South Africa will be paying more for petrol. The increase will include a 30c a litre increase in the RAF levy.Photo: Ihsaan Haffejee
JOHANNESBURG - The National Treasury said yesterday that the Road Accident Fund (RAF) - which compensates victims of road accidents for losses and damages - remained insolvent and was a drag on social security funds.

The Treasury said in its Budget review papers that the single factor driving this erosion was the “unreformed RAF”.

It said the RAF’s liabilities were expected to grow from R189.2bn in 2016/17 to R355.3bn in 2020/21, while its assets growth base will remain largely flat.

The Treasury said the consolidated net asset position of the Social Security Funds was expected to deteriorate from a deficit of R19.5 billion in 2016/17 to R109bn in 2020/21. Other funds under social security are the Unemployment Insurance Fund (UIF) and the Compensation Fund.

“To make road accident compensation more affordable, equitable and sustainable, the RAF will be replaced with a no-fault arrangement,” Treasury said.

In his maiden Budget speech yesterday, Finance Minister Malusi Gigaba said that South Africans would be paying 52 cents more per litre for fuel from April 4.

The increase would include a 22 cents a litre increase in the general fuel levy and a 30 cents a litre rise in the RAF levy.

Treasury said the RAF collected R33.7bn in revenue in the 2016/17 financial year and paid R32bn in benefits.

It said claims received but not finalised would spike from 207 461 in 2017/18 to 214 847 in 2020/21.

To accommodate the persisting backlog, the fund’s total expenditure was expected to increase at an average annual rate of 8 percent from R71bn in 2017/18 to R99.6bn in 2020/21.

The fund’s accumulated deficit was expected to surge from R215bn in 2017/18 to 343.2bn in 2020/21.

The RAF, Eskom and independent power producers accounted for the majority of the government’s contingent liabilities. The government’s obligations to the RAF increased by R9.7bn to R189.2bn.

Moves to replace the current RAF system gained momentum last year when the Road Accident Benefit Scheme (Rabs) Bill was put before Parliament in the first semester of 2017.

The bill was now in the next phase of the legislative process. Rabs would be overseen by an administrator who would be governed by a board, but like RAF, the scheme would be funded through the fuel levy.

The new Road Accident Benefit Scheme would move away from a lump sum payout towards more specific claims that can provide prolonged assistance if necessary. It was estimated that winding down the RAF to make way for the scheme would cost R231bn over the next eight years.

Gert Nel, director at Gert Nel Incorporated Attorneys, said: “The key selling points of the proposed bill are that is based on a “no-fault” system and that there are structured benefits on offer It is said that these two key changes would drastically reduce the administrative and financial strain currently experienced under the RAF dispensation.”

Treasury said it expected the UIF’s net asset value to increase from R133.3bn in 2016/17 to R188.1bn in 2020/21.

In 2016/17, the UIF approved 729919 claims, up from 691536 in 2015/16.

The UIF said it expects to pay out an annual average of R16.4bn between 2018/19 and 2020/21, compared to the R7.9bn between 2014/15 and 2016/17.

The fund also said it would be contributing R250million over the next three years to Productivity South Africa to prevent job losses.

Treasury expected the Compensation Fund to post an average medium term annual surplus of R3.9bn.