Where does the Road Accident Fund get its money from?
We constantly hear that the Road Accident Fund (RAF), which compensates injured motorists, passengers, and pedestrians, is in deep financial trouble. So how can they compensate those that have been injured?
Fuel levy
The main income received by the Road Accident Fund is a levy that is based on fuel sales known as the RAF Fuel Levy. The RAF Fuel Levy income is a charge levied on fuel throughout the country and the amount of the RAF Fuel Levy per litre is determined by the National Treasury on an annual basis.
With effect from 7 April 2021, the Fuel Levy in the price structure of petrol and diesel amount to 393.0 c/l and 379.0 c/l respectively. The Road Accident Fund levy currently accounts for R2.07 for every litre of both petrol and diesel sold. This provides the RAF with an average annual income of around R43 billion. In other words, every person that spends money on fuel, albeit indirectly by paying for transport, contributes to funding the RAF.
Why do RAF payments take so long?
The dire financial situation of the RAF is often reported on in the news with fears of the RAF being declared insolvent. Claimants can however find comfort in knowing that although the RAF has a severe backlog in payments, which means significant delays in payments up to 2 years after finalisation, it does continually receive funds on a yearly basis derived from the RAF fuel levy. The RAF is currently focusing on dealing with the oldest payments first and newer claims thus have to fall in the back of the queue.
For more information on how the RAF is dealing with its backlog view our article
In explaining its financial difficulties, the RAF cites exorbitant legal fees as its biggest immediate challenge. Research conducted by the embattled insurer showed that while R10.6 billion was spent on legal fees, more than 95% of these cases were settled out of court “without any trial being run”. The RAF spends R17 billion on administrative costs, with R10.6 billion dedicated to legal expenses.
One of the biggest challenges, even after a case had been settled, is determining how much the RAF should contribute to the claimant’s legal fees. This involves a process of Taxation of the legal fees at court (which does not have any connection to SARS or VAT). Unfortunately backlogs on court rolls also contribute to a delay in finalising the determination of payments. The RAF’s Acting Chief Executive Officer of the RAF, Collins Letsoalo, said it would also revise its medical assessment costs to save money. Letsoalo referenced the R32,000 paid per neurosurgeon assessment and R29,000 per orthopaedic surgeon assessment as examples of these exorbitant expenses, which are incurred by the RAF’s legal teams in order to defend claims.
Unfortunately as a very large national organisation the RAF does have its fair share of internal difficulties including understaffing and mismanagement of funds. Ideally claims should be dealt with in the early stages to avoid incurring unnecessary legal costs for both the claimant and the RAF. Unrepresented claimants are especially at risk for undersettlement and delay of claims and for that reason it would be wise to appoint an attorney familiar with the processes and requirements of a RAF claim.
Who can I contact for advice?
Should you need any advice about your RAF claim and the compensation involved, feel free to contact Paul du Plessis Attorneys for a free telephonic consultation at 012 809 1588 or send an email to paul@pauldup.co.za.
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