Transport Department develops five-point intervention plan developed for struggling entity
Cape Town – TRANSPORT Minister Fikile Mbalula said on Friday they were investigating all fraudulent claims and corrupt individuals and activities of the Road Accident Fund (RAF).
“We will bring all crooks to book. We will bring this fund to sustainability and address its going concern status,” Mbalula said.
He made the statement when he delivered his budget vote for the 2021/22 financial year.
Mbalula said the sixth administration has highlighted and elevated the challenges facing RAF.
“We brought governance and administrative stability. Upon assumption, we appointed a fully fledged and competent board.”
He also said they appointed a competent CEO, Collins Letsoalo.
“He has got all my support, the support of the board and the support of this government.”
Mbalula said it has been a difficult task to bring the entity to sustainability and that a five-point intervention plan had been developed and implemented.
“We took up a fight that was avoided for a very long time. We challenged the rogue lawyers who were milking this entity,” he said.
The minister said in 2018-19, RAF collected R17 billion in revenue from the fuel fund and of that amount, R10bn was spread on legal fees.
“We dissolved the panel of attorneys and we are in court but we are winning.”
Mbalula said they have signed a memorandum of understanding with the solicitor-general in the state attorney’s office, a move that was saving about R10bn annually.
“We are changing the model of the fund. We have for the first time gazetted the medical tariffs for RAF.”
Mbalula noted that the RAF has operated on a financially unsustainable model for several decades.
“The long-term liabilities of the fund are now the government’s largest contingent liability. In recent years, the fund has also experienced liquidity challenges as claims against the fund have outpaced the growth in the RAF levy.”
He said claims against the fund have increased from R61.3 billion in 2017/18 to R78.2 billion in 2020/21.
These were expected to increase to R102.9 billion by 2023/24, and the accumulated deficit was expected to increase to R518.7 billion in the same period.
“The other biggest cost drivers for RAF are legal fees that the entity has to settle, both in terms of its own legal cost and those of the claimants.
The current Covid-19 disruptions are expected to worsen the liquidity of the RAF.
“It is expected that this impact will extend to the 2021/22 and 2022/23 financial years.”
Mbalula said although the lockdown levels resulted in revenue loss, this has narrowed to an expected R5 billion for the year ending on March 31, 2021.
“The most significant change going into the 2021/22 financial year is the new RAF Operating Model. The Operating Model represents a new approach to the investigation, settlement and litigation of claims.”