Briefing by Board of the Road Accident Fund

NCOP Public Services

28 October 2002
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Meeting report

SELECT COMMITTEE ON PUBLIC SERVICES

PUBLIC SERVICES SELECT COMMITTEE
29 October 2002
ROAD ACCIDENT FUND: BRIEFING BY BOARD

Chairperson:
Ms. P C P Majodina

Documents handed out:
Briefing on Road Accident Fund
Some tables might not appear on the web version. Please email info@pmg.org.za for full document

SUMMARY
The Board of the Road Accident Fund (RAF) briefed the Committee on the state of the fund, the state of its finances and actions concerning allegations of fraud and corruption in its ranks. The Committee also heard that definite steps were being taken to educate and inform the public about the fund and how they can proceed in claiming from the fund.

MINUTES
The Chairperson, Ms Majodina, explained that the board of the RAF was invited to brief the Committee since there had been much in the media about fraud and corruption in the fund. She also mentioned that in the process of amending the RAF Bill many questions had arisen and for that reason the Committee thought they would hear from the board itself. They had asked the board to address certain issues, the state of the fund, legal and operational framework, fraud and corruption, delays in processing of claims and the future of the fund.

Mr Naidoo: Chairman of the RAF Board, explained that Judge Greenland would brief the Committee on the legal and operational aspects of the fund.

Legal and Operational Aspects
Judge Greenland began by outlining the fundamentals of the RAF. He explained that the RAF was the public insurer. Everybody paid a premium when purchasing fuel and this provided every driver with cover should they injure or kill someone in a road accident. This meant that there was no uninsured driver in South Africa. This was an African invention and it is unmatched internationally. The average motorist pays approximately R300 annually into the RAF through the fuel levy which at present was at 18,5c per litre.

Judge Greenland continued to explain that the fund had been in place for the last 50 years. It had, however, changed in 1996 when the fuel levy system was introduced. It is therefore a creature of statute since it was brought into being through the Road Accident Fund Act, 1996.

The Fund's mandate is to compensate if loss, resulting from injury or death, is caused by fault. The RAF attends to claims such as medical expenses, loss of income, funeral expenses and general damages. Claims of certain categories of passengers are limited to R25 000 against their own driver, but claims against other drivers are unlimited.

The RAF is managed by the Chief Executive Officer who reports to the board. The board consists of members from a cross section of society. The board reports to the Minister of Transport. Of the claims that are lodged with the board, 99,9% are done via the legal profession although claimants can lodge claims themselves.

Judge Greenland continued to explain that two issues were considered when claims were made. The first issue was the question of fault. This created a problem as it was not an exact science. There was a great deal of tension around this, which created bad publicity. The second issue was around the amount that should be paid out. This also created problems because humans were never satisfied. These two issues caused the RAF to be controversial and not very popular.

The real problem that the RAF faced, according to Judge Greenland, was the high accident rate in South Africa. South Africa had the third highest accident rate in the world after Kenya and Egypt. He felt that this problem should be addressed. The other problem facing the RAF was the deficit it faced as a result of the high accident rate. The fuel levy, which was used to fund the RAF, was also politically sensitive. Claims which were paid out to passengers also mainly came from the poorer communities. The Fund also had a bad habit of delaying processing. The problem was that the Fund was reactive. It was not possible for it to be pro-active since it had to wait for claimants to submit their claims.

Claims have increased by 400% over the last year. It was important to note that the system of paying out large lump sum amounts created an incentive to participants. This also generated fraud and delay as the claimants' representatives held out in the hope of receiving more. An inherent defect of the fund is that it was never really geared to address the medical component of claims. The Board, however, is addressing this and a medical executive is to be appointed.

In the year 2002, the fund has paid out R2,028 billion in compensation. It was the Judge's feeling that the Fund was doing well despite the problems it had. The number of outstanding claims which the Fund had to attend to was increasing and this was largely due to the fact that the Fund had a capacity problem.

In closing, Judge Greenland stated that the RAF Commission had still not submitted its report. It had asked for a number of extensions and this created some uncertainty around certain matters.

Discussion
Mr V Windvoel (ANC) requested that a clearer definition of fault be given. He also suggested that the RAF pay out installments instead of lump sum amounts since it seemed that lump sum amounts were causing a problem. He wanted to know what the status of the Commission's report was.

Rev. P Moatshe (ANC) asked whether South Africa's accident rate really was very high or whether it was media propaganda.

Ms D Ntwanambi (ANC) asked if the RAF would pay out in the event of veld fires affecting drivers and causing accidents. She also wanted to know if claimants could reapply should a claim be rejected or should the RAF lose documents.

The Chairperson wanted know whether claim forms were user friendly and what steps were being taken to educate claimants to the fact that they can go direct to the fund and not necessarily through a lawyer. She also wanted to know what relationship exited between the RAF and the traffic departments.

The RAF team gave a general response to the set of questions. Mr Naidoo suggested that the fact that the RAF Commission's lifespan had been extended was a stumbling block to the RAF. The Minister of Transport was expecting the report at the end of November. The RAF had not seen the report yet and once it had been given to the President, it would be given to the RAF board. He then handed over to Mr T Mhambi to explain what had been done about disseminating information.

Mr Mhambi explained that the main problem was that claimants did not know that they could approach the RAF directly. Many claimants were approached in hospitals and then signed away power of attorney. The RAF had embarked on a program to address this problem.

Leaflets with information about the RAF and how to claim, have been printed in all official languages. A total of 750 000 leaflets have been printed. The RAF has embarked on roadshows to publicise its activities. These roadshows have been held south of Pretoria as far as East London, west of Pretoria as far as Middelburg, north as far as Rustenburg and east as far as Newcastle.

The RAF has also developed a partnership with the South African Commuter Organisation and have held workshops to share information about the Fund. The RAF also has a weekly slot on all the SABC radio stations. Advertisements have also been placed in all the major newspapers.

Mr Mhambi explained that results have already been seen since they have embarked on this program. In Cape Town, Durban and East London, the number of claims submitted per month have increased from an average of 55 to 99 per month. In Johannesburg and Pretoria the number of cases have increased to 360 per month.

Mr Mhambi stated that claim forms were not as user friendly as they could be. There are, however, information officers at RAF offices and they sit down with claimants and assist them in filling these forms. These officers also follow up on claims. The processing time for claims has decreased from eighteen to six months. The fact that the fund only had five branches militated against it processing claims faster. Mr Mhambi pointed out that the fund had earmarked R1,5 million in its budget to develop a strategy so that it was physically present to help claimants. The other alternative was to use non-governmental organisations as agents or to use satellite offices. It was hoped that by 2005, 50% of claims would be submitted directly to the fund. It is also planned that leaflets be placed at Traffic Department offices. The Traffic Departments have requested R30 000 for RAF kiosks in its offices.

At this point the CEO of the RAF, Mr Kgomongwe, explained that although they wanted claimants to claim directly from the fund, lawyers do know more than the average member of the public and can therefore submit a more thorough claim. It was therefore a priority to empower the public so that they could claim directly.

Ms Majodina asked whether claimants were penalised if they changed attorneys and whether the information officers could not be brought closer to the public through municipal offices.

Judge Greenland added his response. He said that claimants can sue attorneys if the claim lapses. South Africa's accident rate was not propaganda and the statistics were given by the government itself. He agreed that the payment of lump sum amounts was a problem and said that it was the board's aim to do away with these cash incentives. In explaining what fault meant, Judge Greenland said that a wrong must have been done for it to considered as a fault. In the case of veld fires, he explained that if a driver causes an accident by driving in the smoke, it is the fault of the driver, and therefore the RAF would be liable. South Africa was the only country which compensated in the case of hit and run accidents. He did admit that this opened the door for fraud.

Mr Mhambi added that the Johannesburg and Pretoria offices had relocated to the city centre so that it could be more accessible to the public. T he aim was to use state and community facilities as sites for the fund.

Mr R M Nyakane (UDM) wanted to know when the above would happen. He stated that this was a matter of urgency.

Mr Windvoel suggested that party constituency offices also be used to disseminate information about the fund.

Rev. Moatshe stated that he did not know where to find the leaflets mentioned and added that he was hearing for the first time that members of the public could claim directly. Was this information being hidden from the public?

Ms Ntwanambi also said that she did not know that she could claim when her daughter was killed six years ago. She also suggested that the party constituency offices be used as information points.

Mr Nyakane wanted to know what the Fund was doing to empower previously disadvantaged communities.

Mr Naidoo conceded that the Rev Moatshe was justified in the way he felt. The board was also concerned about informing the public. He reminded the Committee that the board was only appointed two years ago and that that it was the first black board. He also stated that Mr Mhambi was specifically appointed for this reason. The Committee's remarks would be addressed and that the RAF was not deliberate in hiding information.

Mr Mhambi added that the study which the board had commissioned would be done by March 2003 and that R30 million was set aside for the establishment of offices in the next financial year. In the case of major accidents, the RAF would go to the site and get claimants to apply for compensation. As an example he mentioned that the RAF had been at the Queenstown accident at which schoolchildren were involved. He welcomed ideas, especially the suggestion to use constituency offices.

Mr Kgomongwe (CEO) also added that the suggestion to use constituency offices would definitely be pursued. The dissemination of information had only started this year and that there were plans to expand the program.

Rev. Moatshe reiterated that he was waiting to the leaflets and urged the board to get the ball rolling. The CEO promised to send the committee leaflets.

Judge Greenland informed Ms Ntwanambi that she could still claim for her child's death although it had happened six years ago. There was no prescription period on the death of children.

Ms T Radebe, a member of the board, explained that she represented SACO and that she ensured that communities were informed about the RAF. Meetings were held at homes, churches and work places.

Finances of the RAF
At this point Mr Naidoo handed over to Mr Rabe to brief the committee on the finances of the RAF. Mr Rabe referred to the table on page 7 of the document handed out and stated that the fund derived its funds mainly from fuel sold. For the eleven months ending in March 2002, the fund had received R2,483 billion from fuel levies. A small amount was also received from investments that the fund had made. It was expected that in the year 2003, the fund would receive R3,167 billion from fuel levies. The payment of claims was 91% of its expenses. The RAF also sponsored the Arrive Alive campaign. Administration costs were 9% the fund's expenses. Of this amount, 60% was spent on human resources. At present, the fund paid out R13,5 million per day. Mr Rabe pointed out that the fund could not increase its income like other insurance companies as it relied on the levies. It had to apply to the Minister should it require an increase in the levy. He stated that the fund was in an insolvent position since it had made provision for outstanding claims. It was hoped that legislation would enable the fund to pay out in installments in future and not in lump sums.

Mr Naidoo then proceeded to discuss the issue of fraud and corruption in the RAF. He stated that the bad press that the fund had received was justified. Some of the reasons for this was the fact that there is a great deal of money available and various people are interested. There are also people in the fund who do not have the RAF at heart.

The board had ordered a forensic audit and had discovered fraud. The board has thus embarked on a program to combat such fraud. Some of the actions taken have included improving the internal system, improving the computer system and improving the claims section of the fund. Interaction between the fund, SAPS, the Scorpions and the Asset Forfeiture Unit has also improved. As result of this, a syndicate was identified and R266 million has been recovered. It is expected that 80% of this amount is fraudulent. The fund has appealed for information on this syndicate and offered amnesty in return. He hoped that the message would reach the public that it was not worth submitting fraudulent claims

The CEO added that relationships with other authorities were being strengthened. They were also reviewing structures and processes so that syndicates could be discovered. A forensic department is also being established. He mentioned that a pilot study was being done in Port Elizabeth, trying to gather as much information as possible at accident scenes and then comparing the information submitted in claims. This pilot project would run until March 2003.

The Chairperson suggested that a national database be set up so that claims paid out would reach the intended claimant.

Mr Windvoel referred to the Commission's outstanding report and said that he hoped they would have more time to study it. He commended the board for its work and wished it well. He hoped that the RAF would extend its offices and eliminate lawyers from the process. He also suggested that the fund issue non-transferable cheques to claimants to ensure that it reached the intended individual.

Mr N Raju (DP) expressed his appreciation to the board for coming and stated that he valued their openness and honesty.

Mr Nyakane also commended board for its work and once suggested that the fund pay claims in installments since the balance could also accrue interest.

The Chairperson said that once the RAF Commission's report was released she hoped to invite the board again to discuss the way forward. She also suggested that the Committee accompany the board on its roadshows.

Mr Naidoo concluding by stating that the elimination of lawyers from the claims process was their main concern but was also a very emotional one. Management had held a symposium with members of the legal fraternity to discuss alternative methods. They had received much opposition from attorneys who were concerned that they would not receive their fees. Management had suggested that the fund would keep back the lawyer's fees and pay the rest to the claimant. The attorneys were not happy with this arrangement. He reiterated that the board was serious about eradicating corruption and stated that certain employees were recently suspended as it had come to light that they were involved in bribes.

Judge Greenland reminded the Committee that the government had ordered a special investigation into the payment of claims, but has been defeated by attorneys in the Constitutional Court. Management had proposed that claimants sign for money and that lawyers be paid their portion and claimants theirs. The attorneys however were not happy with this. He reiterated that was a very emotive issue and that the CEO was not very popular. They were asking government to deregulate this process.

The meeting was adjourned.

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