Road Accident Fund

The RAF is a juristic person established by an Act of Parliament, namely, the Road Accident Fund Act, 1996 (Act No. 56 of 1996), as amended (”RAF Act”). It commenced operations on 1 May 1997, assuming at the time, all the rights, obligations, assets and liabilities of the Multilateral Motor Vehicle Accidents Fund. The RAF is responsible for providing compulsory social insurance cover to all users of South African roads; to rehabilitate and compensate persons injured as a result of the negligent driving of motor vehicles in a timely and caring manner; and to actively promote the safe use of all South African roads. Section 3 of the RAF Act stipulates that "the object of the Fund shall be the payment of compensation in accordance with this Act for loss or damage wrongfully caused by the driving of a motor vehicle". The customer base of the RAF, therefore, comprises not only the South African public, but all foreigners within the borders of the country. The RAF provides two types of cover, namely personal insurance cover to accident victims or their families, and indemnity cover to wrongdoers.

Prior to 1997, the system of compulsory motor vehicle accident insurance was governed by the following legislation:

• Motor Vehicle Insurance Act, 1942 (Act No. 29 of 1942)
• Compulsory Motor Vehicle Insurance Act, 1972 (Act No. 56 of 1972)
• Motor Vehicle Accident Act, 1986 (Act No. 84 of 1986)
• Multilateral Motor Vehicle Accidents Fund Act, 1989 (Act No. 93 of 1989)

The RAF, as established by the RAF Act, is owned by the South African public. It is listed as a national public entity in accordance with schedule 3A of the PFMA. Government's governance oversight over the RAF includes:

• (National Assembly) through the relevant Portfolio Committee and the Standing Committee on Public Accounts (“SCOPA”); The Executive Authority
• Honourable Minister of Transport
• Board of the RAF.

The National Assembly has legislative powers and maintains oversight of the National Executive Authority and the RAF as an organ of State. In addition, Parliament oversees the Executive Authority who is required to provide Parliament with full and regular reports concerning matters under his control. Parliament exercises oversight of the RAF through the Transport Portfolio Committee and through SCOPA. The Portfolio Committee oversees service delivery and performance in accordance with the mandate of the RAF and its corporate strategy. It reviews financial and non-financial information, such as efficiency and effectiveness measures in delivering services against corporate goals.

The Minister of Transport is the Executive Authority of the RAF and is concerned with the financial viability and risks of the organization, as well as policy-making and monitoring of policy implementation to ensure that the RAF effectively delivers on its mandate. The board of directors acts as the Accounting Authority of the RAF and is accountable to the Executive Authority for the performance and affairs of the entity. The RAF's Board is responsible for determining the overall direction of the RAF, formulating and implementing policies that are necessary to achieve the RAF's strategic goals, and maintaining good corporate governance.

The RAF provides compulsory cover to all users of South African roads, both citizens and foreigners, against injuries sustained or death arising from accidents involving motor vehicles within the borders of South Africa. This cover is in the form of indemnity insurance to persons who cause the accident, as well as personal injury and death insurance to victims of motor vehicle accidents and their families.

Road transportation is a critical element supporting and directly contributing to growth in any economy. Road accidents are, unfortunately, a negative consequence of this economic growth, affecting both economically active members of our society and other citizens. Free markets, and in particular the private sector, do not fully address the impact of road accidents on society and the economy. The RAF provides a social security safety net to the country and economy by making available compulsory social insurance cover to all users of South African roads. Contributions to the RAF are done by way of a levy on fuel used for road transportation. The cover extends to all members of society including, but not limited to, the poor, children, legal and illegal immigrants, foreigners, owners and drivers of motor vehicles, as well as their passengers. The social insurance cover, however, does not extend to drivers of motor vehicles that are found to be negligent.

The socio-economic role of the RAF is to re-integrate victims of road accidents into society, from a health and economic perspective, and to protect at-fault drivers and their families from financial ruin. This is done by the RAF paying the medical and related services costs required to restore accident victims to health, compensating the victims or their families for income or support lost as a result of the accident, and indemnifying the wrongdoer from liability. In addition, the RAF pays general damages to accident victims as compensation for pain and suffering, loss of amenities of life, disability and disfigurement, as well as funeral costs to families in circumstances where the victim of the accident sustains fatal injuries.

The vision of the RAF is “to provide the highest standard of care to road accident victims to restore balance in the social system”. The mission of the RAF is “to provide appropriate cover to all road users within the borders of South Africa; to rehabilitate persons injured, compensate for injuries or death and indemnify wrongdoers as a result of motor vehicle accidents in a timely, caring and sustainable manner; and to support the safe use of our roads”.

The RAF can obtain its funding from several sources as outlined below: •Fuel levy income •Government grants, paid by National Treasury when there is a pressing need such as an acute cash shortage •Borrowings/loans, which are an allowed source of funding according to the RAF Act. This option has not been used to date •Investment income, acquired from invested funds that occasionally result when the RAF's operational capacity prevents it from paying out all its funds.

The primary source of income for the RAF compensation scheme is a levy raised on fuel. The levy is measured in terms of cents per litre on petrol and diesel fuel sold in South Africa and forms part of the general fuel tax regulated by government. The fuel levy per litre is set by National Treasury on a yearly basis, whereas total fuel sales are influenced by a number of macro-economic factors. On an annual basis, the RAF requests National Treasury for an increase in the RAF Fuel Levy, based on a financial model and a calculation of its costs during the coming year. The full extent of the RAF Fuel Levy requested is seldom granted. This is because National Treasury has historically set the levy on the basis of a pay-as-you-go principle rather than with the purpose of establishing a fully funded position for the RAF. During the 2012 financial year the RAF Fuel Levy was set at 80 cents per litre.

The RAF is not involved in the collection of its fuel levy. The South African Revenue Service (“SARS”) administers the collection of the fuel levy and pays it to the RAF, in accordance with provisions of the Customs and Excise Act, 1964 (Act No. 91 of 1964) and the RAF Act. The two main variables that determine the income of the RAF are the volume of petrol and diesel sold per annum and the rate of the levy. The RAF Fuel Levy can be viewed as a compulsory contribution to social security benefits which is used only for the specific purposes as provided for in legislation.

The RAF is affected by general economic conditions and other environmental factors, and by the extent to which it manages its costs effectively.

The nexus of all these factors is road activity in South Africa: •The number of vehicles on the road influences the amount of fuel sold, which in turn affects the revenue granted to the RAF by National Treasury. This revenue comprises the fuel levy together with ad hoc government grants and minor income from investments to equal the RAF's total revenue. •The number of vehicles on the road also influences the number of accidents, although many other factors influence this statistic, particularly the relative severity of accidents. Volume and severity of accidents influence the volume and average value of claims made against the RAF. Claims, combined with the cost of third parties, such as attorneys and medical/legal experts, and the RAF's administration costs, equal the RAF's total costs.

The head office is in Centurion. Other offices are in Menlyn, Pretoria, Johannesburg, East London, Durban, and Cape Town.