Greed and maladministration collide: How the Road Accident Fund was bled dry

The Road Accident Fund (RAF), which was established to assist crash victims, has itself largely fallen prey to unscrupulous elements and dubious legal practices. Notwithstanding its own admitted issues and administrative shortcomings, the RAF has become something of a microcosm of how opportunistic society can be in general. 

Where there’s a loophole to exploit, a feeding frenzy will almost inevitably ensue. The RAF is no different in this regard.

The net effect of the RAF’s own administrative inefficiencies and wily legal manoeuvring has resulted in the fund experiencing severe liquidity constraints to the point where some of its bank accounts and moveable assets have been attached through writs of execution. Most alarming is the fact that the fund’s monthly levy income has also, in some instances, been attached.

The Standing Committee on Public Accounts held a hearing on Wednesday morning on the RAF’s 2019/20 audit outcomes. The entity obtained a clean audit for the financial year under review. Its executive management has stabilised and a permanent board has been appointed. The RAF CEO, board and Transport Minister Fikile Mbalula, whose portfolio has oversight on the entity, ran legislators through the fund’s financial and non-financial performance for 2019/20.

Although the presentation by the executive was compelling, the transport minister’s inputs on the state of affairs at the RAF was rather intriguing. His speaking notes to the committee and the board’s presentation are both readily available online. So, too, is a full recording of the briefing, which is well worth watching.

According to the minister, in October 2019, for example, the RAF had a total of 1,688 bank attachments, the value of which was R1-billion. As a result, the fund had a high volume of duplicate payments. The reasons why the fund keeps attracting this sort of lucrative legal action are largely attributable to its own lack of standardisation when it comes to claims. 

As things stand, the claims criteria are rather loose and flexible, making the process ripe for exploitation. That, in turn, opens the floodgates to all manner of questionable practices. In short, the system is replete with legal middlemen who stretch every legislative and regulatory loophole available for maximum claims. The substantial success fees paid for successful claims reinforce and incentivise the practice. 

Despite this, the minister states that the RAF has been no passive bystander in the saga and has instead taken a proactive approach. The new RAF leadership has seemingly got a handle on the risk of writs of execution by changing the fund’s payment strategy and dealing with older claims.

The RAF leadership sought court counsel and petitioned for an order to suspend the writs of execution issued against the fund, pursuant to court orders, according to the minister. The court order sought was for a 180-day suspension of writs of execution.

The minister noted that the court action assisted the fund greatly in improving its liquidity position. In addition, the RAF was also able to recoup some R400-million in duplicate claims. Furthermore, the fund referred more than 100 law firms to the Legal Practice Council. 

The dysfunctional nature of the present system has led the transport minister to the realisation that it is inequitable. A major contributor to this is how individual claims are assessed and calculated. The current system looks at a person’s earnings and future earning potential.

The transport minister has proposed a new operating model for the RAF to resolve that inequity. A key feature of such a redesign would be cutting away legal middlemen, who are a major contributor to the current system’s inefficiencies. 

The rationale for pursuing such a course of action is that “victims of road crashes should not rely on lawyers to access RAF benefits”, says the transport minister. 

However, lawyers aren’t the sole drivers of the underlying administrative woes at the fund. The minister admits that there are myriad challenges facing the RAF. These include insufficient funds from the fuel levy to meet all claims, as well as unethical conduct by some lawyers, RAF employees and actuaries. It’s an entire ecosystem of grey ethics that requires careful rejigging and robust repurposing. 

At  the end of the 2019/20 financial year, the RAF had accumulated an annual deficit of R5.3-billion. During the same period, the fund had finalised claims to the value of R14-billion but could not process payment because of cash flow constraints.

That crystallises the urgency of an equitable operating model, the absence of which is fuelling the toxic flames of maladministration. BM/DM