# The Road Accident Fund is hopelessly insolvent

- Link: https://dearsouthafrica.co.za/2019/10/24/the-road-accident-fund-is-hopelessly-insolvent/
- Published: 2019-10-24T09:43:14+02:00
- Author: dearSA

![](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2019/10/20191229/Screenshot-
2019-10-24T092642.643.png "Screenshot - 2019-10-24T092642.643")

The Road Accident Fund (RAF) is hopelessly insolvent.

The fund was set up to pay compensation to victims of road accidents and provides
support in respect of future treatment and rehabilitation.

Dependent on fuel levies to meet its ever-increasing liabilities, and with an accumulated
deficit R262.2 billion in 2019, the RAF is deep in the red.

Board chair Dr Matsontso Mathebula, in his report to the 2019 integrated annual 
report, remarked that the RAF “has continued on its journey to be a key player in
South Africa’s social security system …”, and notes that challenges remain in the“
legislative and financial environments”.

Acting CEO Lindelwa Xingwana-Jabavu reported that: “Close on 2 100 fraudulent claims
to the value of R1.45 billion were identified before payments were made and nine
people were arrested for fraud against the RAF.”

She added that “the increase of 30c/l in RAF Fuel Levy” that came into effect on
April 1 last year saw total revenue increase by 15.8% to R43.2 billion.

Cash flow constraints resulted in a 30% increase in the amount of interest paid 
during the year, from R224 million in 2018 to R291 million in 2019.

Claims of R42.6 billion were settled in the 2018/19 financial year: R3.6 billion
was paid towards medical costs, R160 million towards funeral costs, R10.3 billion
towards legal and other expert costs, R9.2 billion towards general damages (primarily
to persons not seriously injured), and R19.4 billion towards loss of earnings and
support for those who qualified.

The percentage of RAF fuel levy income that was used to pay claims rose to 97%  (
from 93%).

The increase in total revenue for 2019 to R43.24 billion (2018: R37.34 billion) 
was mainly due to the 30c per litre (c/l) increase in the RAF fuel levy from the
beginning of the financial year.

During the 2019 financial year the RAF fuel levy was set at 193c/l (2018: 163c/l).

The total amount of claims paid (including net effect of ‘requested not yet paid)
increased by 21% to R41.96 billion (2018: R34.6 billion).

Claims liabilities increased by 27% to R272 billion (2018: R215 billion).

The RAF is hopelessly insolvent.

**Auditor-General’s report to parliament**

The Auditor-General (AG) notes that the accumulated deficit of R262.2 billion, together
with the excess of liabilities over assets of R262.1 billion, indicates that there
is a material uncertainty relating to whether the RAF is a going concern.

This will not absolve it from its debts. The total claims liabilities amount to 
R271.9 billion.

Other notable concerns were:

 * Material misstatements were identified in the annual performance report submitted
   for auditing.
 * Management did not implement proper record-keeping in a timely manner to ensure
   that complete, relevant and accurate information is accessible and available 
   to support performance reporting.
 * Management did prepare regular performance reports, however, these reports were
   not accurate and complete and were not supported and evidenced by reliable information.

**Executive remuneration**

Despite leading the company into an unsustainable loss position, the board and executives
received performance bonuses for the year.

Read: [What is the real tax rate in SA? ](https://www.moneyweb.co.za/financial-advisor-views/what-is-the-real-tax-rate-in-sa/)

Amounts paid to the board members and executive remuneration amounted to R28.8 million(
2018: R28.9 million). Performance bonuses amounted to R4.6 million (2018: R6.5 million).
Non-executives were paid fees of R6.6 million (2018: R6.8 million).

**Crawling out of the mess**

The government cannot continue to hike the fuel price to bail out the insolvent 
RAF.

The latest fuel price is R15.79 per litre. Fuel price increases have a devastating
impact on the poor, leading to higher transport and food costs.

The RAF as a concept is not viable. It is time to bring in the expert insurance 
companies and plot the way forward.

[Article](https://www.moneyweb.co.za/news/south-africa/the-road-accident-fund-is-hopelessly-insolvent/)
by Moneyweb