The Minister of Transport, Fikile Mbalula, says the appointment of Collins Letsoalo as the new Chief Executive Officer (CEO) of the Road Accident Fund (RAF) will bring stability to the organisation.
"I am pleased to announce that Cabinet has approved the appointment of Letsoalo as the CEO of the RAF. We welcome this decision and we believe this appointment will go a long way in placing the RAF on stable footing," the Minister said on Friday.
Letsoalo was over the last few months on secondment from the Department of Transport as the acting CEO at the RAF.
In his previous capacity as the Chief Financial Officer of the department, he was intimately involved in providing support to the fund.
"Letsoalo joins the RAF at a time when it is facing daunting challenges and requires a steady hand to guide it through the change into the Road Accident Benefit Scheme, once the enabling law has been passed by Parliament.
"I have no doubt that he will rise to the occasion and provide decisive leadership in tackling the challenges," the Minister said.
The Road Accident Benefit Scheme Bill was introduced in Parliament with the aim of addressing the challenges faced by the RAF.
"The passage of this Bill will establish a sustainable Road Accident Fund Benefit Scheme predicated upon social insurance and capped benefit principles," the Minister said.
The Department of Transport is working with Parliament to ensure the Road Accident Benefit Scheme Bill is passed.
"This legislation will not only place the RAF on a stable footing, but will also ensure that the intended beneficiaries receive their benefits much quicker in order to restore their livelihoods affected by road crashes," the Minister said.
Letsoalo holds various qualifications including a Bachelor of Commerce in Economics, Advanced Diploma in Central Banking, a Diploma in Treasury Management and Trade Finance, a Postgraduate Diploma in Trade Finance, as well a Postgraduate Diploma in Management.
The Minister said Letsoalo brings to this role a wealth of management experience both from the public and private sectors.
"The RAF continues to experience tremendous pressure on its ability to carry out its mandate. Each time some is injured on our roads, whether they are South African or foreign nationals, the RAF incurs liability," Mbalula said.
As at 31 March 2020, the RAF liability grew to R324 billion and also had claims of R17.2 billion that had been finalised but could not be paid due to financial cash flow challenges.
"The key driver of this liability has been the increasing number of claims and the high administrative costs. During the 2019/20 financial year, the fund registered approximately 102 086 new claims.
"The R17.2 billion is owed to claimants, who have already waited, on average, for five years, to have their claims settled," the Minister said.
He said the fund has operated on a financially unstainable model for a number of decades.
"However, this challenge is compounded by the ever-increasing administrative costs of the RAF scheme. Of the revenue collected, more than R17 billion or 40% of this goes to administrative costs, with only R26 billion or 60% received by claimants.
"Of the R17 billion, R10.6 billion is legal costs. In the R26 billion paid, there is a further 'success fee' to the claimant's attorney, as part of the contingency fees agreement entered into between the claimants and their legal representatives," the Minister said.
While the majority of these legal costs are incurred, there is very little value added, as most of these claims (more than 90%) are settled out of court, after an average of five years has lapsed.
"This means that less than 5% of the RAF legal matters end up in front of a judge, while constituting more than 80% of the civil trial court rolls. The neglect of early investigations and settlement of claims has also resulted in the fund receiving an average of just over 4 353 summons per month," the Minister said.
He said these challenges require strong and visionary leadership.
"The board we appointed in December wasted no time tackling the challenges head on. They prioritised the task of appointing a fit and capable CEO to steer the ship and confront the intractable challenges head on," the Minster said.