The RAF might need a major government bailout

It appears increasingly likely the Road Accident Fund (RAF) will require a significant government bailout. This follows the RAF receiving another bloody nose from the Supreme Court of Appeal (SCA), which on Thursday dismissed, with costs, its appeal against a high court judgment that declared a Board Notice and its RAF1 Form unconstitutional, unlawful and invalid. It has been estimated the RAF has about R500 billion in unqualified contingencies, a portion of which is attributable to the fund rejecting claims that complied with the RAF Act but did not comply with the Board Notice and RAF1 Form.

Attempts at the weekend to obtain comment from RAF board chair Kenneth Brown and Songezo Zibi, chair of parliament’s Standing Committee on Public Accounts (Scopa), on the SCA judgment were unsuccessful. Scopa is conducting an oversight inquiry into the affairs of the RAF. Gert Nel of Gert Nel Inc Attorneys, one of the major firms involved in assisting road accident victims in lodging RAF claims, said on Sunday the RAF created a parallel claims system because the fund did not register any claims that were not compliant with the Board Notice.

Nel said this did not stop attorney firms from lodging claims and getting default judgments on many of these claims, which the RAF does not currently have recorded in its register. He said the RAF put those claims in envelopes and sent them back to the claimants/plaintiffs “as if they do not exist”, but the RAF Act permits claims to be lodged through registered post, which means there is proof that these claims were lodged. Nel said if the RAF does not make an offer to settle a registered claim within 120 day, as prescribed by the act, the fund can be summonsed and the claim will follow a litigation process, which most attorneys have done.

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“This is where the RAF liability based on default judgments comes from. “That in itself is about R500 million at the moment and has created an immense immediate financial burden on the RAF,” he said. Nel said his firm is currently running a book in excess of R100 million that the RAF has not yet paid, with default court orders in place for all of these matters, which were not compliant with the Board Notice but were lodged in terms of the act.

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