Minister Fikile Mbalula. Picture: Werner Beukes/SAPA
Minister Fikile Mbalula. Picture: Werner Beukes/SAPA

Road Accident Fund records first surplus since 1981, says Mbalula

By Zintle Mahlati Time of article published Jun 7, 2021

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ALTHOUGH the Road Accident Fund (RAF) is in financial dire straits, the fund has made some improvements, with a surplus of more than R3.2 billion reported for the period ending in 2021, Transport Minister Fikile Mbalula says.

The RAF has been in financial turmoil for years. Mbalula has attributed this to the numerous fraudulent claims posted to the fund.

The RAF is funded through fuel levies and pays out claims for accidents.

Mbalula said that since 1981, the RAF has been posting a deficit that rose to concerning levels of R1.2bn in 2015.

That was while the fund was not posting a surplus.

Mbalula was briefing the media on the fund’s performance in its strategic recovery plan on Monday. He was joined by RAF chief executive Collins Letsoalo.

He said the RAF was the country’s second-biggest liability concern, after Eskom, because of its R322bn actuarial liability. Its financial stability remained a concern.

The RAF collects about R43bn a year in income from fuel levies. About 60% of that is spent settling claims. The rest is spent on legal costs, administrative costs and medical costs.

The minister said the RAF had, for the first time, posted a surplus of R3.2bn for the period ending in 2021. The fund had made a deficit of R5.2bn in 2020.

“Although the fund recovered well from the Covid-19 revenue dip, the annual income of R42bn was still lower than the 2019 level of R43bn. Following an investigation into the claims liability, which at the reporting period ending 31 March 2020 was R330bn.

“There has been good progress registered in the RAF strategic plan and the priorities agreed to with the board on the shareholder compact. Preliminary results show an overall performance of over 77%. This is despite the challenges brought by Covid-19. These developments show we have turned the corner in addressing the RAF challenges, we are on the right path,” Mbalula said.

A breakdown on the cost reductions at RAF – which contributed to it reporting a surplus;

• Investment income has increased by 152%, year-on-year, from R62 million to R157m.

• Finance costs have decreased by 62%, year-on-year, from R263m to R90m.

• Writs of execution have reduced by more than 50%, through a legal strategy and stratification of the debt book.

• The short-term liability has been reduced by R2.2bn, from R17bn to R14.8bn.

• Current assets have increased, including the cash position, by more than R4bn.

Last month, Mbalula told Parliament that the RAF had operated on a financially unsustainable model for several decades.

He said claims against the fund have increased from R61.3bn in 2017/18 to R78.2bn in 2020/21.

These were expected to increase to R102.9bn by 2023/24, and the accumulated deficit was expected to increase to R518.7bn in the same period.

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