Booming car sales hobble RAF
South Africa's booming car sales have hit the Road Accident Fund hard as accidents increase and more people claim compensation.
This was according to the RAF's latest annual report, which attributed the increase in claims to an increase in motor vehicles on the roads and increased public awareness of the fund.
About 1 million new vehicles have been added to the country's roads due to an expanding domestic economy enabling more people to afford cars.
For the RAF, the boom has meant a corresponding increase in vehicles involved in accidents and people claiming compensation.
The fund settled a whopping R5,131-billion of claims last year, compared to R3,105-billion in the previous financial year.
The National Treasury gave the RAF R2,7-billion in March after it technically went bankrupt due to mismanagement, fraud and corruption.
The insolvency saw outstanding claims soar to the current 443 399 from 216 648 in 2002.
Transport Minister Jeff Radebe appointed businessman Jacob Modise as the new chief executive and a new board of directors, chaired by businesswoman Danisa Baloyi.
Modise and the new board came up with a "Rescue Plan" to turn the RAF into a financially healthy organisation. Radebe approved the plan in May.
Modise says the full results of the plan will only be realised between 2008 and 2010.
The controversial RAF Amendment Act, which limits the sum accident victims can claim from the fund to R160 000, was passed into law last year.
In the 2006 financial year, 6 500 claimants received about R1 billion for loss of earnings benefits at an average of R155 000 per claim. The loss of earnings category generally caters for the middle to higher income group.
About 2 700 claimants received about R332-million in loss of support benefits in the same period at an average of R125 000 per claim while 71 000 claimants received R355 million for medical benefits at some R5 000 per claim.
About 30 claims, 53 percent of them by foreigners, seek an average of R13,3-million each from the RAF, and this remains outstanding as the fund estimates outstanding liability on those claims at at least R5-million each.
Approximately 128 000 claimants' legal and other experts received more than R800-million - an average of R6 250 each - in payouts while the fund spent R520 million on its own legal and other experts as a result of litigation.
With transport one of the key components to the country's successful hosting of the soccer World Cup in three years' time, the RAF is gearing itself to deal with accidents that might occur during the event. A stated priority is to make tourists from outside countries understand how accident compensation works in South Africa.
The income for the RAF comes from a special levy on petrol and diesel sold. The levy was increased from 26c to 31.5c per litre last year, which resulted in an increase in income to R6,079-billion for the fund. The increase in the levy was also a result of increased consumption of fuel due to the high volume of vehicles.
However, sectors such as agriculture, forestry, sea fisheries and coastal shipping, the NSIR, rail freight and mining are granted concessions and do not pay the RAF the diesel levy.
The SA Revenue Service administers the concession as a refund, which amounted to R527-million last year.
A report of the board blames the fund's poor financial health partly on receiving the fuel levy from the treasury on a monthly basis, the escalation in the number of claims submitted, administration, human resources, investigation and litigation costs.
Auditor-general Shauket Fakie drew attention to the fact that the fund's claims continued to outstrip income from the fuel levy.
The RAF has a net deficit of R18,37-billion, indicating that the fuel levy is not sufficient to cover the money required to settle all the claims and operational expenses. Read more
This was according to the RAF's latest annual report, which attributed the increase in claims to an increase in motor vehicles on the roads and increased public awareness of the fund.
About 1 million new vehicles have been added to the country's roads due to an expanding domestic economy enabling more people to afford cars.
For the RAF, the boom has meant a corresponding increase in vehicles involved in accidents and people claiming compensation.
The fund settled a whopping R5,131-billion of claims last year, compared to R3,105-billion in the previous financial year.
The National Treasury gave the RAF R2,7-billion in March after it technically went bankrupt due to mismanagement, fraud and corruption.
The insolvency saw outstanding claims soar to the current 443 399 from 216 648 in 2002.
Transport Minister Jeff Radebe appointed businessman Jacob Modise as the new chief executive and a new board of directors, chaired by businesswoman Danisa Baloyi.
Modise and the new board came up with a "Rescue Plan" to turn the RAF into a financially healthy organisation. Radebe approved the plan in May.
Modise says the full results of the plan will only be realised between 2008 and 2010.
The controversial RAF Amendment Act, which limits the sum accident victims can claim from the fund to R160 000, was passed into law last year.
In the 2006 financial year, 6 500 claimants received about R1 billion for loss of earnings benefits at an average of R155 000 per claim. The loss of earnings category generally caters for the middle to higher income group.
About 2 700 claimants received about R332-million in loss of support benefits in the same period at an average of R125 000 per claim while 71 000 claimants received R355 million for medical benefits at some R5 000 per claim.
About 30 claims, 53 percent of them by foreigners, seek an average of R13,3-million each from the RAF, and this remains outstanding as the fund estimates outstanding liability on those claims at at least R5-million each.
Approximately 128 000 claimants' legal and other experts received more than R800-million - an average of R6 250 each - in payouts while the fund spent R520 million on its own legal and other experts as a result of litigation.
With transport one of the key components to the country's successful hosting of the soccer World Cup in three years' time, the RAF is gearing itself to deal with accidents that might occur during the event. A stated priority is to make tourists from outside countries understand how accident compensation works in South Africa.
The income for the RAF comes from a special levy on petrol and diesel sold. The levy was increased from 26c to 31.5c per litre last year, which resulted in an increase in income to R6,079-billion for the fund. The increase in the levy was also a result of increased consumption of fuel due to the high volume of vehicles.
However, sectors such as agriculture, forestry, sea fisheries and coastal shipping, the NSIR, rail freight and mining are granted concessions and do not pay the RAF the diesel levy.
The SA Revenue Service administers the concession as a refund, which amounted to R527-million last year.
A report of the board blames the fund's poor financial health partly on receiving the fuel levy from the treasury on a monthly basis, the escalation in the number of claims submitted, administration, human resources, investigation and litigation costs.
Auditor-general Shauket Fakie drew attention to the fact that the fund's claims continued to outstrip income from the fuel levy.
The RAF has a net deficit of R18,37-billion, indicating that the fuel levy is not sufficient to cover the money required to settle all the claims and operational expenses. Read more
posted by Jopie Fourie at 8:01 AM
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