Road Accident Fund stays as it was

September 16, 2020

……article dated 2 September…..

Parliament withdraws Bill making settlement changes…

The idea that MPs might be able to revitalize the Road Accident Fund (RAF) by changing the method of claims payments under a new Road Accident Benefit Scheme (RABS) Bill  has been dropped by the Parliamentary Committee on Transport.   The method envisaged, it has been decided, would massively increase costs against the national fuel levy which could not be tolerated, an increase which would have to be borne unfairly by the consumer.

Under the present Road Accident Fund claims system, compensation paid has amounted to as much as R11bn for the year 2019/20, way over its budget allocation; meaning that the Fund technically insolvent.  Currently reliant on Treasury bail outs, it forms part of Treasury’s major national debt worries.

No blame concept

A switch has been thought possible to a ‘no-blame’ pay out system in order to avoid much of the costly litigation in determining liability,  all of which processes have resulted over the years in a disproportionate amount of the funds in the RA Fund landing up with the litigators rather than the litigants, and lengthy delays in settlement of claims awaiting court outcomes.

However, as was strongly suspected would be the case this year, there has been even more strain upon funds because of COVID 19 budget claw backs by Treasury on Fund allocations, resulting in yet more pressure to investigate  further possibilities of a different system of the payment of claims.

Extended social plan

The possibility was tabled some months ago of introducing a regular social payment similar to a pension payment and this paid over a number of years as a planned annuity-type settlement. This it was thought would both improve the Fund’s cash flows and would help to avoid the bad habit of claimants of spending cash pay outs in one initial splurge. Some pointed out that it was not the job of government to run people’s lives.

The Bill has been sitting moribund on the Transport Committee’s agenda for well over a year, simply because no one was prepared to actually cost out what was envisaged as an enormously expensive system needed to effect the plan.   ANC MPs who had become extremely enthusiastic on the idea, baulked at the costs in the face of Treasury misgivings.  Now it has now been finally admitted by a majority vote that the costs of instituting such a system would be similar to running a small SOE all reliant on the national fuel levy, idea not sustainable.

Another idea wanted

DA’s Carl Hunsinger successfully moved this week a motion this week for the Bill to be withdrawn by the Speaker, but this move is accompanied by a suggestion that the Department of Transport go back to the office on the subject and urgently work out a way, as put by Hunsinger, “address the structural manner the way that the Fund operates and bring down costs”. Parliament, he said, wants an answer.

Parliament has called instead for a draft Bill rather amending the RAF Act and “provide a working system that the country can afford”.  Presumably the matter will be taken off the parliamentary agenda.

 

Basics at play

The Fund is managed through a Board and receives its revenue direct from SARS, collected from the fuel tax levy by them.   Technically, as established by the RAF Act, the Fund does not have share capital, is an entity is owned by the South African public.   It is listed as schedule 3 public body in accordance with the Public Finance Management Act.

 

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