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

2. 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

3. 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

4. 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

5. Claims Statistics

6. Statistical Overview

7. 2003/4 AUDIT REPORT
Going Concern
AFCT
Controls
Claims

8. 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.

9. 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

10. 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

11. 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

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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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.

22. 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–”

23. 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.

24. 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.

25. 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.

26. Questions