The Road Accident Fund (RAF) wants to increase its funding in South Africa, which would result in higher fuel prices for motorists.
The RAF is funded through a national fuel levy that adds R2.18 to every litre of petrol and diesel sold in the country, but the levy has not been adjusted for years.
RAF’s argument for higher fuel prices
The RAF is a state-owned entity that provides compulsory cover to all road users in South Africa for injuries or deaths sustained by victims or the families of victims of motor vehicle-related accidents.
It has been facing financial difficulties for several years owing to the high cost of payouts for victims as well as the method by which it operates, which often involves lengthy legal proceedings.
Earlier this year, it was revealed that a single car accident can cost taxpayers an average of R2.57 million and that the RAF paid out over R43 billion in injury benefits for incidents that took place between 2020 and 2022 – all funded by the RAF Levy.
The RAF also attests that a major contributor to these huge sums is that its operating model is based on litigation as it is frequently sued for damages.
The organization recorded a R1.5-billion deficit for the 2023/2024 financial year, which is actually an improvement to the R8.4-billion shortfall it saw the previous year.
RAF CEO Collins Letsoalo claims that the R2.18 levy has been reduced to R1.93 in real terms due to a lack of adjustment for inflation, which partly explains the group’s poor performance.
The Road Accident Fund Levy is typically adjusted in February each year, but the fuel tax has not been raised since 2021 as part of an economic relief measure for citizens that was first introduced during the Covid-19 pandemic.
Even with these measures, South Africa’s fuel prices are still sitting uncomfortably high for most households which is why the National Treasury has made no adjustments, and why the RAF Levy has been pegged at R2.18 per litre for the last three years.
As a point of reference, petrol 93 is currently sitting at R21.79 per litre as of September 2024, which means the RAF’s funding source accounts for roughly 10% of what citizens are paying with every top-up.
Why the levy should not be increased
The RAF’s demand for an increase to the fuel levy has been met with criticism by Hennie Klopper, a former private law professor at the University of Pretoria.
The professor recently wrote to MyBroadband expressing his concerns over the proposal, claiming that inefficiencies in the RAF are making South Africa’s petrol prices higher than they need to be.
Klopper said that the road organization wasted about R48 billion in unnecessary litigation over the last 20 years, and is relying on fuel hikes to make up for its financial missteps.
It only has around 2,400 employees responsible for managing the estimated 100,000 death and injury claims that are generated by South Africa’s roads each year.
RAF corporate communications head McIntosh Polela said that the company’s litigation-based model is unsustainable and that it should not be possible to sue the state for people injured in accidents to access their benefits.
Klopper contested this point, arguing that this is plainly false and that the RAF has a legislative and constitutional obligation based on common law to recover losses or damages incurred by claimants.
“The statement suggests that the RAF does not seem to have a clear conception of the RAF Act, which it is legislatively and Constitutionally obliged to administer,” he said.
“The system is not based on litigation as is stated, but on common law. What is recovered by claimants as clearly stated by the Act are not benefits but loss or damage suffered.”
He also pointed out that the RAF Act encourages the settlement of claims without litigation and that it actively discourages the use of the court system.
“Some of these RAF provisions carry the sanction of loss of claim and an adverse legal cost order where there is non-compliance of early disclosure of information requirements, or where there is unnecessary and speculative litigation by claimants,” he said.
“The fact that the RAF is a litigant is a direct consequence of the RAF’s failure to timeously and effectively deal with lodged claims.”
Claimants are effectively forced to seek legal proceedings to enforce and prevent prescription of their claims, which is when a debt or claim becomes uncollectable after a certain amount of time has passed.
“The RAF is a delinquent litigant, as has been stated by a number of judges,” Klopper said.
The Fund is so reliant on legal proceedings that it is clogging up the country’s courts, according to a report by Daily Maverick.
All of this suggests that the solution to the RAF’s financial pressures is a new operating strategy and better management, rather than another fuel hike that will be felt by every person in South Africa.
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