Road Accident Fund; Airports Company SA; Air Traffic and Navigation Services on their 2015/16 Annual Performance & Strategic Plans

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17 April 2015
Chairperson: Ms D Magadzi (ANC)
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Meeting Summary

The Deputy Minister was in attendance as several entities from the Department of Transport presented their  Strategic and Annual Performance Plans. The Department of Transport is going through a restructuring process, and the Director General outlined the restructuring plans that aim at improving performance in: public entity oversight; strategy planning; monitoring and evaluation; and risk management.

Air Traffic and Navigation Services (ATNS) highlighted its successes and challenges. ATNS aims to increase its spending to R242 million in 2015/16, and to maintain the quality service it has produced in the past. SA has never had an accident due to air navigation failures, and it received two awards recently. The first award is from the African Airlines Association for the best air navigation services provider. The second is a global award that recognized the training efforts of ATNS. Members raised concerns about the involvement of ATNS at small airports to contribute to national security.

Airports Company South Africa (ACSA) presented its 2015/16 corporate plan. It said that a major initiative of this corporate plan is to curb costs on a sustainable basis by over R100 million in the next two years Members asked about the strategic plan and showed concern that the sluggish economy is adversely affecting the growth of passengers in our airports.

The Road Accident Fund (RAF) revenue grew to R22.4 billion last year, with claim payments of R21.5 billion paid, and 21 600 claims worth R6.7 billion still awaiting payment. 173 700 new claims were registered, with 123 000 medical payments made and the reduction of open claims from 232 285 to 217 710.a performance review, noting that last year there were R6.7 billion unpaid claims. However, the model of RAF is unsustainable and will continue to suffer shortfalls and add to government’s liabilities unless legislation around this entity is changed. RAF said the adversarial fault-based compensation system needs to change, and a new dispensation must be achieved to make RAF more sustainable

Sudden load shedding cut the meeting short and the Chairperson decided to pre-emptively adjourn the meeting.

Meeting report

Director General Pule Selepe apologized for events that occurred the previous day. The Director General had not accompanied entities appearing before the Committee, and the governmental officials were not approved. That same evening Mr Selepe phoned Mr Ramatlakane to apologize, and he wanted to apologize to the Committee as well. He is aware of the role of the Committee and takes it seriously. As a new manager, he is focused on stabilizing the management and diagnosing challenges as he goes. The department is focused on improving many issues: a lack of professionalism; poor quality of output, non-compliance with policy and legislation, fraud and corruption, and an extremely high vacancy rate of 23.4%. Three weeks ago the department won a case enabling it to produce drivers licences in-house. It is also pursuing key matters, such as the RAF Bill, the learner transport program, and many other operations, some of which are being planned with the help of the Deputy President. It is considering taking heavy vehicles off the road during peak periods and is rolling out public transport networks in key municipalities. It is looking at the establishment of a single transport economic regulator. Internally, a skills audit, a qualifications audit and a lifestyle audit for officials in the department have begun with the help of the Office of the Director General. This is aimed at improving performance in: public entity oversight; strategy planning; monitoring and evaluation; and risk management.

He noted that Mpumalanga Community Safety MEC Shongwe’s daughter was tragically struck by a vehicle and killed on the 15th April. The department publically shared its grief for this loss.

The department needs to give a full presentation to the Committee at some stage regarding the challenges within the department.

The Chairperson said that the Deputy Minister had also indicated apologies on behalf of the Minister to the Committee. The Committee welcomes these apologies and hopes the department will improve its presentations in the future.

Air Traffic and Navigation Services (ATNS) presentation
ATNS Board Chairman, Mr Mpho Mr Mamashela, said that he was proud that ATNS would be presenting a good story. The mandate of ATNS includes communication with South Africans about the quality of its performance. Positive results from this, as well as international recognition in the form of awards, have led to the respected position ATNS now has. One of the challenges ATNS is facing is spending money and creating jobs, as governmental departments should do. ATNS has deliberately aimed to partner with local companies over international options to always help develop local, black-owned businesses, and this process has led to some under-spending over the last few years which will soon be rectified, as local businesses will be supported even more. Mr Mamashela reminded the Committee that ATNS is working towards the same goal as the rest of the department and is part of one of the first aviation community to put plans in place for the reduction of carbon emissions in the world. The board of ATNS has embarked on a strategy to work towards creating an entity that aims to identify the capacities and strengths of the South African aviation community and develop them within Africa. The Committee will soon hear more about these plans. The ATNS stands strongly against the xenophobia going on in the country, and calls for harmony.

Mr Mthiyane, CEO of ATNS, noted the ATNS was founded in 1993 by an Act in Parliament with the mandate to provide air traffic management and navigation services on behalf of the state in accordance with International Civil Aviation Organization (ICAO) standards, recommended practice as well as the South African regulations and technical standards. The area of responsibility is about 10% of the world’s airspace, incorporating roughly 225 million square kilometres. ATNS works with ICAO guidelines as a first guide, also using the ICAO Africa and Indian Ocean Regional Plan. The SA National Airspace Master Plan and Air Traffic Management (ATM) Operations and Communication, Navigation And Surveillance (CNS) Infrastructure Plan also guide the actions of ATNS.

ATNS has six imperatives that explain the imperatives of the organization. These are:
- Deliver continuous improvement of our safety performance
- Become a transformative organization that invests in its people
- Provide efficient air traffic management solutions and associated services that meet the needs and expectation of the ATM community
- Maintain long- term financial stability, especially in the current economic context
- Play a leading role in the deployment of air traffic management in Africa and selected markets
- Deploy and use leading technologies to the benefit of the ATM community

The strategy linkage of ATNS works with many different outputs, which is determined by the National Development Plan, the DoT governmental outcomes, and ATNS strategic imperatives.

The business concept of ATNS is to fulfill ATM needs in South Africa, while moving towards dealing with other African countries and selected global markets. It will aim to develop a thorough understanding of global ATM needs, and find what it can effectively offer in that context. ATNS needs to excel in: business intelligence; the quality of its product in relation to the global product; and relationship management with different entities in the aviation field. Critical issues facing ATNS going into 2015/16 have been identified, such as aiming to enable the growth and expansion programs that will make ATNS self- funding.

The performance indicators for ATNS in 2015/16 are to:
- Improve safety service provision by maintaining 2.0 safety events per 100 000 air traffic movements
- Maintain an error margin of 0.005% in operations, which is the global benchmark target
- Improve operational efficiency to maintain average delay related to ATNS per delayed flight at 120 sec
- Improve availability of communications infrastructure
- Ensure commercial sustainability and maintain a debt/equity ratio of 25%
- Implement new ICAO performance-based navigation (PBN) concept technologies in ACSA airports which will help to reduce carbon emissions.

Mr Selepe noted that ATNS is one of the global leaders in this technology and that it has benefited greatly from its implementation.

Mr Mthiyane said that ATNS has not done well in its infrastructure development over the past few years, and thus it aims to improve its spending to R242 million in this financial year, R150 million of which will be used on upgrades and replacement of equipment. The SADC satellite network service offered by ATNS will aim to improve its revenue to R26.8 million in the next financial year. Its North-East Africa networks will aim to achieve a revenue of R26.4 million. These African initiatives of ATNS enable pilots in Africa to communicate in ways they would not be able to otherwise, thus improving safety and security in these areas.

The ATNS aims to maintain its 100% compliance approval from its last unqualified audit report. Whistle blowing will also be encouraged. It aims to resolve all issues brought forward within 90 days. The environmental plan of ATNS is to calculate and report on its carbon footprint on a quarterly basis. It aims to offer environmental awareness training to 50% of employees and produce an annual environmental assessment report.

ATNS aims to recruit 60 air traffic services personnel to contribute to job creation, which will come in three batches of 20. It also aims to offer six engineering learnerships and a graduate development program with a capacity of six, while assisting five unemployed graduates. The ATNS has continued to develop air traffic controllers and aims to maintain its workforce capacity levels.

Mr Sepele said that smaller airports would be prioritized for the improvement of ATNS infrastructure and services, and that final plans created in the near future will offer more information about these improvements.

The ATNS aims to reach level 3 of broad-based black economic empowerment, and will hopefully be able to reach level 2 in the next few years. On employment equity, it aims to achieve a proportion of 58% previously disadvantaged people in its workforce, and specifically 40% females within the air traffic services workforce. On B-BBEE, it aims to achieve 72% black representation, 46% female representation and 3.5% people with disabilities.

Mr Sepele reminded the Committee that air traffic workers have to be qualified to the international standard, as there are no quality levels required below what the company needs. Safety standards sometimes have to overrule transformation standards, although the development of female specialists in the air traffic field is going well.

Mr Mthiyane explained the core programmes of ATNS for 2015/16. He also noted the following:
- Speculations about developments in the next fifteen years in air traffic management technologies will be linked with the NDP to guide user expectations going forward.
- The new company programme will take advantage of opportunities for expansion of non- regulated business
- Business processes will be aligned and unified throughout the organization
- Cyber security and IT repositioning will be prioritized with specific safety measures
- The training model will be reviewed and compared to other contemporary programmes
- The services offered in South Africa will be optimized and new technologies will be investigated for use in South Africa

Mr Sepele said that the training programmes planned by ATNS have been delayed by students from Ebola-stricken countries being unable to travel to training classes in SA.

The key assumptions of the 2015/16 financial plan for ATNS have been agreed on by ACSA and the aviation industry, with a baseline determined by research done by the Bureau of Economic Research. The ATNS has a target total revenue of R1.34 million, and a target total expenditure of R1.06 million, with a targeted total profit of R147 661. For 2015/16 total assets will be R2.5 billion, total liabilities will be R601 million and total equity will be R1.9 billion. The target of air traffic movement growth for is 1.6% for 2015/16, and the tariff increase will be 0.8%. These targets are aligned with the corporate plan. Debt equity will be targeted to increase to 22.6% in 2015/16.  A current ratio of 4.02% is the target for this financial year, along with an interest cover of 5.8%, decreasing to 2.6% by 2017/18. Decreases in Capex and new loans are targeted for the next few years.

Mr Sepele said that he is proud of Mr Mthiyane for rising up through the ranks to become the CEO of ATNS. It is not the priority of ATNS to flaunt wealth in disadvantaged areas, and instead aims to supply services like extra maths lessons and container libraries, which have been supplied by ATNS in certain areas. Mr Sepele said that the CEO will be available to the new DG for any issues he may need assistance with. SA has never had an accident due to air navigation failures, and it has received two awards recently. The first award is from the African Airlines Association for the best air navigation services provider. The second is a global award from ICAO that recognized the training efforts of ATNS.

Mr Sibande (ANC) referred to the private and small airports in South Africa. ATNS can offer state security and should monitor these landings. Small airports and private landing strips have been used to smuggle illegal drugs into the country, and so they should be monitored. The training that ATNS conducts should benefit individuals from a large geographical spread in the country. More clarity is needed on the Department of Transport performance indicators.

Mr de Freitas (DA) also congratulated the CEO of ATNS for his rise up the ranks and the intelligent management of the entity. Are the carbon emission targets put in place for ATNS reflective of international standards and requirements? ATNS is a level above most other air navigation service providers in Africa. Is ATNS assisting any of these service providers in the African continent in order to improve their quality?

Ms Xego-Sovita (ANC) said she conducted a site visit to the ATNS offices in Johannesburg in the last quarter and it is conducting transformation efforts effectively. The entity is also able to sustain itself. Is ATNS satisfied with the services it offers in regional and smaller airports in terms of safety and security? ATNS can take the lead and encourage other aviation entities to reduce general delays further.

Ms Boshielo (ANC) said that the communication of ATNS must improve to reassure the public that it offers a good service, in comparison to others, which have devalued public trust in air travel. ATNS must be commended for protecting and training African nationals. However, it needs to do more to improve its search and rescue commission, and it should perhaps receive more funding for this initiative. ATNS must hold stakeholder meetings with counterparts to combat issues of flight delays.

Ms D Magadzi (ANC) said that ATNS should make itself more well-known as an entity in the South African aviation field.

Mr Mamashela replied that the issue of ATNS interacting with small airports would have to go through the department. It is implementing a multi-declaration system that enables it to monitor aircraft from the ground up, in order to monitor smugglers and other unregulated aircraft coming into South Africa.

The recruitment and encouragement of young South Africans by ATNS needs to be geographically spread and scholarships will subsidize 100% of the costs of learners while studying.

ATNS was basically insolvent in 2009, and has prioritized positioning itself in a position to be self-sufficient and attractive to lenders.

The international community has not reached a consensus on carbon emissions and so ATNS works constantly towards reduction. Offering aircraft shorter journeys and swift landing permission enables ATNS to reduce carbon emissions. ATNS aims for continuous descents, and is one of the first companies worldwide to do so, along with the free-flight system, which both make flying over South Africa more efficient and saves fuel.

ATNS has recently recruited a commercial manager and will hopefully implement more positive communications in the future.

The Deputy Minister of Transport, Ms Sindisiwe Chikunga, said that ACSA and ATNS are two of the 21 Schedule 2 companies that are said to be Major Public Entities. They are being monitored closely to achieve the best performance. The success and track record of these entities is important.

Airports Company South Africa (ACSA) presentation
Mr Bongani Maseko, CEO of ACSA, gave an overview of the corporate functions of ACSA. Its mandate is determined by the Airports Company Act No. 44 of 1993, and its pledge is to drive a culture of excellence around customer services and communication and have purposeful relationships with all of its stakeholders. ACSA recently had a strategic planning session and it has embraced the principles of sustainability in its business. Intellectual capital, human and social capital, and financial capital will be utilized according to a ten-year plan to ensure sustainability. The integrated value creation model used by ACSA is linked to its prioritization of sustainability and speaks to the capitals referred to previously.

The governance structure of ACSA is determined by communication with board committees, executive Committees, and other entities. A transformation Committee has recently been formed as well. The only change from the last presentation is that there are three new board members, including a new chairman with a wealth of transport experience. Two board members have also been added, one with economic experience and another with financial and accounting experience. Since the last presentation, many vacancies have been filled. A business development executive has been added to drive developments of ACSA business inside and outside of South Africa. The position of information technology has been elevated, and the chief of information technologies is now an executive position. ACSA has hired the first female African head at OR Tambo International Airport this year. The new head information officer will redesign the operating model of ACSA, and this will assist in the changes that ACSA wants to make in its corporate structure. ACSI, a regional aviation society, recognized OR Tambo as the second best airport on the continent in 2014, and Upington airport as the most improved airport. Sky Tracks from the UK rated OR Tambo International, King Shaka International, and Cape Town International as the top three airports in Africa from first to third respectively. A SWOT analysis has been done on the corporate plan to ensure that threats are adequately addressed.

The operating environment of ACSA is heavily dependent on the economic climate, as the present sluggish economic climate will lead to slow passenger growth in airports. The economic regulator had to be taken to court in 2010, due to the lack of a dispute resolution mechanism. These issues, relating to transparency and certainty, will be addressed and such a mechanism will be developed with the collaboration of ATNS, airports and other entities. The security of energy supply is an issue for airports as stage 2 and stage 3 load shedding can adversely affect airport operation, although airports do have emergency generators. Two new airlines have emerged recently with the decline of crude oil prices. The effects of Ebola on air travel into South Africa were negative, as a decline in passenger numbers from the US, Europe and China corresponded to Ebola outbreaks in other parts of Africa. Airport transport policy will hopefully be an enabler for different companies. The maintenance of ACSA’s credit rating will be delicately considered, as it has achieved a good credit rating and will be borrowing more funds in the future. Stakeholder relations are good as ACSA works to keep its stakeholders abreast of all happenings in the company. The corporate plans of ACSA are well aligned to the objectives of the Department of Transport and the NDP.

One of the key risks facing ACSA’s corporate plan was an IT strategy that was not aligned to business objectives, and this is in the process of being rectified. Long-term profitability is also a problem due to economic uncertainty and some tariff targets may not be achievable. The ability of ACSA to be flexible with the fluctuating economic factors that affect its business has been identified as a key risk. The operating model will be kept lean and flexible and responsive to changes. The security of energy, particularly fuel supply at OR Tambo, such as when fuel was rationed for domestic flights, is a risk. The negative impact of competition from other modes of transport and other airports, along with the maintenance of OR Tambo’s reputation is another risk. Airports are growing in places like Kenya and Ethiopia, where they have a closer link with many parts of the world and create a more attractive entry point into Africa. Stakeholder management and stakeholder relationships are prioritized and constantly maintained through policies such as engagement plans. These plans are in place for the long-term life of ACSA.

The current Corporate Plan does not provide for the returns expected by shareholders, with government as its main shareholder, and investors to enhance shareholder value. A major initiative of this corporate plan is to curb costs on a sustainable basis by over R100 million over the next two years. ACSA has responded well to growth, but its efficiency has not necessarily been evaluated.

The strategic thrusts of ACSA are to:
- Deliver shareholder value
- Building win-win partnerships with all stakeholders
- Identify and secure new business opportunities, inside and outside of South Africa
- Accelerate our sustainability and transformation programs, especially by encouraging the involvement and support of women- owned and youth- owned entities
- Business excellence and efficiency
- Managing and developing a high performing team, including more African employees in middle management positions. The board has approved housing and transplant policies in order to better accommodate and support workers.

The key initiatives are:
- Re-engineering its operating model by focusing on sustainable options
- Transformation of the businesses and individuals who usually win opportunities for retail and other business in airports
- Provide commercially viable airport management solutions for South African and International Airports,
- Grow traffic by leveraging our existing airports locational and traffic profile
- Align airport development plans to local and provincial government plans
- Diversify revenue opportunities

Ms Magadzi asked ACSA to make its final and most important points in the interest of saving time.

Mr Mekgoe, COO of ACSA, presented the key projects of ACSA for 2015/16. These are:
- Business operating model and leadership alignment to emerging strategy
- IT strategy roll-out
- Commence with strategic land acquisitions before commence of construction of the new aligned runway, especially in Cape Town
- Approve site development plan ORTIA Western Precinct (possibly for hotel or conference space) and cargo and logistics plan signed off and aligned with Ekurhuleni
- Execute the transformation strategy
- Implementation of the permission application FY2016 – FY2020
- Resolution of the transit visa with the relevant stakeholders with home affairs and other entities to encourage clarity

Ms Manyama-Matome said that ACSA expects its tariffs to go down by 12% during 2015/16 and 12% again during 2016/17 in accordance with the corporate plan. Domestic flights will cost approximately R97.81 per passenger and international flights will cost R267.24 per passenger with these decreases. There is currently a 0% tariff increase as the company is waiting for the decision of the economic regulator. There have been no dividends anticipated in ACSA’s budgets or plans for the next few years.

Net profit is currently declining along with the return on equity and the capital employed, and the current focus for ACSA financially is to reduce costs. The ratio of non-aeronautical revenue to total revenue is expected to grow until 2018, and is expected to grow at 5% per annum. International and property revenue will boost this growth. The company continues to have a strong balance sheet with total assets valued at approximately R26 billion. The company repaid a loan of R1 billion by 21 March 2015 which reduced total borrowing.

Mr Mekgoe said 49% of the capital expenditure of ACSA until 2018 will be on capacity investment, while 33% will go to refurbishment and replacement. 10% will go efficiency and technology, with 7% going into statutory and compliance measures and 1% to commercial activities. 60% of this capital spend is made up by four projects. The first is a project for parking stands at OR Tambo, which will cost R1.3 billion. The second is a refurbishment of the fuel pumps at the same airport. The third is the new, realigned runway in Cape Town, which is estimated to cost about R3.2 billion. The fourth is the possible creation of a new space for domestic arrivals in Cape Town.

Ms Botshielo (ANC) thanked ACSA for their presentation. She said that ACSA must address the issue of stolen luggage. She had personally suffered theft while flying in South Africa. Officials tell victims of these crimes that it is a hopeless case. This attitude needs to change. ACSA also needs to look at other sources of revenue to become self-sustainable and maintain its world-class service.

Mr de Freitas (DA) said that there seemed to be confusion about the recent economic effects on ACSA’s performance, with a sluggish economy and increased tourism having converse effects.

Mr Mulaudzi (EFF) asked why lost luggage was not seen as a key risk for ACSA to tackle in the coming years. More signage like that on the roads at King Shaka airport could also be made available in other airports.

Ms Xego-Sovita (ANC) asked about the roadworthiness of vehicles used to transport passengers in airports, as some seem not to have shock absorbers. Is there a platform for the discussion of issues that face ACSA that it might not be aware of?

Mr Sibande (ANC) said that the problem of lost baggage might be due to the privatization of the security companies. There was an issue with the airport in Mpumalanga, and the maintenance and supervision of small landing strips does not seem to be part of ACSA’s mandate. ACSA should aim to also limit the amount of accidents suffered by small aircraft.

Deputy Minister Chikunga said that the monitoring of small landing strips and private airstrips is considered a priority by ACSA. It is currently preparing a paper to present to the South African National Defence Force (SANDF) and SAPS in order to improve and combat this possible risk facing ACSA. The black economic empowerment and transformation of the aviation community is a priority for the DOT and will be actively pursued. Clear strategies will be put in place to empower women and other previously disadvantaged people.

Mr Maseko said ACSA recognizes baggage theft, and this issue is being discussed at forum meetings and is on the operations risk register. Unaudited figures show that international passengers reduced by 1% in the last year, which damages the growth prospects of ACSA. New buses have been ordered for OR Tambo and other airports, and are regularly checked for roadworthiness. Airports Council International is an international umbrella organization for airports around the world, which ACSA is a part of. Mr Maseko is not aware of the particular issue in Mpumalanga, but efforts are being made to improve and support smaller airports. This is the first year the Auditor-General is auditing ACSA, and as such it has not received certificates yet.

Ms Magadzi said that ATNS and ACSA hold up the aviation light for the South of Africa. The factors for improvement, particularly for ACSA, are not insurmountable. ACSA needs to strategize and work towards rectifying the issues that have been raised. These entities rightfully condemn the spate of violence related to afrophobia and xenophobia, and the Committee stands behind these sentiments. South Africans need to know about the excellent work that these entities are doing, as well as the awards they win internationally.

Ms Magadzi invited the Road Accident Fund (RAF) to present their presentation. The good work of RAF over the Easter weekend must be commended. She acknowledged that the Deputy Minister would have to leave soon and thanked her for her presence.

Deputy Minister Chikunga said that she and the Minister would be available to appear before the Portfolio Committee for any issue that the Committee needs to discuss. Open letters that are directed to the Minister are an unfortunate decision - as the Minister is always available for communication and there is nothing “insane” about what the Department is doing.

Road Accident Fund (RAF) presentation
Dr Ntuthuko Bhengu, RAF Board Chairman, welcomed Dr Watson to present the information.

Dr Eugene Watson, RAF CEO, said that the legacy of the RAF as a funding mechanism has a rich, 70 year history. It has moved from protecting wrongdoers to supporting crash victims, and is funded by the fuel levy, although insufficiently as is apparent by the last 30 years of insolvency for RAF. Compensation is fault-based and must be proven, with a significant compliance burden. There is a dependence on external parties to make sure that payments are made. Court rulings are not always consistent and decisions tend to be subjective. Many continue to be excluded, especially those who had no income to lose in the first place. There is a micro-economy of intermediaries that thrive on the business of the RAF. Half of all matters on the court roll are related to road accidents, with 70% related to RAF in some courthouses. Claimants are often not primary beneficiaries and compensation is not always used for rehabilitation.

Revenue grew to R22.4 billion last year, with claim payments of R21.5 billion paid, and 21 600 claims worth R6.7 billion awaiting payment. 173 700 new claims were registered, with 123 000 medical payments made and the reduction of open claims from 232 285 to 217 710.

This structure of the RAF is aligned to accommodate various targets and objectives within the department and the NDP. A specialist executive is in charge of each of the seven pillars of RAF. RAF aims to:
- Reduce the claims backlog, especially the age of the backlog
- Ensure direct claims’ origination
- Reduce legal costs
- Implement post- crash care strategy
- Increase engagement of stakeholders
- Increase availability to general public
- Improve cash flow management
- Improve procurement outcomes
- Increase percentage of B-BEE rated suppliers
- Move towards paperless system
- Promote performance culture
- Evaluate what skill sets are valuable to RAF in the present and future
- Reduce absenteeism
- Improve fraud management

RAF contributes as a public entity within the portfolio of transport to the deliverables of the NDP, as well as some of the social targets. The outreaches save customers money and promote delivery. The post-crash care system helps achieve social targets and payment of claims for the department of health. The movement towards the Road Accident Benefit Scheme (RABS) is indicative of better social health and security. The human resources targets of RAF will see it make a contribution to the transformation of the workforce through the prioritization of B-BEE empowerment. Corruption is battled through the ethical work of RAF and fraud management policies. Nation building and social cohesion are also targets RAF works towards.

When RAF made its strategic plan, the 2015 Budget Speech had not been made. It was working on information from the National Treasury, which said that it would receive an additional R0.08/litre. 92% of this income was planned to be used for claims and claim-related expenditure. Personnel costs were expected to rise by 8% to accommodate for inflation. The provision for claims incurred will hopefully decrease as the claim pool is reduced, but expenditure should increase as time goes on due to increased claims. Claims expenditure should go up by 15% for the next year. Revenue would grow from R21 billion to R31 billion over five years, and these funds will be used to cover administrative and claim costs, although there is a projected shortfall of up to R29 billion a year. These liabilities could grow from R107 billion to R182 billion over the five years, which will make it difficult for this entity to be sustainable.

The RAF was granted a 50c once-off increase in its fuel levy share, which translates to a real increase of R10 billion per annum. RAF has engaged National Treasury since then and RAF will make some replacement financial speculations to ensure what it needs to be self-sustainable. Productivity will not increase much at a visible level because this income will be used to cover liabilities and claims. The capacity for dealing with claims will increase by 10 000 claims per year. With the additional 50c fuel levy, the fuel levy will grow from R21 billion to R34 billion over the five years. There will still be a shortfall, which will be at an all-time low of R29 billion in 2019. The legislation around RAF’s finances needs to change or it will continue to be a burden in the government’s liabilities.

Adequate funding is a key challenge for RAF. The dispensation of the RAF is expensive, and there are constant shortfalls. Operations will be curtailed unless more funding is received. Claims expenditure exceeds income, and the provision for claims expenditure grows faster than CPI growth. Claim values have increased as a result of the Amendment Act which excludes minor injuries, as well as market forces aimed at higher value ‘pay-outs’.  A possible solution for this is to curtail claim processing, by making it cheaper to process more claims. The adversarial fault-based compensation system needs to change, and a new dispensation must be achieved to make RAF more sustainable.

RAF has been through 70 years of difficulty but continues to do its work of touching the lives of victims. Initiatives that bring information about RAF and other helpful entities to victims save them time and improve their chances for rehabilitation. Many road awareness initiatives are aimed at improving road safety, which will also indirectly save RAF and the taxpayer money. Payouts are not the entire mandate of the RAF, as it also supports hundreds of thousands of disabled citizens every year.

It is vitally important for RAF to introduce new legislation to make it sustainable.

Mr G Radebe (ANC) commended the work of RAF and said that it is a great thing that every victim of a road accident can benefit from its work. Is RAF’s work based on a worldwide standard? If I am in an accident overseas, will I also get funding from them?

Mr Mulaudzi (EFF) asked what the strategy was to make the Fund sustainable amidst the backlog of unpaid claims? Rehabilitation centres need to move closer towards disadvantaged people. They are in cities and need to move towards rural areas.

Mr Sibande said he was happy with RAF’s accessible service. In his constituency, someone was involved in a car accident, the family was assisted, he was taken home and the incident was well dealt with. However, RAF representatives take too long to respond in hospitals, and these representatives indicate that doctors take long to fill in RAF forms. Record keeping must also be a priority in hospitals. The issue of taking correct statements from victims of accidents is also important and should be prioritized. Doctors creating problems must co-operate with RAF and help them to process claims.

Amidst sudden load shedding, members began leaving. The Chairperson moved to adjourn the meeting with apologies to RAF members. Questions are to be responded to through written responses to the Committee secretary within five working days. RAF’s good work could possibly can be emulated in other African countries.


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