2010 Annual Report. Presentation to the Portfolio 21 October Click to edit the outline text format. Third Outline Level

Transcription

1 Annual Report Presentation to the Portfolio 21 October Click to edit the outline text format Committee Second Outline on Level Transport Third Outline Level

2 Table of Contents Highs and Lows Background Key Challenges Key interventions and successes Financial and operational review Employment Equity Performance against objectives Governance Report of the Auditor General Page 2

3 Background - Highs and lows Highlights Net fuel levy income grows by 42% Claims finalised decreased by 21% Claims backlog drops by 20% Compensation paid rises by 6% Cost-to-income ratio stabilised at 28% Cash holdings declines to R0.65 billion at year-end RAF wins application in High Court challenging the Amendment Act New System roll out commences Page 3

4 Background Registered vehicles Number of registered vehicles Number registered - million Year (January to December) Page 4

5 Background - Fatalities Motor vehicle fatalities 16,000 15,500 15,000 15,419 Number of fatalities 14,500 14,000 13,500 14,135 14,920 13,875 13,768 13,000 12, Year (January to December) Page 5

6 Background - Fatalities Fatalities per road user category ,678 4,066 5,023 Drivers Passengers Pedestrians Page 6

7 Background - Fatalities Deaths per population Page 7 Number

8 Background RAF Fuel levy RAF: Historical analysis of RAF fuel levy vs fuel price and basic fuel levy 1,200 1, Cents /2006 7/ /2006 1/2007 4/2007 7/ /2007 1/2008 4/2008 7/ /2008 1/2009 4/2009 7/ / /2009 Gauteng fuel price c/l Road Accident DateFund levy c/l Basic fuel levy c/l Page 8

9 Background RAF Fuel levy FUEL PRICE BREAKDOWN AS AT 31 MARCH INLAND TRANSPORT RECOVERY LEVY 0% DSML 1% PETROLEUM DEALERS MARGIN PIPELINES 9% 0% SERVICE & DELIVERY 1% BASIC FUEL PRICE 53% WHOLESALE MARGIN 6% BASIC FUEL LEVY 19% CUSTOMS & EXCISE 1% RAF LEVY 8% SLATE LEVY 0% ZONE DIFFERENTIAL GAUTENG 2% Page 9

10 Background RAF Fuel levy Fuel Levy for road use Million litres 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000-14,566 14,675 14,910 15,538 16,140 16,622 17,149 18,157 17,682 17, Months: Jan - Dec Page 10

11 Background RAF Fuel levy 1200 Diesel refund R' million Financial year Page 11

12 Key challenges Funding Model Legislative Amendments New Systems and Processes Page 12

13 Challenges Internal and external challenges facing the RAF Dissatisfied and disillusioned stakeholders Challenges faced by the RAF Systems & processes Prevalence of fraud and corruption High legal costs Unsustainable economic model Poor financial health Move towards a more efficient and client centric New RAF that will provide South African road users with peace-of-mind Support the DoT in the implementation of a no-fault, defined benefit accident compensation system Support the DoT in implementing the Revenue Requirement model RAF actions Page 13 Largely controllable by the RAF Moderately controllable by the RAF Largely not controllable by the RAF

14 Key challenges New Systems and Processe s New Operating Model - Elements Objective to invest in systems and processes that provide superior service delivery to victims of motor vehicle accidents, their families and service providers Claims Processing Centralised processing of claims Specialist processing units Paperless environment Public Access Distributed Customer Services Network National Coverage 11 Official languages Infrastructure Strong IT backbone Direct links with hospitals Customer centric software Page 14

15 Key challenges Legislati ve Amendm ents Constitutional challenges to the RAF Act (as amended) Implementation of No-fault Amendments to Current Act to reduce subjectivity (urgently required) Page 15

16 Key challenges subjectivity of future loss of earnings Case 1 Claimant 1 was 28 years at the time of the accident, and now 33 years. The injured suffered a diffuse axonal brain injury as a direct result of the injuries sustained in the accident. A claim for future loss of earnings in the amount of R54 m alone was lodged against the Fund. He was employed at a commercial bank from September 2002 as a Market Risk Analyst. In less than a period of 3 months he was promoted to Market Risk Manager earning a salary of R340k A tender was made in 2008 for R9 m in respect of future loss of earnings capacity. Offer not accepted by plaintiff - Trial ran in Supreme court - an award of R4,3 m was given to the injured. Matter was taken on Appeal by the injured s Attorney. In the court a quo s award of R4,3 m was set aside and replaced by the amount of R13.6m Page 16

17 Key challenges subjectivity of future loss of earnings Claimant 2 was 32 years old at date of accident and is now 38 years old. The injured suffered multiple injuries to his lower limbs and the back, claiming an amount of R8,5m including R2m for future loss of earnings. Case 2 A claim for future loss of earnings based on his salary earned between R20k and R60k. He was intermittently employed in the security industry, having also worked in Afghanistan for a short period earning the higher salary of R60k a month. The matter was set down for trial on 26 July and on 19 July the claim was amended to R17,1m. A tender of R2,8 m inclusive of loss of earnings was made and rejected. The tender was based on the lower end scale of his earnings due to 98% of the claimants work history. The matter was argued in front of a judge who ordered the Fund to pay R5,7m based on earnings of R40k for the major portion of the claimants working life. Page 17

18 Legal Framework Challenges Fault-based common law system fails to best meet the needs of victims Weakness with current legislative system Inequitable The poor are less able to access the system as they do not have the financial outlay to pay the costs required to prove a claim. Results in unreasonable cross-subsidisation between low income earners and high income earners, with the poor receiving less compensation than the rich, yet paying the same premium for the cover. Foreigners, who have short stays in the country and contribute very little by way of premiums, receive the same level of cover as South African citizens. Wasteful High delivery costs consume resources intended for accident victims. Delivery costs enrich the facilitators and not the victims of road accidents. The fault based common law system is by its very nature adversarial and encourages litigation. Resources are not used appropriately major portion of fuel levy utilised to pay general damages and legal costs. Perverse Incentives System discourages injured road users from being rehabilitated and returning to work as victims will receive less compensation should they be more fully rehabilitated. The existing compensation system rewards disability, instead of enabling injured persons to have speedy access to medical care and rehabilitation Subjective Determination of fault and damages in a common law system with lump sum payments depends on numerous factors that are inherently unknown and often amounts to nothing more than crystal ball gazing. Page 18

19 R e v e n u ec o s t Road activity Key Drivers of RAF Financial Position Mismatch between expenses and income Page 19 Fuel sold Number and severity of accid ents Levy on fuel Volume of clai ms Grants investm and ent reve nue Finan cial posit ion Value of claims Third party co st s Administrat ive co st s

20 Key challenges - financial Fundi ng Mode l Short-term liquidity constraints Long-term recapitalisation Utilization of the Revenue- Requirement Model Page 20

21 Financial Challenges Problems have been in existence for 30 years now RAF: Analysis of important financial indicators R 50,000,000 R 45,000,000 R 40,000,000 Provision for outstanding claims R 35,000,000 R 30,000,000 Accumulated deficit R 25,000,000 R'000 R 20,000,000 R 15,000,000 Net Fuel levy income R 10,000,000 R 5,000,000 Total cash claims expenditure Page 21 R 0 21

22 Fraud and Corruption Sources of the fraud Systems and controls (IT, finance, payroll, etc) Legislation (whiplash claims, 2-3 years lodgement vs. 120 days processing, lump sum, fault, staged accidents) Lawyers (power of attorney, touts, contingency, perverse incentives) Doctors (over servicing) Police (poor cooperation, corruption) Etc Page 22

23 Key Interventions Can t do it alone Road Accident Fund RAF to invest in new systems and processes that will provide superior service delivery to victims of motor vehicle accidents, their families and service providers. National Treasury National Treasury to ensure that the system put in place for South Africa is appropriately funded and that correct economic models are used to determine the pricing of the RAF Fuel Levy on a regular basis. Legislative Amendments Funding Model New Systems and Processes Government of the Republic of South Africa Department of Transport and Parliament to introduce appropriate legislation to set up a benefit system for South Africa that is equitable, affordable, sustainable, and appropriate for the ountry and eliminates wastages, inefficiencies akages inherent in the current system. Page 23

24 Interventions - Legal Framework Limitation Tariffs Threshold Cap of R160,000 for to medical of access R25,000 per treatment general annum on passenger damages on (emergency LOE claims and LOS and removed non-emergency) RAF Amendment Act 1, Exclusion on passengers Exclusion Secondary who on emotional are passengers members shock on of motor excluded the same cycles household removedr Page 24

25 RAF Amendment Act CONSTITUTIONAL CHALLENGE CHALLENGES NORTH GAUTENG HIGH COURT RULING PRESENT STATUS s17(1) and s17(1a) limitation of general damages to serious injuries Challenge dismissed No appeal s17(4)(c) cap on claims for loss of earnings/support Challenge dismissed Judgment pending before Constitutional Court (CC) s17(4b) & regulation 5(1) non-emergency tariff s21 abolition of common law claim Regulation 3(1)(b) method of assessment (AMA/narrative) Regulation 3(3) procedure for lodging claims Challenge dismissed Challenge dismissed Challenge dismissed Challenge dismissed Judgment pending before CC Judgment pending before CC No appeal No appeal Page 25

26 RAF Amendment Act CONSTITUTIONAL CHALLENGECHALLENGES NORTH GAUTENG HIGH COURT RULING Regulation 3(4)-(13) Appeal Tribunal etc Challenge dismissed PRESENT STATUS No appeal reg 5(2) emergency medical tariff Regulation 6(1) place for lodging Regulation 6(2) questioning of claimant Challenge dismissed New interpretation in accordance with s24 of the Act Challenge dismissed No appeal No appeal No appeal RAF1 Form Challenge dismissed No appeal RAF4 Form Challenge dismissed No appeal Page 26

27 Interventions - Legal Framework No-Fault benefit scheme being designed to provide an equitable, sustainable, reasonable and affordable system Payments to be paid periodically and not in lump sums Immediate access to medical Benefits treatment will and be rehabilit inclus Scheme will shift from legal liability system Page 27

28 New systems and processes New Operating model Centralised hub Call centre Collection of MVA information, manage medical treatment and provide 24hr communication to all parties Benefit processing unit Finalise outstanding merit assessments, determine benefits, provide legal support and generate standards Systems and I T Systems and software required in order to support the organisation Regional presence Satellite office structure Collection of additional information, communication to claimers and brand building Mobile RAF Mobile RAF representation throughout the country X Accident presence Information collection agent On scene accident representation through 3rd party primary responder (e.g. SAPS, Netcare 911, ER24) X X In progress In place X Page 28 Not in place

29 New Systems and Processe s Interventions IT Systems 1. Reduced business Risk Centralised storage of data Centralised back-up of RAF data Implemented hosted data center at Vodacom Security - (Databases) updated Informix, Claims and Exchange - Introduced Public Key Infrastructure (PKI) - Introduced Biometrics devices 2. Lowered costs Introduced virtualisation and server consolidation 3. Introduces user convenience Logon from anywhere using cloud computing Mobility ( ing and calendar on mobile devices) Page 29

30 Interventions IT Systems New Systems and Processe s 4. People development - Project Khusile Initiated a people and skills development program People 5. Improved service delivery National operations center (NOC) Initiated a new incident management system 6. Refreshed technology Upgraded Exchange, Informix, Citrix platforms Page 30

31 Fuel levy pricing model Model split to separate backlog funding and future pricing ROC 4. RETURN ON CAPITAL REQUIRED ONCE FULLY CAPITALISED Future Capital build-up 3. MARGIN REQUIRED TO BUILD-UP CAPITAL (SUSTAINABILITY MARGIN) Cost of future liabilities 2. REQUIREMENT TO MEET COSTS OF FUTURE LIABILITIES Past Cost liability backlog 1. REQUIREMENT TO MEET COSTS OF LIABILITY BACKLOG Page 31

32 Revenue Requirement model Model not being utilised to determine RAF levy FUEL LEVY HISTORY TO cents cents cents cents cents cents Fuel levy increase - requested * - received Difference Total Fuel levy approved by NT * Based on the Revenue Requirement Model, the fuel levy increase for the financial year is 38 cents. An increase of only 8 cents has been requested based on the feedback received from National Treasury. If we receive a 38 cents increase we will be solvent in 2017, with an 8 cents increase we will only be solvent in Page 32

33 Interventions Redesigning our processes Str ate gy Vision Mission Vision To be a sustainable, world class provider of cover for personal injury arising from the use of motor vehicles in South Africa Customer Service Network Processing Collect &Service (Accident & Claim) Verify & Determine Benefits Rehabilitation Pay Compensation Provide an Outstanding Customer Experience Fairly, Consistently& Efficiently Determine Benefits Provide Effective, Timely & Appropriate Rehabilitation Make Accurate & Timely Payments for Genuine Claims Improved Risk Management & Fraud Prevention Improved Accountability & Performance Management Performance Measures Human Capital/Organisational Structures Page 33

34 Interventions and extending geographic access where it is most needed Page 34

35 Interventions Fraud & Corruption RAF formed joint project team between National Prosecuting Authority as well as the Commercial Branch of the SAPS 154 arrests made for financial year 176 convictions Currently +/ claims being investigated Page 35

36 Interventions Stakeholder Management & Communications The Road Accident Fund has been proactively involved in the burial of people involved in the mass accidents around the country Prominent accidents that we have attended include the following: Christiana; 8 children died whilst coming from a Church Music concert. Kokstad; 6 people travelling in a bakkie died. Groblersdal; 10 people died in a taxi accident. Hammanskraal; 6 family members died whilst attending funeral. Mogwase Rail Crossing; a Toyota Venture carrying school children collided with a Goods train, 6 of the children died. Recently in Limpopo; 11 women died whilst they were passengers on a truck. In the Western Cape de Doorns; a bus travelling from the Eastern Cape overturned and killed 24 of the passengers. Vryheid in KwaZulu Natal; last week 13 people died when a taxi collided with a truck. Page 36

37 Interventions Stakeholder Management & Communications Page 37

38 Interventions Stakeholder Management & Communications Comrades Marathon Tollgates: We had promoters manning the 3 entry points to Durban; Oribi Plaza, Mooiriver & Umvoti. At these points the promoters handed out brochures to all motorists brochures were handed out over this 3 day period. Page 38

39 Interventions Stakeholder Management & Communications Youth debate competition Page 39

40 10-year Financial Review Statement of Financial Position 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 30 April Statement of Financial Position R'million R'million R'million R'million R'million R'million R'million R'million R'million R'million Restated Restated 11 months Assets Current Assets 3,523 3,110 3,155 4,054 4,275 1, Cash and cash equivalents 655 1,091 1,192 2,404 3,692 1, Transfers receivable from fuel levies 2,750 1,912 1,884 1, Interest and other receivables Consumable stock Non Current Assets ,343 Other receivables Investments ,276 Property, plant and equipment Intangible assets Total Assets 3,878 3,396 3,297 4,207 4,360 1, ,250 1,632 1,934 Liabilities Current Liabilities 10,734 9,920 9,806 5,659 7,002 5,515 4,881 3,708 3,687 3,111 Payables and accruals Financial liabilities measured at amortised cost Defered government grant income Provision for outstanding claims 9,925 9,223 9,052 5,180 5,658 4,006 4,076 3,241 3,618 2,990 Other provisions Non-Current Liabilities 35,474 33,311 21,319 18,789 15,726 16,058 14,444 12,972 14,474 11,962 Financial liabilities measured at amortised cost Provision for outstanding claims 35,441 33,278 21,288 18,755 15,693 16,044 14,433 12,963 14,474 11,962 Employee benefits Total Liabilities 46,208 43,231 31,125 24,448 22,728 21,573 19,325 16,680 18,161 15,073 Net Deficit (42,330) (39,835) (27,828) (20,241) (18,368) (19,865) (18,557) (15,430) (16,529) (13,139) Net Deficit Investment reserve Revaluation reserve Accumulated deficit (42,409) (39,915) (27,887) (20,300) (18,368) (19,865) (18,557) (15,430) (16,529) (13,139) Total Net Deficit (42,330) (39,835) (27,828) (20,241) (18,368) (19,865) (18,557) (15,430) (16,397) (12,943) Page 40

41 10-year Financial Review Statement of Financial 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 30 April Statement of Financial Performance R'million R'million R'million R'million R'million R'million R'million R'million R'million R'million Restated Restated 11 months Revenue from non-exchange transactions - Transfers from Government 60 2, , Net fuel levies 12,566 8,845 8,222 7,011 5,552 4,566 3,512 2,860 2,441 2,165 12,626 11,395 8,222 7,013 8,054 4,566 3,512 2,860 2,441 2,165 Revenue from exchange transactions - Investment income and other revenue (36) Expenses: Total Revenue 12,684 11,969 8,405 7,277 8,142 4,624 3,600 2,824 2,610 2,389 - Claims expenditure (excluding provision for outstanding claims) 11,399 11,117 8,984 6,119 4,850 3,884 3,983 3,118 2,541 2,495 - Reinsurance premiums Employee costs Administrative expenses Depreciation, amortisation and impairments Finance costs Road Safety Project (50) Road Accident Fund Commission Total Expenses 12,312 11,920 9,588 6,625 5,344 4,382 4,429 3,613 2,795 2,731 Surplus/(Deficit)before provision for outstanding claims (1,183) 652 2, (829) (789) (185) (342) Provision for outstanding claims (2,866) (12,161) (6,404) (2,511) (1,301) (1,541) (2,305) (3,516) (3,140) (2,512) (Deficit)/surplus for the year (2,494) (12,112) (7,587) (1,859) 1,497 (1,299) (3,134) (4,305) (3,325) (2,854) Page 41

42 10-year Financial Review 20,000 Solvency -13,139-15,073-16,529-18,161-15,430-16,680-18,557-19,325-19,865-21,573-18,368-22,728-20,241-24,448-27,828-31,125-39,835-43,231-42,330-46,208 1,934 1,632 1, ,708 4,360 4,207 3,297 3,396 3, ,000-40,000-60,000-80, ,000 Financial year Total assets Total liabilities Net deficit Page 42 R'million

43 10-year Financial Review 10,000 Liquidity 5,000 4,275 4,054 3,155 3, , , R'million -5,000-3,111-3,687-3,708-4,881-5,515-7,002-5,659-10,000-15,000-2,520-3,035-3,053-4,193-3,870-2,727-1,605-9,806-9,920-6,651-6,810-10,734-7,211-20,000 Financial year Total current assets Total current liabilities Net current liabilities Page 43

44 10-year Financial Review 4,000 Cash holdings 3,500 3,000 3,692 2,500 R'million 2,000 1,500 2,404 1, ,145 1,192 1, Financial year Page 44

45 10-year Financial Review R' million Profitability Financial year (Deficit) / Surplus before provision for outstanding claims Provision for outstanding claims Page 45

46 10-year Financial Review Percentage Cost to Income Ratio Financial Year Claimants' legal & expert costs as % of total income RAF's legal & expert costs as % of total income RAF's admin costs as % of total income Page 46

47 10-year Financial Review 14,000 Revenue 12,000 R'million 10,000 8,000 6,000 4,000 2, ,389 2,610 2,824 3,600 4,624 8,142 7,277 8,405 11,969 12, Financial year Page 47

48 10-year Financial Review Composition of total revenue 14,000 12,000 12,566 10,000 R'million 8,000 6,000 7,011 8,222 8,845 4,000 4,566 5,552 2,000-2, ,441 2,860 3,512 2, , ,000 Net fuel levies Investment income Government grant Reinsurance and other income Page 48

49 10-year Financial Review R 300 Investment income R 250 R R' million R 150 R 100 R R R -50 R -100 Financial year Page 49

50 10-year Financial Review 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December Calendar year Units * Fuel consumption for road use: Megalitres 17,461 17,682 18,157 17,149 16,622 16,140 15,538 14,910 14,675 14,566 * Estimated fuel sales for road used (based on CSIR Report CR-2002/79 which recommended that 98% of all petrol sales and 70% of all diesel sales should be allocated for road use purposes 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 30 April Financial year Units RAF Fuel Levy: Petrol C/l Diesel C/l Gross Fuel Levy: R/m 13,658 9,721 8,998 7,623 6,079 4,987 3,857 3,212 2,483 2,165 Diesel Refund: R/m (1,092) (876) (776) (612) (527) (421) (345) (352) (42) - Net Fuel Levy: R/m 12,566 8,845 8,222 7,011 5,552 4,566 3,512 2,860 2,441 2,165 Diesel Refund % of gross Fuel levy % 8.00% 9.01% 8.62% 8.03% 8.67% 8.44% 8.94% 10.96% 1.69% 0.00% Implied average fuel consumption (Gross fuel levy / RAF Fuel Levy c/l) Megalitres 21,341 20,905 21,682 20,885 19,298 18,819 17,940 17,362 15,048 14,931 Implied average fuel consumption subject to diesel refund (Diesel refund / RAF Fuel Levy c/l) Megalitres (1,706) (1,884) (1,870) (1,677) (1,673) (1,589) (1,605) (1,903) (255) - Implied average net fuel consumption (net fuel levy / RAF Fuel Levy c/l) Megalitres 19,634 19,022 19,812 19,208 17,625 17,230 16,335 15,459 14,794 14,931 Source: South African Petrolium Industry Accociation ("SAPIA"), Department of Minerals and Energy ("DME"), Road Traffic Management Corporation ("RTMC") Page 50

51 10-year Financial Review Composition of total expenditure 94% Claims expenditure 4% 2% Staff costs Administrative and other expenses Page 51

52 10-year Financial Review , , , , , , , ,388 14, , ,000 25,000 20,000 15,000 10,000 5, ,000 Analysis of total expenditure Financial year Claims expenditure including provision Staff costs Admin and other Road safety project Page 52 R'million

53 10-year Financial Review Page 53

54 10-year Financial Review Claims outstanding Number , , ,479 86, , ,779 69,346 31,832 23,197 14, , , , , , , , Financial year Non-supplier claims Supplier claims Total claims (non-supplier & supplier) Page 54

55 10-year Financial Review Claims lodged Number 350, , , , , ,000 50,000-40,081 58,041 57,054 57, , , , , , , , , , , , ,146 85, Financial year Non-supplier claims Supplier claims Total claims (non-supplier & supplier) Page 55

56 10-year Financial Review Claims finalised 350,000 Number 300, , , ,000 27,522 46, , , , , ,000 50,000-88,116 96, , ,869 65,000 25, , , , , , Financial year Non-supplier claims Supplier claims Total claims (non-supplier & supplier) Page 56

57 10-year Financial Review Claims age analysis as 31 March 60 Percentage of total outstanding claims % of claims younger than one year % of claims between 1 and 2 years % of claims between 2 and 3 years % of claims older than 3 years Page 57

58 10-year Financial Review Average size of claims paid 120, ,000 Number of claims 80,000 60,000 40,000 95,302 79,057 77,027 75,605 43, ,139 65,167 20,000 32,071 18,634 18,675 8,389 9,790 3,146 4,129 1,815 2,341 1,045 1, < R1,000 R1,000 - R9,999 R10,000 - R19,999 R20,000 - R49,999 R50,000 - R99,999 R100,000 - R249,999 R250,000 - R499,999 R500,000 - R999,999 R1,000,000 - R4,999,999 > R5,000,000 Category Number of claims 2009 Number of claims Page 58

59 10-year Financial Review Cumulative % of claims paid Cumulative % of claims paid < R1,000 R1,000 - R9,999 R10,000 - R19,999 R20,000 - R49,999 R50,000 - R99,999 R100,000 - R249,999 R250,000 - R499,999 R500,000 - R999,999 R1,000,000 - R4,999,999 > R5,000,000 Category % of claims paid 2009 % of claims paid Page 59

60 10-year Financial Review 12,000 Composition of claim payments 10,000 2,530 2,686 R'million 8,000 6,000 4, ,319 1,668 2,050 2,000-2,188 2,401 3,015 2,180 3,832 4,934 6,698 8,595 8, Financial year Compensation and medical cost RAF and claimant legal cost Page 60

61 10-year Financial Review 12,000 Composition of claim payments including estimated contingency fees R'million 10,000 8,000 6,000 4,000 2,000-1, ,801 2,261 1, ,090 1,916 1,319 1,916 1,668 2,467 2,050 3,349 2,467 3,349 4,298 4,343 2,530 2,686 4,297 4, Financial year Compensation and Medical cost RAF and Claimant legal cost Contingency f ee Page 61

62 10-year Financial Review 6,000 Composition of compensation 5,000 R'million 4,000 3,000 2,000 1, ,006 1, ,208 1, , ,895 4,751 1,333 2,126 1,795 2,630 2,009 3,905 2,827 3, Financial year Loss of earnings and support General damages Claimant medical costs Funeral costs Page 62

63 10-year Financial Review 120,000 Undertakings Number 100,000 80,000 60,000 40,000 20,000 42,878 2,395 56,751 2,741 69,443 2,707 80,912 2,383 88,001 2, ,583 2, ,791 2, Financial year Total undertakings Active undertakings Page 63

64 10-year Financial Review R'000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 - Undertakings -Amount paid 57,592 59,184 58,724 59,125 58,740 80,926 82, Financial year Page 64

65 100% 80% 10-year Financial Review Delay between accident year and the financial year claim is reported % Reported 60% 40% 20% 0% Accident year < Fin year 1 Fin year 1 Fin year 2 Fin year 3 Fin years 4+ Page 65

66 10-year Financial Review Average delay between accident and settlement 40 Delay period (months) / / / / / / / / / / Date settled Page 66

67 10-year Financial Review Total payment per claim Average R value of claim payments R 45,000 R 40,000 R 35,000 R 30,000 R 25,000 R 20,000 R 15,000 R 10, , , , , , , , , , , , , , ,000 Total individual claim payments R 5,000 R 0 R 24,231 R 23,492 R 28,198 R 31,165 R 26,519 R 33,171 R 38, ,000 - Financial year Average Rand value of all claim payments Number of payments Page 67

68 10-year Financial Review 250, , , ,000 50,000 R 28, ,757 R 28, ,423 R 35, ,263 R 41, ,480 R 44, ,544 R 52, ,275 R 64, ,962 R 70,000 R 60,000 R 50,000 R 40,000 R 30,000 R 20,000 R 10,000 R 0 Non-supplier payment per claim Total individual claimpayments Financial years Average Rand value - non- supplier claims Number of payments Page 68 Average R value of claim payments

69 10-year Financial Review Supplier payment per claim Average R value of claim payments R 5,000 R 4,500 R 4,000 R 3,500 R 3,000 R 2,500 R 2,000 R 1,500 R 1,000 24,930 28,780 42,133 59, , , , , , , ,000 80,000 60,000 40,000 Total individual claim payments R 500 R 0 R 2,858 R 4,309 R 3,059 R 3,603 R 3,209 R 2,730 R 2, ,000 - Financial year Average Rand value - supplier claims Number of payments Page 69

70 10-year Financial Review General damages payment per claim Average R value of claim payments R 50,000 R 45,000 R 40,000 R 35,000 R 30,000 R 25,000 R 20,000 R 15,000 R 10,000 R 5,000 R 0 94, ,058 97, , , ,705 R 15,537 R 19,547 59,893. R 22,567 R 26,875 R 31,347 R 36,409 R 45, , , , , , , , , Total individual claim payments Financial year Average Rand value - General Damages Number of claim payments Page 70

71 10-year Financial Review Loss of earnings payment per claim Average R Value of claim payments R 400,000 R 350,000 R 300,000 R 250,000 R 200,000 R 150,000 R 100,000 R 50,000 R 0 6,730 6,444 6,194 5,957 6,782 7,695 R 128,117 R 130,278 4,172 R 158,755 R 222,655 R 264,337 R 335,503 R 314, ,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Total individual claim payments Financial year Average Rand value - Loss of Earnings Number of claim payments Page 71

72 10-year Financial Review R 125,778 R 93,617 R 122,558 R 151,253 R 175,457 R 187,236 R 230,968 2,960 2,758 2,922 2,708 2,960 2,986 3,117 R 250,000 R 200,000 R 150,000 R 100,000 R 50,000 R 0 Loss of support payment per claim 3,500 3,000 Total individual claim payments 2,500 2,000 1,500 1, Financial year Average Rand value - Loss of Support Number of claim payments Page 72 Average R value of claim payments

73 10-year Financial Review Medical compensation payment per claim R 6, ,000 Average R value of claim payments R 5,000 R 4,000 R 3,000 R 2,000 R 1,000 R 0 63,511 50,755 71,120 86, , , ,115 R 5,155 R 5,593 R 4,989 R 5,670 R 4,367 R 5,241 R 4, , , , , ,000 80,000 60,000 40,000 20,000 - Total individual claim payments Financial year Average Rand value - medical compensation Number of claim payments Page 73

74 10-year Financial Review Funeral cost payment per claim Average R value of claim payments R 8,000 R 7,000 R 6,000 R 5,000 R 4,000 R 3,000 R 2,000 R 1,000 R 0 3,174 3,116 3,571 3,450 3,952 3,223 R 4,262 R 4,674 1,793 R 5,003 R 5,783 R 5,847 R 6,650 R 7, Financial year 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Total individual claim payments Average Rand value - Funeral Costs Number of claim payments Page 74

75 R 18, year Financial Review Claimants' legal cost payment per claim 180,000 R 16, , , , ,000 Average R value of claim payments R 14,000 R 12,000 R 10,000 R 8,000 R 6,000 R 4,000 R 2,000 R 0 108,764 93, , ,572 R 5,342 R 5,844 R 6,213 R 6,713 R 8,285 R 11,399 R 15, , , ,000 80,000 60,000 40,000 20,000 - Total individual claim payments Financial year Average Rand value - Claimant legal costs Number of Claim payments Page 75

76 10-year Financial Review 100,000 80,000 60,000 40,000 R 8,112 R 8,571 R 10,411 R 10,198 R 9,483 R 9,977 R 10,224 42,751 44,895 49,939 66,198 82,998 98,311 97,392 R 12,000 R 10,000 R 8,000 R 6,000 R 4,000 R 2,000 R 0 RAF's legal cost payment per claim 120,000 Total individual claim payments ,000 - Financial year Average Rand value - RAF legal costs Number of payments Page 76 Average R value of claim payments

77 10-year Financial Review 0.60% 0.50% Finalised Number of Claims where Compensation paid is greater than R (in real terms) as percentage of Total Finalised claims 0.50% Percentage 0.40% 0.30% 0.20% 0.23% 0.21% 0.21% 0.10% 0.00% 0.05% Financial Year Page 77

78 10-year Financial Review Rand value of Compensation Claim Payments Greater than R as Percentage of Total compensation paid 30.00% 20.00% 10.00% 0.00% 24.83% 8.57% 2.76% 4.48% 6.06% Page 78

79 10-year Financial Review Staff count 2,500 Number of permanent staff 2,000 1,500 1, ,138 1,657 1,751 1,677 1,566 1,711 1,810 1,953 1, Financial year Page 79

80 10-year Financial Review Claims finalised per staff member Number of Claims Financial year Page 80

81 Workforce Employment Equity 90% Internal vs External demographics Internal vs national 80% 70% 60% 50% 40% 30% 80% 73% RAF composition External composition 20% 10% 0% 9% 9% 6% 3% 13% 9% African Coloured Indian White Page 81

82 Workforce Employment Equity Gender Distribution 43% 57% Femal e Male Page 82

83 Workforce Employment Equity Race analysis per categogy of staff Afri can Coloured Indian White CEO & Executives Senior Managers & Managers Bargaining Unit Staff living with disability Page 83

84 RAF Board Performance Targets No. National Objectives Annual Performance Indicators Target Comment Submit proposals/comments to DOT on the No-Fault system 90 days from request for on or before the required target date proposals/comments Achieved Develop a list of urgent and necessary amendments to the 31-Mar-10 current RAF Act, as amended. Achieved Implementation checklist completed for RAF Amendment Act. 30-Jun-09 Achieved 1 Management of transport costs and infrastructure development to contribute to ASGISA Communicate implications of RAF Amendment Act to all relevant taxi licencing authorities and Dept of Home Afffairs in order to notify foreigners. Development of an internal law section to deal with magistrate court claims 30-Jun-09 Implemented by 31 March Achieved Achieved Increase the RAF footprint accross the country. 10 Achieved Submit a recommended list of non serious injuries to DOT for 30-Apr-09 publication. Achieved Update the revenue requirement model used by National 30 September 2009 Treasury to determine the annual fuel levy increase. Support Achieved DoT in order to present it to Cabinet for approval. Determine the appropriate capital adequacy ratio's for the RAF 30 September 2009 with input from the FSB where possible. Achieved Projected deficit for 2009/ (R44,117 million) Achieved Establish an investment portfolio in an amount equal to or R100 million greater than the targeted amount by 31 March to commence to build an asset base necessary to cover outstanding liabilities. Achieved Page 84

85 RAF Board Performance Targets (cont.) No. National Objectives Annual Performance Indicators Target Comment Roll out the performance management module of the SAP ERP 31-Mar-10 solution by target date. Not Achieved 2 Efficient administration of the organization Complete the development and testing of the new claims 31 March management solution by target date. Achieved Number of claims finalised for the financial year ended ,699 March should be equal to or greater than the targeted Achieved number. Number claims to be originated in hospital based offices. 10,000 Achieved Total RAF legal, Claimant legal, administration and human 33% resources costs, as a percentage of Total income not to exceed the percentage in the target Achieved 3 Corporate governance and legislative compliance Compliance with the Public Finance Management Act, RAF Act and RAF financial supervision act. Target to be set by end of first quarter after compliance checklist have been completed. Achieved Page 85

86 RAF Board Performance Targets (cont.) No. National Objectives Annual Performance Indicators Target Comment 4 Black Economic Empowerment The amount of discretionary spending on administration, RAF legal and experts cost spend on BEE as a percentage of the total administration, RAF legal and experts costs, should be equal to or greater than the targeted percentage (BEE Procurement) 50% Achieved Develop of an implementation plan for the full roll out of the intergated B-BBEE Charter of Transport 31-Mar-10 Achieved The number of African, Coloured, and Indian staff members as a percentage of the total staff compliment, should be equal to or greater than the targeted percentage (Employment Equity) 65% Achieved 5 Employment equity The amount spent on training of staff and learnerships as a percentage of the total staff costs, should be equal to or greater than the targeted percentage (Capacity Building) The number of staff members with disabilities as a percentage of the total staff compliment, should be equal to or greater than the targeted percentage (Disability) 2% 0.5% Achieved Achieved Page 86

87 RAF Board Performance Targets (cont.) No. National Objectives Annual Performance Indicators Target Comment 6 Corporate social investment Amount spent on Corporate social investment. R 1,000,000 Achieved 7 Extended Public Works Programme (EPWP) N/A Promote Road safety awareness ahead of. R5 million 8 FIFA Soccer World Cup Objectives Achieved 9 National industrial strategy Develop a research document on FIFA with effects on RAF operations. N/A 31-Oct-09 Achieved Page 87

88 OPERATIONAL EFFICIENCIES Click to edit the outline text format Backlog Second Outline Level of outstanding claims reduced by 53% Third from Outline Level in 2006 to at the end of Fourth Outline Level Fifth Outline Level Sixth Outline Level Seventh Outline Level Eighth Outline Level March Cost to income ratio reduce from 40% in 2004 to 28% at the end of March. Cash claims expenditure increased by 135% from R4,85 Billion in 2006 to R11,369 billion at the Ninth Outline LevelClick to insert sub heading C Click to edit the outline text format l i end of March. [Insert presentation title] Second Page Outline 88 Level c

89 PERFORMANCE: ACTUAL VS. BUDGET ACTUAL EXPENDITURE VS. BUDGET: FINANCIAL YEAR FULL YEA R ITEMS Actual Budget Variance R'million R'million R'million REVENUE COMMENTS Net fuel levies 12,566 12, The net fuel levy received for the year is over budget due to more than expected number of litres sold. Other income Total revenue 12,683 12, EXPENDITURE - - Claims expenditure 14,264 17,417 3,153 Claims paid for the year is over budget. Increased revenue utilised to pay more claims to reduce the - Cash paid 11,399 11,203 (195) backlog The provision is less than expected after actuarial - Provision: increase/(decrease) 2,866 6,214 3,348 valuation done at year end. Staff costs The Human Resource expenditure for the period is within budget. Administration costs The General administrative expenditure for the period is within budget. This is mainly due to the new operting model being rolled out in a phased approach. Total expenditure 15,177 18,644 3,467 - (DEFICIT) /SURPLUS FOR THE PERIOD (2,494) (6,165) 3,672 Page 89

90 Report of the Auditor General Unqualified audit opinion Emphasis of matter Going concern Sheriff and Interest costs leading to Fruitless & Wasteful expenditure Page 90

91 Report of the Auditor General Sheriff and Interest costs how does it occur? Problem starts with the fact that RAF does not have enough funds to make offers of settlement within 120 days Over the years the RAF has seen an influx on summons being issued which is linked to the increase in warrants that are being issued against the organization. Issuing of summons has become the norm than exception as it is a guarantee of an increase in legal fees - >100,000 summons pa Impossible to settle Loss of Earnings and certain General Damages claims within 120 days When RAF settles a claim at steps of court or through a court order and does not pay within 14 days, the plaintiff can force the RAF to pay by issuing a writ of execution Page 91

92 Report of the Auditor General Sheriff and Interest costs how does it occur? The effect of the bills of costs being taxed in court means that payment becomes due and payable immediately causing the attorneys to issue warrants of execution against the RAF Liquidity problems leads to issuing of more writs, as plaintiff attorneys do not want to wait for payments Problem is then operationally compounded by the fact that legally, plaintiff can serve a writ at any of the six regional offices, irrespective of where claim was settled Volumes of writs leads to its own operational problems Sheriff issues the writ, up to per day, and wants immediate payments, or else assets are removed Page 92

93 Report of the Auditor General Sheriff and Interest costs what is the RAF doing about it? Fix the real problem take away the incentive to litigate over the quantum of the claim. Pay future loss of earnings monthly and based on pre-determined objective scales. Make legislative changes to ensure that operationally the RAF does not have to litigate. In the interim, try and extend number of days to make payment, to buy time through approaching Court Rules Board RAF is building an integrated litigation system, to assist in the management of 100,000 plus summonses a year. From summons, to trial, to settlement, to payment. Currently most of it happens manually. Will ensure payments are prompted after settlement. Page 93

94 Governance Establishment of the RAF, Reporting Lines and Principles The RAF was established by an Act of Parliament, the Road Accident Fund Act, 1996 as amended and is classified as a schedule 3A public entity in terms of the Public Finance Management Act, 1999 as amended. It commenced its operations on 1 May 1997 following the closure of the Multilateral Motor Vehicle Accidents Fund established through the Motor Vehicle Accidents Fund, The Board of the RAF is responsible for determining the overall direction of the RAF. The Board is tasked with monitoring the efficiency and effectiveness of management and renders support to management in implementing the strategies of the Board. The RAF Board as the Accounting Authority reports directly to the Minister of Transport, who exercises an oversight role on behalf of the Government of the Republic of South Africa. The RAF regards good corporate governance as fundamental to the success of the RAF and is fully committed to ensuring that best practice is followed in implementing recommendations as set out in the King III report as well as other legislation applicable to the RAF. Page 94

95 STRATEGIC PLAN SCENARIO SUBMITTED TO PROJECTED STATEMENT OF FINANCIAL PERFORMANCE NDOT AND NATIONAL TREASURY (R'000) Total Fuel levy (per litre) R R R R R Net Fuel Sales (litres) 18,319,929 18,686,328 19,060,053 19,441,255 REVENUE Net Fuel Levies 12,566,090 13,190,349 14,949,062 17,154,048 19,441,255 Investment Income 48,347 47,276 84, , ,571 Other Income 1, Reinsurance Income 8, Government Grant 59, Total revenue 12,683,398 13,237,625 15,033,848 17,306,232 19,634,826 LESS EXPENSES INCURRED Claims expenditure (incurred) 14,264,200 13,849,591 15,328,540 15,455,335 17,845,735 Claims Expenditure (paid) 11,398,557 12,441,228 12,430,359 15,025,052 17,327,628 Net Increase in Claims Provision 2,865,643 1,408,363 2,898, , ,107 Reinsurance Premiums 27,890 32,557 34,999 37,624 40,446 Staff Costs 594, , , , ,976 Administrative Expenses 195, , , , ,961 Marketing expenses 14,609 50,000 52,500 55,125 57,881 Finance Costs 40,756 17,050 15,221 11,132 10,000 Depreciation - Property, Plant and Equipment 21,341 36,969 46,932 52,790 60,568 Amortisation - Intangible Assets 17,740 28,143 32,310 36,560 45,060 Total other expenses 912,703 1,122,399 1,274,482 1,397,302 1,507,892 Total expenses 15,176,903 14,971,990 16,603,022 16,852,637 19,353,627 SURPLUS/DEFICIT FOR THE PERIOD (2,493,505) (1,734,365) (1,569,174) 453, ,199 Page 95

96 STRATEGIC PLAN SCENARIO SUBMITTED TO PROJECTED STATEMENT OF FINANCIAL POSITION NDOT AND NATIONAL ASSETS TREASURY (R'000) Current Assets 3,523,440 3,190,384 4,612,233 5,613,191 6,506,485 Cash and Cash Equivalents 655, ,733 1,566,716 2,131,620 2,572,497 Income Receivable 2,750,183 2,566,749 2,908,982 3,338,057 3,783,131 Receivables 115, , , , ,184 Inventories 2,508 2,759 3,035 3,338 3,672 Non current assets 355, , , , ,812 Receivables Property, Plant and Equipment 254, , , , ,312 Intangible Assets 100,572 92,429 70,119 43,560 8,500 Total Assets 3,878,584 3,630,416 5,040,023 6,001,631 6,864,297 LIABILITIES Current liabilities 10,734,757 11,114,430 11,823,481 11,990,483 12,163,584 Payables and Accruals 535, , , , ,588 Unutilised Government Grant - Provision for Outstanding Claims 9,924,998 10,233,114 10,867,167 10,961,303 11,074,652 Other Provisions 274, , , , ,344 Non-Current Liabilities 35,473,820 36,580,344 38,850,074 39,191,086 39,599,453 Payables and Accruals 4,697 6,385 7,183 7,606 8,267 Employee Benefits 28,123 32,712 37,516 41,959 44,906 Provision for Outstanding Claims (Ammend.) Provision for Outstanding Claims 35,441,000 36,541,247 38,805,375 39,141,522 39,546,280 Total Liabilities 46,208,577 47,694,774 50,673,556 51,181,569 51,763,037 Nett liabilities 42,329,993 44,064,358 45,633,532 45,179,938 44,898,740 Deficit Revaluation Reserve 78,740 78,740 78,740 78,740 78,740 Accumulated Deficit (42,408,734) (44,143,099) (45,712,273) (45,258,679) (44,977,480) Total Net Deficit (42,329,994) (44,064,359) (45,633,533) (45,179,939) (44,898,740) Page 96

97 RAF Annual Report Thank you Questions?? Page 97