiba’s appointment, including whether it was aware of the charges brought against him when he was hired as acting chief investment officer in 2023.
The disciplinary hearing against Modiba was never heard since he left the CoJ before the hearing date, and apparently no further action was taken by the city. The CoJ acknowledged the receipt of questions on the issue sent a week ago, but had not answered at the time of publication.
The charges against Modiba span almost a decade, and include the charge that in 2016 and twice in 2017 he had supported the withdrawal of R2.6bn from the CoJ’s sinking fund, to “test the readiness” of Regiments Capital Fund Managers. These decisions cost the city a little more than R13m.
The decisions were not justified and did not make business or commercial sense because Regiments had been managing sinking funds since 2006, so the withdrawal of the funds was “completely unnecessary and irrational”, the charge sheet said.
Sinking funds are normally used to set aside money for some specific planned expense or future debt payment, as part of a financial strategy to manage expenses without financial strain. But in this case, it appears Modiba was supplying capital to Regiments to manage, which would have helped boost the income of the controversial financial services company.
In a separate charge, Modiba was accused of not claiming input VAT from Regiments for five years and that he had failed to prevent Regiments from “double dipping” in charging fees. He was also charged with gross dishonesty for failing to declare a conflict of interest in a tender process involving BnP Capital and his consulting business Marang a Medupe.
All in all, there were eight counts of gross dereliction of duties, misconduct, acting without necessary authority, misrepresentation, gross dishonesty, and contravention of the council’s standard of conduct agreement.
Regiments Capital was liquidated after it was revealed it was deeply enmeshed in the Guptas’ state capture network, serving as a key enabler of allegedly corrupt financial transactions that benefited the Gupta family at the expense of South Africa’s public institutions.
The charge sheet against Modiba came to light following a Promotion of Access to Information Act (PAIA) application in a related court case against the RAF, which is still to be heard. It was issued by CoJ’s deputy director: public access to information, Thembisa Zwane, in May 2021.
The council refused to disclose a string of other records including board resolutions regarding the case, on the basis that PAIA does not permit the release of documents if they are being requested for use in pending criminal or civil proceedings. However, the city did disclose it did not have any record of a police case number, suggesting the case was never reported to the police for criminal investigation.
Increasing liabilities
The job of the chief investment officer at the RAF has become more vital following the surprising accumulation of funds in the organisation, despite liabilities increasing at a frightening rate. The 2023/24 annual report records a 145% increase in investment funds to R702m.
However, this is not the result of improved financial performance, but because the organisation is failing to pay claims, with academic Hennie Klopper, emeritus professor in the department of private law at the University of Pretoria, estimating that of the 107,000 claims lodged between 2022 and 2023, fewer than 3,000 were processed.
The RAF is paid about R5bn a month derived from a levy on fuel to compensate third-party victims in car accidents.
The fund has in the past resolutely refused to discuss its booming cash holdings, and where they are currently invested. In relation to questions on its appointment of Modiba, the fund replied: “The Road Accident Fund (RAF) does not wish to engage on this matter.”
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