overview of the performance of the road accident fund in 2012/13 portfolio committee of transport

Overview of the Performance of the Road Accident Fund in 2012/13

Portfolio Committee of Transport

10 0ctober 2013

Purpose

•The purpose of this presentation is to present an overview of the performance of the Fund in 2012/13…

•Background information

•Where the business is:− Status at the end of 2012/13 − Highlights in 2012/13− Challenges− Annual Performance Plan − Auditor-General

•Where the business needs to go:− Strategic framework− Operational targets for 2013/14− Priorities for 2013/14

Background…

•Road Accident Fund Act, 1996 (Act No. 56 of 1996) & RAF Amendment Act, 2005 (Act

No. 19 of 2005)

− “Payment of compensation in accordance with this Act for loss or damage wrongfully

caused by the driving of a motor vehicle”

− Provide compulsory cover to all users of South African roads against injuries

sustained or death arising from accidents involving motor vehicles within the borders

of South Africa

•Constitutional Court Rulings and legal precedents have shaped the mandate

•National public entity (Schedule 3A of the PFMA)

Corporate and Statutory Form

Background…

Business Model

Road Activity

Number & severity of accidents

Levy on fuel

Grants & investment

revenue

Financial Position

Volume of claims

Value of claims

Third party costs

Administrative costs

Fuel sold

Revenue

Cost

Background…

Business Process

Background…

•Physical − Head office in Centurion− Five regional processing centres

Pretoria, Johannesburg, Durban, East London and Cape Town− Customer service centres

NelspruitMafikeng, Bloemfontein, Polokwane and Kimberley

•Virtual − Call centre (0860 23 55 23)− Web (www.raf.co.za)− Twitter (@RAF_SA)− Facebook (www.facebook.com/#!/RoadAccidentFund)

Service Infrastructure

http://www.raf.co.za/

Background...

•South Africa...Roads…Vehicles...Transport...Crashes...Death & Injuries...Consequences!

•70 year funding regime driven by an “accessible” revenue stream

− Moved from protecting a wrongdoer from being sued to supporting victims

•Compensation is fault-based and fault must be proven or excluded

− Rulings and Orders are not always consistent

− Great deal of subjectivity

•Micro-economy has been created and is sustained by the RAF

− Lawyers, Advocates, Assessors, Experts etc

− Contingency fees charged in excess of 25%

•50% of matters on the Court roll relate to road accidents

•Claimants are often not the primary beneficiary

Operational Context

Background...

Social Context

Social Security

PillarBen. Benefit

Social Support

Funding SolventLoss of Income

Loss of Support

Medical Costs

UIF Employed ++Limited Yes No NoPayroll tax &

RelatedYes

COIDA Employed +Limited Yes No YesPayroll tax &

RelatedYes

SASSA Poor +++Limited No Yes NoFiscus & Budget

Yes

RAF AllUnlimited

& Increasing

Yes Yes YesFuel Levy & Unrelated

No

Background...

•The RAF carries an extensive legacy, partly true and partly perceived, which was built

over many decades

− Compensation scheme that has not had revenue and expenditure aligned

− ‘Insolvent and bankrupt’ for 31 years as a result of a provision for claims incurred

− A “lawyers” business

− Intensely bureaucratic

− Inefficient, uncaring and impersonal

− Fraught with fraud

•The Board and management committed in 2012 to create a new legacy, one of

delivering services efficiently and effectively to victims of crashes who need the

support

•Early signs of change are visible...

Unfortunate legacy

Purpose





Where the business is…

Financial indicators

2011/12 2012/13

Fuel levy 80c/l 88c/l

Total revenue 17.1bn 17.9bn

Loss or deficit 16.5bn 4.9bn

Deficit 46.4bn 51.2bn

Total exposure to claims incurred 72.0bn 82.8bn

Growth in o/s claims provision 20.4bn 6.4bn

Claims expenditure 12.2bn 15.2bn

Represented compensation pay-outs-General damages-Income support-Medical costs

8.9bn (71%)3.9bn4.3bn800m

11.4bn (75%)4bn

6.3bn1.1bn

Cash balance 4.2bn 6.1bn

Claim payments 225,905 227,855

Fruitless expenditure 22,108m 20,226m

Irregular expenditure 7,042m 4,327m


Status at the end of 2012/13Historical Review


Status at the end of 2012/13



Amounts in R’bn NotePersonal: Old Act

Personal: New Act

Under-takings Supplier Total

Provision as at 2012 03 31 29.0 38.8 4.4 0.5 72.7

Interest (@8%) 2.3 3.1 0.4 0.0 5.8

Payments -10.1 -5.0 -0.2 -0.6 -15.9

Accidents since 2012 03 31 - 14.5 0.3 0.4 15.2

Allowance for the Paixao ruling - 1.1 - - 1.1

Undertaking basis change 1 - - 0.4 - 0.4

Allowance for re-classification of claims with status “D” 2 0.1 0.9 - - 1.0

Unexpected increase 3 1.6 0.3 0.3 0.3 2.5

Provision as at 2013 03 31 22.9 53.7 5.6 0.6 82.8

Movement in % (21%) 38% 27% 20%

13.8%



Description Actual 2013 Budget 2013 Variance to Budget

Actual 2012 Variance to 2012

R’000 R’000 % R’000 %

Net fuel levies 17,380,217 17,853,056 3% 16,989,071 2%

Other revenue 259,960 159,075 63% 114,626 127%

Total revenue 17,640,177 18,012,131 2% 17,103,697 3%

Claims expenditure

21,579,683 13,670,722 58% 32,587,268 34%

Administrative expenditure

1,176,381 1,287,441 9% 1,003,751 17%

Deficit for the year

(5,115,887) 3,053,968 268% (16,487,322) 222%



Description Actual 2013 Budget 2013Variance to Budget

Actual 2012Variance to 2011

R’000 R’000 % R’000 %

Total assets 10,717,258 9,642,000 11% 8,572,312 25%

Total liabilities 62,181,211 48,766,000 28% 54,971,743 13%

Total Net deficit

(51,463,953) (39,124,000) 32% (46,399,431) 11%

Where the business is…Status at the end of 2012/13


•2012 was “The Year of the Customer”

•Road Accident Fund (Transitional Provisions) Act, 2012 enacted on 13 February 2013

•Supreme Court of Appeal in Lebeko and Duma confirmed that it is not for the court to determine whether the injury is serious

•High Courts declared so-called “common law” contingency fee agreements that do not comply with the Contingency Fees Act, 1997 invalid

•RAF on the Road in 15 communities, serviced more than 8 000 claimants and settled R102 million

•Nelspruit office was established and is fully operational (North West, Northern Cape, Limpopo and the Free State)

•Streamlined business processes designed, documented and implemented

•New organisational structure designed and implemented

•Quicker turnaround times for the settling of claims recorded

•The average number of capital (or compensation) payments and finalisations per claims handler improved

Highlights in 2012/13


•SOP for the management of writs of execution developed and implemented

•Full review of all claim files was undertaken and the staging of all open claims is now known

•Contract and bid templates developed to ensure efficient tender processes

•Various regulations to the Act were published

•Risk management methodology and systems reviewed, evaluated and changed successfully

•Numerous internal audit findings resolved and the final audit is “Clean”

•Fund achieved 86% of APP targets (53% in 2011) (70% against original APP)

Highlights in 2012/13


•The number of outstanding claims− Enhanced activity, assessed business processes and enhanced claims processing

capacity − Structured block settlements were held − Management of the panel of attorneys was improved

• The growing liability for claims incurred− Improved claims processing and finalisation− Curtailed the re-opening of claims − Introduced quarterly actuarial appraisals

•The large amounts of money spent on legal costs− Management implemented new processes in the claims environment − Litigation units established in each of the regional offices− Presence maintained in Courts

• The settlement of direct claims− Marketing yielded great demand − Capacity has been enhanced − New business processes put in place

Challenges attended to


APP Performance in 2012/13

* Target partially achieved – (1) Number of claimants engaged at road shows per annum and (2) Achieve / exceed Employment Equity target of 90%**Target not achieved - Relates to 5% reduction in the deficit


•Opinion − The financial statement present fairly, in all material respects, the financial position

of the Road Accident Fund as at 31 March 2013

•Emphasis of the matter − My opinion is not modified in respect of this matter− Going Concern

Accumulated deficits of R51 587 567 and that the public entity’s total liabilities exceeded its total assets by R51 463 953 as at 31 July 2013

•Predetermined objectives− There were no material findings on the annual performance report concerning the

usefulness and reliability of the information

•Compliance with laws and regulations− I did not identify instances of material non-compliance with specific with specific

matters in key applicable laws and regulations

• Internal control− I did not identify any deficiencies in internal control which i consider sufficiently

significant for inclusion in this report.

Annual audit by the Auditor-General

Purpose





Where the business needs to go…Strategic framework

Where the business needs to go…

•The Fund has succeeded in aligning its strategic and operational targets

− The strategic plan’s targets tie back to the four strategic objectives

− Targets contained within the Strategic Plan flow to the APP and then onward to

Executive and employee scorecards

•For 2013/14 there are 25 performance targets which are clearly defined in the APP

Operational Targets for 2013/14

Where the business needs to go…

•Strategic priorities

− Implement the APP successfully

− Ensure that new targets are timeously attended to

•Operational priorities

− Build on the enhanced brand and market presence

− Ensure optimal capacity ~ numbers and performance measures

− Maintain efficient operational ~ processes and costs

− Improve claim processing ~ turn around times, process adherence and volumes

− Prioritise direct claims ~ staff numbers and process adherence

− Improved litigation management (Panel of Attorneys and Court case flow)

− Improve data collection, analysis and reporting

− Roll out the national customer service footprint and RAF spatial plan

− Procure claim administration services

− Implement the claim system enhancements

Priorities for 2013/14

Conclusion

•RAF has not been in ‘the best of places’

− Challenges, weaknesses and risks were entrenched and often long-standing

•Change is taking place and there is growing recognition of the Fund’s mandate and

contribution

• Great effort is and will continue being placed on:

− Fulfilling the strategic objectives

− Addressing the challenges and risks

− Providing efficient support to the victims of road accidents

− Preventing the catastrophic socio-economic effects of accidents in our society

•2013 is the RAF’s “Year to Shine”

Thank You

overview of the performance of the road accident fund in 2012/13 portfolio committee of transport

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