New board vital to stabilising road fund

The government says the appointment of a permanent board at the troubled Road Accident Fund will be key to stabilising the entity.

The government says the appointment of a permanent board at the troubled Road Accident Fund (RAF) will be key to stabilising the entity.

Transport minister Blade Nzimande dissolved its board in July due to “serious divisions” and dysfunction. He appointed an interim board to address the governance challenges that had bedevilled the organisation.

The RAF pays compensation for those injured in car accidents. However, it has been struggling to fulfil its mandate largely due to poor management. Earlier in 2018, the Treasury pointed out that the claims received by the fund were significantly larger than the income generated from the road accident fuel levy. Of the 52c-a-litre increase in the fuel levies announced in the 2018-19 budget, 30c would go towards the RAF to stabilise short-term liabilities at about R8.5bn a year, the Treasury said.

In the medium-term budget policy statement tabled in parliament in October, the Treasury said the RAF and the SA National Roads Agency (Sanral) were fiscal risks. The Treasury said the RAF would most likely require a large increase to the fuel levy in the next three years to manage its short-term liability.

In a written reply to a question from COPE leader Mosiuoa Lekota in parliament last week, Nzimande said the government was working hard to stabilise the cash-strapped fund.

“The process to appoint a permanent board has commenced. The process to appoint a CEO recommenced two months ago,” the minister said.

The fund has been in financial disarray for long and been struggling to pay road accident victims, something ascribed mainly to leadership failure.

Nzimande said in the longer term, the design of the system of road accident compensation must change to address the fact that the existing system is unaffordable, with income not matching expenditure.

“To this end the RABS [Road Accident Benefit Scheme] Bill, which is currently before the portfolio committee on transport, will address the future financial viability of road accident compensation by ensuring a balance between funding and benefits,” said Nzimande. In the interim, the RAF had implemented a cash-management strategy to ensure that available funding was distributed in an equitable and fair manner.

He said the RAF wanted to ensure any funds not committed due to general savings or delays in procurement were allocated to the settlement of claims, where possible.