The Road Accident Fund (RAF) interim board has told parliament that even if the fund saves money internally, it still won’t cover the massive growing claims bill.
This is because the RAF already owes around R100bn in unpaid claims and most of the funds are mismanaged by the entity. As a result, Treasury has withheld further money from the institution.
Speaking before the Standing Committee on Public Accounts (Scopa), board chairperson Kenneth Brown said internal savings would not resolve the problem.
“People will say, ‘Hey, the Road Accident Fund is underfunded. It needs more money,’ right? But if you go to the Treasury with that notion, they will start looking at you differently. They will say the following: ‘If you look at how inefficient your administration is, you spend close to a billion rand on media, medicals and other areas. You also undertake certain procurements that do not make sense. You could save quite a bit of money there.’ That would be the start of the argument,” he said.
“The second issue, which you will probably raise at some point, is that we pay approximately R45bn to R50bn to claimants. In terms of the Contingency Fees Act, about 25% of that goes to attorneys. That amounts to roughly R12.5bn spent on administration.
“If we were to change the model and move to direct claims, we could potentially save a significant amount of money. Maybe that view is right, maybe it’s wrong, but we need to brainstorm around it,” he said.
If we were to clean up the administration, we would certainly be able to free up a substantial amount of money, but that requires significant work.
— Kenneth Brown, board chairperson
He added that default judgements last year amounted to R6.6bn and now totalaround R15bn.
“Many of these amounts are inflated because the matters were not defended, and we ended up paying as a result. If we were to clean up the administration, we would certainly be able to free up a substantial amount of money, but that requires significant work,” said Brown.
Alfredina Themba, chairperson of the audit and risk committee, said the system itself is structured in a way that makes matching revenue and liability inherently difficult.
She said the organisation is focused on clearing a backlog of claims and accurately identifying liabilities.
She admitted there is no simple solution.
“From an accounting perspective, if your revenue is fixed and your costs keep increasing, you are supposed to reduce costs. But how do you reduce costs when claims come from people who are injured in accidents? If we fix the system, how do we increase revenue? We cannot stop claims from coming in,” she said.
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