Cut out the rich, says Road Accident Fund CEO

CEO of the Road Accident Fund (RAF) Collins Letsoalo has said that he believes that the RAF Act must be reviewed to exclude the rich from claiming from the fund.

Speaking to the Standing Committee on Public Accounts (Scopa) on 16 October, Letsoalo said that high-income earners are the only ones truly benefiting from the scheme.

“The people who earn the most benefit the most because [payment] depends on loss of earnings,” said Letsoalo.

“We must exclude the rich out of this scheme” to benefit those who cannot afford private insurance, he added, although did not describe which income bands classify as rich.

From the get-go of the meeting, there was debate over whether the RAF was a social benefit fund, which Letsoalo refuted.

“Why would you even have a situation where there’s a social benefit that needs a lawyer for you to access it? So, it’s not for the poor, this thing, and that’s a fact,” said the RAF CEO.

“As I said, it’s the most regressive form of taxation issue. Because the ones that have the most will obviously get the most from the system,” he added.

In a recent Moneyweb@Midday interview, RAF spokesperson McIntosh Polela said that those who can afford to get cover for themselves should not dip into the RAF’s coffers.

“The RAF covers all and sundry, whether you are middle class, rich or you are a billionaire, it covers you, and that’s not fair to the people who need this money the most,” said Polela.

“So the argument is, you and I can afford to pay our own cover using a private entity, why are we dipping into a social benefit? We don’t need this social benefit as the people who can afford it need it to be going or redirected to those who cannot afford it,” he added.

Polela said that the RAF is not saying that the middle class should not be covered, but there are people who can afford to cover themselves.

“The rich can afford to cover themselves so why are they being covered by the RAF? We pay the rich a lot of money.

“The rich, when they say, ‘I have had loss of earnings’, it means that we have to pay hundreds upon hundreds of millions of rands – something that can’t be enjoyed by poor people,” said Polela.

He said that the criteria that would be used to determine eligibility is still in the works.

“We are going to come up with a proposal to say, people in this kind of pay grade should not be covered by the RAF, but rich people, for now, we’re just saying should not be covered by the RAF,” said the RAF spokesperson.

These proposals were met with mixed reactions in the meeting.

EFF MP Mazwikayise Blose agreed with the proposals and said that “those who afford medical aid and everything else are the rich of the richest [but] they still come and claim a draft, you know, so the entire scheme is structured incorrectly, and it needs huge legislative reforms.”

Meanwhile, DA MP Patrick Atkinson said that it is inefficiencies within the RAF itself that is excluding the poor.

“To make a claim at the RAF, I believe it’s quite a complicated process, so if we talk about excluding poor people, we’re excluding them because of the complications of the process,” said Atkinson.

Finances under the microscope

Scopa members expressed concern about the RAF’s adverse audit outcome from the Auditor-General (AG) for the 2023/2024 financial year.

RAF has received adverse outcomes for three financial years, which the committee said is “mainly due to the entity’s decision to apply a different accounting policy to what the National Treasury has determined.”

The RAF has refused to use the Generally Recognised Accounting Practice (GRAP) prescribed by the Public Finance Management Act (PFMA) for it as a government entity.

RAF uses the International Public Sector Accounting Standards (IPSAS) 42 as an accounting standard which differs from the GRAP.

To date, the matter has been litigated in both the High Court and the Supreme Court of Appeal (SCA), with both agreeing with the AG.

The entity told the committee that it had applied to the judge president of the SCA for reconsideration.

There were also concerns raised about the financial sustainability of the fund under its current funding model during the meeting.

The RAF relies mainly on the fuel levy as its main source of revenue stream, which is the committee said is insufficient.

Deputy Minister of Transport, Mkhuleko Hlengwa said that the ministry is conducting a review of the funding model and the related pieces of legislation to enable RAF to be sustainable.

The RAF, which recorded a R8.43 billion deficit for the 2022/23 financial year, recently revealed that it is struggling to get on top of mounting claims, recording a backlog of over 321,000 – largely due to missing supporting documents.

In an interview with City Press, Letsoalo said that not only has the number of claims gone up, but so has the number of crash victims claiming. He largely laid the blame for ailments in the fund’s fiscal position at the feet of non-South Africans for having “exorbitant” and “suspicious claims,” as well as unscrupulous lawyers.

The State Investigating Unit (SIU) has been investigating “serious maladministration in the affairs of the RAF” and “any irregular, improper or unlawful conduct” for some time.

The full investigation has been divided into four phases, which looks into:

1. Duplicate claims-payments made to attorneys, claimants, sheriffs, and change of mandates.
2. Procurement and tender irregularities (Fruitless and wasteful expenditure).
3. Payments made to service providers in terms of RAF Act and/or contract.
4. Fraudulent claims.

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