South Africans are straining under the yoke of very high fuel prices, and those prices are worsened by the Road Accident Fund (RAF) levy. It sits at R2.25/l, roughly 8.5% of the pump price. With a new era at the fund, might there be a way to reduce this additional cost?
The appointment of Waseem Carrim as CEO of the RAF creates an opportunity to repair a spectacularly dysfunctional institution. There is plenty for him to do. Claims administration needs rebuilding, litigation needs controlling, fraud needs attacking and the relationship with lawyers, medical professionals and claimants needs normalising.
But even if Carrim turns out to be the administrative equivalent of Superman, this does not solve the central problem. The RAF receives roughly R50bn a year and faces liabilities estimated by parliament at close to R100bn. Its projected expenditure for 2026/2027 is about R70bn against projected revenue of just under R50bn. That is not a management problem; it’s a design problem.
There are two big choices.
The first is to keep the RAF as a social insurance scheme but limit what it pays. The second is much more radical: shrink or abolish the RAF and make vehicle owners carry compulsory third-party personal injury insurance, as happens in much of the developed world.
Both sound simpler than they are.
There is an assumption that capping RAF claims would inflict some unprecedented cruelty on accident victims. But South Africa already caps claims for loss of earnings and support. The current statutory limit is R390,664 a year, adjusted periodically for inflation. General damages are also restricted to victims who have suffered a “serious injury”.
This is the question
So the principle has already been conceded. The question is where the cap should sit and what should be protected from it.
Australia provides a useful example. The state of Victoria operates a compulsory transport accident scheme combining no-fault benefits with restricted access to common-law damages. Treatment and support continue, while large damages claims require a serious injury and are subject to limits.
That is quite a sophisticated compromise. The state does not reject the claim of a paraplegic accident victim: medical treatment, rehabilitation and support remain available. What is capped is the extent to which the compensation system replaces a very high lifetime income or places a monetary value on pain and suffering.
A cap becomes deeply unfair if it leaves seriously injured people without wheelchairs, carers, rehabilitation or medical treatment. It is much less obviously unfair to say that taxpayers and motorists have an obligation to replace your lost income up to a generous limit, but perhaps not an obligation to reproduce indefinitely the earnings of a merchant banker. Social insurance normally involves precisely this kind of pooling.
New Zealand’s system goes even further. It operates on a no-fault basis and has largely abolished the right to sue for compensatory damages for personal injury. Instead, injured people receive legislated benefits covering treatment, rehabilitation and income replacement. Road accidents are funded partly through vehicle registration charges and partly through a petrol levy, currently about 2% of the cost of petrol.
The great advantage is that vastly less energy is spent proving fault, calculating hypothetical lifetime earnings and arguing in court. The disadvantage is that exceptionally high earners or people who believe their suffering deserves enormous compensation cannot recover whatever a court might otherwise have awarded.
At the other end of the spectrum sits Britain, where third-party motor insurance is compulsory. A separate Motor Insurers’ Bureau compensates victims of uninsured and hit-and-run drivers.
Enforcement is the issue
South Africa could theoretically move in this direction too. But there is one enormous South African problem with this solution: enforcement. Britain can insist on compulsory insurance because it has a relatively effective licensing, vehicle registration and policing system. South Africa already struggles to ensure that vehicles are licensed, roadworthy and driven by people with valid licences. Creating another compulsory financial obligation risks producing millions of uninsured motorists. And when one of them knocks over a pedestrian, the personal hardship caused would be extreme. But you could transform the RAF into a residual fund for uninsured victims.
This is why the sensible answer probably lies somewhere between the models.
Keep a public RAF providing universal catastrophic cover: emergency medical expenses, long-term care, rehabilitation and reasonable income replacement. Tighten and simplify the schedule of benefits. Cap earnings compensation at the upper end. Restrict large general damages awards. Pay continuing costs as annuities rather than giant lump sums. And, crucially, allow people who want additional protection to buy it privately. That would turn the RAF into genuine social insurance.
There is a final route to cutting the RAF levy, and strangely it attracts less attention than redesigning compensation law. South Africa could have fewer road accidents.
The RAF is ultimately a tax on the country’s inability to police its roads. Better enforcement would reduce claims without taking a cent away from any victim.
So Carrim has an unenviable job. He must make the existing machine work while the government decides what machine it actually wants. That decision belongs to the transport minister, the Treasury and parliament.
They have avoided it for far too long.
