Unsurprisingly, Finance Minister, Enoch Godongwana’s announcement of a fuel price rebate relief during his Medium-Term Budget Policy Statement (MTBPS) has been met with scepticism from opposition party members. Given that the MTBPS out-line came just two weeks before South Africans go to cast their votes for the local government elections, it was inevitable that the announcement of the rebate relief – which is meant to last only the next two months – would be dismissed as mere election point scoring by the ANC minister.
Beyond the narrow confines of the MTBPS, whenever the tectonic plates of geopolitical tensions shift, the pressure is immediately felt by motorist at the fuel pumps as South Africa has but depleted its reserves with only a month worth of strategic crude oil reserves left.
At yearly budget speech deliveries by the finance minister, one can predict with almost certainty that increases on the so-called sin taxes on tobacco and alcoholic beverages as well as increases on the RAF fuel levy will be in the offing, as has been the case for the last donkey years. Whilst sin taxes have also featured in the Apartheid era, they have been a regular feature of the democratic epoch and have almost become a ritual started under Trevor Manuel and maintained by his successors in the Treasury.
The sin tax increases are usually received with humorous cheers in the house and from the gallery even by drinkers and smokers. Unlike the sin taxes, the RAF fuel levy increases are often met with an uneasy frown. RAF levy increases directly affect citizens’ pockets and have been seen as the grinch that stole the Christmas budget. Over the years, there have been calls by many for the scrapping of the Road Accident Fund which has been accused of incompetence, corruption and maladministration.
Establishment of the RAF System
The RAF was established through the Road Accident Fund Act, Act 56 of 1996. It replaced the old MVA system which was essentially an insurance-based system payable through the renewal of MVA discs. In a fundamental departure from the MVA system, the Road Accident Fund Act introduced a fuel levy-based system which, unlike the MVA system, ensured that no driver would be uninsured.
The Road Accident Fund Act, mandates the RAF “to pay compensation for loss or damage wrongfully caused by the driving of motor vehicles.” Thus, the Act simultaneously ensures that victims of road accidents are compensated for any loss or damage due to bodily injury or death caused by “wrongful” or negligent driving of the motorist. N.B. The RAF cover does not extend to the normal vehicle insurance that compensates for the loss or damage of vehicles.
Litigious system riddled with inefficiencies and wastage
By design, the fault-based nature of the RAF system makes it litigious, and a fertile feasting ground for legal eagles. Whilst the system is conceptually progressive, its litigious nature generally makes it inaccessible to the poor who cannot afford legal representation. Those who can afford better legal representation are able to litigate for better compensation from the system. This makes the system inherently inequitable.
Compensation payments are often an outcome of legal tussles as there is no predetermined quantum of compensation. This breeds inefficiencies and wastage in the system as a lot of time and resources are wasted on offers by the RAF claims administrators and rejections by the claimant legal representatives.
More often, the RAF claims processing employs newly qualified lawyers with little to no experience in litigation. This factor coupled with the adversarial nature of the claims settlement process results in settlements at best being agreed at the door of the court, or at worst with default judgments being taken against the RAF as claimant representatives take advantage of the claim prescription period.
Also, the fact that the offers and acceptances are on a negotiation basis, makes the system susceptible to human deviance and corruption. It is also common for law firms specialising in RAF claims business to recruit RAF trained claims personnel who understand the workings of the system.
Unsustainable ecosystem
The RAF compensates victims of road accidents for medical expenses, loss of earnings, loss of support by dependents and general damages. These are often payable in a lumpsum. The compensation of road accident victims on a lumpsum basis makes the RAF system an unsustainable ecosystem. Whereas someone who loses their ability to earn a living due to incapacity arising from a road accident would ordinarily earn their income on a periodic basis, settlements are often made on a lumpsum basis as determined by the courts.
As a progressive cover, the RAF compensation system is unmatchable. There is just a handful of such fuel levy-based systems in the world. However, with the high costs of claim settlements, lumpsum payments and payments for general damages – these are payments for pain and suffering – the system is unsustainable. The RAF also extends cover to non-resident victims of road accidents on South African roads.
There is also a risk of double dipping creeping into the system. In a recent case, a Western Cape court ruled that medical payments made by Discovery Health on behalf of the claimant were a separate matter to the claimant’s right to full compensation by the RAF arising from a motor vehicle accident. The court ordered the RAF to pay the claimant its full liability at an amount of R5,45 million despite prior cover by the medical aid.
The RAF 2023/24 Annual report indicates that cost of claim settlements for 2019 and 2020 averaged R9,5 billion with 25% payable to legal and other costs and 75% paid to claimants. There is a huge mismatch between the revenue collected via the fuel-levy and the quantum of compensation payments due to claimants as a result of the high rate of accidents every single year. The levy collected is a function of the litres of fuel sold at petrol pumps and does not reflect the quantum required to sustain the RAF’s operational requirements.
The 2023/2024 annual report describes the RAF liability as a combination of claims not yet requested for payment together with claims requested but not yet paid (RNYP). The report only recorded the quantum of the RNYP at R8,3 billion with actuarial estimates of the Fund’s short-term liability projected to escalate to R51 billion.
One is mindful of the wranglings at SCOPA on unilateral changes to accounting policy and deviations from GRAP reporting standards. However, the 2025/ 2026 annual report confirms that the RAF is technically insolvent. With full compliance to GRAP reporting standards, the report recorded the RAF’s net liabilities at R439,5 billion against a yearly revenue of R48 billion.
The Satchwell Commission recommendations
The Road Accident Fund Commission commonly known as the Satchwell Commission – headed by Judge Kathy Satchwell – was established in 1998 to inquire into and make recommendations regarding a reasonable, equitable and sustainable system for the payment of compensation and/or benefits in the event of injury or death arising from road accidents.
It was no surprise that the Commission would establish that the fault-based nature of the RAF system made it highly litigious and financially unsustainable and recommended for its replacement with a separate no-fault Road Accident Benefits Scheme (RABS) whilst the RAF was being wound down.
The RABS scheme would be run along the lines of a medical scheme under social security and not as an agency under the Department of Transport. The recommendation to run the scheme more like a medical aid scheme would effectively free the new scheme from the RAF’s highly litigious nature and reduce the time and high costs of claims processing primarily emanating from litigation. The commission also recommended for the scrapping of lumpsum payments in favour of periodic payments among other recommendations.
Needless to say, the Satchwell Commission recommendations have been met with resistance from both the RAF management and the legal fraternity – albeit for different reasons – resulting in undue delays in implementation. More than two decades later, the Satchwell Commission recommendations are yet to be implemented. The reasons are not difficult to fathom.
As far back as 2011 cabinet approved a policy for motor vehicle accident compensation to pave the way for the implementation of the Satchwell Commission recommendations. The RABS bill was introduced in parliament in 2017, however, it was met with strong opposition from various quarters. It has gone through various parliamentary processes and is now effectively going nowhere slowly.
The RAF is a cash cow that has made many in the legal space and in medical aid schemes (via undertakings) and Medico-legal assessments very rich. It is no rocket science that that those who benefit from the system will find all sorts of legal and constitutional reasons why a system which is flawed by design and financially unstable must continue to be milked to the ground.
It is the goose that lays the golden eggs, and they will protect it at all costs until the system implodes. It is the nature of our political economy; those who control the purse decide the politics. Next time you lament the high petrol price think again, it is not only about the Strait of Hormuz and the depleted reserves, but more about the intersection of politics, litigation and the medico-legal.
