Treasury offers eleventh-hour recommendations to fix Road Accident Fund | Fin24
 
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Treasury offers eleventh-hour recommendations to fix Road Accident Fund

Aug 15 2018 05:45
Khulekani Magubane

The Road Accident Fund is in desperate need of financial, governance and structural reforms if it is to remain functional, National Treasury has told Parliament. 

Speaking to the Portfolio Committee on Transport on Tuesday afternoon, Treasury told Parliament it was necessary to change how the RAF is funded, how its leadership is constituted and how it responds to the needs of claimants who seek compensation.

However, the committee responded that Treasury was presenting new recommendations at the tail end of processing the Road Accident Benefit Schemes Bill.  

'Social security reform' 

In 2011, Cabinet approved a policy in which the Road Accident Fund would be converted from being a fault-based, liability insurance system to a fully funded social security system.

National Treasury Chief Director for Urban Development and Infrastructure Ulrike Britton told the committee that while statutory certainty was important, the system also had to be fair and sustainable. 

"The bill allows for the adjustment of tariffs, income caps and funeral benefits to take inflation into account," she said, adding that inflation was "not the only relevant economic and financial consideration". 

Britton said organisational changes should be considered in the bill, such as the shareholder representative (the Transport Minister) being granted voting rights.

She said it did not make sense to have the minister sitting in meetings "as an observer without the right to vote on issues".

"This is the biggest social security reform that the South African government has undertaken since the roll-out of social grants. The bill and system being put forward have huge financial implications on the fiscus and society as a whole," Britton argued.

She also reminded committee members that the current RAF had been insolvent since 1981.

Funding

Britton said clause 26 of the bill brought a much-needed separation of financial, fiduciary and accounting requirements of the administration of the scheme, as well as the funding of its benefits.

"We told the department that we should not fund the scheme on the basis of pay-as-you-go," Britton said.

"We also said we would rather not have an average national income as a means of determining what beneficiaries are given, as it is arbitrary." 

Spanner in the works

However, committee member for the African National Congress (ANC), Leonard Ramatlakane, told National Treasury officials that their submission of the new recommendations threw a spanner in the works for the committee, as they were at an advanced stage of finalising the bill.

Another committee member for the ANC, Mtikeni Sibande, said by waiting as long as they did, Treasury allowed recommendations which could have sharpened the scheme and saved the fiscus billions to fall by the wayside.

Committee member for the Democratic Alliance (DA), Christian Hunsinger, told the Treasury officials that National Treasury should be given the opportunity to brief the Department of Transport fully on their recommendations before these recommendations could be taken on by the committee.

Johannes Makgatho from the Department of Transport told the committee that National Treasury only briefed the Department of Transport on the recommendations related to the financing of the scheme.

Committee chairperson Dikeledi Magadzi said she would seek to engage Minister of Finance Nhlanhla Nene and Minister of Transport Blade Nzimande on the meeting soon. She said the committee could still finalise its report of inputs within two weeks.

It is understood that Nzimande wants the bill finalised urgently.

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