The Road Accident Fund (RAF) says it intends to reduce the number of days it takes to pay out claims. It hopes to pay out funds in a year after an accident instead of three years thereafter.
The fund recently briefed Parliament on its annual report and financial statements. It says its biggest cost drivers are accidents and legal challenges. As of 31 March last year, the fund had accumulated an annual deficit of R5.3 billion.
Claims of up to R14 billion were finalised but could not be paid due to financial cash flow challenges.
Transport Minister Fikile Mbalula says the fund has been financially unstable for a number of decades.
“For the longest time, there has not been a nexus between the fuel levy and the number of accidents that occur on public roads, however, to exacerbate this challenge is the ever-increasing administration cost of the RAF. Of the revenue collected R17 billion, 40% of this goes to administrative costs with only R26 billion, 60 %, received by claimants. Currently, the RAF’s biggest cost driver is the number of road accidents that occur on our public roads.”
RAF Chief Executive Officer, Collins Letsoalo says they have a new operating model aimed at paying claims within a shorter period of time.
“ A new operating model driven at the basis of trying to reduce the time it takes for someone to wait for payments reduced from 1475 days, we want to reduce this to 120 days and that we are going to do by way of making sure that we assess and process claims within 320 days and make payment within a short space of time, but that we are going to do without going to litigation model, that this financial year was based on consequently spending more than R10.6 billion of the R17 billion that we spent on legal fees and for us that is not sustainable,” says Letsoalo.
WATCH: RAF CEO responding to questions at the Standing Committee on Public Accounts, 18th August 2021
Very important session on the sustainability of RAF. https://t.co/FsH7Ny9I8D
— ANC SECRETARY GENERAL | fikile Mbalula (@MbalulaFikile) August 18, 2021
Minister Mbalula says the financial stability will require both a regulatory overhaul and operational improvement due to the RAF’s liquidity challenges.
The Road Accident Fund has operated on a financially unsustainable model for a number of decades. In recent years, the fund has also experienced liquidity challenges as claims against the fund has outpaced the growth in the RAF levy. pic.twitter.com/nq5cn1ndAn
— ANC SECRETARY GENERAL | fikile Mbalula (@MbalulaFikile) August 18, 2021
He says the Road Accident Fund Amendment Bill, which is before the Transport committee, will address these challenges.
