‘We are tackling a 40-year-old problem’: Road Accident Fund chair

The Road Accident Fund spends R10.6bn on legal fees, but more than 95% of matters are settled without any trial being run, says chairperson Thembelihle Msibi. Stock photo.
The Road Accident Fund spends R10.6bn on legal fees, but more than 95% of matters are settled without any trial being run, says chairperson Thembelihle Msibi. Stock photo.
Image: 123RF/Stockstudio44

The Road Accident Fund (RAF) board has slammed media campaigns that it claims are waged by groups that benefited from the entity’s inefficiencies.  

Chairperson Thembelihle Msibi said the campaigns include peddling of fake news, marches and vexatious litigation.

Msibi, who addressed the media on Thursday alongside CEO Collins Letsoalo on the entity’s financial affairs, said the RAF’s achievements are often downplayed and trivialised.

Last week, the fund obtained an extraordinary high court order suspending all writs of execution granted against it as well as settlements it has already reached with claimants for a period of 180 days. The RAF said this will enable it to pay the oldest claims first.

The entity’s latest draft annual financial statement, for the year ending March 31 2020, paints a bleak picture of its finances.

It shows an accumulated deficit of R322bn, and liabilities exceeded assets by more than R300bn. Revenue from the fuel levy between April and September 2020 was R7.9bn less than it expected.

Msibi said the judgment — delivered by the high court in Pretoria on Friday — is being misinterpreted.

“The RAF has noted with concern the various media reports that seem to distort the facts with regards to the progress by [the fund] over the past 18 months,” she said. “The majority of these distortions have taken to republishing articles as old as 2005 in an attempt to project the RAF as a failing entity.

“What is of greater concern is when RAF is discussed on media platforms without being invited to clarify the position or give its viewpoint. Our ... court application and subsequent judgment by the full bench of the North Gauteng High Court is being misconstrued and mischaracterised through these campaigns. We view this as mischievous and unfortunate.”

Msibi said this is “clearly calculated” to confuse South Africans. “The claimants are even misinformed and told that they cannot submit claims until September 30,” she said.

“We have taken a decision today to address all South Africans on the true state of affairs at the RAF.

“On September 9 2019, the minister of transport seconded Mr Collins Letsoalo, the then CFO of the department of transport, to the RAF in a bid to effect a turnaround of the RAF into a sustainable entity.

“This was followed by the appointment of a permanent board on December 3 2019. This board comprises individuals with various skills suitable to the needs of the RAF and, in particular, turning it about. The board was given five priorities to focus on which would turn the tide in the ailing entity.”

Msibi said the priorities were:

  • the reduction of legal fees and medical costs;
  • a review of business processes;
  • the introduction of an integrated claims management system; and
  • eradication of fraud and corruption.  

“The reality is that time is required in turning [about] an entity this size and magnitude of the RAF,” she said.

“The financial position of RAF has been a challenge since 1981. We are therefore faced with solving a 40-year challenge.

“We began the turnaround strategy by developing a five-year strategy whose implementation started on April 1 2020. It has therefore been only one financial year since the execution of this strategy started. We are still at the beginning of our journey to an effective RAF transformation.

“This has not been done without resistance from those who benefited from RAF. In pursuing our strategy, we had to look at the core structure of the RAF and what we found is that we pay more than the market for most of the services that we procured from this market.

“In some instances, we paid five times what the market paid for these services. We also discovered that there is wastage and inefficiencies as some of these services were not even necessary for the efficient running of the RAF.”

Msibi said the RAF collects R43bn a year and only disperses R26bn to claimants, while spending R17bn on administrative costs, including R10.6bn on legal costs.

“It means that for every rand collected in revenue, we spend 40c to disperse 60c,” she said. “In most cases, 25% of this 60c is paid to the lawyers as success fees for represented claims. The claimants therefore get only 45c of every rand collected.

“It became obvious to us that the situation is unsustainable. We embarked on a process to reduce all these administrative costs.

“The first was focused on the legal fees. We ... discovered that although we spend R10.6bn on legal fees, more than 95% of these matters were settled without any trial being run.

“Our approach was to focus our powers and functions as provided for in ... the ... RAF Act [which] provides that RAF must investigate and settle claims. Litigation has taken over this mandate at huge expense to the claimants.

“We took a decision to dispense with the use of the panel of attorneys when their contract ended on May 1 2020 as it was not affordable to the RAF.”

Msibi said medical costs were also exorbitant. “We were paying, in cases, five times what other medical funders were paying for certain procedures,” she said.

No entity can afford this kind of wastage of resources that does not add any value to the life of the claimant.
RAF chair Thembelihle Msibi

“We became aware of a Constitutional Court ruling in 2013 that expected us to publish our own medical tariff that is market related. In this regard, we have on March 10 2021 published RAF medical tariffs to  ensure that we get value for money and pay market-related medical costs.

“We are also aware that we are paying far too much for our medical assessment costs. We pay R32,000 in surgeon assessment, R29,000 for an orthopaedic assessment — this is simply not sustainable or affordable for the RAF.

“Furthermore, we are paying about R10,000 for a loss-of-earning-or-support calculation. No entity can afford this kind of wastage of resources that does not add any value to the life of the claimant. All this happens while claimants have to wait an average of five years for assistance from RAF.”

Msibi said the RAF has  reviewed its internal processes with the aim of investigating and settling claims within 120 days.

“We are also assessing all the claims currently in the system to ensure that they have all the requisite documentation, to ensure that we can go through the backlog,” she said.

“Our preliminary findings are that most of these claims are not assessable as they lack the necessary information. We will be communicating with the claimants or their representatives on this matter.

“In our analysis, we have also discovered that we have paid plenty of attorneys in duplicate to the amount of R1.2bn. We have now collected R600m of these duplicate payments. We have also reported 102 law firms to the Legal Practice Council for mismanagement of their trust accounts.

“We are continuing with the reconciliations going back some years and continue discovering more duplicate payments.

“We must hasten to add that these duplicates are also a result of attachments of our bank accounts that have been going on for decades. We have interventions to address all these challenges, however we have been met with resistance obviously from those who benefit from these inefficiencies.”

She said the resistance manifests itself in different ways, “from fake news to marches to being taken to court through what we consider vexatious court applications”.

Msibi added: “We also — in the past financial year, 2019/2020 — got a clean audit. However, most of these achievements are downplayed or trivialised. We appeal to South Africans to be aware of these misrepresentations and always use official RAF platforms to get the factual information.”

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