The petrol tax leeching South Africans dry

Over R145 billion has been raised from from the Road Accident Fund (RAF) Levy from 2022 to 2024 – and of this, R142 billion has been paid out in claims.

This was revealed by Transport Minister Barbara Creecy in a response to Parliamentary questions posed by DA MP Dr Chris Hunsinger.

The RAF was established with the aim of providing various types of benefits to accident victims and their dependents.

Funded from levies on petrol and diesel, these benefits can include compensation for medical expenses, loss of income, funeral costs, general damages, and future medical and rehabilitation expenses.

According to the information provided by the Minister, a breakdown of some of the figures are:

Currently, the RAF Levy is R2.18 per litre of petrol or diesel, which goes straight to the RAF to fund its operations.

According to analysis by BusinessTech, contributions towards the RAF have gone up by over 1400% for petrol users and 2016% for diesel users since January 2000.

While petrol consumers have always paid slightly more towards the fuel levy, diesel and petrol consumers began paying the same contribution towards the RAF since 2002, with its larger increases seen from around 2009.

The RAF has seen the most dramatic year-on-year hikes over the past 25 years, jumping over 60% in 2002.

RAF hikes have predominantly sat well over the inflation rate, with that being the same case for fuel levies from 2004 to 2006 and 2009 to 2021.

RAF’s woes

While the fund is seen as a critical intervention to assist those impacted by accidents on South Africa’s roads, the RAF has been hampered with inefficiencies.

“South Africans contribute approximately 40% of the total current fuel levy to the RAFS, yet, despite this substantial public contribution, the RAF is mired in a financial and operational crisis, leaving victims waiting up to eight years for compensation,” said Professor Hennie Klopper, a legal scholar and authority on third-party compensation law.

In Parliament’s recent Standing Committee on Public Accounts (Scopa) meeting, 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 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, which the committee strongly bemoaned.

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

The RAF relies on the 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.

Of 107,000 claims lodged in 2022/23, fewer than 3,000 were processed.

“Instead of settling straightforward cases early, victims are pushed into costly litigation. These inefficiencies have increased the average cost per claim by 20% since 2020, inflating the RAF’s financial woes,” said Klopper.

In an interview with City Press, RAF CEO Collins 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 and the rich for having “exorbitant” and “suspicious claims,” as well as unscrupulous lawyers.

Klopper said that the RAF’s recovery requires a multi-pronged strategy, including:

• Road Safety & Law Enforcement: Implement measures to reduce crashes and fatalities, cutting claim volumes.
• Operational Efficiency: Set up a “Settlement Hub” to expedite claims and reduce legal costs, with skilled professionals handling cases.
• Financial Reform: Secure a government bailout with stringent oversight to manage liabilities and prevent future issues.
• Legal Alignment: Repeal policies like Board Notice 271 and ensure compliance with court rulings on victims’ rights.

“These steps require political will, judicial oversight, and collaboration from all stakeholders,” said Klopper.

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