‘We’re going to fight this thing,’ says battle-ready road fund

THE Road Accident Fund (RAF), the state-sanctioned personal injury insurance system funded by a fuel levy, is in dire straits and is technically bankrupt, with a huge reduction in the number of claims settled, while total outstanding claims have exploded. 

But long-time RAF CEO Collins Letsoalo yesterday defended the organisation, singling out “lily-white” law firms particularly, and citing individually the largest payouts made to legal firms, and generally blaming the legal fraternity for the RAF’s problems. 

He repeatedly castigated Pretoria law firm Gert Nel Attorneys, specifying that the firm had received more than R2bn in payouts from the fund, and implying Nel had tried to influence him by inviting him to go fishing, which he had refused.

Letsoalo’s defence of the fund at times bordered on the paranoid. At one point he said: “We are better ready.  We’ll battle them, and they must know that. There are no two ways about it. We are going to fight this thing. For the benefit of all South Africans. 

“They will do everything. They will throw propaganda at us. They’ll throw professors at us. They’ll throw editors at us, at us, and we know those editors, by the way, by name. We will name and shame them at the right time. We’ll even tell them how much they got. So there is nothing we don’t know.  We are watching you, quite closely,” he told the press conference. 

Letsoalo, however, refused to address this issue or the fund’s other big problem – its backlog of unpaid claims, which reportedly now exceeds R500bn. This backlog has led to unprecedented delays in compensation for accident victims, exacerbating the fund’s financial strain.

As of March 31, the RAF had a claims liability of just more than R36 billion, which included R8,3 billion in claims requested but not yet been paid, and R28 billion in offers made but not yet requested for payment. This constitutes a modest increase from the R34,194 billion in claims liability in 2023 and R25,965 billion in 2022. 

Lawyers who work in the personal injury field say many of the RAF’s problems are self-inflicted, because it simply doesn’t respond to claim requests, and it often doesn’t even acknowledge receipt. As a result, the lawyers are forced to issue summons against the fund after the time for response has lapsed, usually 180 days, and even then the fund does not respond.

The next legal step is for the applicants to apply for default judgments, but with courts jammed with applications, finalising these claims can now take up to six years. This is why the increase in default judgments is such an important factor in the auditor-general’s findings.

In the most recent auditor-general report to the standing committee on public accounts (Scopa), it was announced that default judgments issued against the RAF from 2018 to 2023 had reached R4,7 billion. 

The fund’s perspective is generally that law firms have an enormous incentive to maintain the current system and that their complaints are designed to weaken the RAF’s ability to contest claims or change the system to allow better outcomes. 

“No amount of overtaking us is going to change our view.  No amount of trying to capture us will help you. We won’t be captured. We’ll refuse to be captured by you. And we will say it as we know it. And how we want it to be changed. It’s important.  There must be a voice for the voiceless in this country,” Letsoalo said.

The unanswered questions

One interesting aspect of the RAF’s financial position that Letsoalo refused to be drawn on was the organisation’s huge increase in its investment income, which according to the 2023/24 annual report increased 145% from R286 million in 2022/23 to R702 million in 2023/24. For an organisation that itself acknowledges huge quantities of unpaid claims, this increase is eye-catching. 

Asked about this seeming anomaly at the press conference, Letsoalo refused to answer, saying it was “dealt with” at a previous press conference and in a parliamentary question.

Neither did he expand on the RAF’s lost court case, in which it sought to change the accounting standard used to compile its annual financial statements, which it sought in defiance of the Accounting Standards Board, the auditor-general, and its line department, the department of transport.

In 2021, under Letsoalo, the RAF decided to change from International Financial Reporting Standards (IFRS) 4 to International Public Sector Accounting Standards (IPSAS) 42, which would account the organisation as a social benefit scheme rather than as an insurance company. 

Social benefit schemes prioritise transparency and impact reporting with simpler financial constructs, while insurance companies adhere to stringent regulatory frameworks, complex reserving methods, and profitability metrics. One of the biggest changes would be at what point the organisation recognises a claim against it, which in turn tends to decrease the technical definition of outstanding claims. 

In April this year, the high court in Pretoria ruled against the RAF.

♦ VWB ♦

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