The deficit of the Road Accident Fund has doubled to R16,7 billion in the past four years and it is “untenable for the fund to continue with such a deficit”, says Financial Services Board boss Jeff van Rooyen.
The deficit of the Road Accident Fund has doubled to R16,7 billion in the past four years and it is “untenable for the Fund to continue with such a deficit”, says Financial Services Board chief executive Jeff van Rooyen.
The fund was technically insolvent and was experiencing a negative cash flow, he said in a report on the fund tabled in Parliament yesterday.
According to report in , Van Rooyen said there was no indication that the deteriorating trend would subside. If the trend continued the accumulated deficit would double every three to four years.
At the end of the financial year to April 1998 the deficit stood at R8,4 billion. It rose 27 per cent to R13,3bn in the 2001 financial year and by 25 per cent to R16,7 billion in the 11 months ending March 2002.
The fund derives its funds from the fuel levy and meets the qualifying claims of road accident victims. It has been mired in controversy for many years and been shrouded by allegations of fraud and corruption.
Van Rooyen says it is "imperative that bold decisions are now taken to put this system on a healthy footing. The viability of the fund to continue its operations without loss to current and future creditors is dependent upon financial support from the government - and that is something that has not been guaranteed.
"It is untenable for the Road Accident Fund to continue with a deficit of the magnitude currently in place," he added.
The fund experienced a negative cash flow of R331 million and R133 million in the 2001 financial year and the 11 months to end-March 2002.
CARtoday.com reported earlier this year that the Satchwell Commission of Inquiry had recommended that the Road Accident Fund be replaced by the Road Accident Benefits Scheme (RABS), which will be run as a social-security scheme.
In a 2 067-page report, which was tabled in Parliament in January, the commission suggested billions of rands in outstanding claims against the RAF should be ring-fenced. The RAF will be responsible for all claims arising out of accidents that occur before legislation creating the new scheme is enacted.
After that date, the commission said, the RAF’s fuel levy funding should be redirected to the new body, and the existing claims funded by special allowances from the finance department. The new scheme should further be funded through a flat-rate levy on fuel purchased on land and partial exemptions for fuel used in the forestry, agricultural and mining industries.
Meanwhile, in an effort to speed up its crackdown on corrupt officials, the Fund will limit the time it takes for suspended employees to appear before disciplinary committees. According to reports, the move was intended to fast track the processing of cases of employees who, in some cases, have been suspended for longer than six months.
Van Rooyen said on Tuesday the Short Term Insurance Act required that insurers should at all times have sufficient assets to meet their liabilities and at the same time maintain a prescribed solvency margin.
The fund did not meet this requirement and could not be regulated as a short-term insurer, he added.
Original article from Car