Pretoria - A full bench of the Gauteng high court has given the Road Accident Fund (RAF) a reprieve of 180 days in which to pay claims.
It was ordered that the fund is to pay all claims based on court orders already granted or settlements reached, which are older than 180 days. This must be done before the end of April, provided that the RAF has been notified by the attorneys involved that they have outstanding claims which are older than 180 days.
Judge PA Meyer also ordered that all writs of execution and warrants of attachment against the fund based on court orders already granted or settlements already reached, which are not older than 180 days, be suspended from May 1 until September 12.
The RAF, in the meantime, was ordered to take all reasonable steps to register court orders or written settlement agreements for claims on its list of payments, in order of the date on which the court order was granted or the date of the settlement agreement.
The fund must ensure that court orders or written settlement agreements for claims are registered on the RAF’s payment list within 30 business days of receipt of the court order or settlement agreement.
The RAF and its chief executive, Collins Letsoalo, earlier turned to the court to try to find a solution to its financial woes. The fund asked for a 180-day reprieve in which to pay claims. The problem facing the fund was that various law firms which have obtained settlements or judgment against the fund were issuing writs of execution against the RAF’s assets in a bid to force payment.
Numerous law firms and sheriffs across the country were cited as respondents in the application, while the General Council of the Bar and the Pretoria Attorneys Association joined the proceedings as a friend of the court.
Letsoalo told the court that the implosion of the RAF was imminent, and that the main aim of the application was to try to find a solution to everyone’s benefit.
Judge Meyer said there was no doubt that the RAF had been beset with financial problems for several years, and was currently in a precarious financial position. He said the fund was frank with the court about its financial position.
The RAF accepted that its systems and processes have in the past been antiquated, and that its employees were a major part of the problem.
Its systems are plagued with corruption, and during 2020 (since the appointment of the RAF’s new management) it had engaged in large investigations and disciplinary hearings.
Matters of corruption, among others, are now being investigated by the National Prosecuting Authority, the Hawks and the Special Investigating Unit.
Letsoalo said continuing with old structures that were in place before his appointment would increase the fund’s exposure to claimants on a virtually daily basis while increasing its factual insolvency.
He said the application was aimed at immediately and urgently stabilising the RAF’s operations and financial position. If there was not an immediate intervention, the fund’s implosion would be imminent, he added.
The RAF’s primary available resource is the revenue generated through the allocation of the fuel levy. The RAF’s draft annual financial statement ending March 2020 shows that it had an accumulated deficit of R322 billion. Its total liabilities exceeded its assets by over R300bn.
The fuel levy received from April to September 2020 was R7.9bn less than expected.
The expectations are that over the next 12 months the claims settlements will average R4.3bn a month. The RAF’s fuel levy income is expected to average R3bn per month, and its operational costs will average R178 million a month.
The court was told that the deficit was expected to average at about R1.25bn a month. This would result in the list of unpaid successful claimants to increase from R17.6bn to R33bn by September 2021.
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