The CEO of the Automobile Association of South Africa (AA), Bobby Ramagwede, has questioned whether the Road Accident Fund (RAF) should be scrapped and replaced with a new, compulsory third-party insurance system.
These comments were made in response to the recent news that the Department of Transport (DoT) wants to introduce a new tax to support the RAF.
The RAF is a state-owned entity that compensates victims of motor vehicle accidents in South Africa, covering matters like medical expenses or a loss of income caused by the victim’s death or injuries.
It receives its money from the Road Accident Fund Levy, a fuel tax that adds R2.25 to the cost of every litre of petrol and diesel sold in South Africa.
However, the DoT is concerned that the RAF’s revenue will decline due to the growing popularity of electric vehicles (EVs), since these cars don’t require fuel and therefore don’t contribute to the RAF.
Because of this, Transport Minister Barbara Creecy has proposed that a transitional levy should be introduced to offset EV sales and continue supporting the RAF.
This levy would take the form of a new fee, which would be attached to vehicle licence disc renewals.
The announcement has been met with fierce opposition from the public, industry stakeholders, and civil action groups, who argue that the levy would essentially be a double tax and that motorists are already paying too much.
In an interview with Cape Talk, Ramagwede said that the idea of a new fee on vehicle licence disc renewals was laughable.
“It’s no secret. The RAF is embattled and maladministered. In fact, it collects more money than it disburses,” he said.
“Surely, by fixing its efficiencies and its operations, there’d be no reason for us to be collecting a further fee.”
The CEO said that EVs reducing the RAF’s fuel levy revenue was not a good enough reason to introduce a new tax, especially when the state-owned entity has been badly mismanaged.
“EV adoption is very slow. If one were to compare the rate of EV adoption versus the amount of money we’re haemorrhaging from the RAF, it’s abundantly clear that the issue is operational,” he said.
For context, the RAF receives approximately R45 billion per year from fuel taxes. Despite this, the entity is technically insolvent with billions of rands in debt.
The RAF has been flagged for corruption and mismanagement by the Special Investigating Unit (SIU) which, among other things, found over R340 million in duplicate payments to law firms.
It is also investigating 10 contracts for possible irregularities, fruitless and wasteful expenditure. Some of these contracts were flagged by the Auditor-General of South Africa.
With this in mind, Ramagwede questioned why motorists should be expected to continue paying for the RAF, stating that a compulsory third-party insurance policy would achieve the same goal.
DA supports a move away from the RAF
The Democratic Alliance (DA) has also voiced its support for a new system to replace the RAF.
The DA’s spokesperson on Transport, Dr Chris Hunsinger, stated that they oppose the new vehicle licence disc tax on motorists and that the party is preparing to challenge the proposal.
“The Democratic Alliance is ramping up our fight against plans being considered by Transport Minister Barbara Creecy to make motorists pay even more to prop up the failing Road Accident Fund,” he said.
“Instead of fixing the RAF’s long-standing failures, the ANC is once again asking hardworking South Africans to pay more,” Hunsinger declared.
The DA argued that the RAF has become an unsustainable burden on taxpayers and that it should be scrapped, not propped up with another tax.
“The RAF is not in crisis because motorists are not paying enough, the RAF is in crisis because years of mismanagement, corruption, waste and poor governance have left it financially crippled,” said Hunsinger.
“South Africans should not be forced to foot the bill for the government’s failures.”
“The solution is to fundamentally reform and ultimately replace the RAF with a sustainable, efficient and affordable system that delivers support to accident victims without continuously demanding more money from the public.”
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