RAF grossly undercapitalised - report

2010-09-30 12:41

Cape Town - The Road Accident Fund (RAF) is "grossly undercapitalised" with liabilities exceeding assets by R42.4bn, according to the fund's annual report which was tabled in Parliament on Thursday.

Chief executive officer Jacob Modise says in the report that liquidity and solvency problems, which "hamper the paying of claimants", will remain until the RAF fuel levy is raised from 17c a litre to the 38c a litre it requested from the Treasury in its Revenue Requirement Model (RRM).

"The balance sheet still remains grossly under capitalised with the net deficit currently at R42.3bn compared to R39.8bn (the previous year)," Modise says.

"For as long as we are not funded in line with RRM, the fund will continue to face liquidity and solvency problems and be hampered in paying claimants on time."


Modise says the 209 186 backlog of cases could be "completely wiped out" within a few years, provided there is adequate funding.

The report says wastage continues to exist in the scheme, which was resulting in "the inappropriate allocation of economic resources".

Of the R11.4bn paid out, more than R2.5bn was on legal and expert costs.

Another R4.7bn was paid in general damages - primarily to people "not seriously injured".

Success fees paid to attorneys are estimated to be R4.3bn, which Modise says is "exacerbating the plight of the poor who suffer (the) most hardship from accidents".

The average time it takes to settle a claim still hovers between 12 and 60 months for non hospitalised claims, "primarily because of the need to prove fault".

The report says the number of accidents with fatalities increased by 0.5% to 10 857 in 2009 from 10 805 in 2008.