Road Accident Fund (RAF) CEO Collins Letsoalo has called for a major overhaul of the Road Accident Fund, describing the current system as “anti-poor” and advocating for capping claims, adding that he believes it should have exclusions and prescribed benefits.
Letsoalo, who has been CEO of the state-owned insurance scheme that compensates car crash victims for the past five years, has been painting a picture of the scheme's deteriorating financial health, with the latest annual report showing that for every R1 it owes, it only has 32c.
Even then, the auditor-general, Tsakani Maluleke, issued the severest type of audit opinion, an adverse opinion, saying the R36bn-plus claims liability was grossly understated, as tens of thousands were returned to claimants as they had not met the legal definition of a claim.
Letsoalo proposed that the fund should exclude wealthy individuals and foreign individuals from claiming, suggesting an affordability test similar to other social benefit schemes to limit the number of claimants.
“The affordability test will help limit the number of people that can claim from the fund. As it stands now, a billionaire can come claim from RAF,” Letsoalo said in an interview with Business Day.
In March, the fund disclosed in parliament that it had paid R1.62bn to foreign claimants, both legal and illegal, during the 2022/23 financial year.
“When a foreigner comes into SA, they are entitled to claim from the RAF should they be injured while in the country. The fund benefit is for loss of earnings so if their earnings are in euros, dollars or any other currency, you must replace the loss in the currency they were supposed to earn. Nowadays there is a cap on loss” Letsoalo said.
“This means foreign nationals will always earn at the top of the loss cap while South Africans will have a lower loss.”
When you get to Heathrow Airport [in London, UK], you will find a plaque that says foreigners are not allowed to claim social benefits. That is a developed country, but in our country, a person can do that.
Letsoalo’s comments come just over a year after the transport department introduced the RAF Amendment Bill, which by and large echoes his sentiments. The bill proposes a major overhaul of the Fund, emphasising its role as a social benefit rather than operating as an insurance company, and excluding certain third parties from claiming.
“When you get to Heathrow Airport [in London, UK], you will find a plaque that says foreigners are not allowed to claim social benefits. That is a developed country, but in our country, a person can do that. This one is clear because the law says we must pay,” Letsoalo said.
He also highlighted the legal and practical dilemma with illegal immigrants claiming from the fund, saying that on the one hand, the RAF was required to compensate all individuals injured in accidents, but on the other it must comply with immigration laws that prohibit supporting illegal immigrants.
“We were with lawyers at the strategic session and I asked them, ‘How then do they make the payments to the illegal immigrants once RAF makes a payout to the lawyer’s trust fund? Since the person is here illegally which bank account do lawyers pay into?’”
Emeritus professor in the department of private law at the University of Pretoria, Hennie Klopper, maintains that excluding foreigners and the wealthy would not save the RAF.
He pointed out the 2018 amendment that capped loss claims, suggesting that the system already prejudiced the affluent. “The limit on April 30 2024 was R361 372.00. This means that a person earning more than the limit forfeits any balance,” said Klopper, writer of Third Party Compensation and RAF Practitioners’ Guide.
Economist and researcher at the University of Johannesburg, Sean Muller said the RAF as an open-ended social insurance scheme with no cap on claims, was fundamentally flawed.
“In principle excluding anyone who currently qualifies would improve the financial state of the fund over the long term. There are also some valid reasons for excluding these two categories, or limiting the extent of the funds for which they qualify,” he said.
A 2024 study by University of the Witwatersrand academic Gregory Whittaker, published in SA, proposed that the RAF could save R3bn in the 2023/24 financial year by excluding loss of income claims for non-serious injuries. It goes on to say that loss of income claims for non-serious injury within the RAF framework were excessive when compared to local and international standards.
Letsoalo insisted that RAF was a social benefits fund, rather than an insurer, and should be able to distribute funds to claimants without claimants first litigating — a stance that also finds expression in his approach to handling claims liabilities.
Just four years ago, the RAF had R300bn-plus in claim liabilities, an amount that not only threatened to bring the entire structure down but also knocked finance minister Enoch Godongwana’s fiscal consolidation efforts off course.
The reason for the dramatic drop in claim liabilities to R36bn in the 2024 financial year was due to a technical accounting treatment concerning how much is set aside for potential claims as a bona fide social benefits fund — one that has no reserves and just receives monthly payouts, such as the SA Social Security Agency.
The auditor-general treats the RAF as a social insurance company, which has a regulatory duty to have extra money in reserve even for claims that are yet to meet the legal definition.
Under that accounting treatment four years ago, RAF claims liability had been projected to reach R600bn by this year — a titanic burden on a company that makes less than R50bn in revenue from the fuel levy.
“For the liability you have, you don’t have assets that you must hold against those liabilities. No insurance works like that because for insurance you need assets and there is nowhere where we are classified as an insurer,” Letsoalo said.
The RAF has lost a third case in its legal dispute with the auditor-general’s office for adverse audit reports but Letsoalo said he was working with the Accounting Standards Board (ASB).
“We are saying that the ASB must release a standard for social benefits. The auditor-general has refused to engage on the standards, stating that it is the responsibility of the ASB as the standard setter. We have participated in the consultation process for the ‘exposure draft’, which has been released by the ASB for comment. This draft in its current at least agrees with the accounting policy of RAF,” Letsoalo said.
With Tiisetso Motsoeneng
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