The Road Accident Fund (RAF) revenue of R90 billion per annum is not enough to get the RAF back to a solvent status. Drastic steps are required, and the latest amendment bill will go a long way to rectify the shortcomings.
The main income received by the RAF is a levy that is based on fuel sales known as the Fuel Levy. The RAF Fuel Levy income is a charge levied on fuel throughout the country. The quantum of the RAF Fuel Levy per litre is determined by the National Treasury which levy accounts for about 6% of total tax revenue and brings in more money than customs duties or alcohol and tobacco excise duties combined.
All our state-owned entities have trouble, but the RAF is high on the ranks, absorbing and wasting petrol levy collections. The RAF is a juristic person established by an act of Parliament, namely the Road Accident Fund Act. This is an organisation that has a total spend on advertising of between R25m to R35m per annum.
The number of attorneys reported to the SAPS or Legal Practice Council was 102. The RAF has not been in a solvent state since 1981, this is a result of many wrongs including corruption, inflated legal fees, inefficient claims procedures, and a claims management system. At the essence of all this is that compensation is legislated instead of defined (and limited) benefits.
1. One of the hosts of issues is the fact that one part of the government conflicts with another part of the government. The auditor-general said the use of the IPSAS42 accounting standard by a public entity, such as the RAF, was inappropriate and did not fairly and accurately reflect its contingent liability for outstanding and future claims. The auditor-general, Tsakani Maluleke, added that the use of the accounting standard would result in non-compliance with the Public Finance Management Act. We should applaud our courts for the bold but necessary step, which had ruled against RAF board members and the CEO, with cost orders in their capacity, on this matter.
2. The new draft Road Accident Fund Amendment Bill, 2023 is open for public comment. The most important amendment emanates from the following section: “(1A) In accordance with this Act, the Fund shall provide social benefits to the victims of motor vehicle accidents which occurred on a public road.” This will replace the provision that states, “the payment of compensation”. All the benefits to be paid in future will be subject to prescribed limits. One of the limits “includes a claim for loss of income or support, the annual loss, irrespective of the actual loss, shall be proportionately calculated to an amount not exceeding— (i) R319 810.00 per year in the case of a claim for loss of income.” This amount can be referenced to the average salary earned in South Africa at the moment which is R26,650 per month.” From a principal point of view, one can imagine two people who lose their income. The one is the CEO of one of our large banks and earns an income of R10 million a year or more. In South Africa, according to PwC, in the year ending February 2022, the average CEO got a total guaranteed annual package of R5.7m, CEOs also typically earn short-term incentives (a form of bonus) of about R3m to R4m. A minimum wage worker earns R21.69 per hour or less than R42 000 a year, or R3 500 per month.
3. Of the more important exclusion of cover include the following: Section 19 of the principal Act is hereby amended by: (a) the substitution for the words preceding paragraph (a) of the following words: “The Fund shall not be obliged to provide a benefit to any person in terms of section 17 for any loss or damage —
(h) to the extent that the operator’s passenger liability insurance cover provides cover in relation to the passengers injured or killed in the motor vehicle accident
(i) to the extent that the third party’s medical aid cover or medical insurance cover provides cover in relation to the treatment of the third party’s injuries sustained.
(o) if the claimant is not a South citizen or direct permanent resident as defined in the Immigration Act, 13 of 2002 (as amended).“
Bad and especially reckless driving contributes to the high claims rate. There are no consequences for bad driving, and we must change this. This can be achieved by insistence that the private sector comes to the party via compulsory passenger liability insurance for taxi and bus operators. Obviously, insurance companies will punish bad driving habits with higher premiums and that will bring about more responsible driving habits.
One can expect diverse views on the exclusion of non-South Africans. In this regard, the people against this exclusion must ask themselves if a South African will receive any cover in such countries, in particular, our immediate neighbours.
Regarding people covered by other insurance once again, I am all for this exclusion as it is an acceptable principle in the Insurance Industry that a person cannot have coverage from more than one insurer for the same incident.
4. The graph illustrates the improvement of this ratio in South Africa According to worldpopulationreview.com’s road-quality-by-country, South Africa ranks high on road quality on a world comparison basis. Roads Quality Index methodology: Quality of Road Infrastructure score is based on data from a survey of business leaders in 144 countries, who are asked to rate the quality of roads on a scale from 1 (underdeveloped) to 7. Mean Speed Score is a measure of cross-country road quality based on the travel time between large cities according to Google Maps. South Africa scored a road quality score of 4,5 and a mean speed Score of 100. This is in the top quarter of scores of all counties measured. South Africa’s accident-related road death score rating does not compare well with that of the rest of the world, according to worldlifeexpectancy.com. We come in at a rate of 22.7 deaths per 100 000 of the population. Countries with extremely high scores include Cameroon at 40.18 and Sierra Leone at 41.61. At the low end, we have Singapore at 1.69 and Switzerland at 1.71 per 100 000 citizens.
In South Africa, the need for passenger liability insurance in general has often been debated due to the existence of the RAF. The RAF Act prevents an injured person or his dependants from suing the driver or owner of the vehicle that was responsible for the accident and without a legal process, the owner or driver cannot be held liable for the injury, therefore there can be no claim against passenger liability insurance.
5. An extremely important stipulation of the act says that, should the RAF go insolvent, the injured party’s right to sue the driver will be reinstated. It is a well-known fact that the fund has been insolvent for several years. This aspect is ignored by all the stakeholders, the legal community included. This translates into every driver on our roads being held liable for injuries caused to people in an accident as the fund is insolvent. The parliamentary oversight committee needs to insist on accountability and the auditor-general should express an opinion which must include the national Treasury. The Treasury is under pressure from all sides, and we must stem the tide of cash outflows from every source as revenue is scarce to come by.
In conclusion, it is my opinion that the amendments are well thought out and have a lot of merit. The proposed amendments will drastically lower the legal fees squandered which money will now be redirected to pay benefits, not sustain lawyers who earn more an hour than the minimum wage per month. They have abused the system for many decades, and we cannot tolerate the abuse one day longer. Regarding the more than one hundred law firms that have been reported to SAPS for receiving double payments, the public insists on consequences. According to other media reports, there are more than 21, 123 complaints against lawyers but only 123 have been debarred. Not only must they be debarred from practice if found guilty, but they should also be jailed where warranted and appropriate actions need to be taken to recover money. In addition, penalties must be imposed, and they should receive a criminal record.
* Kruger is an independent analyst