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Road Accident Fund faces imminent implosion

Situation is close to constitutional crisis, warn judges.
Image: Shutterstock
  • The Road Accident Fund has secured an extraordinary court order stopping successful claimants and their attorneys from laying claim to its money and assets.
  • The fund is in danger of imploding due to mismanagement and corruption.
  • If the fund collapses drivers will be open to being sued, while claimants will struggle to get compensation.
  • The fund is currently under investigation and a new management is trying to rescue its finances.

The Road Accident Fund (RAF) has secured an extraordinary court order preventing successful claimants and their attorneys from laying claim to money in its bank account and other assets in order to recover what they are owed. The fund is facing imminent implosion, the consequences of which will be disastrous.

A constitutional crisis is brewing, Pretoria High Court Judge Pieter Meyer (with Judges Leicester Adams and Johann van der Westhuizen concurring), said in Friday’s ruling.

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Read the judgement.

Judge Meyer explained that implosion of the fund will trigger a section of the Road Accident Fund Act which bars any claims against it for compensation.

This, in turn, will reinstate the common law, leaving drivers open to being sued, and claimants struggling to get compensation from “impecunious”, penniless defendants.

In its application, the fund sought an order to suspend all writs of execution and attachments based on court orders already granted or settlements already reached where payment has not been received within 180 days.

This, it argued, would enable it to make payments on its oldest claims first, which it would do before the end of April.

The matter first came before court in December last year. The respondents, the Legal Practice Council, Sheriff’s offices around South Africa and law firms which deal with fund claims, were ordered to not execute against the fund’s Absa Bank account or any other moveable asset until the end of February this year.

That order was extended until March, when the three judges heard the application, and then again until judgment was delivered last Friday.

Judge Meyer said the fund’s tardy and wasteful litigation and poor administration was being brought under control by a new management team, appointed by the Minister of Transport in 2019.

“The RAF accepts that its systems and processes are antiquated, plagued with corruption.

“Under the new management team, there have been large investigations, and disciplinary hearings, matters of corruption are being investigated by the NPA, the Hawks and the SIU. It has embarked on a five-year turnaround plan from 2020 to 2025.”

Judge Meyer said the focus was to reduce legal costs, revise the structure and business process, put in an integrated claims assessment system and a revised supply chain management structure “in order to avoid its collapse”.

About 100 law firms have taken action against the fund but this needed to be stopped so that it could get its affairs in order, the judge explained.

He said the fund had disclosed in court papers that it relied on the fuel levy and loans for its funding.

It could not apply for loans at present because of its financial plight.

The fund’s draft annual statement ending March last year showed a deficit of R322 billion, with liability exceeding assets of more than R400 billion.

On top of this, last year during lockdown, expected income from the fuel levy had halved.

Payment delays were expected to increase from an average of 187 days to 331 days.

On the up side, new management had already received R600 million back in duplicate payments.

“A large number of attorneys are willing to work with the RAF to solve the current crisis, agreeing that the larger public interest must trump any possible infringement caused by delayed payments,” Judge Meyer said.

“Most of those opposing argue that the relief it seeks is unconstitutional. And it will infringe on the successful claimant rights to equal protection and benefit under the law. But the RAF says it is doing this to prevent a constitutional crisis from occurring.

“I am of the view that exceptional circumstances exist, taking into account the interests of justice, to order a temporary suspension for a limited period of 180 days, of all execution and attachment against the RAF, based on court orders and settlements already obtained which are not older than 180 days as from the date of order or settlement.”

He said that without this the social security net for all road users would fall away. Claimants would be left without compensation and drivers would be exposed to grave financial risk.

In terms of the order, the fund must pay all successful claims older than 180 days by the end of April.

All writs of attachment based on court orders/settlements which are not older than 180 days are suspended from 1 May to 12 September.

Any party may approach the court during September to vary, extend, or amend the order.

This article was first published on GroundUp, here.

© 2021 GroundUp.

COMMENTS   27

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“A large number of attorneys are willing to work with the RAF” — never waste a good crises, time for a feeding frenzy?

The same lot that files for exorbitant claims; now wants to run RAF. Crazy

IT IS PAST TIME TO STOP THIS SLOW MOTION TRAIN WRECK!!!

Develop a table of defined benefits and scrap this thing where everybody argues for years whether Johnny’s arm was worth R500k or R5m and the only people that get paid are the personal injury lawyers.

Set tables with prescribed benefits that are appropriate to the average South African – for injries and for loss of life. Road users that want extra insurance can anyway take out appropriate additional policies and pay accordingly. Johnny whose arm is worth R5m according to his lawyer is paying the same cents per liter fuel than Mary whose arm is only worth R500k.

Let’s get real

the principles of compensation are sound; it’s the RAF itself that’s a black hole. there remains a huge amount of subjectivity in your proposed approach, not to mention that many injuries are complicated and difficult to predict the long term impact. it’s not a simple as losing an arm. the RAF needs to get a top notch private-sector-proven exco; changing the benefit structure will not fix the problem.

If a simple table is good enough for millions of people’s decades-long insurance policies it should be good enough for road accident insurance.

Any insurance fund that pays differential benefits for a fixed premium is on a hiding to nowhere. We all pay X per liter to the fund, have one table. If you want more insurance than the table, take out extra personal insurance.

I agree. But I think the whole train wreck should be completely privatised and you will have to buy third party insurance from the insurer of your choice with compulsory minimum cover; as I understand happens in many first world countries. No insurance; no drive. RAF covers the reckless (think taxis) and is a fruitful source of easy legal fees on both sides; the RAF uses its ANC connected lawyer pals to defend the indefensible and the plaintiffs have a slam dunk against incompetent oppositions with no defences BUT who drag it out as long as is practically possible.

Not that any of this will ever happen in third world SA; open for looting under the ANC.

Is this a feasible? :

Outsource the accident cover to established insurance companies and used the RAF levy to pay the premiums. They will never have a better group scheme and there is no incentive to litigate if a standard claims payment methodology is used.

Surely this would be much cheaper, speedier and effective.

In addition road users can select the company they prefer to submit their claim to or have cover from.

Nothing that an increase in taxes on petrol or tyres (wonder what happened to that tax revenue?) will not solve.

ANOTHER F’ING GOVERNMENT INSTITUTION F’D UP!!! When will the imbeciles learn that they are incapable of doing ANYTHING properly???

On top of this, last year during lockdown, expected income from the fuel levy had halved.

Referring to the above statement, the risk and potential claims would have been exponentially less (no alcohol sales, restricted freedom of movement etc) I don’t know what is worse – inept govt. institutions or alleged journalists spewing crap

there’s a 2 to 5 year period from accident to settling claims; the cashflow required now is not for accidents occuring in 2020.

Yawning
What did u expact?

Managed and controlled by…let us guess..ANC cadres again. RAF joins Denel, SAA, Eskom, SARS,the Judiciary etc in ruined and broken institutions.

When will we ever see and ANC person create something. Only destruction of value!

the sad reality is there is no one standing up to correct the problems in this country…. that includes the President ( I almost get the feeling that he is hiding behind a work group and that he portrays to us that he has said something on the matter but his power is limited.

Better headline :
RSA faces Imminent Implosion. !

RAF
SAPS
Denel
Eskom
Transnet
SAA
Mango
Landbank
Municipalities
Home Affairs
SSA
Covid19 Vaccination program

What more can go wrong in this beautiful country ?

Add the following to your list:
Post Office
Petro SA
Alexkor
Transfer of land to emergent farmers

Everything that the ANC has touched and stolen from has imploded or about to implode.

WHo is the 400 billion debt owed to? Because if we add that to Eskom’s debt we hit a trillion

The ANC really does have the Shidas touch

RAF ‘imploding’ now only? (…they held up for longer than anticipated).

No news really…the whole of SA is in various stages of imploding, with the continuation of skills (and taxpayer) exodus post ’94.

…it’s expected, as otherwise how would SA become a proper 3rd world country?

The cadres certainly have the fecal touch …can’t fault their consistency though

Never mind the RAF the country faces an imminent implosion with EWC looming, no meaningful plan for Eskom, and out-of-control Government spending. Each issue on its own is a cause for implosion. The ANC – more focused on infighting than running the country – likes to play close to the edge with the country’s future and soon they may go over the edge.

These guys, Denel, SABC and ESKOM NOW SANRAL, they have people who work in powerful positions THAT DON’T CARE!!!!!!!!!!!!!!!!!!!!!!!!!

Liquidate the RAF and make everyone get thrid party insurance

Before 94 the insurance companies ran the RAF claims processes successfully.

Deputy Minister of Transport Jeremy Cronin was approached to revert back to the pre-94 system but he held the ideological view – the government cannot hand back institutions to the private sector.

A R300 billion shortfall is not enough to convince him.

Foxes and fowl coups.
Guards and criminals.

Seems like this new SA of ours has championed the art of screwing things up. Look around you people and catch a wake up. The whole freaking country is falling apart. Soon they will be coming for your personal belongings. The end.

End of comments.

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