Payments of Road Accident Fund claims are being delayed, in some cases for as long as eight months. At the end of last year all stakeholders (including attorneys and claimants) were advised that the Road Accident Fund has serious cash flow constraints, and that as a result payments will be queued to be paid as and when funds are available. The Fund is, however, committed to honoring all of its payment obligations, both present and future.
Many of our clients are affected by this significant backlog. The Fund had a similar problem during about 2004/5, when firstly, a moratorium was placed on settlements and payments for six months, followed by staggered payments over four to six months. That approach seems more sensible – many claimants wait for many years and suffer a great deal of hardship before their claim finalises. It doesn’t seem fair that they then have to wait even longer for payment. The good news is that the Fund got through its liquidity problem then, and we’re sure it will get through it this time.
Road Accident Fund Committed to Honoring its Obligations
The silver lining seems to be that the Road Accident Fund is committed to honoring all of its payment obligations, both present and future. Accident victims should not be scared off by this liquidity problem. Government has an obligation to meet these commitments and has in the past made numerous payments to assist with liquidity.
According to the Chief Financial Officer of the RAF, Mrs Y van Biljon, the focus remains on settling the longest overdue items first, and that the RAF can only succeed at managing this situation with stakeholder support and cooperation. The Road Accident Fund is aware of the fact that the current situation causes hardship and frustration, but remains hopeful that the on-going communication, transparency and information will at least address some uncertainties. The RAF, however, remains dedicated to honouring its commitments.
The additional funding allocated to the Road Accident Fund by the Minister of Finance is still awaited, and currently the view is that this will be solely dedicated to addressing the oldest outstanding amounts for at least the first four months following receipt in no order other than from the oldest outstanding amount. It is further important to note that the additional funding is not sufficient to address both the backlog and close the gap between productivity and available funding going forward. The situation we find ourselves in is here to stay for the foreseeable future as indications are that the Accounts Payable book will only reduce to a comfortable level in the next 24+ months.
At the end of May 2015, it was reported:
– Around 5 300 Service Providers are owed R7bn;
– The oldest amounts due according to the financial system were requested for payment in October 2014;
– 42% is > 30 days;
– 7%/1,909 of claims are >R1m;
– 93%/27,422 of claims are <R1m
– 1,209 writs to the value of R175m have been recorded and are due.