Finding RAF: Extract from 2013/14 chairman statement

Dr NM Bhengu (Chairperson of the RAF Board)

On behalf of the Board of Directors of the Road Accident Fund (RAF), it is my privilege to present the organisation’s Integrated Annual Report and the Annual Financial Statements for the financial year ending 31 March 2014.

As with any other business, the RAF is affected by general economic conditions and other environmental factors, as well as the extent to which it manages its costs effectively.

According to a recently published Organisation for Economic

Co‑operation and Development (OECD) Economy Report, South Africa is making progress. Per capita incomes are growing, public services are growing, health indicators are improving, crime rates are falling and demographic trends are favourable. The public finances are in better shape than those of many OECD countries, the financial system is healthy and core inflation is stable and within the Reserve Bank’s target zone.

However, a high proportion of the population is out of work, as has been the case for most of the past three decades. Moreover, income inequality, educational outcomes and a greater demand for public service delivery warrant closer attention.

Environmental challenges such as climate change and water scarcity threaten the sustainability of economic growth, while high current account deficits represent a point of macroeconomic vulnerability.

According to this report, at a macroeconomic policy level, the country’s deficit expanded rapidly in cyclically adjusted terms during the global economic crisis and has reduced gradually since. Much of the increase in public spending came through large increases in the public sector wage bill, while public investment has fallen as a share of total expenditure. With core inflation remaining well contained, monetary policy has been eased cautiously.

Education remains a critical problem. Skill mismatches represent one aspect of the persistently high unemployment rate, especially for the youth. If South Africa is to achieve full employment, the quality of basic and vocational education has to be improved.

The policy framework for addressing “green” issues, including climate change and water scarcity, is sound, but implementation has been slow, in part due to limited administrative capacity. In the electricity and water sectors, there are similar problems: supply is struggling to keep up with demand in a setting in which prices, where they exist, do not cover total costs, let alone reflect environmental externalities.

It is against this background that fuel consumption for road use decreased by 2.9% to 18,907 mega litres in the 2013/14 financial year from 19,473 mega litres in the previous financial year. The implied net fuel consumption experienced by the RAF showed an increase of 3.9% to 21,123 mega litres based on the average net fuel levy income received, divided by an average levy in cents per litre.

The RAF received an 8c per litre increase in its fuel levy, lifting the levy from 88c in the previous financial year to 96c in the year under review. The expectation is that this trend will continue in the medium-term.

Strategy and Performance of the RAF

The 2013/14 financial year saw the RAF efficaciously continuing on its path of change. Overall, change was well received within the organisation owing to a number of factors, inter alia, alignment of organisational systems to support needed changes, which included a sound change and succession management plan, a well-executed performance management system, rewards for and recognition of top performers, stringent disciplinary approaches, fair compensation, internal promotions and the hiring of new staff in critical positions. This was augmented by frequent and honest communication, operational efficiency, leadership commitment, and the perceived need for change to design appropriate strategies in order to avoid change failures or resolve troubled change projects.

It was an eventful year in which the RAF’s leadership inserted passion and passionate people into the organisation’s processes and outcomes.

Productivity and excellence became the hallmarks of the institution, with leadership, employees and even customers becoming fervent about the brand and what it does. It was a year in which two more values, i.e. “excellence” and “efficiency” were approved by the Board and added to the longstanding values of the organisation. Goals became specific, measurable and linked to time limits. The organisation won an award for a clean audit by the Auditor-General, implying that there were no governance findings during the 2012/13 financial year, and

the long-awaited Road Accident Benefit Scheme (RABS) Bill was approved for a second round of publication.

We bid farewell to the old Board and welcomed the new Board. The need for a review of Board Committee structures was identified and Committees were refined to align focus areas to the new strategic structure.

In addition, the Board realised that it was important and necessary to ascertain what the priority areas of work are, as the RAF’s success depends on these areas being attended to. Subsequently, a refined set of strategic priorities was identified. It was decided to:

  • Determine and execute the strategy by maintaining operational plans to achieve the Annual Performance Plan (APP) targets, using scorecards to determine performance standards and monitoring, evaluating, performing and reporting at all times. To this effect, 83% of the targets outlined in the 2013/14 APP were achieved; and the 2014/15 APP was approved by the Board and the Minister of Transport.
  • Pay claims efficiently and cost-effectively by maintaining the organisational structure and processes; maintaining an available and practical Information Communication Technology (ICT) infrastructure; maintaining and implementing regulations, as well as proposing changes; implementing projects and business plans (e.g. outstanding claim reduction plans;

Project Siyenza); driving production through result-oriented performance management; managing litigation – internally and externally, directly and indirectly – and monitoring outputs through objective Business Intelligence tools. Successes in respect of the aforementioned include the following: Daily, weekly and monthly performance reporting and management took place. The full financial year showed a reduction in personal, supplier and awaiting-cost claims. More than R22 billion worth of claims payments were made in 2013/14, an all-time high.

  • Render quality services by establishing and maintaining (qualitative and quantitative) quality assurance functions; and surveying and testing services and perceptions. To this end, Quality Assurance Managers in the regions have tested operational performance and compliance across all regional teams. The Compliance business unit conducted reviews of all business processes. The Complaint experience has reduced when compared to prior quarters. An independent customer satisfaction survey has shown a material improvement in satisfaction and service perceptions. Overall service perception increased to 64% from 52% and customer satisfaction went up to 72.8% from 66%.
  • Expand access by promoting and marketing the mandate, brand and service offering; expanding the number of access points, intermittent and permanent; and maintaining available and accessible access across all modes. A hugely successful

‘Four Cities RAF on the Road’ took place in in Soweto, Mthatha, Umlazi and Secunda simultaneously on 15 March 2014 and saw the RAF servicing 7,638 claimants and settling claims to the value of R164,715 million on the day. Leases for the four Customer Service Centres (CSCs) in Kimberley, Polokwane, Bloemfontein and Mahikeng have been concluded and staffing of the four offices is almost complete. Over 26,000 calls are now attended to by the Call Centre on a monthly basis.

  • Ensure optimal capacity in terms of people and performance by recruiting, remunerating, managing and retaining skilled staff; identifying talent and managing succession; training and developing, while managing outliers; and recognising and rewarding performers within the organisation. Highlights in this regard include the following: The staff complement now stands at 2,288 and work is underway to conclude the final appointments of 252 vacant posts; the vacancy rate has now reduced to below 10% and the APP target has been met; succession plans for Executives, General Managers, Senior

Managers and Managers have been developed; the new Chief Strategy Officer has taken office and the new Chief Financial

Officer will commence her duties on 1 June 2014.

  • Ensure adequate financial resources by accounting accurately; reporting systematically; forecasting revenue and expenditure; modelling cash flows; quantifying the provision; and engaging stakeholders such as the Department of Transport (DoT), the

NT and the Financial Services Board (FSB). To this end, financial management has continued in line with approved processes.

A Finance Functional Review was conducted by Internal Audit and the Finance function was found to be of an acceptable maturity level, save for Procurement where a clear turnaround strategy is required. Continued engagements with the DoT,

NT and FSB have taken place on legislative, budgetary and operational requirements, as well as emerging risks.

  • Maintain a sound system of internal controls by setting of controls in terms of maintaining a policy environment,

Delegation of Authority (DoA) framework, and implementing combined assurance. Achievements in this regard include the following: The Policy business unit has been formally established in the Legal division and a Policy Development framework has been implemented. Combined Assurance Forum meetings have taken place and this function is being bedded down.

  • Address weaknesses by evaluating controls and identifying weaknesses; resolving and reporting these timeously.

Weaknesses have been addressed. Comprehensive audits were conducted in Finance, Procurement, IT and HR during the year under review.

  • Introduce RABS by drafting, consulting and proposing legislation; engaging stakeholders; and supporting the DoT. The RAF developed draft rules and forms for the new RABS administrator, which have been published concurrently with the revised draft RABS Bill and Regulations for a second round of public comment.
  • Assess and treat strategic risks by maintaining an Enterprise-wide Risk Management Framework; preventing, detecting and managing fraud; identifying and treating emerging risks within the confines of the Risk Appetite (RA) and Risk Bearing Capacity (RBC). Achievements in this regard include the following: The Enterprise-wide Risk Management Framework has been maintained. An internal audit revealed that the RAF’s risk maturity level has improved to Level 4. Fraud management has continued and work is underway to reduce the accumulated backlog of referrals. The RAF’s risk appetite was adopted and reporting against the appetite takes place on an on-going basis. The most prominent risk during the period under review related to the outcome of the Court case on the panel of attorneys tender which was declared invalid and the subsequent correspondence by the outgoing panel of attorneys. The risk was treated, stakeholders were timeously informed and legal advice was utilised to respond to each challenge. At this juncture, the old panel is handing over claim files.


Some high-level challenges which have been attended to include, but are not limited to, the following: The number of open claims transiently returned to previous levels during the year, but this was rectified by year-end. Despite a predictable fuel levy increase, the fuel levy income has grown below the Consumer Price Index (CPI). The RAF only received an 8c per litre fuel levy increase, which is fast becoming a predictable trend. It is also noteworthy that the RAF’s liability is growing faster than the CPI.

Finally, the panel of attorneys tender which was challenged before it was even adjudicated posed another challenge to the continuity of the RAF’s litigation work.

The Year Ahead

There is growing recognition of the RAF’s mandate and contribution to society as Government’s consoling arm. Great expectation rests on our shoulders based on recent performance. It is important that optimal focus is placed on the strategic priorities that the Board has identified; and that Management executes the required work effectively.

Dr NM Bhengu

Chairperson of the Board

Date: 31 July 2014

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