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The days of the Road Accident Fund (RAF) could be numbered if Maponya Attorneys has his way, as he has petitioned the Gauteng High Court that the state entity, which compensates car accident victims, be liquidated.
Maponya, who was appointed to the fund’s panel in December 2014, says that given the financial peril the RAF is in, a court-ordered liquidation is the fairest outcome for all stakeholders.
As it stands, the fund is insolvent as its total liabilities exceeded its assets by R262.11 billion according to its 2018/19 annual report.
It has also worsened since then, as its cumulative deficit is expected to rise from R329.7 billion in 2019/20 to R593.1 billion in 2022/23, according to a presentation to parliament in June.
The deficit has increased due to a multitude of problems. In recent years, it has encouraged people, who would have given little thought to making claims against the fund, to do so.
There have also been allegations that some lawyers were overcharging for their services and that the fuel tax is an inappropriate financing mechanism.
Clearance sale
RAF financing problems have led creditors to place 560 liens on their bank accounts in fiscal year 2018/19. Maponya says that several creditors, who are owed R97 million, have already seized personal property seized at the fund’s Centurion office in an attempt to sell it.
Maponya is owned by R20.6 million and she fears that in the flood of civil lawsuits against the RAF, she and other creditors could lose out to those who have already repossessed assets.
To prevent this from happening, he applied to the Gauteng High Court on August 26 to resolve it under the provisions of the Insolvency Act.
In doing so, Maponya says it will replace individual debt collection resources with a fairer one for all creditors. Doing so this way will also formalize the involvement of relevant unions, employees, and tax authorities.
The RAF has yet to answer questions about whether it will oppose the request. He noted in his 2019/20 annual performance plan that the financial troubles surrounding the RAF are nothing new, as it has been insolvent since 1981.
The fund must deliver the response documents before the close of operations on September 28.
Run out of way
The government has long viewed the RAF’s structure as unsound, and that is why it wants to introduce the Highway Accident Benefit Scheme (RABS) to replace it.
With RABS, the goal is to expand access to benefits by removing the requirement to establish who was “at fault” to qualify for benefits.
RABS also reduces the need for legal representation.
“Similarly, the RABS will ensure that the intended beneficiaries receive benefits intended for traffic accident victims and their dependents, in contrast to the RAF, where numerous intermediaries often unfairly benefit at the expense of the claimant,” according to the transportation department 2019/20 Annual Performance Plan.
With a new structure on the way, the government sees no need to undo the RAF.
“While we, as the Ministry of Transport, recognize that the RAF’s debts are substantial and that the turnaround time for claimants’ payments may leave much to be desired, we believe that the RAF’s financial obligations are not insurmountable if they carry out the necessary reforms that are currently underway and are fully implemented, ”the transportation department said in a statement.
The department also notes that progress has been made to tidy up the RAF house, such as increasing the fuel tax contribution, reducing administrative costs such as those incurred through legal fees, which cost the RAF around R13. billion in the previous financial year.
“Given the reasons mentioned above, we believe that any attempt to liquidate the RAF is short-sighted and narrow-minded. We are ready to defend our position in court if necessary. “
However, it is unlikely that the RAF would not have been in this position if Parliament had passed the RABS bill on December 6, 2018.
Back then, in accordance with the department’s 2019/20 annual performance plan, a vote on the bill was scheduled, but had to be postponed because there were too few deputies to form a quorum.
This article first appeared on Moneyweb and was republished with permission.
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