ROAD ACCIDENT FUND LEGISLATIVE AMENDMENT BILL, 2004 Presentation to the Portfolio Committee on Transport 18 May 2005

Agenda Strategic objectives Key assumptions Claims statistics Statistical overview of claims 2003/4 Auditor General Report Key achievements in 2004/5 New initiatives in progress * Strategic Recovery Plan * Core-Business Re-alignment Comment on the Legislative Amendments Questions

Strategic Objectives of the RAF To achieve excellence in RAF business processes To promote a road safety culture among road users To effectively manage stakeholder relations To eliminate fraud and corruption

Key Assumptions New Claims lodged – 185,000 per annum Current Claim backlog is 445,000 – Discounted actuarial valuation is R18,5 billion as at 31 March 2004 Average cost of settlement – R22,000 per claim Rate of Settlement to improve by 15% Current proposed Legislative amendments will have minimal financial effect on 2005/6 budget – will only have a material impact on 2006/7 budget Estimated annual fuel consumption is 18,3 billion litres

Claims Statistics

Statistical Overview

2003/4 AUDIT REPORT Going Concern AFCT Controls Claims

Key Achievements Average settlement costs have reduced in 2004; from R27,758 in 2003 to R24,783 in 2004 Claims that are finalised have increased incrementally on a year to year basis when comparing Claims finalised vs Claims lodged; from 66% in 2003 to 96% in 2004 Claims settlement rate has increased dramatically when comparing total finalised vs total number of claims outstanding for 2004 financial year; from 120% in 2003 to 102% in 2004.

Key Achievements (continued) Claims administration costs per claim has decreased dramatically from R3,651 per claim in 2003 to R2,818 in 2004. Financial and budgetary controls have been streamlined to ensure effective operational cost management

New Initiatives Claims backlog-special project was embarked on to settle high volume supplier claims. Validation of outstanding claims provision-project was embarked on to verify outstanding claims independently, as it is thought that a lot of fraudulent claims are included in the unsettled claims

New Initiatives (Continued) Promotion of Direct claimants – this should significantly reduce legal costs which constitutes a large portion of the total payout Forming strategic alliances with organs of state like the NPA and SAPS to reduce fraud

New Initiatives (Continued) Cutting down on Fraud-RAF has joined alliances with SAPS & Scorpions – high success rate

Strategic Recovery Plan Verification unit was established to validate claims lodged more accurately long before an offer is made to a claimant Evaluation of existing service providers to reduce reliance on them & to enhance internal capacity Overall business process re-engineering underway to enable business improvement Agreement was reached with Legal profession to temporarily structure compensation payments in installments

Strategic Recovery Plan (Continued) All service provider contracts reviewed to ensure proper service delivery & BEE compliance New Integrated Claims Management System (ICMS) has been piloted and is in the process of being rolled out to all RAF regional offices Proper liquidity management process has been implemented that ensures accurate cash flow forecasting

Core-Business Re-alignment 2004-2005 Business Area Implementation strategy Implementation impact Top Structure re-alignment Strategy-structure alignment Efficient Corporate Plan delivery and re-alignment of business focus to RAF mandate Direct Claims implementation Splitting of EL Region Walk-inn Centers Request statistics on accidents (hot-spots) Establish direct claims sections & draft manual Establish a branch office in PE Improved accessibility Reduced legal costs Improved public image Efficient service delivery Legal Costs Decentralise the function and integrate it into the main-stream claims process Reduce operational costs and improving accountability & reporting Alternative Dispute Resolution (ADR) Phased roll-out of Mediation & Arbitration Reduce operational costs and improving “actual” client service delivery

Core-Business Re-alignment 2004-2005 Business Area Implementation Strategy Implementation Impact In-house Litigation Recruit and train competent staff Pilot the project with time lines Reduce litigation costs Develop staff Suppliers Invoice Establish suppliers invoice section and draft policy Reduce backlog Reduce legal costs (summonses) Career-pathing of non-legal staff Train and assess staff Retain staff Core-Business Support Introduction of the ICMS Systems Standardisation and efficiency Better control on internal collusion Direct Claims Phased (on BC) roll-out of “WiC” Redefinition of “Customer” Customer orientation

Core-Business Re-alignment 2004-2005 Business Area Implementation strategy Implementation impact Claims payment function Section is split from previous Accounting function to ensure focus on timeous, accurate and valid payments Resources will report to Snr Man: Treasury in stead of Snr Man: Fin Accounting Undertaking payments Financial core activities to reside in Finance division Resources could potentially be reallocated from Undertakings HO to Finance HO Procurement The final quality control and releasing of Purchase orders will be centralized at HO to comply to Supply chain best practices. No HR resource impact, only business process re-alignment

Core-Business Re-alignment 2004-2005 Business Area Implementation Strategy Implementation Impact Fixed assets Process of control over fixed assets register to comply with Supply chain best practices Better control over RAF assets and streamlined SLA service delivery between FM & Procurement

Core-Business Re-alignment 2004-2005 Business Area Implementation Strategy Implementation Impact Performance Management Implement RAF customised Performance measurement and management Improved retention of talent Recognition of employees Improved service delivery Policies Development Review and/or development of RAF-wide policies and procedures Improved accountability and compliance to legislation Process Automation Identification and automation of other non-core business processes Best-practice to enable quick services turn-around times Organisation Development Job Profiling of all Core & non-core jobs Job evaluation of all jobs Salary Broad-banding Improved people management practices to ensure parity & fairness thus enabling retention and development

Core-Business Re-alignment 2004-2005 Business Area Implementation Strategy Implementation Impact Human Capital Give effect to decentralisation Decentralising HC services and support in alignment with the core business requirements Empowering of HC in core business Repositioning of central HC as a centre of excellence Improvement of service – decisions made at source, less delays, more accountability Research capability and therefore provision of guidelines, policies, frameworks that are based on best practice Implementation effected in the business Corporate Compliance and Legal Services Merge Corporate Legal Services and Corporate Secretariat into one division reporting directly to the CEO Best practice alignment and improved co-ordination

AMENDMENT BILL COMMENT The Fund does not hold any views on the Amendment Bill that are contrary to those put forward by the Honourable Minister and the Department of Transport, and is duty-bound and committed to effectively and efficiently operationalise and administer the proposed legislative changes, as soon as they are enacted. The Fund does not however intend to rely solely on the enactment of the proposed legislative changes to stabilize its operations and management. The Fund is of the view that there is considerable scope for improvement in this regard. Much has already been accomplished and more could be done. It is nevertheless imperative to note that the insufficient funding of the Fund over many years remains a cause for serious concern and will continue to bedevil the best intentions and efforts in this regard.

AMENDMENT BILL COMMENT The Fund supports the proposal to extend its powers to conclude agreements with service providers and with fellow organs of state. The Fund would however request that the introductory part of the proposed new section 4(4)(a) should read as follows: “(4) (a) The Fund may conclude an agreement with any other organ of State regarding any matter affecting the Fund in order to improve or ensure–”

AMENDMENT BILL COMMENT The Fund supports the proposed changes regarding the corporate governance of the Fund. It would however request that the possible implications for continuity in this regard be considered in conjunction with the commencement date of the changes. For reasons of social equity and administrative convenience the Fund supports the proposal that no special limitations should apply to the claims of passengers. The Fund supports the proposals regarding the capping of its liability, but considers that the proposed amounts may possibly provide inadequate compensation to claimants.

AMENDMENT BILL COMMENT The Fund believes that the claims of foreigners should be treated as if the claimants were locals, and that the same limitations that apply to local claims should also apply to foreign claims. The Fund supports the proposal that it should be liable for emergency medical treatment regardless of fault on the part of any person. The Fund would however request that the momentous financial implications of this proposal be carefully considered. The Fund is of the view that its liability in respect of medical expenses needs to be fixed in accordance with a tariff or tariffs.

AMENDMENT BILL COMMENT As regards the manner of effecting compensation, the Fund believes that it should have the choice to make payment of large sums in respect of compensation for future loss of income or support and of general damages, by way of a number of installments (not annuities) when considerations of balance sheet temporarily require that course of action.

Questions