Would scrapping the RAF in favour of a mandatory insurance less the cost of fuel? Picture - iStock elements, created by Narissa Subramoney
As authorities investigate ways to cushion the impact of rising fuel prices, South Africa’s Fuel Retailers Association has proposed scrapping the country’s controversial Road Accident Fund (RAF) in favour of a mandatory insurance scheme.
According to the Business Tech report, the association argued that RAF in its current revenue structure should be wholly scrapped and replaced with a mandatory motor insurance flat fee – not linked to the petrol pump price.
The association is an independent employers organisation that represents the country’s fuel service station owners.
It argued that several European countries have introduced compulsory insurance for individuals and businesses when driving, with the mandatory system raising funds to provide protection for accident victims.
While the RAF offers similar compensation for road accidents, the funds are primarily raised from a levy attached to the Basic Fuel Price.
The RAF levy is currently set at R2.18/litre after the National Treasury opted not to increase it in the 2022 financial year.
The proposal comes a week after the RAF reported that it was making steady progress in its turnaround strategy. The RAF has been technically insolvent since 1981.
But despite RAF’s [progress report the 2022 Budget Review revealed that during the 2020/21 period, RAF accounted for 83.7% or R374.6 billion of the liabilities of the government’s social security funds.
The other funds are the Unemployment Insurance Fund (UIF) and Compensation Fund.
Data from civil society group Outa shows that the RAF levy made up 5% of the price of petrol in 2009, and generated around R9 billion per annum for vehicle-related injury compensation.
As of 2022, it now makes up more than 10% of the fuel price and contributes close to R45 billion to the RAF.
“This specific ‘tax’ has undergone a number of substantive increases – from R0.45c per litre in 2009 to R2.18 in April 2021 – to keep pace with the growing demand on these lucrative revenues which are largely wasted due to inefficient administration, corruption and unscrupulous legal claims which the RAF administrators are too weak to challenge,” Outa said.
Scrapping the Road Accident Fund could also have other benefits for the country’s fiscus, with the scheme previously flagged as one of South Africa’s biggest budgetary concerns next to Eskom.
The latest data from the Central Energy Fund shows South Africa could see an increase of between R1.76 – R1.83/litre for petrol, and R2.98 – R3.14/litre for diesel in April.
Compiled by Narissa Subramoney
NOW READ: RAF chair says it’s making ‘great strides’ with turnaround strategy
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