Minister of Finance Tito Mboweni’s suggestion of private premium funded insurance for motorists, to remove the burden on the state of the Road Accident Fund, has been described as good in principle but detached from reality.
The minister told journalists ahead of his budget speech last week that when someone bought a financed car, they were required to produce proof of insurance, saying: “It is your personal responsibility to buy insurance. Don’t burden the state with your carelessness.”
The current scheme, which the National Assembly is currently in the process of replacing with the Road Accident Benefit Scheme, is grappling with financial mismanagement woes and wastage on legal costs.
Treasury recently revealed the RAF’s accumulated deficit was expected to deteriorate at an average annual rate of 18.5% over the medium term to R402 billion in 2021/22.
On an accrual basis, the fund will have an average annual deficit of R53.3 billion, mainly as a result of claims awarded but not paid. Chris Hunsinger, the Democratic Alliance’s transport spokesperson, said solutions for the fund were abundant and the state would not be burdened if practical solutions were introduced.
He said current vehicle insurance was restricted to damage on vehicles and said premiums would skyrocket if this was extended to injury to persons.
“In principle, it is well established in terms of world practice, but in terms of the current situation, it is detached from reality.
“There is a strong argument that everything can stay as it is if we can just fix the behaviour of drivers/motorists,” Hunsinger said.
“If we have fewer accidents, the fund would not be burdened.”
The RAF’s main funding method is fuel levies, which Mboweni increased by 29c for petrol and 30c for diesel. Previously, the RAF revealed that it continued to struggle to pay claims due to a net deficit climbing sharply to R206.3 billion by the end of the 2017/18 financial year, with its legislative framework resulting in the fund being insolvent since 1981, and threats of attachment and removal of property remaining constant operational challenges.
Last year, it was revealed that the fund spent almost R500,000 a month renting 300 office chairs.
“There must certainly be a debate around this and there should be a specialist commission appointed. The DA has called for a commission made up of specialists because the industry is loaded with people that want to present solutions,” he said.
According to Hunsinger, more than 80% of Gauteng high court rolls were congested with RAF cases, of which only 1% went to trial. He said this had steep legal costs implications and this was where Mboweni should look to save money.
“There is an income of R80 billion a year and the legal bill is R8.1 billion. Address the nerve of this problem.
“It can be that in one financial year, three years ago, we had over 500 people employed by [the RAF]. That was an expansion of employees of 25% (R300 million a year) but in the same year it outsourced its work,” Hunsinger said.