Home / Africa / A new account helps solve the financial misery of the Road Accident Fund – Nzimande

A new account helps solve the financial misery of the Road Accident Fund – Nzimande



The current Road Accident Fund scheme is "unfair, wasteful and open to abuse". That is why a new regulation is being set up that is financially feasible, transport minister Blade Nzimande said.

The RAF provides mandatory coverage for users of SA roads against injuries or death as a result of accidents within SA.

The minister responded in a written answer to a question from ANC MP and chairman of the portfolio committee on transport Dikeledi Magadzi. The MP asked the Minister what measures had been taken to stabilize and secure the financial sustainability of the RAF, as well as the National Office for National Roadside Assistance (Sanral).

Nzimande reacted candidly about the insolvent position of the RAF, which held a "considerable amount of time" as he put it.

Five years of cash flow problems

The RAF has handled more claims than it can honor with the available funding, said Nzimande.

"As a result, the RAF continues to face physical cash flow constraints over the past five years, insofar as compliance with the" going concern "requirement is considered problematic," he said.

Earlier this year, Treasury officials pointed out to the Standing Committee on Credits that the compensation claims received compensated the proceeds of the fuel contribution for road transport.

In the medium-term budget statement, the Treasury stressed the RAF and Sanral as fiscal risks, and said that the RAF may require a major increase in fuel tax over the next three years to manage its short-term liability.

Nzimande said the current regulation had to be transformed, and the RABS bill (Road Accident Benefit Scheme) will be able to tackle many of the RAF's challenges.

"The final promulgation of this piece of legislation will address many of the current RAF challenges.

"Active pursuit of the RABS promulgation will see a financially viable social security system introduced, become affordable through a mechanism such as the RAF and be financed in an appropriate manner," he said.

In the meantime, the RAF has also launched initiatives since 2014/15, including regularly preparing cash flow projections to reflect the latest available financial status in an effort to identify any deficiencies in funding.

There are also "comprehensive" reporting mechanisms to monitor cash flows.

In addition, the RAF commits itself with Treasury, the transport department and other stakeholders to provide status updates.

Sanral

As for Sanral, the Minister said that the Treasury had agreed to allocate R5.8bn to the e-toll portfolio, which did not generate revenue due to non-payment by road users.

"The e-toll uncertainty has made Sanral's going concern as uncertain because of the significant debt to investors, which requires maintenance … This will support the cash flow situation of Sanral for a period of 12 months from the date of the audit report, "said Nzimande.

"On the basis of this support from the tax authorities, Sanral's council has the confidence to approach the capital market in the near future in order to re-finance part of its short-term bonds."

Nzimande said that he had been instructed to find a solution for the e-toll challenge, and that he would enter into discussions with various stakeholders to find an optimal solution for the financing of road infrastructure.

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