New bill will help solve Road Accident Fund’s financial woes – Nzimande

New bill will help solve Road Accident Fund’s financial woes – Nzimande

The current Road Accident Fund scheme is “inequitable, wasteful and open to abuse”, which is why a new scheme is being set up that aims to be financially viable, said Transport Minister Blade Nzimande.

The RAF provides compulsory cover for users of SA roads against injuries or death arising from accidents within SA.

The minister was responding in a written reply to a question from ANC MP and chairperson of the portfolio committee on transport Dikeledi Magadzi. The MP asked the minister what measures had been put in place to stabilise and ensure the financial sustainability of the RAF, as well as the SA National Roads Agency (Sanral).

To this, Nzimande responded frankly about the RAF’s insolvent position, which has persisted for a “considerable amount of time”, as he put it.

Five years of cash flow problems

The RAF has been settling more claims than it can honour with its available funding, Nzimande said.

“As a result, the RAF has continued to experience material cash flow constraints for the past five years, to the extent that meeting the ‘going concern’ requirement is deemed problematic,” he said.

Earlier this year, Treasury officials highlighted to the Standing Committee on Appropriations that claims received outweighed the income generated from the road accident fuel levy.

In its medium-term budget policy statement, Treasury highlighted the RAF and Sanral as fiscal risks, and said the RAF may require large increases to the fuel levy in the next three years to manage its short-term liability.

Nzimande said the current scheme needed to be transformed, and the Road Accident Benefit Scheme (RABS) Bill will be able to address many of the RAF’s challenges.

“The ultimate promulgation of this piece of legislation will address many of the current challenges experienced by RAF.

“Active pursuit of the promulgation of the RABS will see a financially viable social security system introduced, via a mechanism like the RAF, become affordable and appropriately funded going forward,” he said.

The RAF, in the meantime, has also put in place initiatives since 2014/15, which include preparing cash flow forecasts on a frequent basis to reflect its latest available financial status in an effort to identify any funding shortfalls.

There are also “extensive” reporting mechanisms in place to monitor cash flows.

Additionally, the RAF engages with Treasury, the transport department and other stakeholders to give status updates.

Sanral

As for Sanral, the minister said Treasury had agreed to allocate R5.8bn to the e-toll portfolio, which has not been generating income due to non-payment by road users.

“The e-toll uncertainty has rendered Sanral’s going concern status as uncertain, due to the significant debt owed to investors, which requires servicing… This will assist the cash flow situation of Sanral for a period of 12 months from the date of the Audit report,” Nzimande said.

“Based on this support from the fiscus, the Sanral Board has the confidence to approach the capital market in the near future to re-finance some of its short dated bonds.”

Nzimande said he had been tasked with finding a solution to the e-toll challenge, and will be engaging with various stakeholders to find an optimal solution for the funding of road infrastructure.

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Credit: New bill will help solve Road Accident Fund’s financial woes – Nzimande