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TRANSPORT PORTFOLIO COMMITTEE
14 October 2003
ROAD ACCIDENT FUND AMENDMENT BILL: BRIEFING AND HEARING
Chairperson: Mr J Cronin (ANC)
Documents handed out:
Road Accident Fund Amendment Bill [B64-2003]
Road Accident Fund Act [No. 56 of 1996]
Report by CEO of Road Accident Fund (RAF)
Presentation by the National Department of Transport on Bill
Assessment of RAF and Proposals by Coalition
Quadriplegic Association of South Africa submission
Law Society of South Africa submission
Actuarial Report by Munro Consulting
General Council of the Bar of South Africa submission Part 1
General Council of the Bar of South Africa submission Part 2
Board of Healthcare Funders of Southern Africa written submission
South African Medico Legal Society written submission
Kruger & Co written submission
KwaZulu-Natal Association of Personal Injury Lawyers (KAPIL) written submission
Black Lawyers Association written submission
South African Medial Association(SAMA) written submission
Submissions were given by various interest groups on the Road Accident Fund Amendment Bill. A key concern was that the consultative process had been ignored. Most of the organisations had not been consulted during the drafting of the Bill. Further, the proposed amendments did not fulfil the criteria of equitable compensation and the Bill itself was constitutionally open to attack. It was implied that the findings of the Satchwell Commission were totally ignored. The concerns concentrated around the issues of retrospectivity, instalments as opposed to lump sum payments, the undertakings, tax implications, emotional shock criteria, respective loss of earnings, general damages and arbitration. The proposals were insensitive to the poorest of the poor. All submissions expressed concern about the fast processing of the Bill and urged the Committee to allow the time and careful consideration that it deserved.
Briefing on the Road Accident Fund Amendment Bill
- Input by the Road Accident Fund
The CEO of the Road Accident Fund, Mr H Kgomongwe, noted the key issues that the Bill dealt with:
the need to channel damages to accident victims by paying damages as and when they are suffered
the dire financial and cash flow position of the RAF
the need to optimise appropriation of scarce public resources
the practice of sound corporate governance.
Mr Kgomongwe discussed the topics of undertakings of future medical expenses, undertakings for future loss of earnings and loss of support, general damages, medical tariffs, deducted collateral benefits, limit to claims of non-residents, claims for emotional shock, dispute resolution, and operational realities (see the Report for detail).
- Input by the National Department of Transport
Mr W Ndou, Department Legal Advisor, pointed out that for years, the RAF has had cash flow problems that threatened its survival, hence the Bill aimed at improving the efficiency of the Fund. The main purpose was to provide for amendments that limited the liability of the Fund by regulating the amounts of claims, introducing cheaper ways of reaching agreement on the amount to be paid by Fund, and finally, the exclusion of claims related to emotional shock suffered by a bystander. He then went through the Bill clause by clause (see presentation).
Mr S Farrow (DA) asked the presenters about the communication and consultation process with stakeholders as in both cases they had referred to extensive consultation. Referring to the example of the May 2001 Symposium, he inquired who had been contacted and what had been the response.
Mr T Mambi (Road Accident Fund) said that there had been 151 people at the symposium, 27 of them were in a way related to the RAF. The critical stakeholder directly affected by the Bill was represented by Arrive Alive, South African Commuter's Association, Black Lawyers Association, Cross Border Transportation Agency, and others. The Bill was first released for public comment at the end of 2001 in a number of newspapers. Comments were invited from interested parties. The Bill could also be accessed from the RAF website. RAF also held a meeting with the Law Society of South Africa in 2002 that focused on direct payments to the claimants. Virtually all the stakeholders had access to the RAF proposals. Verbal and written comments had been received from 80 organisations and individuals. All this consultation preceded the bringing of the Bill to Parliament's attention. Therefore a very reasonable and extensive consultation had been done up to this stage.
Prince Zulu (IFP) noted Clause 2 that amends Section 17B (Collateral benefits in case of bodily injury). This ensures that the Fund takes into account benefits received from other sources when determining benefits payable. He asked if there were ways of combining this in order to end up with one payment to the claimant.
Mr Kgomongwe (CEO of RAF) replied that RAF had been working on developing a system that would provide an electronic linkage with numerous institutions. The software that RAF has been working on for the past 18 months is intended to determine precisely the status of the situation before making any payments.
Mr A Ainslie (ANC) asked about the success of the private projects around arbitration as well as legal fee costs.
Mr Kgomongwe replied that before arbitration and mediation replaced litigation, RAF had embarked on a pilot project in the Western Cape that proved to be working. About 80% of matters using arbitration were resolved. RAF has advertised the project nationally, interviewed potential service providers. The University of Western Cape Social Law Project has trained arbitrators. Last year, the legal fees amounted to R700 million.
Mr S Swart (ACDP) asked if proper costing has been done on implementation of the Bill and what would the costs be like in the long term?
Mr D Anderson (RAF) replied that RAF needed to strategize in terms of the IT sector in improving on the use of technology in their administration. There was no massive increase in bureaucratic costs, however a significant increase in the care costs and undertakings was found.
Mr A Calitz said the Coalition was concerned with the pace with which the legislation was being dealt with and urged the Committee to allow the time and careful consideration it deserved. The Coalition developed a strategy to achieve cash savings of roughly R500 million per annum to the RAF. A suggestion was made to introduce a threshold at the bottom end of the claims process to abolish all claims under R20,000. This would save the Fund R463 million per annum in compensation paid out. It would also save on transaction costs plus unburden the administration of the RAF.
Their submission dealt with the RAF cash flow, its administrative burden, fraud, the continued compensation of seriously injured accident victims, as well as the concern that the money ought to reach those who it was originally intended for.
The Coalition argued that the Bill totally disregarded the findings of the Satchwell Commission with regard to undertakings, deferred payments, respective loss of earnings, and general damages. The Bill was impractical to implement and could lead to great hardship amongst victims of road accidents. It would limit their access to health care and to legal representation. It falsely created the impression of great cash savings for the RAF from this system, totally ignoring enormous transaction costs over the next 50-60 years as future costs would simply be deferred.
The Coalition argued that the Bill was constitutionally open to attack. The proper implementation of the clauses dealing with prescribed medical tariffs could only be accomplished after a proper consultation process with health care providers in order to ensure that those tariffs were fair and reasonable and equitable in terms of the effect on the victims of road accidents.
The Coalition supported amendments in respect of the arbitration forum, claims for emotional shock of bystanders and most definitely in respect of foreign citizens. (See submission for detail).
The Chair summarised the Coalition submission by noting that out of the 5 amendments, three of them were supported by the Coalition, namely arbitration, issue of foreign citizens, emotional shock and damage. In principle, the Coalition did not oppose prescribed tariffs. However, it suggested consultation with key stakeholders on the matter. The concerns concentrated on the issues of instalments as opposed to lump sum payments, the undertakings, and tax implications. The Chair noted that at the moment the Committee was not trying to implement the Satchwell Commission's recommendations as this was a longer-term process. Although the recommendations had received Cabinet approval in principle, the Committee would only focus on transforming the existing Road Accident Fund as a stop-gap measure.
Mr Swart asked Mr Calitz about the potential savings of R500 million per annum and whether that proposal had been presented to the Department and if so, what had been the response?
Mr Calitz replied that such a proposal was never presented to the Department, however, the Coalition would be happy to discuss it in detail with Mr Kgomongwe, the CEO of RAF. He urged the Committee not to act in haste in the next few weeks but to give the Coalition an opportunity to assist the Committee in proper implementation of the proposed amendments.
The Chair was of the opinion that the proposed ceiling of R20 000 would not be effective and would inconvenience the poorest of the poor.
Mr Calitz replied that the ceiling was in fact Judge Satchwell's recommendation, based solely on research done on the claimants' profiles. In her report, Judge Satchwell argued that claims at that level where actually not for the poorest of the poor, but were claims for general damages. In fact for claims less than R20 000, only 2% of that total amount was made up of claims for loss of earnings.
Quadriplegic Association of South Africa (QASA)
Mr Ari Seirliz said that QASA strongly opposed certain amendments to the Bill. QASA opposed payments by instalments, because with that system there was no capital to finance the required adjustments. Secondly, the undertakings simply did not work, whilst in principle they were well intended, the RAF often did not pay them. The RAFundertakings department was obstructive, unhelpful and made people miserable. The basis of the undertaking was that a person had to first incur the costs and then recover them, which caused extreme hardships and prejudice on claimants who could not afford to pay for the medical treatment and equipment up front. QASA also questioned whether the persons listed as being consulted about the proposed amendments were actually consulted, as QASA had not been consulted. No amendment of this nature could be proposed without their input as it was their very membership who would be most affected. QASA opposed these amendments, which in their opinion, were unjust, unfair, unreasonable, and crippling.
The Chair summarised the submission by highlighting its principal concerns of undertaking and instalments. QASA's experience provided evidence that these aspects were not working out. Those who have suffered from various injuries were going to suffer even more as a result of the Bill.
Mr Seirliz (QASA) added that he would support the opportunity to still have proper legal representation in making claims. On a different note, he commented that the lump sum allowed the opportunity to make the first purchase of the equipment and to overcome the capital restrictions.
Mr Swart asked for a comment on the problem of abuse of lump sum payments.
Mr Seirliz replied that the system abuse cases highlighted by the media constituted only a minority. Most claimants of lump sum payments have used the money wisely and have successfully integrated back into the community. Very few have become dependent on the State again.
Law Society of South Africa (LSSA)
Mr M Parker pointed out that normal procedures had not been followed before the tabling of the Bill, hence he questioned the legitimacy of the process. The consultative process, the cornerstone of the initial stages of the legislation, had been ignored. In contrast to statements released, the LSSA was never consulted on the issue. He further argued that the proposals were insensitive to the poorest of the poor and that they would not result in savings for the Fund. To the contrary, it could result in multiplication of the already existing problem of extensive bureaucracy. The Fund was not administering its business efficiently. The Fund's statistics could not be relied on as being correct, and unconfirmed reports indicated that the Fund has been spending lavishly. He gave the example of R1 million on accessories such as baseball caps. The LSSA had made various suggestions on ways of decreasing expenditure and increasing the income of the Fund, however they were rejected without giving them any thought.
Mr R Munro spoke on the issues of cash flow and liabilities. He repudiated the idea that the Bill would improve the cash flow situation of the Fund. He argued that the cash flow crisis was merely delayed by the Bill and that deferring costs was not a sufficient solution as the problems would resurface in the future (see the Actuarial Report by Munro Consulting for details).
Mr D Gush argued that the method of finding savings in the payment through instalments did not guarantee success. Any savings incurred would arise from the money that did not reach the claimants. Savings would not be increased out of the efficiency or reduction of liabilities. The fact was that presently the Fund was experiencing difficulties in dealing with undertakings. That problem would only be exacerbated by increasing the number of undertakings. The medical tariffs was not a bad idea but the concept needed to undergo consultation prior to its implementation. The transfer of treatment of claimants from the private to public sector might overburden the public sector which had existing difficulties.
On the issue of deduction of collateral benefits, Mr Gush said that there was no justification for reduction in compensation by deducting entitlement to accident insurance payments. The RAF Commission made a point that it should not be deducted. Limiting claims of compensation from non-residents had to be properly investigated and could not be implemented without proper consultation in order to eliminate any adverse affect on the tourism industry. The exclusion of bystanders' emotional shock would infringe on the right of those for whom the Fund was created.
The mediation and arbitration provided for a form of dispute resolution, however, there was nothing in the Bill that would suggest that the mediation and arbitration process would be given the funds required to function properly. The exclusion of legal representation would place attorneys in jeopardy. Their existence was essential to ensure access to justice and legal advice. (See the submission of the Law Society of South Africa for more details).
Mr Parker (LSSA) added that the lawyers could not agree to compulsory arbitration. It must be assured that it be done on a voluntary basis.
Mr Farrow asked about the implication of placing a cap of the claims.
Mr Munro replied that the matter still needed to be properly studied and the tourism industry must be consulted on the issue. The LSSA proposed either capping or insurance, as a means of resolving the problem for foreigners.
Mr Farrow asked the Department and the RAFif that aspect was given proper consideration and what were its implications.
The Chair remarked that the RAF Act was not about encouraging tourism and he found it outrageous that the Fund was spending large amounts of money based on calculations of loss of future earnings in Dollars and Sterling.
South African Association of Personal Injury Lawyers (SAAPIL)
Ms Renata Williams, representing Monique Woods (SAAPIL) said that SAAPIL, like many other organisations, had never been consulted on this Bill. She argued that no vision emerged from the proposals and that there was no indication that they were based upon any strategic planning for the future of road accident benefits in South Africa. The new amendments sought to expand on what was already a disaster. The undertakings were the elements of the RAF that had the poorest performance. She criticised having the general damages and future loss of earnings paid in instalments. In her opinion, the amendments were a step backwards and aimed at not compensating victims rather than doing so. She questioned why a claimant should be forced to go through mediation, arbitration and ultimately the litigation route, when he could take the litigation route directly thereby cutting out unnecessary expenses. The administrative costs of RAF had almost doubled over the years from 1999 to 2002. In essence, the amendments aimed at reducing the claims and expenses so that the Fund did not run into deficit. There was no evidence tabled before the Committee to prove that the proposed amendments were affordable, let alone, sustainable. They did not fulfil the criteria of equitable compensation and the provisions were repugnant to the Constitution.
General Council of the Bar of South Africa
Adv E Dane raised the issue of retrospectivity which he noted dealt with fundamental constitutional issues. He focused his attention on the victims of road accidents as the main clients of the Bill. As an experienced lawyer, he believed that a qualified and well-trained legal profession was essential for the individual. The right of people must be protected. Adv Dane questioned what was going to happen to an individual who had been loaned large amounts of money to get by, if suddenly his claim was no longer going to be paid as a lump sum, but rather in instalments. He objected that the Bill proposed that since emotional shock was not a physical injury, it should not be compensated. Anybody who had seen a loved one in an accident, would be devastated to the point of no longer being able to function, despite not suffering any physical injury. That person should also be compensated. The GCB opposed both the collateral benefits amendment and the emotional shock amendment.
The Chair said that all the comments presented during the hearings were noted and that they would receive serious consideration. The Committee would the next day to deliberate on the concerns raised in the hearings as well as those in the written submissions, which did not have a chance to be voiced publicly. The Committee would also engage in discussions with the National Department of Transport and with the Road Accident Fund to raise questions of clarification.
The meeting was adjourned.