The Road Accident Fund, referring to reports from the United Nations and the World Health Organisation, stated that road traffic injuries were a global problem affecting all sectors of society that had received insufficient attention partly because of a lack of political responsibility. Road traffic injuries cost low and middle-income countries between 1% and 2% of their gross national product: of all deaths caused by injuries, 22.8% were caused by road traffic accidents, a far higher percentage than deaths caused by war injuries (3.4%) and violence (10.8%). Road traffic injuries were the second leading cause of death in persons aged between 5 and 14, the first leading cause of death in persons aged 15 to 29 years, and the third leading cause of death in persons between 30 and 44 years. In brief, road accidents had their biggest impact on the youngest in society worldwide. South Africa, with 33.2 road traffic deaths per 100 000 of population, ranked amongst the highest in Africa. According to data from the Road Traffic Management Corporation, in 2008 there were 12 011 fatal accidents in South Africa, in which 14 057 people lost their lives – 38 people a day.
The Road Accident Fund was misunderstood as to the nature of its business, which was to provide to all the users of South African roads peace of mind and cover for death or bodily injuries, financed by the payment of fuel levy, collected by the South African Revenue Service (SARS) at refineries and paid subsequently to the Fund via the National Treasury and the Department of Transport. Problems arose from the fault based system of compensation whereby the Fund spent a disproportionate amount of time determining who was at fault, rather than prioritising assisting the injured. Compensation included past and future hospital, medical and related expenses, funeral expenses, past and future loss of support, past and future loss of earnings, and general damages. The system was subject to widespread abuse and ‘systemic fraud’. The Fund admitted that the scheme was inaccessible to ordinary South Africans. Furthermore, a fault of the scheme was its subjectivity in the need to project expected earnings of a claimant. This perpetuated past inequities, since assessors based projected earnings on earnings of parents. This was a scheme where ‘the poor subsidise the rich’. The cost of administration was excessive; more than half the R0.64 fuel levy went towards administrative costs, including the costs of legal experts. The Fund sought support from the National Treasury in setting a fuel levy policy that would result in the scheme being fully capitalised.
In response to Members’ questions, the Road Accident Fund said that it was undertaking a complete retraining of its staff towards the objective of faster processing of claims; the Fund admitted that few of its staff thus far had direct contact with accident victims. It wanted to ensure that all its systems were properly redesigned, tested and proven, before undertaking a public awareness campaign. It was hopeful that changes to be challenged in the Constitutional Court could eventually be achieved. One of the reasons for the difficulties with the Fund’s present scheme was that it was a fault-based scheme. The necessity to prove that someone was at fault involved ‘traversing complex legal issues’ and delays in payment to essential service providers such as ambulance crews. It was vital to provide medical care to accident victims immediately.
A Committee member said that one of the most important items to be tabled was the matter of legal fees. If arbitrators could be given a fixed rate, to deal with the Road Accident Fund’s legal representative, who would be trained to exercise an administrative mandate, then legal fees of more than R2 billion could be avoided and better spent on compensating accident victims. It would just take two legal minded people to come together to assess the value of a claim based on precedent. The important thing was to accelerate the processing of the backlog of claims.
The Road Accident Fund asserted that there were strong interest groups that sought to maintain the system as it was at present. The Fund had been able to obtain enactment of the Amendment Act, signed by the President in 2005, only from August 2008, because the Law Society had sought to challenge the Fund at every step. The Fund sought the support of the Committee in facing the many challenges that it anticipated from the Law Society in any changes to legislation.
The draft policy for a no-fault based system of compensation for road accident victims would be presented to the Cabinet's social cluster on 9 September. The Department of Transport would advise on appropriate principles on which it would like public comment as soon as possible. It was important to note that to move a whole system from fault to no-fault entailed reaching agreement on the impact on the industry at large and on members of the public. It would be premature to commit to the content and details of such a policy prior to its endorsement by the Department’s principals.
There was consensus in the Committee on dissatisfaction with some members of the legal profession who were alleged to exploit accident victims and benefit themselves at the expense of the Road Accident Fund.
This was epitomised by the views of the Chairperson: ‘It is very unfortunate that the legal fraternity in this country, especially the Law Society, would continue to commercialise the misery of the people …. because it serves their interests …. with no benefit to the public and the communities that we serve …. Are material resources more important than people?’
The Chairperson welcomed Dr Maria Koorts, Deputy Director-General, Public Entity Oversight and Border Control Branch, Department of Transport; accompanying delegation from the Road Accident Fund (RAF) led by Mr Jacob Modise, Chief Executive Officer. Apologies were received from the Minister of Transport, the Director-General, Department of Transport.
Road Accident Fund presentation
Mr Jacob Modise delivered the briefing that had been postponed from 18 August 2009. He concentrated on the organisation’s challenges and objectives, ‘the new scheme’, the failings of the current scheme and why it should be changed, examined elements of the rescue plan and progress achieved in the three years thus far, and described financial results.
Road accidents were a global problem that had attracted the attention even of the United Nations (slide 5). According to the United Nations General Assembly report for 2003 on road traffic injuries and their impact on societies, road traffic injuries were a global problem affecting all sectors of society. To date road safety had received insufficient attention at international and national levels partly because of a lack of political responsibility and multidisciplinary collaboration needed to tackle it effectively. Mr Modise mentioned that the Department of Transport had attempted to improve such collaboration.
According to the World Health Organisation (WHO)’s 2004 report on road traffic injury prevention, road traffic injuries were a growing public health issue, disproportionately affecting vulnerable groups of road users, including the poor; more than half the people killed in road traffic accidents were young adults aged between 15 and 44, often the breadwinners in a family. Furthermore road traffic injuries cost low and middle-income countries between 1% and 2% of their gross national product – more than the total development aid received by those countries (slide 6). Mr Modise observed that this was a large amount that needed attention. Additionally, Mr Modise said, pedestrians, motor cyclists, cyclists, and other vulnerable groups bore a disproportionate burden of the problem of road accidents. The poor, more especially in developing societies, were most vulnerable. Vulnerable groups were defined as pedestrians, motor cyclists, and cyclists.
Also the WHO’s 2004 report noted that of all deaths caused by injuries, 22.8% were caused by road traffic accidents. This was a far higher percentage than deaths caused by war injuries (3.4%), fires (6.2%) and violence (10.8%) (slide 7).
According to the WHO’s global status report on road safety, 2009, road traffic injuries ranked ninth as a leading cause of death, below HIV/AIDS as the sixth leading cause of death. However, road traffic injuries were projected to rise to fifth place by 2030, overtaking HIV/AIDS (slide 8).
According to WHO figures on the global burden of disease, road traffic injuries were the second leading cause of death in persons aged between 5 and 14, the first leading cause of death in persons aged 15 to 29 years, and the third leading cause of death in persons between 30 and 44 years. In brief, road accidents had their biggest impact on the youngest in society worldwide (slide 9).
According to WHO figures, South Africa, with 33.2 road traffic deaths per 100 000 of population, ranked amongst the highest in Africa (slide 10). In fact South Africa was in the top ten countries worldwide, including developed economies, in terms of ‘the scourge’ of road traffic deaths.
HO figures indicated the great vulnerability of pedestrians – 39% of road accident fatalities in South African in 2005 (slide 11).
According to data from the Road Traffic Management Corporation (RTMC), 4 061 drivers were killed on South Africa’s roads in 2008, 5 191 passengers, and 4 801 pedestrians (slide 12). In 2008 12 011 fatal accidents occurred, in which 14 057 people lost their lives – 38 people a day (slide 13). The World Health Organisation had indicated that insufficient attention was paid to the needs of pedestrians in terms of building suitable and safe infrastructure for them.
The RAF was a mirror of the success or failure of policies implemented by government to address the problem of road accidents, since the RAF did not only pay for people who died on the roads but also for those who were injured.
The RAF was misunderstood as to the nature of its business, which was to provide to all the users of South African roads peace of mind and cover for death or bodily injuries on the roads (slide 14). There were two types of cover: firstly, indemnity to the wrongdoer, and, secondly, compensation to the victim or his or her family (slide 15). This insurance cover was written into legislation, a fact that was not widely known. The nature of cover was compulsory by way of a form of social insurance contribution by some, for example, commuters, for the wider benefit of society (slide 16). In exchange for the payment of fuel levy, collected by the South African Revenue Service (SARS) at refineries and paid subsequently to the RAF via the National Treasury and the Department of Transport, customers obtained indemnity and compensation.
The RAF’s customer base was the 49.3 million South African citizens, some 9.7 million foreign visitors per year, and an estimated five million illegal immigrants (slide 17). All were covered by the RAF. In exchange for the payment of the fuel levy, collected at refineries, customers were given indemnity and compensation (slide 18).
Mr Modise explained the process of collecting from refineries the fuel levy via the SARS, the National Treasury and the Department of Transport (slide 19). The fuel levy had replaced the old system of third party insurance purchased at the time of buying a car, but often not renewed.
Mr Modise explained the process of submitting claims to the RAF (slide 20). Road accident victims could claim from the RAF for medical expenses, loss of income, loss of support, general damages and funeral costs. Claimants could claim directly from the RAF. However, alternatively they could claim through an attorney, and 90% of claims were for various reasons submitted through attorneys. The parties could use the courts to determine the claim. Legal and expert costs were claimed by attorneys.
Mr Modise explained the problems arising from the fault based system of compensation (slide 21). ‘The object of the Fund shall be the payment of compensation in accordance with this Act for loss or damage wrongfully caused by driving a motor vehicle’. (Section 3 of the Road Accident Fund Act, 1996 (Act No. 56 of 1996). The RAF spent a disproportionate amount of time determining who was at fault, rather than prioritising assisting the injured.
The nature of compensation covered included past and future hospital, medical and related expenses, funeral expenses, past and future loss of support, past and future loss of earnings, and general damages (slide 22).
Referring to the Amendment Act introduced on 01 August 2008, Mr Modise discussed ‘the new scheme’ and the ‘no-fault scheme’ to be introduced ‘soon!’ (slide 28). The old scheme’s faults included its complexity. It was very difficult for a claimant to prove fault – even lawyers who were not specialists in third party compensation found it difficult to claim from the scheme. ‘This is why the scheme is so inaccessible to ordinary South Africans’.
Furthermore, a fault of the scheme was its subjectivity in the need to project expected earnings of a claimant. This perpetuated past inequities, since assessors based projected earnings on earnings of parents. This was a scheme where ‘the poor subsidise the rich’.
The institutional framework was problematic. The scheme was unaffordable; re-insurers in London were amazed that a tiny developing economy such as that of South Africa was ‘so generous’ in the area of compensation in cases such as that of the R500 million claim of Swiss national Schoss. Mr Modise said that the appropriate political decisions had not been taken to plug the holes. It was important to base compensation not on the cost of foreign medical treatment but on the cost of treatment locally provided to reduce these excessive payments to foreign claimants.
The cost of administration was excessive; more than half the R0.64 fuel levy went towards administrative costs, including the costs of legal experts. There was also abuse, especially of general damages which were too often paid to persons who were not seriously injured – this was a form of systemic fraud; moreover, there was need for enabling legislation (slide 29). Currently, even the kind of claims forms used by the RAF was prescribed by legislation.
Within ‘the new scheme’, the socio-political aims of the government must be taken into account (slide 30). There should be limitations only if reasonable and justifiable in an open and democratic society (slide 31).
In discussing ‘the new scheme (slide 32), Mr Modise described the legislative background and the seven commissions of enquiry since 1954. What had gone wrong in the past was an inappropriate solution to a socio-economic problem. He said that road accidents were a negative consequence of economic growth and development (slide 34). He said that ‘no-fault’ was not necessarily a panacea; successful fault-based schemes existed in the world – such schemes were not subjective. Most of the cases with which the RAF dealt were concerned with ‘quantum’. The advantage of no-fault was that it reduced the processing time for claimants.
Mr Modise stressed the importance of changing legislation in order to change the RAF’s model. It was a scheme that could really help poor South Africans if such changes were made.
Mr Modise reviewed motor vehicle accident (MVA) systems throughout the world (slide 36) and the shortcomings in the South African system as found by the Satchwell Commission (slide 37). The new scheme focused on accident prevention, rehabilitation, benefits and cover (slide 38). The Amendment Act of 2005 was an initial attempt to address problems with the existing scheme (slide 39) by excluding claims for emotional shock and limiting loss of income and support to a maximum of R160 000 per annum irrespective of the actual loss. General damages were to be paid only for serious injuries.
Mr Modise reviewed elements of the rescue plan, including key challenges identified by the RAF such as the inability to process claims effectively, the high costs of administration and service providers, the prevalence of fraud and corruption, the dissatisfaction and disillusionment of stakeholders, the unsustainable economic model and poor financial health (slide 41). The first four of these challenges were ‘largely RAF controllable’. The last two were could be influenced by the RAF but not controlled by it.
Rescue plan actions were described (slide 42) comprising internal initiatives such as a review of operations, risk and governance, and stakeholder engagement, and joint external initiatives including a financial review to develop an RAF model that was financially sustainable and to eliminate the deficit and return the RAF to solvency. The RAF sought to reduce costs to 33% of compensation paid by 2010 (slide 43).
Strategic alternatives were outlined (slide 44). Legislative amendments would be necessary to redesign the RAF’s model (slide 45). The RAF sought to become involved proactively in ‘the pre-lodge process’ of claims, since delay of up to three years in lodging claims resulted in loss of evidence, gave the RAF little time to assess and verify facts, and less time to respond (slide 48).
The RAF sought support from the National Treasury in setting a fuel levy policy that would result in the scheme being fully capitalised (slide 49). The RAF sought to focus on delivery and customer service (slide 53). In this context Mr Modise noted that few RAF staff had previously interacted with accident victims.
The RAF sought geographic access where it was most needed (slide 54); including a presence in provincial hospitals to enable claims to be made early before victims were approached by touts. It would be possible to claim in the rural areas from mobile claim centres. Electronic claiming would be possible. A new claims operating model was described (slide 55). Potential improvements in staffing efficiencies were described (slide 58). The fully-integrated SAP system was introduced in December 2007 (slide 59). This would enable clients to track claims. The roll out of the new claims management system had begun (slide 60). Full migration to the new system, whereby the new system would process new and old legislation claims, was envisaged in 2010 (slide 63). The RAF’s information technology (IT) plan was described (slides 65-67).
The fuel levy pricing model was described (slides 70-83). In this regard the model was split to separate the backlog funding and future pricing. A macro economic review was provided as a background (slides 85-87). The RAF reported that the claims backlog had dropped over the last three years (slide 88). The average age of outstanding claims had been reduced (slide 89). However, provision for outstanding claims remained a ‘black box’ (slide 90) and the RAF remained insolvent (slide 91).
Cash holdings had been managed steadily (slide 92). Revenue had increased to nearly R12 000 million by 2009 (slide 93). The fuel levy represented less than 7% of the fuel price (slides 94-95). There had been an increase in income due to transfer payments (slide 96). The diesel rebate was increasing (slide 97). Claims payments remained the largest component of costs (slide 98). Suppliers were benefiting from claiming directly from the RAF (slide 100). Legal costs remained a drain to the scheme (slide 101). Contingency fees continued to rob claimants of relief (slide 102). General damages remained a big leakage in the scheme (slide 103). The scheme remained wasteful with avoidable costs (slide 104). The RAF was grossly undercapitalised (slide 105). An analysis of important financial indicators showed that problems had been in existence for years (slide 106). The RAF grossly lacked liquidity (slide 107). Cash holdings were close to one month’s worth of claims (slide 108). The IBNR was adding to increased liability (slide 109). Liability had increased in recent years (slides 110-112). The RAF’s staff complement mirrored the demographic profile of society. Costs had been kept under control (slide 114). The RAF’s budget for 2010-2012 was described (slides 115-119).
The Chairperson thanked Mr Modise for a well-detailed presentation, and commended him for ensuring that the hard copy of the presentation circulated to Members matched exactly what he had presented on the screen. This made it easy for Members to follow the presentation and make comments.
Mr S Farrow (DA) thanked Mr Modise for another professional and thorough presentation, but was concerned that the Committee was hearing the same story over again.
Mr Modise agreed with Mr Farrow that it sounded ‘like a broken record’. It went back to what he, Mr Modise, had said earlier, that there had been seven commissions of enquiry, and progress seemed to be slow. The RAF preferred to view the fuel levy less as a tax than as a contribution to the cost of road accidents. At present, there was a shifting of responsibility to future generations. It was all very well not setting the correct fuel levy on the basis that someone else would eventually pay. Those people would be our grandchildren and this was unacceptable.
Mr Farrow believed that the Portfolio Committee had the power to change matters for the RAF. The Treasury had briefed the Committee the previous year on a remodelling of the fuel levy to ensure that it made a sufficient contribution to the RAF’s funding. He was concerned that the RAF’s deficit had continued to grow.
The Committee had deliberated on some amendments to legislation in 2005 to the effect that foreign claims allowed in South Africa would no longer be paid out in foreign currency but in rands and in accordance with the tariffs of South African medical practitioners. He asked about the outcome of those deliberations. There was nowhere else in the world where a tourist could arrive, refuel a motor cycle with a few rands worth of petrol, become involved in an accident, and succeed in a claim for R500 million. This had to be stopped ‘and the power actually rests in our hands to make sure that happens’. When South Africans went overseas, they took out cover for accident insurance.
In effect, however, after those amendments and the R160 000 cap, one was no better off than four years previously. When Mr Modise had reported to the Committee previously, he had indicated that there were various constitutional court challenges with regard, for example, to the terminology used to define serious injury. At the same time there were some changes that were made by the Department before that amendment went through for final ratification; this resulted in delay and having to refer to the President. This delay, according to Mr Farrow’s understanding, was costing the RAF R10 million a day, simply because the amendment that Parliament had requested failed to go through. This worried him.
The cheapest way of providing assistance to people was surely through the fuel levy. Therefore if it was necessary for the Committee to appeal for an increase in the levy to ensure that the RAF would remain viable and to reduce the backlog, then the Committee should do so.
Mr Modise responded that the reason for the delay in making changes to the RAF and the consequent costs to the economy was mainly the opposition of interest groups. Over the time span of seven commissions of enquiry, the interest groups had been consistently strong. However, the RAF was confident that with the ‘new political will’ and the interest of the Committee, changes could be effected through legislative changes that would begin to address some of the problems. He asked Members to remember that these problems were not unique. Nor were they difficult to serve. They just required political will to put into place appropriate legislation, even if some parties objected and took the matter to the Constitutional Court, since if proposed changes were deemed appropriate for a democratic society, some of the changes would be passed by the Constitutional Court. The South African Constitution did not provide for ordinary South Africans ‘to be robbed in this manner’. He remained hopeful that some of those changes would eventually be achieved.
Dr Maria Koorts commented on the Amendment Act. She said that the RAF was faced with past and present challenges. During 2008 most of those challenges had been addressed; however, some of the consequences of the historic challenges would continue to be faced in years to come. She outlined the most important changes, referring to slide 39. Within the fault-based system as at present, it had to be asked if the RAF could be sustainable with the income that it was at present deriving from the fuel levy. ‘The answer is yes.’ However, if the RAF was also to be expected to pay the backlogged claims, ‘it is not possible’. It was for this reason that the RAF did not constitute a proper entity in the financial sense. She suggested that one must be very responsible and careful in making any changes to the system. The Department was examining various options. It was necessary to address the comprehensive social security issues that South Africa was trying to integrate. However, it was necessary to affirm that the RAF would be able to survive financially, although it might not be able to address all the other challenges facing it within the ‘legal fraternity’ and the ‘medical service fraternity’. The Department needed the support of the Portfolio Committee ‘to address the R40 billion backlog’. The Department regarded a funding model that sought to address this backlog retrospectively as unsatisfactory.
Mr Modise added that there were strong interest groups that sought to maintain the system as it was at present, because the money involved was more than R2.5 billion; it was money that was taken through contingency fees. The President had signed an amendment into law in 2005. However, the RAF had been able to obtain its enactment only from August 2008, because the Law Society had sought to challenge the RAF at every step. The initial Constitutional challenge related to an administrative matter. All that the Department had sought to do was to publish changes and promulgate changes in the administrative part of the Act, such as regulations for the appointment of directors. Because initially the wrong clause was referred to, which the President corrected, the Act ‘got stuck for two years in the Constitutional Court and by the Law Society’. Moreover, the main body of amendments was subject to challenges by the Law Society. ‘Their hope is that it will take as long as possible.’ The RAF hoped that the Committee would be strong because any changes in legislation would be challenged. ‘There is too much money involved.’
Mr Farrow said that a problem with the RAF was that it had between 500 and 600 litigators within its business, and some 90% of claims were made by people who were fighting each other through litigation.
Mr Modise agreed with Mr Farrow that a large number of the RAF’s staff were legally qualified. He said that the Road Accident Fund was undertaking a complete retraining of all its staff members with better utilisation of specialised skills towards the objective of faster processing of claims (slides 122-123). The Fund admitted that few of its staff thus far had direct contact with accident victims. It was true that most of the claims were settled at the steps of the court.
Mr Farrow said that in the Western Cape about five years previously, there was an arbitration pilot project to administrate claims on the basis of fair compensation. ‘I just think that we need to know whether that arbitration process is not the way forward to get rid of this horrible amount that you talk about of R2.15 billion …. It’s like putting money into a bottomless pit, because you got R2.5 billion from us last year as a special cash injection and all it did was cover the damned costs of a another couple of lawyers having a go at each other.’
Mr Modise responded regarding the arbitration pilot project established with the measurable objectives of reducing the time taken to process claims and costs thereof. It was unfortunate that some panel members delayed beginning their work until as little as ten days before the court case concerned. In this regard, it was to be noted that to obtain a date for a court case could take as long as 18 months, for example the case of the Swiss national who had intended to be in South Africa for only three weeks. The premium that he paid in terms of the fuel that he had purchased for a Harley-Davidson motorcycle did not exceed R100. The accident had happened in 2002. The claim had been settled, after intervention, only as late as 2007, when he received compensation of R500 million. Thus the claim had taken five years to settle, even though it was in the arbitration forum. It had been found that the same behaviour had existed as previously. ‘It takes two to tango.’ Some of the problems arose from some of the RAF’s own plaintiff attorneys who said that they would not do any work until there was pressure of time. There was delay in submitting documents, and delay from plaintiff attorneys who would not begin work ahead of time. As part of the arbitration process, it was aimed to obtain the co-operation of claimants in subjecting themselves to medical tests. This was to avoid waiting in the absence of a medico-legal report. He admitted that it had been partly the fault of the RAF that such behaviour had continued. Arbitration had not proven cheaper than the normal court process, since the RAF was required to pay for the services of arbitrators. There was thus no real benefit in terms of cost. The greater problem, however, was ‘behaviour that has been engrained for over sixty years that has been difficult to break.’ Thirdly, however, the RAF would say that arbitration was the mechanism of choice based on the experience of other countries. However, in South Africa, the relationship between parties had been ‘exceptionally adversarial’. ‘That was the sad part with the arbitration forum,’ which could have worked but for the manner in which it had been implemented.
Mr Farrow asked Mr Modise if he was aware of any legal processes that were not above board. He asked if the RAF had taken upon itself to report any lawyers deemed to be unscrupulous to the Law Society for investigation.
Mr Modise replied that the RAF had an arrangement to investigate attorneys and medical practitioners who were suspected of dishonesty. Such attorneys were reported to the Law Society and in certain cases action was taken. However, in reality, the RAF lacked detailed statistics on how many attorneys were being taken off the roll of the Law Society for dishonesty. He added that the RAF was aware of legal processes that were ‘not above board’ which it reported to the Law Society. Moreover, the RAF had a forensic unit.
Mr M de Freitas (DA) was pleased to see statistics in the RAF’s presentation but was concerned that they were already outdated. According to information given at a conference on road safety attended by the Minister in Dar-es-Salaam in 2009, trends now indicated that road accidents would become the number one killer of all age groups above 10 years. As a continent, Africa was the ‘biggest road killer on the planet’, with about 200 000 people dying every year on the roads. ‘It’s just madness’. In South Africa the problem was underrated. Mr De Freitas was himself one of the 297 000 claims. His own dealings with the RAF, before he had recourse to legal assistance, had been less than satisfactory. As a road victim one was forced to seek legal advice, because legal practitioners were the individuals who knew whom to contact and how. His accident had occurred in 2007, but his court case would not be until 2010. ‘The drama that one had to experience with the RAF was just traumatic.’ The proposed changes were important and needed to be taken into account. He wanted the Committee to examine the changes that it could push forward immediately. As a new Member he wanted to ascertain the reasons for the delay. He asked about progress in making the RAF more user-friendly and efficient. He anticipated that the legal fraternity would defend its stance by arguing that because the RAF was complicated and not user-friendly claimants needed their services.
Mr Modise acknowledged the personal experience of Mr De Freitas when saying that one of the reasons that the RAF was retraining its entire staff was that it felt that it was not giving its clients the customer service that they deserved. He admitted that there had been years of incorrect training and it was difficult to deal with the arrears. Very few staff had ever met an accident victim. Typically all that they saw were pieces of paper.
Ms P Ngwenya-Mabila (ANC) also commended Mr Modise on his presentation. She complained that it was difficult for claimants to find out the total amount of the compensation that they had been paid. When the RAF was approached, enquirers were often referred to the attorneys concerned who did not give a clear answer.
Mr Modise responded that if money was held in a trust account, ‘that interest, never, unfortunately, gets into the hands of the accident victims’. Attorneys had found it convenient to use the five to ten years to process a claim as an excuse; also on many occasions when the RAF had paid claims, lawyers retained the money. Because accident victims had no mechanism by which to deal directly with the RAF or had not been empowered to do so, ‘that excuse has been very convenient’. In the case that the money was held in a trust account, the interest came into the hands of the Law Society. He replied further that if money was held in an attorney’s own bank account, the interest accrued was rarely paid to victims. The whole matter was complex and lacked transparency.
Mr Modise responded further that it was unfortunate that some of the staff members were not able to assist claimants. This reflected the need for more staff training. The RAF had lost a court case in Cape Town in which the court had ruled that the RAF could not pay compensation directly to a particular accident victim. The RAF had been considering the idea of making regular public announcements. ‘In this regard, we do believe that South Africans do deserve to know how much compensation has been given to them.’ That information would allow them to make the right decisions.
Ms Ngwenya-Mabila also asked how long the claims process was, what proportion of claims were paid directly to claimants rather than through attorneys, if there was a public awareness campaign on behalf of the RAF, and if the claims form was user-friendly and available in the various national languages. She asked what the current status of payment to service providers was. She asked the RAF to provide more information on its experiences with the changes in the system of collecting the fuel levy. She asked how funeral costs were paid. She asked for further clarification about the payments made to foreign claimants. She asked if the RAF had a new board to replace the one whose term had expired in July 2009.
Mr Modise responded with regard to the time taken to claim from the RAF that one of the big handicaps was that the RAF’s present scheme was fault-based. The necessity to prove that someone was at fault involved ‘traversing complex legal issues’. This was especially difficult in the case of accidents in remote rural areas. A second reason was the ‘quantum’ approach to claims, in which victims’ attorneys sought to determine compensation based on projected loss of future earnings. Such projections were often speculative. A further difficulty was that to obtain a court case took at least 18 months, whereas the RAF sought to process claims within 120 days, in accordance with the terms of the Road Accident Fund Act. If one could achieve a system whereby accident victims did not have to prove fault, then it would be possible to pay service providers such as ambulances crews immediately, rather than delay until fault had been proven. It was vital to provide medical attention to accident victims immediately. This would not only save lives but save society some of the ongoing costs of rehabilitating accident victims.
Mr Modise stated that the RAF did have public outreach programmes, but did not do as much as it wished to do. The RAF wanted to ensure that all its systems were properly redesigned, tested and proven, before undertaking a full public awareness campaign to encourage accident victims to approach the RAF directly; this was to avoid the disappointment to which members of the public had become accustomed. It took about two and a half months for money collected by the SARS at the refineries to reach the RAF’s coffers via the National Treasury, although the system had the advantage of ensuring that the levy was collected successfully. The National Treasury administered the diesel rebate. Previously, when the money had been collected by the Central Energy Fund, it had reached the RAF within one month. The term of office of the RAF’s board had expired.
Dr Maria Koorts added that an interim board had been appointed to attend to fiduciary duties. Candidates had been short-listed.
Mr Modise responded that the biggest payments were made to persons who were injured rather than to those who passed away. There was no fixed amount that the RAF made for funerals, but, in accordance with the Act, the RAF paid ‘a reasonable amount’ for the cost of a funeral.
Mr E Lucas (IFP) said that if South Africans travelled overseas, they had to ensure that they had extra cover. He asked if the same could not apply to foreign visitors to South Africa. ‘So I think that they’re really ripping us off.’ The RAF had been abused by so many people. Two years previously he had been at the hospital in Durban with a friend and he had observed agents running around and getting people to sign in the reception room, at a time when they were most vulnerable. The legal fraternity served a purpose, but he did not think that it should be their main source of income. ‘Worst of all, the victim never knows how much they’re entitled to.’ In the rural areas there were many accidents with tractors and trailers without lights, yet for diesel fuel there was a rebate. This was contradictory because the same vehicle that was not supposed to be licensed was on the road and was the cause of an accident, but no one could claim from them. One should examine this situation very closely, since someone had to pay. Then there was the situation of vehicles that were unroadworthy, of speeding drivers, and drivers under the influence of alcohol. The driver who was the cause of the problem should pay, whereas at present the RAF was expected to pay out, while the guilty driver went free. He asked if the fuel levy applied to paraffin.
Mr Modise responded that South Africans, when they travelled abroad, purchased travel insurance to cover medical expenses incurred while travelling. One wondered why the same could not be required of foreign visitors when they came to South Africa. This was an important point. The South African Constitution gave protection to anyone who found him or herself in South Africa, but did not prevent the development of policies to ensure that limits were applied in terms of submitting claims in travellers’ own currencies. He said that the law should be modified to prevent abuse of accident victims by touts or ‘ambulance chasers’. He deplored that some members of the legal profession sometimes took advantage of accident victims and asked them to sign documents without informing them of the options open to them. He narrated personal experience of how he had, after involvement in an accident, been approached by various parties asking him to sign documents. ‘This is how our people are taken for a ride.’ This kind of situation also led to fraudulent claims.
Mr Modise said that accidents involving farm tractors on farm land were covered under occupational safety and health regulations. However, compensation for the victim of an accident involving a farm tractor on a public road was available from the RAF, though technically the owner of the farm tractor would have claimed a rebate on the levy as provided for under the diesel rebate scheme for operators of vehicles not normally used on the public roads. In such instances the RAF found itself covering clients who had not contributed by means of the fuel levy.
Mr Modise responded to Mr Lucas’ concerns about accidents involving alcohol abuse, reckless driving, and criminal activities such as cash heists. Under the present scheme, victims claimed from the RAF. In other jurisdictions, similar schemes had introduced limits on such claims. He pointed out that the RAF was primarily concerned with saving lives, but beyond rendering essential medical attention the RAF did not want claimants to benefit from crimes that they might have committed. It was important to provide for this limitation in new legislation to include it in the RAF’s scheme.
Mr Farrow asked a follow-up question concerning the legal costs and the implications thereof, ‘one of the most important things that we could put on the table today’. One of the things that Mr Modise had mentioned concerned the issue of protocol. If one examined court precedent over the past sixty years, one could find precedent for every injury and case that had taken place within the RAF over that period. If those arbitrators were to be given a fixed rate, to go and make a deal with the RAF’s legal representative, who would be trained to exercise an administrative mandate, then legal fees of more than R2 billion could be avoided and better spent on compensating accident victims. It would just take two legal minded people to come together to assess the value of a claim based on precedent. If the precedent could be reduced, then that would be all to the good, but the important thing was to accelerate the processing of the backlog of claims.
Mr Modise responded that the RAF accepted Mr Farrow’s point. For the RAF, nothing would have been better than to deal with claims on that basis. However, one of the difficulties that the RAF had found was that unless it addressed also some of the ‘perverse incentives’ that were operating in the present system, such an intervention would never work. Some of these ‘perverse incentives’ arose from the viewpoint of plaintiffs who hoped that they could get more and more by protracting their cases. ‘The more you get, the more you hold out for.’ Also claimants saw courts awarding high levels of compensation and thought that if they persisted in their claims, they could obtain even more. This dissuaded claimants from agreeing to an early settlement. Most of the discussions in court were in fact not centred on fault (who caused the accident) but on ‘quantum’, ‘because it’s so subjective, it’s like you can throw a dart at the wall and you’re lucky, and the guy just push and push and push…’ Unless those ‘perverse incentives’ could be addressed, other interventions would be futile. Most of the legal battles could be removed if protocols could be established to pay a fixed amount of compensation to victims of a particular category of accident. ‘One of the things that the RAF has been pushing for is to say “Remove the subjectivity in determining the compensation that somebody is entitled to; don’t leave it to experts who argue on matters where, in reality, not even the courts can foretell the future. Why don’t we come up with a scheme whereby we say, if you have this type of accident, this is a fixed amount that you get; once you do that, you get away from all these perverse incentives where people hold out and think that it’s going to be more and more.”’ This showed fundamental problems in the scheme that needed to be addressed.
Mr Modise thanked Members for the incisive questions that they had asked.
The Chairperson thanked Mr Modise for presenting a report and a solution, ‘a good plan’, that served to address the challenges. She noted that Mr Modise had asked for the Committee’s intervention with regard to legislation to ensure that the financial challenges of the backlog of claims could be met. She noted that Mr Modise had said that there was a lack of awareness, especially in the rural areas, of the rights and benefits offered by the RAF. She noted that in South Africa ‘we have two worlds in one … we have the first world that is informed, rich, and has access to information, and we have the third world that is poor, uninformed and [has] no access to information.’
She noted that it was rare that the chief executive officer of an entity or a department presented challenges as they really were rather than portray the entity as doing well, when that was not the case. The RAF’s presentation was commendable because it spoke not only of its achievements ‘within a system that was not good’ but also analysed the system from the viewpoint of how it was supposed to benefit the accident victim and had pointed out the flaws and the challenges that needed to be addressed. Moreover, the RAF’s presentation indicated clearly to the Committee what was required from it to help make the RAF’s plan a success. ‘A plan remains a plan until it is implemented … Mr Modise, you have a very good plan.’
She noted that the RAF had spoken of the no-fault policy. She asked the Department about progress with the legal process to achieve the no-fault policy. This was important since the RAF’s plan depended on implementation of the no-fault policy.
Dr Koorts responded on the no-fault policy. The Department had drafted a no-fault policy and had responded to the Cabinet’s questions submitted in 2006 regarding the constitutionality and the financial and operational impact, including effects on other sectors, in particular the health and social development sectors with regard to social security. The no-fault policy would be tabled for comment as a draft to the appropriate cluster, dealing with social security, on 09 September 2009. The Department would also advise on appropriate principles on which the Department would like to request public comment as soon as possible. It would be very important to note that to move a whole system from fault to no-fault, apart from agreeing on the concept, which could easily be done in a small group such as the Committee in its present meeting, entailed reaching agreement on the impact on the industry at large and on members of the public. It would be important to examine how the health sector would handle the concept of no-fault, for example. There would be smaller issues that the Department would debate in this Committee at a later stage. However, firstly it was necessary to draft that document responsibly; it would be premature to commit to the content and details of such a policy prior to its endorsement by the Department’s principals.
The Chairperson asked for resolutions to change the culture of not doing work until there was pressure of time.
Mr Modise said that historically because the scheme allowed the RAF to pay all the legal costs there was an incentive to prolong and elaborate processes, for example, writing 20 letters in regard to a matter that might be resolved in a single meeting between the parties. It was an unintended consequence of the RAF’s willingness to pay all legal costs.
The Chairperson narrated her personal experience of her brother who had passed away in a motor vehicle accident; he had been the father and breadwinner of six children. ‘He never got a cent.’ Some of his children were very young at the time. She saw many advertisements on the South African Broadcasting Corporation (SABC) for insurance services but not for the RAF. If public awareness campaigns were too expensive, she asked why there could not be presentations to Members of Parliament, so that they could pass on the information to their constituents. She noted also the possibility of using the multipurpose centres in every ward that were often unused. Also the ward committees, which were paid by government, could be used to educate the communities.
She narrated her personal experience as part of the voter education team in 1994 in which one of the communication strategies was to play music tapes in the taxis and buses. This was effective in ensuring that members of the public knew how to vote.
Mr Modise thanked the Chairperson for many of the questions and comments, which highlighted areas where the RAF could do better, in particular in terms of public awareness. He admitted that before his appointment to the RAF, he had hardly known of the organisation’s capacity to help the victims of road traffic accidents. There was no reason why the RAF should not invest in communication.
The Chairperson asked about the relationship between the RAF and the transport Sector Education and Training Agency (SETA), since one heard that money intended for training was under spent. At the same time one was aware of the need for a public awareness campaign to educate communities about their rights with regard to injuries sustained in road traffic accidents.
Mr Modise said that the RAF did not have a direct relationship with the SETA, but it would examine the matter.
The Chairperson narrated her personal experience of attending a funeral in the Eastern Cape for 19 victims of a bus accident; she also told of an accident between a truck and a kombi in which 15 people died. She asked why one saw in the hospitals agents other than community workers.
‘It is very unfortunate that the legal fraternity in this country, especially the Law Society, would continue to commercialise the misery of the people and fight to have the system unchanged because it serves their interests and greed for money with no benefit to the public and the communities that we serve. Why is this carrying on 15 years into democracy? … I am questioning the attitude of the legal fraternity, particularly the Law Society to say money for them is more important than the people. The scheme was not designed to benefit them but they can use all the legal muscle to have the system unchanged so that they can continue to benefit while other people are suffering. Why is the misery of the people in this country so much commercialised? Are material resources more important than people? And I think that this Portfolio Committee would need to look at more biting laws so as to deal with that.’
The Chairperson expressed satisfaction with the outcome of the meeting and commended the RAF for not concealing any issues. She gave a commitment to inform the RAF of the matters that the Committee would be following up on its behalf.
After the minutes of the 18 August 2009 meeting were considered and adopted, the meeting was adjourned.
- Briefing by the Road Accident Fund on its organisation, restructuring and programmes; Consideration and adoption of previous min
- Briefing by the Road Accident Fund on its organisation, restructuring and programmes
- Transport: briefing by the Road Accident Fund on its organisation, restructuring and programmes
- Road Accident Fund (RAF) on its organisation, restructuring and programmes
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