South African Airways and Eskom are not the only state entities in a fiscal mess. The RAF is hopelessly insolvent. This has however been the case for many years where the RAF deals with the situation by delaying payments and waiting for a new budget to become available to pay old debt. This essentially results in “using one credit card to pay off another”.
The Road Accident Fund (RAF) brought an urgent application in the Pretoria High Court this week against the Sheriff of Centurion East, Absa Bank and 346 claimants that have in the last six weeks sent the sheriff to attach all the monies in its eight Absa bank accounts.
The impact of this on victims is that that court cases and payments are being purposefully delayed by month so years by representatives of the RAF.
Read more: https://www.moneyweb.co.za/news/south-africa/road-accident-fund-hits-the-wall/
In the Auditor-General’s report to parliament it is noted that the RAF has an accumulated deficit of R262.2 billion. There are an excess of liabilities over assets of R262.1 billion.
The RAF is however incapable of being liquidated, and can only be wound up through an act of parliament.
This will not absolve the RAF from its debts. The total claims liabilities amount to R271.9 billion.
Other notable concerns were:
- Material misstatements were identified in the annual performance report submitted for auditing.
- Management did not implement proper record-keeping in a timely manner to ensure that complete, relevant and accurate information is accessible and available to support performance reporting.
- Management did prepare regular performance reports, however, these reports were not accurate and complete and were not supported and evidenced by reliable information.
A very sad fact is that even though management lead the company into an unsustainable loss position, the board and executives received performance bonuses for the year.
The amounts paid to the board members and executive remuneration is reported to amount to R28.8 million (2018: R28.9 million). Performance bonuses amounted to R4.6 million (2018: R6.5 million). Non-executives were paid fees of R6.6 million (2018: R6.8 million).
Crawling out of the mess
So how does the RAF crawl out of this mess? Funds for the compensation of victims are currently generated by a RAF levy added to the fuel price. The latest fuel price is R15.79 per litre. Fuel price increases have a devastating impact on the poor, leading to higher transport and food costs.
The government cannot continue to hike the fuel price to bail out the insolvent RAF.
One suggestion is to bring in expert insurance companies to plan the way forward.
To read more: https://www.moneyweb.co.za/news/south-africa/the-road-accident-fund-is-hopelessly-insolvent/
Do you have a Road Accident Claim – contact Paul du Plessis Attorneys