How the RAF could save R10bn
The nature of the Road Accident Fund (RAF) and its operating environment is complex, nuanced and specific, with many changes, disputes and agendas unfolding in parallel.
Add to this the context of SA’s economic condition, severe challenges facing state-owned entities as well as the complexities of the Covid-19 epidemic, and a clear picture becomes difficult to decipher.
Elad Smadja, CEO of legal finance and litigation funding firm Taurus Capital, says despite the general narrative of economic and political doom and gloom at the RAF, a more realistic examination of the state of affairs shows that the RAF is far from a lost cause, especially if a new approach is taken.
‘Annual savings of about R10.6bn could be achieved through a programme of out-of-court settlements, with the average time to reach resolution contracting from four years to a number of months.’
Writing in Business Day, Smadja adds CEO Collins Letsoalo has started implementing a five-year plan to reduce legal costs, revise the structure and business processes, upgrade the integrated claims assessment system, build rehabilitation network and revise the supply chain management structure.
‘The first step in this plan was for the RAF to terminate its panel of defendant attorneys in early 2020, thereby putting a definitive and immediate end to its long-held cornerstone principle of resolution through litigation.’
Smadja notes the RAF is very different to other state-owned entities such as SAA, Eskom and Transnet, and more like the SA Social Security Agency.
He says it is a mistake to view the large claims expenses borne by the RAF in the same light as losses by Eskom, Transnet and SAA.
‘In fact, these expenses should be weighed against what might happen if the RAF disappeared,’ he says.
The Gauteng High Court (Pretoria) judgment in Road Accident Fund v Legal Practice Council and Others said that a secession of the RAF would have ‘disastrous consequences for this country’.
Smadja notes its ‘unique’ funding model ‘ensures a predictable, robust and steady monthly cash flow to the RAF – without it having to justify its allocation or priority from the national budget alongside all the government’s other commitments.
This funding stream is often ignored in considering the fund’s solvency and long-term viability.
Arguing that the negative views on the RAF ignore the progress that has been made in administrative process and payouts since October 2020, Smadja says things are improving and on the mend.
‘It is also important to recognise that progress has been made, especially regarding the reconciliation of payments and the improvement of various operational processes. While there are challenges and work to be done, steps to rectify the situation should be recognised.’
Article disclaimer: While we have made every effort to ensure the accuracy of this article, it is not intended to provide final legal advice as facts and situations will differ from case to case, and therefore specific legal advice should be sought with a lawyer.