Strategic Plan WE CARE

Transcription

1 Strategic Plan WE CARE

2 Road Accident Fund Strategic Plan

3 SECTION 1 INTRODUCTION 1

4 INTRODUCTION TABLE OF CONTENTS Introduction 1 Abbreviations 4 Foreword by the Minister of Transport 6 Introduction by the CEO of the Fund 7 Official Sign-Off 10 PartA Strategic Overview Vision Mission Values National Policy Direction Legislative Environment Strategic Context of the Fund The Fund s Business Model Legal Framework and Other Mandates Relevant Court Rulings Situational Analysis The Draft National Road Safety Strategy Service Delivery Environment Revenue and Cost Key Value Drivers of the Fund Key Challenges Facing the Fund SWOT analysis and the PESTELG Continuing Risks facing the RAF 36 7 The Fund s Strategic Journey Evolution of the Fund and the Fund s Strategy Strategic Transformation of the Fund The Strategic Planning Process 41 2 Road Accident Fund Strategic Plan

5 Part B: Strategic Objectives of the Fund 42 8 Part B: Strategic Objectives of the Fund The Fund s Five-year Priorities to Achieve its Seven Outcomes Measuring the Fund s Delivery The Fund s Outcome Measures and Five-year Targets Financial Plan Human Capital Management 60 Part C: Links to Other Plans 62 9 Part C: Links to Other Plans RAF Funding Requirements Fuel Levy Increase Claims Expenditure Provision for Outstanding Claims (ORC & IBNR) Goods and Services and Compensation of Employees Compensation of Employees Cash Balances Average Claim Amounts Delay between Accident Date, Reporting Date and Settlement Date Finance Model: Based on an Average Increase of 8c per Litre Materiality Framework Concluding Remarks Part C: Links to Other Plans Strategy Alignment to the National Development Plan (NDP) 73 Annexure A: Technical Indicator Descriptions 74 Annexure A: Technical Indicator Description and Examples 76 Annexure B: Funding Model 102 Section 1 Introduction 3 3

6 INTRODUCTION LIST OF ABBREVIATIONS/ACRONYMS Amendment Act RAF Amendment Act, 2005 (Act No. 10 of 2005) APP B-BBEE CEF CEO CFO COO CRMP CSN CSSS DoT EE FID HSC IBNR ICA IDTT LOE Annual Performance Plan Broad-based Black Economic Empowerment Central Energy Fund Chief Executive Officer Chief Financial Officer Chief Operations Officer Compliance Risk Management Plan Customer Service Network Comprehensive Social Security System Department of Transport Employment Equity Forensic Investigation Department Hospital Service Centre The number of claims incurred, but not yet reported Information Collection Agent Inter-Departmental Task Team Loss of Earnings 4 Road Accident Fund Strategic Plan

7 LOS MoU MTEF MVA Loss of Support Memorandum of Understanding Medium Term Expenditure Framework Motor Vehicle Accident PAIA Promotion of Access to Information Act, 2000 (Act No. 2 of 2000) PAJA Promotion of Administrative Justice Act, 2000 (Act No. 3 of 2000) PCOT Portfolio Committee on Transport PFMA Public Finance Management Act, 1999 (Act No. 1 of 1999) PMO Project Management Office POPI Act Protection of Personal Information Act, 2013 (Act No. 3 of 2013) RABS RABSA RAF Road Accident Benefit Scheme Road Accident Benefit Scheme Administrator Road Accident Fund RAF Act Road Accident Fund Act, 1996 (Act No. 56 of 1996) RRM SDI Revenue Requirement Model South African National Civic Organisation Development Institute Transitional Act RAF (Transitional Provisions) Act, 2012 (Act No. 15 of 2012) Section 1 Introduction 5 5

8 INTRODUCTION FOREWORD BY THE MINISTER OF TRANSPORT The history of the Road Accident Fund (RAF) and its predecessors spans more than 60 years, and commenced with the introduction of compulsory motor vehicle accident (MVA) insurance in Over the years, several problems pertaining to equity, affordability and sustainability of the system developed. During its lifespan, the MVA compensation system has been plagued by numerous challenges, including service delivery problems, restricted access to medical care, long settlement delays, spiralling costs, insufficient funding to pay claims, an ever-growing liability, multiple complex and legalistic hurdles due to the adversarial nature of the system, and uncertainty as to whether compensation is ultimately used for the intended purpose. The current scheme of arrangement being based on fault, insurance principles and common law, remains inequitable, wasteful and open to abuse. Thus, the present MVA compensation system is in dire need of reform. The transformation of the current scheme, as envisaged in the recently published Road Accident Benefit Scheme (RABS) Bill, will address many of the challenges facing the Fund that are constraining its ability to deliver on its mandate in an effective and efficient manner. This implies that accident victims will qualify for benefits regardless of who caused the accident. Benefits will also not be reduced based on the accident victim s contributory negligence. In addition, a no-fault, fixed benefit scheme will ensure smooth alignment with the Comprehensive Social Security System (CSSS) envisaged by Government. Once enacted, RABS will have a major impact on the RAF s strategic imperatives. The provision of road accident compensation or benefits could be regarded as a response to specific socio-economic risks, including: the need for trauma and other medical care; the risk of income loss due to injury; the risk of unemployment due to temporary or permanent disability; and the vulnerability of family members who become exposed to financial burdens and dependency when a breadwinner dies. The RAF s Strategic Plan for the financial years reflects the organisation s robust initiatives to reposition and fully align with national priorities and social security principles. In conclusion, the Strategic Plan outlines the RAF s strategic outcomes, strategic objectives, key performance indicators, and annual targets up to The Department, therefore, supports the implementation of the Strategic Plan by the RAF. Minister ED Peters, MP Minister of Transport Executive Authority, RAF 6 Road Accident Fund Strategic Plan

9 INTRODUCTION BY THE CEO OF THE FUND Legislative Environment Financial Sustainability The central goals of the Road Accident Fund (RAF), namely service delivery in terms of its mandate, the optimisation of its business and ultimately the sustainability of the Fund, rely significantly on the legislative environment in which the organisation operates. The current legislative environment hinders rather than enables the Fund in the attainment of this vision, since it is based on fault and insurance principles. This means that drivers at fault are excluded from claiming for compensation. As a result, injured persons are unable to access medical care in a timely manner, and dependants of persons killed in road accidents are left to fend for themselves. The claims procedure is cumbersome, time-consuming and expensive, and often results in litigation. Accident victims need to traverse complex legal hurdles in order to claim. This has led to the perception that claims cannot be lodged directly with the Fund and that legal advice is almost a prerequisite. The Fund is thus distanced from the very people whom it is supposed to serve. By reason of the litigious nature of the system, the Fund is engulfed in legal disagreements with claimants, rather than endeavouring to accommodate their needs. A number of important judgments have been handed down by the Courts in terms of which the Fund s mandate and liability have been affected and the Fund has further adjusted tariffs in accordance with the legislative framework. In an attempt to ease the stated challenges, the Minister has drafted Regulations to limit the Fund s liability and improve claimant access benefits. In addition, there is a number of pending Court cases that could have significant implications for the Fund. Claims payments comprise the RAF s largest expense item. Liquidity is determined by the cash available after claims and other expenses have been paid out for a specific period. Liability is largely composed of outstanding claims that need to be settled, along with their associated costs. Whilst the value drivers may appear conceptually simple, they are driven by multiple other factors. Claims expenditure is influenced, for example, by whether a claimant chooses to claim directly or to be represented by an attorney; awards made by Courts that determine precedent; the number of expert witnesses called; and the time taken from date of accident to date of finalisation of the claim. As a consequence of these revenue and cost drivers, the outstanding claims provision, which has been growing over the last three decades, has increased exponentially in recent years. The Fund is dependent on the fuel levy income in order to pay claims; however, the determination of the fuel levy has little regard for the main drivers of the Fund s claims expenditure, i.e. the number of accidents on the roads, number of vehicles driven, the volume and quantum of the benefits payable by the Fund, and various other economic factors such as the inherent inflation of the benefit levels. The prevailing disconnect between the fuel levy awarded by Government and the Fund s operational cash requirements is the primary cause of the poor liquidity that is being experienced by the Fund from time to time. Furthermore, due to the current national economic climate, there is lower than expected petrol consumption. In addition, the increases in organisational performance and productivity have resulted in increased liquidity concerns for the RAF. To this end, the Fund has developed a Revenue Requirement Model (RRM) that incorporates all of the above in order to scientifically and objectively determine the required fuel levy for Section 1 Introduction 7 7

10 INTRODUCTION any given future accident year. The model projects the claim numbers, income statements, balance sheets and cash flow statements in order to estimate the future financial position of the Fund. Due to its unsustainable financial model, the Fund has been running at a substantial deficit for more than three decades. Consequently, a number of outstanding (open and unpaid) claims have accumulated over time, representing a liability to the Fund. The provision for unpaid claims grows annually due to the expected growth in the cost of settling these claims and interest factors. Since the provision for future claims exceeds the Fund s asset base, the Fund remains technically insolvent and this results in the Fund using its cash reserves to cover the shortfall. The Fund has implemented some mitigation measures to reduce the impact of the liquidity risk and these include: (a) Requesting additional funds from the National Treasury and the Department of Transport (DoT) and proposing sufficient funds via the RRM; (b) Implementing stringent cash flow management practices; (c) Implementing cost containment measures; (d) Implementing the Supply Chain Management Turnaround Strategy; and (e) Working together with the DoT to introduce a more sustainable Road Accident Benefit Scheme (RABS). Operational Environment The Fund recognises that it is imperative to capacitate the organisation in order to address its most pressing performance areas, i.e. the reduction of the number of open claims and the promotion and fulfilment of direct claiming. Many of the targets outlined in this Plan are therefore focused on these two areas. The Fund has commenced with the upgrading of its legacy Information Technology (IT) systems. The upgrading of legacy information system will continue over the medium term to ensure improved service delivery and accessibility to the RAF s service offerings to all claimants. Road Accident Benefit Scheme Between 1999 and 2002, the Road Accident Fund Commission enquired into the reasonableness, sustainability, affordability and equity of the fault-based common law scheme (that had been in existence in South Africa since 1946) to compensate victims of road accidents. While the Commission determined that a legitimate, justifiable rationale existed for Government to fund and regulate a system to provide benefits exclusively for victims of road accidents, it concluded that the current system was inherently flawed and recommended transformation to a no-fault scheme based on social security principles. Following the presentation of the Report of the Road Accident Fund Commission, Government has made significant strides in the processes required to establish the RABS. The benefits of the proposed RABS are: Providing for a scheme that is reasonable, equitable, affordable and sustainable; Expanding access to benefits by removing the requirement to establish fault as a determinant to qualify for benefits; Making available timely and appropriate healthcare benefits based on a reasonable tariff; Simplifying claims procedures; Fewer exclusions from benefits; Defined benefits which promote affordability; Reducing disputes by removing the fault requirement and by providing pre-determined benefits; and Alleviating the burden on our Courts through the establishment of an internal appeal procedure. The transformation of the current scheme, as envisaged in the recently published RABS Bill, will address many of the challenges facing the Fund that are constraining its ability to deliver on its mandate in an effective and efficient manner. It is essentially against this background of transformation taking place in the dispensation through which victims of road accidents will be benefited and the need for the Fund to mitigate its unique challenges so as to sustain and optimise 8 Road Accident Fund Strategic Plan

11 the current system, that its Strategic Plan has been developed. Strategic Pillars As an institution of Government, RAF s mandate outlines its obligations towards the State and its people. This mandate supports and is directly informed by a higher purpose, namely to contribute directly to the rehabilitation of road accident victims and socio-economic balance of the country in order for Government to meet its priorities. The National Development Plan (NDP): 2030 is the primary policy framework for Government and provides the first layer of Government policy for the RAF to carry out its responsibilities and align its plans. The NDP provides a clear account of the challenges the country is facing, as well as the strategic choices that must be made to create a better life for all South Africans. Conclusion This Five-year Strategic Plan was developed in alignment with the shift of Government to an outcomes-orientated monitoring and evaluation approach. The focus of the plan is therefore centred on results-based management. This approach involves people, resources and processes which are integrated in the delivery of the key strategic outcomes outlined above. Aside from the considerable inefficiencies in the current scheme, the inevitable substitution of benefits between a mandatory social insurance scheme and the Fund necessitates its reform within the context of a comprehensive system of social security. Important outcomes of this reform process should be: the removal of unnecessary inefficiencies; the continued protection of access to medical care associated with all road accidents; and ensuring that families are financially protected from the loss of a breadwinner. These protections are particularly important in relation to unemployed and low-income groups. In order to achieve the objectives of the NDP, the RAF will continue to efficiently pay for claims/benefits and effectively rehabilitate victims of road accidents to restore social balance and reduce the burden of reliance on the State. The Fund s strategy over the next five years is anchored on the following seven pillars: Efficient claims processing; Accessible services; Effective financial management; Optimal ICT functionality; Improved people management; Administrative dispensation aligned to the RABS Bill; and Assured control environment. A reform of the Fund holds many opportunities not only at entity level but within the context of a comprehensive system of social security. This could be achieved through the rationalisation of benefits, eradication of a fault system, and the improvement in speedy access to medical treatment and rehabilitation. Such a reform should see the Fund change its focus away from assessments of fault and liability and toward protecting the most vulnerable, which would include those who do not have financial protection against accidental death and disability. Despite the challenges experienced thus far, I am confident that the Fund is well positioned to attain the outcomes envisaged in this Strategic Plan. Each of these pillars aims to deal with specific challenges that the Fund faces. In addition, these will form the basis on which subsequent performance plans and operational plans will be developed. Dr Eugene Watson Chief Executive Officer Section 1 Introduction 9 9

12 INTRODUCTION OFFICIAL SIGN-OFF It is hereby certified that this Strategic Plan: Was developed by the RAF Management and Board under the guidance of the Department of Transport (DoT); Takes into account all the relevant policies, legislation and other mandates for which the Fund is responsible; and Accurately reflects the strategic outcome-oriented goals and objectives that the Fund will endeavour to achieve over the period 2015 to Signature Ms Yolande van Biljon Chief Financial Officer: RAF Signature Dr Eugene Watson Chief Executive Officer Approved by Signature Dr Ntuthuko Bhengu Chairperson of the Board: RAF 10 Road Accident Fund Strategic Plan

13 Section 1 Introduction 11 11

14 12 Road Accident Fund Strategic Plan

15 PART A STRATEGIC OVERVIEW 13

16 PART A 1. Vision 3. Values To provide the highest standard of care to road accident victims and to restore balance in the social system. 2. Mission The following values drive everything that we do and the manner in which we do it. UBUNTU We care for and support our customers. We care for and support each other. Diagram 1: Values of the RAF To provide appropriate cover to all road users within the borders of South Africa; to rehabilitate persons injured; compensate for injuries or death and indemnify wrongdoers as a result of motor vehicle accidents in a timely, caring and sustainable manner; and to support the safe use of our roads. SOLUTION FOCUSED We offer solutions. We take responsibility for our actions. EXCELLENCE We execute our duties with dedication and fortitude while pursuing excellence across the business. We are driven by a desire to succeed which we realise through intelligent planning and and commitment to delivery. EFFICIENCY Doing the right thing with the least amount of resources. In our endeavours we strive to optimal output from the time, cost and effort invested. WE TAKE PRIDE We commit to and demonstrate integrity, honesty, consistency and fairness in our actions and decisions. We model the highest standards of personal and professional behaviour. 14 Road Accident Fund Strategic Plan

17 4. National Policy Direction The RAF s vision is informed by its legislative mandate. As an institution of Government, its mandate outlines its obligations towards the State and its people. This mandate supports and is directly informed by a higher purpose, namely to contribute directly to the health and socio-economic balance of the country in order for Government to meet its priorities. The National Development Plan (NDP): 2030 is the primary policy framework for Government and provides the first layer of Government policy for the RAF to carry out its responsibilities and align its plans. The NDP provides a clear account of the challenges the country is facing as well as the strategic choices that must be made to create a better life for all South Africans. The nine primary challenges as outlined in the NDP are: Too few people work; The quality of school education for black people is poor; Infrastructure is poorly located, inadequate and under-maintained; Spatial divides hobble inclusive development; The economy is unsustainably resource intensive; The public health system cannot meet demand or sustain quality; Public services are uneven and often of poor quality; Corruption levels are high; and South Africa remains a divided society. The role of the RAF in the Wider Government and National Agenda In order to achieve the objectives of the National Development Plan, the RAF will continue to efficiently pay for benefits/claims and effectively rehabilitate victims of road accidents to restore social balance. In addition, the RAF will promote effective governance, strong leadership and active citizenry by: Continuing to improve services and maintaining compliance; Increasing levels of awareness on RAF offerings and benefits; Continuing to partner with other Government departments to improve the State s overall effectiveness and efficiency; Engaging with other MVA Funds, regionally and internationally to exchange best practice; Ensuring that the RAF is free of fraud and corruption. As a response to the above challenges, the NDP aims to improve health and broaden social protection by: Improving the quality of public health care; Lowering the costs of private health care; Long-term vision for implementation of a comprehensive social security system; Social security reforms aimed at providing balance and broadening coverage; Alignment and rationalisation of social security institutions; Short-term reforms focusing on broadening coverage of existing social security benefits; and Longer term priorities include mandatory savings, risk benefits and health insurance. Part A Strategic Overview 15 15

18 PART A 5. Legislative Environment 5.1 Strategic Context of the Fund This section identifies several assumptions about external and internal environments that inform the strategic planning process. The global socio-economic conditions impacting the Fund, as well as the prevalence of road crashes, revenue constraints and how these taken collectively are impacting on the RAF s ability to fulfil its mandate are discussed. 5.2 The Fund s Business Model The RAF s current business model is faultbased; meaning drivers at fault are excluded from claiming for compensation. As a result, injured persons are unable to access medical care in a timely manner, and dependants of persons killed in road accidents are left to fend for themselves. In addition, claims are received and administered in a litigious and dispute-ridden environment, and many cases take years to be finalised and paid. This prolongs hardship and severely impacts on the poor and vulnerable. This is challenging to the Fund as, from a health and economic perspective, it contradicts the Fund s socio-economic role of re-integrating victims of road accidents into society and protect at-fault drivers and their families from financial ruin. The crux of the Fund s underlying business model is determined by the legislative environment in which it operates. At present, claims against the Fund for bodily injury and personal loss arising from road accidents are based on common law rules of delict and liability insurance principles. Inherent in the fault-based system are numerous difficulties, including long delays in accessing compensation and high delivery costs. The current business model of the Fund does not afford the organisation with the capacity to proactively gather and manage road accident and applicant information for better operational and financial planning. Efforts to collect information at the accident scene and/or to find and collect information as soon as possible after the accident are currently not sufficient. As a result, the Fund s ability to proactively originate benefit applications on behalf of accident victims, and thereby improve processing efficiency and the quality of decision-making are not sufficient. 16 Road Accident Fund Strategic Plan

19 5.3 Legal Framework and Other Mandates Schedule in Terms of the PFMA The RAF is a juristic person established by an Act of Parliament, namely, the Road Accident Fund Act, 1996 (Act No.56 of 1996), as amended (RAF Act). It is listed as a national public entity in accordance with Schedule 3A of the Public Finance Management Act (PFMA). The RAF commenced operations on 1 May 1997, assuming at the time, all the rights, obligations, assets and liabilities of the Multilateral Motor Vehicle Accidents Fund Constitutional, Functional and Policy Mandates The central goals of the Fund, being that of service delivery and the optimisation of its business and ultimate sustainability are significantly reliant on the legislative environment in which it operates. As mentioned above, the Fund was established by the RAF Act, section 3, which stipulates that the object of the Fund shall be the payment of compensation in accordance with this Act for loss or damage wrongfully caused by the negligent driving of a motor vehicle. The customer base of the Fund, therefore, comprises not only the South African public, but all foreigners within the borders of the country. The Fund provides two types of cover, namely personal insurance cover to accident victims or their families, and indemnity cover to wrongdoers Policy Mandate The Fund s policy or operations touch on every level and sphere of Government. Social security and transport policy is set at national level; the provincial Government provides an essential framework in which hospital-based operations occur; and local Government provides, among other, an essential liaison with metropolitan police departments for crash scene investigation. Furthermore, the Executive Authority provides the ultimate level of accountability and leadership for the Fund. The legislature is an essential liaison point for amendments to the Fund s legislative mandate and the judiciary provides interpretation of the legislation. In addition to the DoT, the Fund also works with the following Government institutions: Determines the fuel levy, the Fund s National Treasury primary source of income Department of Health Department of Justice Department of Home Affairs Financial Services Board Delivers medical care and rehabilitation to victims of road traffic accidents Through the judicial system, provides the platform through which disputes between the Fund and claimants are settled Provides the Fund with information to verify the identification of claimants The Fund submits returns on claims liabilities and reserves The Fund implements quarterly compliance processes to ensure that it remains abreast of changes in all applicable laws, rules, codes and standards that may impact on its operations. In addition, during the strategic planning process, the organisation assesses Governmental Part A Strategic Overview 17 17

20 PART A and other relevant policy statements and documents and uses these to provide an input to guide its planning processes. Recently, these have included the following, among others: Government s Transport Sector Strategy; The National Road Safety Strategy; Batho Pele principles; National Social Security Reform (Interdepartmental Task Team); The National Development Plan (NDP) of the National Planning Commission (NPC); The National Growth Path; Presidential Outcomes; Financial Services Board (FSB) requirements; and Various national and international policy advances in the field of road safety (for example, the United Nations Decade of Action for Road Safety ). 5.4 Relevant Court Rulings Promulgation of the Road Accident Fund (Transitional Provisions) Act, 2012 (Mvumvu and others vs. the Minister of Transport and the Fund) The constitutionality of section 18 of the Amendment Act, the R25, 000 passenger limitation sections, was challenged soon after the promulgation of the Amendment Act by a number of claimants whose claims were limited under the RAF Act. The Constitutional Court, on 17 February 2011, ordered that sections 18(1) (a) (i), 18(2) of the RAF Act are inconsistent with the Constitution and invalid. The declaration of invalidity was, however, suspended to enable Parliament to remedy the defect. Parliament remedied the defect through the promulgation of the Road Accident Fund (Transitional Provisions) Act, 2012 (Act No 15 of 2012) (the Transitional Act), which came into effect on 13 February Claimants whose claims arose under the RAF Act, prior to it being amended by the Amendment Act, and whose claims are limited by the R25,000 passenger limitation section, whose claims have not prescribed or been finally determined by settlement or Court order, have an election under the Transitional Act to have their claims determined under the RAF Act (prior to its amendment by the Amendment Act), or to have the claim determined in accordance with a transitional regime provided for in the Transitional Act. The Fund currently administers claims under three different frameworks, the RAF Act, the Amendment Act and the Transitional Act. The central goals of the Fund, namely service delivery in terms of our mandate, the optimisation of our business and ultimately the sustainability of the Fund, rely significantly on the legislative environment in which the organisation operates. The current legislative environment hinders rather than enables the Fund in the attainment of this vision, since it is based on fault and insurance principles. It is challenging to achieve operational efficiency and effectiveness in a system that is complex, encourages litigation and focuses on the cause of the accident rather than the immediate medical and financial needs of victims. On 8 February 2013, the DoT published the RABS Bill 2013 (the Bill) for comment. The Bill is aimed at providing for a new, effective, no-fault benefit scheme and the new administrator, the Road Accident Benefit Scheme Administrator (RABSA), to replace the current RAF and the fault-based compensation system administered by it. 18 Road Accident Fund Strategic Plan

21 5.4.2 The Law Society of South Africa and Others vs. the Minister of Transport and the RAF The liability and procedural provisions of the Road Accident Fund Amendment Act, 2005 (Act No. 19 of 2005) (the Amendment Act) came into operation on 1 August Shortly afterwards, the Law Society of South Africa and ten other applicants brought an application challenging the constitutional validity of a number of the provisions of the Amendment Act and Regulations to that Act, also reviewing certain actions of the Minister of Transport taken in terms of the Amendment Act. The application was heard in the North Gauteng High Court, Pretoria. All challenges and reviews were dismissed, apart from the challenge relating to the place of the lodgement of claims, with the Court finding that the relevant regulation must be read together with section 24 of the RAF Act. The applicants applied for and were granted leave to appeal to the Constitutional Court against the findings of the High Court relating to the following: The abolition of the common law right to claim the balance of damages from the wrongdoer; The limitation of the Fund s liability for loss of earnings and support; and The medical tariff for non-emergency medical treatment. Judgment was delivered by the Constitutional Court on 25 November The Court dismissed the challenges to the abolition of the common law right and the limitation for loss of earnings and support. The Court held the non-emergency medical tariff to be inconsistent with the Constitution and made an order that the Minister of Transport may prescribe a new tariff. Pending the Regulation of a revised tariff, the liability of the Fund for non-emergency medical treatment has reverted to the position prior to the Amendment Act, being that the Fund is liable for the reasonable cost of necessary treatment Road Accident Benefit Scheme (RABS) The current scheme of arrangement being based on fault, insurance principles and common law, remains inequitable, wasteful and open to abuse. The transformation of the current scheme, as envisaged in the recently published Road Accident Benefit Scheme (RABS) Bill, will address many of the challenges facing the Fund that are constraining its ability to deliver on its mandate in an effective and efficient manner. In addition, a no-fault, fixed benefit scheme will ensure smooth alignment with the Comprehensive Social Security System (CSSS) envisaged by Government. The benefits of the proposed RABS are: Providing for a scheme that is reasonable, equitable, affordable and sustainable; Expanding access to benefits by removing the requirement to establish fault as a determinant to qualify for benefits; Making available timely and appropriate healthcare benefits based on a reasonable tariff; Simplifying claims procedures; Wider cover to persons injured in road accidents; Fewer exclusions from benefits; Defined benefits which promote affordability; Reducing disputes by removing the fault requirement and by providing pre-determined benefits; and Alleviating the burden on our Courts through the establishment of an internal appeal procedure. The Bill was first published for public comment on 8 February 2013 in Government Gazette No Following receipt of public comments, the Bill was redrafted. New Regulations, Rules and Forms were also drafted to enable a better understanding of how the proposed scheme would operate in practice. The Part A Strategic Overview 19 19

22 PART A DoT published the redrafted version of the Bill in Government Gazette No on 9 May Interested persons were invited to submit comments within 60 days of publication. The comment period was subsequently extended by 90 days to allow interested parties more time within which to submit comments. A national RABS workshop was held on 19 June Focused stakeholder engagements were held on 25, 27 and 30 June with commuter groups, insurance groups, people with disabilities, the funeral industry, the legal profession and medical industry. Provincial RABS consultation sessions were held during September in the Eastern Cape (Zwelitsha, King Williams Town and Port Elizabeth), KwaZulu-Natal (Empangeni, Pietermaritzburg and Durban), the North West (Mahikeng, Rustenburg and Potchefstroom), Limpopo (Giyani and Polokwane), the Northern Cape (Upington and Kimberley), the Western Cape (Cape Town, Vredenburg and George), the Free State (Kroonstad and Mangaung), and Gauteng (Springs and Soweto) Other relevant court rulings that may have an impact on the Fund s liability A number of important judgements have been handed down by the Courts in terms of which the Fund s mandate and liability have been affected. The Fund has further adjusted tariffs in accordance with the legislative framework. The Minister has further made Regulations to limit the Fund s liability and improve claimant access benefits. In addition, there is a number of pending Court cases that could have significant implications for the Fund. Regulatory revisions based on the current Act, recent judgements of the Courts and the pending Court cases are summarised in the table below: Regulatory Revision Pending Court Cases Judgment Delivered Details Adjustment to the emergency medical tariff provided for in section (17 4B)(b) of the Act The Fund adjusted the tariff retrospectively from 1 April R & M Combrink v Road Accident Fund; D De Jager v Road Accident Fund; L Tsoba v Road Accident Fund, L J Moeketsi v Road Accident Fund. Regulation 2 (3) of the pre-1 August 2008 Act provides for a two-year prescription period in respect of hit-and-run claims. It is alleged that the regulation is inconsistent with the Constitution and that the two-year prescription period is ultra vires. The Fund is considering strategy. 20 Road Accident Fund Strategic Plan

23 Regulatory Revision Pending Court Cases MK Mahano, MG Kubjana and RS Thomsen v Road Accident Fund and the Minister of Transport NP Fakude & 46 Others v Road Accident Fund and Minister of Transport RAF v L Sweatman Judgment Delivered Details The Plaintiff alleges that the publication of operational guidelines is a prerequisite for the application of the AMA Guides and/or the regulations and that the Court has authority to interfere with the Fund s decision to reject the RAF 4 form. These declaratory applications were brought solely to avoid referring matters to the Appeal Tribunal for adjudication and to require the Courts to resolve these disputes despite the Regulations setting out a dispute resolution mechanism. The Fund was successful in defending this matter and the Court held that: The publication of operational guidelines was not a prerequisite for the application of the AMA Guides and/or regulations and the Court has no authority to interfere with the Fund s decision to reject the RAF 4 form. Plaintiff applied for leave to appeal and the application for leave to appeal was heard on 22 November The leave to appeal was dismissed with costs. Plaintiff petitioned the Supreme Court of Appeal (SCA) for leave to appeal and the Fund opposed this matter. The matter is set down at the SCA for 9 March In this matter the Plaintiffs instituted legal proceedings against the Fund and the Minister of Transport for an order declared to be unconstitutional and invalid: The requirement of at least 30% WPI and /or the requirement of a serious long-term impairment or loss of a body function or permanent serious disfigurement or severe long-term mental or behavioural disturbance or disorder in order to qualify for general damages; and the proviso to section 17(1) read with section 17(1A) and section 21 read with section 19(a), abolishing the plaintiffs common law rights to claim general damages from the wrongdoer and the statutory right that existed prior to 01 August 2008 to claim general damages from the Fund, first to a maximum of R25 000, 00, and putting nothing at all in its place, whilst providing a disparity of treatment for those passengers subject to the provisions of the Transitional Act who are entitled to an award of R25 000, 00. The claimants are alleging that they are unjustly and unfairly being precluded from receiving compensation for pain and suffering; and prevented from exercising their common law rights in order to claim general damages from the owner of the bus in which they were passengers. The matter was defended and counsel has been instructed to draft a plea. In this matter a dispute centred on the calculation of the estimated Future Loss of Income of the injured minor. The dispute involved the interpretation and application of Section 17(4) (c) and how the actual loss should be actuarially calculated. Presently there are conflicting judgments in different divisions resulting in different calculation methods. The Fund applied for leave to appeal to the SCA and the matter will be heard by five Appeal Judges on 10 March Part A Strategic Overview 21 21

24 PART A Regulatory Revision Pending Court Cases Y Chotia v Road Accident Fund and the Minister of Transport and 9 others Z G Magayiyana v Road Accident Fund and the Minister of Transport and 9 others G W De Waal v Road Accident Fund and the Minister of Transport and 10 others CL Jeftha & others v Road Accident Fund and The Minister of Transport Judgment Delivered Details The Fund was served with an application for an order in the following terms: Review of the Appeal Tribunal decision; the Fund s objection is not valid; the AMA guides are inappropriate, ultra vires and/or unconstitutional; Regulation 3(d) of the Road Accident Fund Act 56 of 1996 be subject to reasonable time parameters and that reasons should be provided for a rejection in terms of Regulation 3(3) (d)(i) be provided. This review is slightly different in that it alleges that the AMA guides are ultra vires/unconstitutional. The Fund s replying affidavit was served and filed. Plaintiff has agreed the only issue to be dealt with is whether Plaintiff sustained a serious injury. The Constitutional issues will be pended. The Fund has been served with an application for an order in the following terms: Review of the Appeal Tribunal decision; the Fund s objection is not valid; the AMA guides are inappropriate, ultra vires/unconstitutional; Regulation 3(d) of the Road Accident Fund Act 56 of 1996 is subject to reasonable time parameters; that reasons for a rejection in terms of Rule 3(3)(d)(i) be provided. This review is slightly different in that it alleges that the AMA guides are ultra vires/unconstitutional. This matter is similar to the matter of Yusuf Chotia v Road Accident Fund Appeal Tribunal, Road Accident Fund, Minister of Transport and others. The settlement in this matter will follow the principle dealt with in the matter of Chotia. The matter is being held in abeyance pending the outcome of the Chotia matter which deals with similar issues. The Fund has been served with an application for an order in the following terms: Review of the Appeal Tribunal decision; the Fund s objection is not valid. The AMA guides are inappropriate, ultra vires/unconstitutional; Regulation 3(d) of the RAF Act 56 of 1996 is subject to reasonable time parameters. That reasons should be provided for a rejection in terms of Rule 3(3) (d)(i). This review is slightly different in that it alleges that the AMA guides are ultra vires/unconstitutional. This matter is similar to the matter of Yusuf Chotia v Road Accident Fund Appeal Tribunal, Road Accident Fund, Minister of Transport and others. The settlement in this matter will follow the principle dealt with in the matter of Chotia. Matter held in abeyance pending the outcome of the Chotia matter which deals with similar issues. Section 19 (g) of the post-1 August 2008 Act excludes the Fund s liability where damages or loss resulting from secondary emotional shock, being when a person is not physically injured in a road accident, but suffers shock due to witnessing or learning of the accident. Mr. Jeftha alleges that he suffered emotional shock after witnessing his grandson being killed in a road traffic accident. He is applying for section 19 (g) of the post-1 August 2008 Act to be declared constitutionally invalid. A date for the hearing is still awaited. 22 Road Accident Fund Strategic Plan

25 6. Situational Analysis 6.1 The Draft National Road Safety Strategy South Africa participates in the World Health Organisation s (WHO s) campaign themed the Decade of Action for Road Safety together with other countries in Sub-Saharan Africa and the rest of the world, who have undertaken to increase countermeasures to reduce road safety fatalities, particularly during this decade , and it is for this reason that this strategy speaks to those commitments and timelines. Countries were asked to prepare a country plan of activities for the decade, using the WHO s framework with the following pillars: Road safety management Infrastructure Safe vehicles Road user behaviour Post-crash care The Fund is a key strategic partner in the implementation of the National Road Safety Strategy. Road fatalities are one of the major factors that drive the costs of the Fund. The Fund is expected to support some of the key aspects of this integrated strategy, more specifically the improvement of post-crash care to reduce the number of deaths and disabling injuries. Pillar 5 of the Global Plan for the Decade of Action for Road Safety emphasises the following: The training of community members in first aid to assist in post-crash trauma in their own communities; The development of incident management systems on national and provincial roads; and The development of guidelines for hospital trauma care to reduce fatalities and the potential permanent disablement caused through injuries. A strategy to address the Decade of Action s five pillars has been developed, taking into account the scope of the Fund s mandate and processes. The Fund s Road Safety Strategy incorporates all five pillars mentioned above. It also outlines the Fund s contribution and interventions undertaken to address issues pertaining to infrastructural requirements. The Fund has in the 12/13 financial year formed a partnership with the South African National Civic Organisation Development Institute (SANCO SDI) wherein a project has been initiated to identify hazardous spots and implement interventions such as mending potholes and erecting speed-calming measures (speed humps). To address issues pertaining to the post-crash care pillar above, the Fund is currently developing a five-year plan to operationalise post-claim settlement processes, with the aim of improving the services offered under this pillar and render it more efficient and effective. The Road Safety Strategy also maps out how the Fund intends to contribute and partner with other transport entities on issues pertaining to road safety management, safe vehicles and road user behaviour. The WHO recommendations call for road safety to be considered as a global policy issue and have called for international collaboration to be strengthened, and also encourage cooperation between international organisations, Government, Non-governmental Organisations and private sector entities. It also recognises that current levels of investment are inadequate to deal with the current risk factors. The full roll-out of initiatives to enhance the operational efficiencies of the Fund will ensure access to healthcare and access to financial assistance by all communities, in support of the National Road Safety Strategy. Part A Strategic Overview 23 23

26 PART A 6.2 Service Delivery Environment The socio-economic role of the RAF augments its legal mandate and frames the important position it occupies in the provision of contributory social insurance within the social security environment. This socio-economic role of the RAF is to reintegrate victims of road accidents back into society from a health and economic perspective and to protect wrongdoers and their families from financial ruin. Claims payments comprise the Fund s largest expense item. Liquidity is determined by the cash available after claims and other expenses have been paid out for a specific period. Liability is largely composed of outstanding claims that need to be settled, along with their associated costs. Whilst the value drivers presented may appear conceptually simple, they are driven by multiple other factors. Claims expenditure is influenced, for example, by whether a claimant chooses to claim directly or to be represented by an attorney; awards made by Courts that set a precedent, the number of expert witnesses called, and the time taken from date of accident to date of finalisation of the claim. As a consequence of these revenue and cost drivers, the outstanding claims provision, which has been growing over the last three decades, has increased exponentially in recent years. This can be ascribed to the accelerated approach to supplier claims, which allowed for hospitals and other service providers to be paid directly by the RAF. As a result, the RAF managed to reduce outstanding supplier claims more effectively than that of personal claims. The RAF continues to receive and settle high volumes of small claims, with more than 87% (average of pre- and post-amendment Act claims) being for settlement values below R50, 000. The number of open personal claims reduced noticeably by 17% in the last financial year and is reflective of the early fruits of the strategic and operational plans being implemented. The ability of the Fund to achieve the desired outcomes is hampered by a number of challenges. These challenges are illustrated and discussed in detail below: The strategic goals contained in this Plan (Part B) that will be pursued and implemented over the upcoming budget year and the next two years of the MTEF, seek to mitigate the negative effects that the challenges have on the ability of the Fund to deliver on its mandate in line with its vision and mission. In the 2013/14 financial year 147,168 claims (personal claims: 53,230 and supplier claims: 93,938) were registered, 240,783 claims (personal claims: 115,736 and supplier claims: 125,047) were finalised and 232,285 (personal claims: 215,665 and supplier claims: 16,620) were still outstanding. Of the 232,285 claims, there were 198,140 where compensation payments (open and reopened claims) and 34,145 legal cost payments were still outstanding at the end of the 2013/14 financial year (which is indicative of the large number of compensation payments now being made which awaits further cost payments). Of the 240,783 total claims finalised in the financial year, a large number of claim payments were at values less than R10, 000. The Fund has commenced the upgrading of its legacy IT systems, and the litigation management system. These developments will continue over the medium term to ensure improved service delivery and accessibility to RAF s service offerings to all the claimants and enable the RAF to operate more efficiently Claims Values The composition of claim payments continues to reflect the inadequacies of the existing fault-based, common law system of compensation. The introduction of a no-fault system (RABS) should address these wastages over the longer term. In the short term, interim legislative changes could address some of 24 Road Accident Fund Strategic Plan

27 the wastages. Of the R22.2 billion cash paid out in respect of claims expenditure for the 2014 financial year, R17.6 billion (i.e. 79%) comprised of capital pay-out. The balance of 21% (2012/13: 25%) comprised of legal and other expert fees. There has been a positive reduction in legal and other expert fees when compared to total expenditure. New claims registered decreased by 2% in 2013/14; 13% in 2012/13 and 22% in 2011/12. Claims finalised increased by 49% in 2013/14 from the 162,130 recorded in the 2012/13 financial year to 240,783 in 2013/14. Repudiated claims decreased from 29,937 in the 2012/13 financial year to 15,736 in the 2013/14 financial year. The decline in repudiations was due to reviewing the claims processing status of all claims on an on-going basis. A full audit was done to determine the exact composition of the number of outstanding claims. The audit data assisted in identifying the claims processing life cycle and determining the actions to be taken to facilitate settlement. Claims had been split into logical groupings and were fast-tracked to settlement. Direct claims received special attention in this regard. Validity checks were also performed ensuring that potential fraudulent files were uncovered and investigated. The numbers of outstanding claims were identified for immediate settlement. A dedicated unit was established and tasked with the elimination of outstanding claims. Plaintiff attorneys were also engaged by the RAF with regard to block settlement of claims Age Analysis of Claims Claims younger than one year decreased from 38% in 2013 to 29% in The bulk of claims outstanding at year-end were mainly claims older than three years, which is indicative of the difficulties faced when claims are litigated and require extensive expert opinion and time in Court. As at 31 December 2014, personal claims older than three (3) years constituted 42.2%, with 13.2% ranging from ages two to three years Ruling on Ronald Bobroff & Partners Notwithstanding the provisions of the Contingency Fees Act, certain Law Societies made provision in their rules for members to charge in excess of the percentages prescribed by the Act. Many attorneys disregarded the law and the fundamental rights of victims of road accidents. Following various Court rulings that these common law contingency agreements could not exceed 25%, one law firm proceeded to elevate the appeals right up to the Constitutional Court. On 20 February 2014, the Constitutional Court delivered judgment in respect of the constitutionality of the Contingency Fees Act. The issue was whether it is justifiable for personal injury lawyers to charge contingency fees outside of what the Act provides. Personal injury lawyers typically assist road accident victims to claim from the RAF. The judgment was in respect of two interwoven cases. The first was that of Ronald Bobroff & Partners who challenged a Full Bench of the North Gauteng High Court who had ordered them to provide an itemised account to Ms Juanne De la Guerre and to refund what they had overcharged her. The second was that of the South African Association of Personal Injury Lawyers (SAAPIL), of which Bobroff is the president, which challenged the constitutionality of the Contingency Fees Act. Both cases were heard simultaneously by the Full Bench of the High Court. The Constitutional Court found no merit in Bobroff and SAAPIL s challenge as a whole, dismissing the argument that the Contingency Fees Act was irrational because it applied only to lawyers. In handing down judgment, the Court pointed out: The right of access to justice is that of the legal practitioner s clients, not that of the legal practitioners themselves. Part A Strategic Overview 25 25

28 PART A 6.3 Revenue and Cost The Fund is affected by general economic conditions and other environmental factors, and by the extent to which it manages its costs effectively. These factors are illustrated in the figure below: Revenue Grants and investment revenue Levy on fuel Fuel sold Road Activity Cost Number and severity of accidents Volume of claims Financial position Value of claims Administrative costs Third-party costs Figure Factors influencing the Fund s financial position The primary source of income for the Fund s compensation scheme is a levy raised on fuel. The levy is measured in terms of cents per litre on petrol and diesel fuel sold in South Africa and forms part of the general fuel tax regulated by Government. The fuel levy per litre is set by National Treasury on a yearly basis, whereas total fuel sales are influenced by a number of macroeconomic factors. On an annual basis, the Fund requests National Treasury for an increase in the RAF Fuel Levy, based on a financial model and a calculation of its costs during the coming year. The full extent of the RAF Fuel Levy requested is seldom granted. This is because National Treasury has historically set the levy on the basis of a pay-as-you-go principle rather than with the purpose of establishing a fully funded position for the Fund. During the 2015 financial year, the Fund Fuel Levy was set at 1.04 cents per litre. The Fund is not involved in the collection of the Fuel Levy. The South African Revenue Service (SARS) administers the collection of the Fuel Levy and pays it to the Fund, in accordance with provisions of the Customs and Excise Act, 1964 (Act No. 91 of 1964) and the RAF Act. The two main variables that determine the income of the Fund are the volume of petrol and diesel sold per annum and the rate of the levy. The RAF Fuel Levy can be viewed as a compulsory contribution to social security benefits which is used only for the specific purposes as provided for in the legislation. The costs that the Fund incurs are as a result of road accidents. The volume and severity of accidents influence the volume and average value of claims made against the Fund. In addition, the Fund s cost consist of (1) third-party costs (e.g. attorney costs, medical and/ or legal expert costs), as well as (2) the Fund s administration costs. 26 Road Accident Fund Strategic Plan

29 6.4 Key Value Drivers of the Fund Revenue Fuel levy Volume of fuel sold Expenditure Number of claims Claims expenditure Statement of Financial Position Outstanding claims provision Cash available RAF Key Value Drivers Figure Key value drivers of the Fund Claim payments comprise the Fund s largest expense item. Liquidity is determined by the cash available after claims and other expenses have been paid out for a specific period. Liability is largely composed of outstanding claims that need to be settled, along with their associated costs. Whilst the value drivers presented may appear conceptually simple, they are driven by multiple other factors. Claims expenditure is influenced, for example, by whether a claimant chooses to claim directly or to be represented by an attorney; awards made by Courts that set a precedent, the number of expert witnesses called and the time taken from date of accident to date of finalisation of the claim. As a consequence of these revenue and cost drivers, the gap between the Fund s deficit and its income, which has been growing over the last three decades, has increased exponentially in recent years Road Activity and Accidents Road crashes have adverse implications for the economic growth, affecting economically active members of our society and others. Globally, road traffic injuries are the eighth leading cause of death, and, current trends suggest that death due to road traffic accidents will be the fifth leading cause of death by 2030 if no urgent action is taken. In 2011, the African region was ranked the highest in terms of the number of deaths due to road accidents reported, with a rate of 24.1 road traffic deaths per population. The WHO has identified road traffic injuries as one of the major risk factors in South Africa with transport accidents ranking as the third leading non-natural cause of death, constituting 1% of the total deaths recorded in Between 1990 and 2011, the number of road fatalities increased by 25%, peaking in 2006 with 15,419 road fatalities. The nexus of all these factors is road activity in South Africa described below: As from 2000, more than 10,000 fatal crashes and fatalities were recorded on a yearly basis. Since 2006, the number of fatalities has decreased by 10%. Rapid urbanisation and mo- Part A Strategic Overview 27 27

30 PART A torisation are major factors to consider in respect of road fatalities. In 2011, there were 28 road fatalities for 100,000 populations, which was among the highest rates worldwide. However the rate has declined from 36.7 in 1990 to in Pedestrians are particularly vulnerable, and represent more than 35% of all reported fatalities. The most vulnerable road users are those in the age group, with the highest fatality rate recorded at age The United Nations General Assembly has proclaimed the Decade of Action for Road Safety. South Africa is one of the member countries that has committed itself to the Decade of Action and as part of the declaration has committed to reducing the number of road deaths by half by While road fatalities per 100,000 people are reducing in South Africa, the venture to instil a culture of road safety and road traffic law compliance is an arduous one. While South Africa strives to achieve a reduction in road traffic accidents, and by extension a reduction in road traffic fatalities and injuries, many thousands of people will continue to suffer losses due to death or injury on our roads. The primary risk group is men in the 18 to 45 age group, whose injury or death often have devastating impacts on the families relying on them for support. The Fund is often all that stands between the victims and their families and a descent into poverty, as many victims are unable to afford medical aid or private insurance cover. In light of the profound negative impacts that victims of road traffic accidents suffer from a health, vocational and social perspective, they not only require, but deserve to have their claims against the Fund assessed and finalised in a speedy and efficient manner. Delays in claims finalisation prejudice victims, and also serve to increase the Fund s liability as historical trends have shown that generally the later a claim is finalised, the higher the liability of the Fund. In light of the above the Fund has resolved to place more focus on settling long outstanding claims. The underlying outcome of the sum of the indicators and targets in this Plan is for the Fund to be an accessible organisation that pro-actively interacts with victims in a caring, supportive and solution-orientated manner. The Fund must provide compensation in a time-efficient and cost-effective manner, while continually exhibiting the highest standards of financial and risk management. The Fund recognises that it is imperative to capacitate the organisation in order to address its most pressing performance areas, i.e. the reduction of the number of open claims and the promotion and fulfilment of direct claiming. Many of the targets outlined in this Plan are therefore focused on these two areas. 1 Source: WHO Global Status Report on Road Safety 2013 # IRTAD 2013 Annual Report # mortality and causes of death in South Africa, 2011: Findings from death notification. 28 Road Accident Fund Strategic Plan

31 6.5 Key Challenges Facing the Fund The effective functioning of the Fund is hampered by a number of factors. These factors can be divided into the following four categories: Issues that are common to all delictual-based systems; Issues specific to the South African system; Environmental issues; and Internal challenges faced by the Fund. The table to the right highlights challenges that have the highest negative impact on the Fund s ability to be financially sustainable, operationally effective and customer-centric. These challenges are briefly discussed below. Issues common to all delictual systems Subjectivity Complexity Inequities Wastages Unpredictable Unreliable Perverse incentives Delays Adversarial relationships Issues specific to South African system Income and expenditure not linked Unaffordable Inhibited by legislation and precedent No established institutional framework Presence of contingency fees Inappropriate allocation of resources Environmental issues High accident rates Scheme is open to fraud Strong interest groups with conflicting views Lack of integration between role players High degree of fragmentation in the industry Unsustainable economic model Internal challenges Increasing deficit Inability to process claims and reduce backlogs within a short period Increasing legal costs Delayed payment of claims Fraud and corruption Culture change to customer-centricity Systemic Flaws Grounded in Delict Subjectivity The Fund s liability is founded on principles of the law of delict and is partially governed by common law, statutory provisions and legal precedent. This system has failed to meet the needs of the public in that it is not only complex and arbitrary, but also time-consuming, expensive, open to abuse and wasteful. It is also fraught with practical difficulties, and the outcome is unpredictable and unreliable. Both the determination of fault and the extent of damages suffered by victims are overwhelmingly subjective. To determine fault, it is necessary many years after the accident to rely on the memories of witnesses to an event that occurred unexpectedly and quickly. The recall of witnesses is often nothing more than conjecture and often pure inventiveness. The determination of compensation is also subjective. The extent of compensation that a claimant will receive is based on predictions of the future. Predictions must be made as to the level of education that would have been achieved if the accident had not occurred and the level that will be achieved having regard to the Part A Strategic Overview 29 29

32 PART A accident, as well as pre- and post-accident earning capacity, life expectancy and future inflation and investment rates. All these factors are inherently unknown and often amount to nothing more than crystal ball gazing. Expert witnesses, whose opinions form the basis of determining the level of damages, are briefed by the adversarial parties and not by the Court. While such witnesses are meant to be witnesses of the Court, the reality is that many experts consider themselves to be the witness of the party by whom they have been briefed and have become a very effective weapon in the party s arsenal of tactics. 2 Far too many expert witnesses have become full-time professional witnesses and are financially reliant on receiving continuous instructions from attorneys. This often translates into these witnesses subjectively advancing the contentions of the party by whom they are instructed, rather than playing an independent role. Complexity The delictual basis of the system introduces unnecessary and burdensome complexity. The claims procedure is cumbersome, time-consuming and expensive, and often results in expensive litigation. Accident victims need to traverse complex legal hurdles in order to claim. This has led to the perception that claims cannot be lodged directly with the Fund and that legal advice is almost a prerequisite. The Fund is thus distanced from the people whom it is supposed to serve. By reason of the litigious nature of the system, the Fund is engulfed in legal disagreements with claimants, rather than endeavouring to accommodate their needs. that no injured person can be sure of receiving compensation and planning his personal finances accordingly. 3 Victims of accidents may for years after the accident not know if they will receive compensation, or the extent of the compensation that will be paid. This uncertainty can give rise to stress that will inevitably delay the rehabilitation of victims. Inequities A delictual system of compensation has numerous inequities, including the following: The poor are less able to access the system as they do not have the financial outlay to pay the costs linked to proving a claim; The structure of the compensation scheme leads to unreasonable cross-subsidisation, for example, between low-income earners and high-income earners, and multipassenger vehicles and single-passenger vehicles; The poor receive less compensation than the rich, yet pay the same premium (standard fuel levy) for the cover; and Foreigners, who have short stays in the country and contribute very little by way of premiums (fuel and diesel levy), receive the same level of cover as South African citizens. High Delivery Costs Delivery costs enrich the facilitators and not the victims of road accidents. The delictual system is by its very nature adversarial and encourages litigation. The table on the next page summarises payments towards claimants legal costs and the Fund s own legal costs over a period of seven financial years. Unpredictable and Unreliable The delict liability system is so unpredictable and unreliable in 2 Report of the Road Accident Fund Commission: Vol. 2, Chapter 24, par , p Report of the Road Accident Fund Commission: Vol. 1, Chapter 14, par 14.29, p Road Accident Fund Strategic Plan

33 Legal costs Rand (billion) Claimant 1,280 1,600 1,700 2,194 2,300 2,300 2,900 RAF ,000 1,223 1,300 1,400 1,700 Total 2,091 2, 500 2,700 3,417 3,600 3,700 4,600 Table Legal and expert costs Legal expenses have exceeded medical compensation paid by the Fund over the last 12 years. This clearly shows that scarce resources are consumed in complex, time-consuming and costly legal processes, rather than appropriated to assist the injured to recover, rehabilitate, heal and resume their economic activities. victims will receive less compensation should they be more fully rehabilitated. There is thus an incentive to undermine the efficacy of rehabilitation or to attempt to defraud the Fund by understating the effectiveness of rehabilitation and deliberately failing to return to work when one is simply able to increase the claim for loss of earnings. The Satchwell Commission concluded that there is no doubt that it is completely unacceptable that such a significant proportion of fuel levy income is currently expended on transaction costs rather than on compensation or benefits and that a further portion of compensation or benefits paid out is utilised to meet outstanding transaction costs. 4 Perverse Incentives Compensation that covers the total loss of earnings and projected future potential earnings in a single payment contributes to over-compensation for minor injuries and under-compensation for serious injuries. 5 It also discourages injured road users from entering rehabilitation and returning to work, as 4 Report of the Road Accident Fund Commission: Vol. 1, Chapter 12, par , p Report of the Road Accident Fund Commission: Vol. 1, Chapter 17, par 17.7, p Adversarial Relationships From the time the claim is lodged until it is finalised, the Fund is involved in an adversarial relationship with the very claimants it is meant to be helping. The fact that most claimants are represented by attorneys means that the Fund does not even meet the persons it has been established to assist. As the Fund is prohibited from paying compensation until liability has been established, it means that it is usually not able to provide funds to enable injured road users to access hospitals and medical care. Even once liability has been established, disputes as to the level of damages suffered can often take years to resolve. Those who are unable to work receive no immediate assistance, and they and their families face hardship on diminished or no income. The scheme fails to support persons injured in road accidents at the time when they most need it, and claimants are largely left to their own resources. Part A Strategic Overview 31 31

34 PART A Systemic Issues Specific to South Africa Premiums and benefits are not linked and economic model is unsustainable considers that a country such as Australia, which has less than a third as many road accident fatalities (per capita) as South Africa, has a much higher per capita income than South Africa does. Thus, the Fund has to support a relatively higher number of accident victims in a much poorer environment. The present compensation system is financed primarily by a dedicated levy on fuel sold. The funding method is theoretically on a pay-as-you-go (PAYG) basis, whereby income is provided when the benefits are payable, rather than set aside when the accidents and liability to pay are incurred, as is the case under a fully funded scheme. In the current compensation scheme, income or assets are not set aside to meet claims incurred in each financial year. The Satchwell Commission found that the absence of any relationship between the fuel levy and the compensation to which a victim may be entitled is not economical and is therefore unaffordable. Scheme is open to fraud The Fund is confronted by two types of fraud, i.e. systemic and opportunistic fraud. The cost of fraud is not limited merely to fraudulent claims either, but there is an additional cost attached to the extensive fraud prevention strategies and systems implemented by the Fund over recent years Environmental Challenges High accident rate South Africa has an exceptionally high number of fatalities related to road accidents, even when compared to other developing countries. The high accident rate places an unreasonably high economic burden on the country, especially when one Lack of integration between role players The Fund experiences difficulties in accessing or obtaining the information required to assess claims. Many of the problems related to information arise because of the lack of integration between the various role players in the industry. Each of the organisations involved in the process from accident to rehabilitation (including the Road Traffic Management Corporation, Department of Health, South African Police Service, Metro Police and the Department of Justice and Constitutional Development, among others), collects and maintains pieces of information relating to its role in the system. However, there is no formal way in which this information is shared. This lack of integration hampers the delivery of effective and efficient services and the forecasting of the actual liability. The Promotion of Access to Information Act, 2000 (PAIA) further inhibits the sharing of information between the Fund and other role players. Fragmentation of the industry Several role players within the Transport, judiciary (legal) and health fraternities, each with different responsibilities and authority, all operate in the same space. This lack of integration complicates matters. However, even if there were to be full integration and information-sharing or collection, it would still be problematic to have many small organisations with overlapping and/or interrelated policy objectives, but no broad oversight or coordination. 32 Road Accident Fund Strategic Plan

35 Strong interest groups with conflicting views The current system has created powerful vested interests in the organisation (such as large groupings of the legal fraternity), who oppose any attempt to reform the system Internal Challenges Fraud and corruption Fraud and corruption are major challenges facing the organisation. The majority of fraud is committed by the lodgement of fraudulent claims and this poses the biggest financial threat for the Fund. The Fund has in the past established a trend involving attorneys, doctors and touts. Touts target the destitute, they sell their claims to attorneys, assisted by medical practitioners, and the more claims sold the more money is made. Specific trends have been identified and the Fund now focuses its efforts on these to curb fraudulent activities. Information communication technology The contribution made by the ICT department in the current position of the business is valuable and noticeable. However, the role of the department is comparatively strategically lower than in similar organisations locally and globally (e.g. SARS, UIF, Home Affairs, etc.). The information systems of the Fund that support the core business were developed more than 15 years ago. They are inadequate, fragmented and involve a lot of manual intervention. There is no capability for a single view of information. Improvement is required in the following areas: IT strategic alignment with business; IT governance; and IT operations. The growing trend on fraudulent activities relating to lodgement of claims relates to loss of support/earnings claims for foreign accident victims. Fraudulent customary marriage certificates and employer certificates are produced for RSA single mothers to fraudulently lodge claims for loss of support/earnings. Mandate changes (conversion of direct claims to represented claims) are seen as a threat to the RAF s effort of increasing direct claiming and are detrimental to the RAF s reputation. Fraudulent activities occur when mandate changes from direct claimant to attorney or from one attorney to another attorney. These types of fraudulent activities are at times committed with the collusion of the Fund s staff with third parties, i.e. attorneys, doctors, assessors etc. Part A Strategic Overview 33 33

36 PART A 6.6 SWOT analysis and the PESTELG The process towards developing the strategy was also informed by the Fund s statutory form of an entity (schedule 3A: National Public Entity). The Fund conducted a PESTELG and SWOT analysis to develop its Five-year Strategic Plan: Political, Economic, Social, Technology, Environment, Legal, Geographic/ Regional (PESTELG) POLITICAL ECONOMIC SOCIAL TECHNOLOGY ENVIRONMENTAL LEGAL REGIONAL/GEOGRAPHIC Comprehensive Social Security Changes in Leadership National Development Plan Support in respect of RABS and Legislative Changes Changes in the RAF Act/Mandate Fuel Price Variation Substance Abuse Poverty Unemployment Corporate Social Responsibility Fraud and Corruption Social Mobility and an Increase in Number of Younger Drivers Changes in Modes of Transport Customer Sophistication Automation of Claims Processing Systems Expanding Network Coverage Segmentation of Customers Green Economy Accessibility to RAF Services Climate Changes Legislative Compliance Constitutional Court Challenges Foreign Claims Foreign Exchange UN Social Security 34 Road Accident Fund Strategic Plan

37 6.6.2 Strengths, Weaknesses, Opportunities, Threats (SWOT) STRENGTHS Exclusive legislative mandate Guaranteed source of revenue Existing infrastructure Unique service offering Corporate governance Good relationship with Shareholder Sound and skilled leadership Recognisable brand Institutional memory Improved delivery and business processes WEAKNESSSES Not effectively applying the RAF Act Operational inefficiencies Perceived poor service delivery Inadequate records management Lengthy claims processing turnaround times Lack of integrated systems Adversarial relationship with strategic partners Inefficient implementation of retention strategy Inadequate change management Operating in silos OPPORTUNITIES Strengthen the brand and reputation Modernisation of the organisation (business process re-engineering and automation) Readiness to implement the RABS Improve post-crash care Expand the footprint Improve IT governance (operations) and better alignment between IT and business THREATS Fraud & corruption Adverse judgments Financial sustainability Organisational change management Litigious environment Stakeholder pressure Economic instability Readiness to take on RABS Negative media coverage Implications of sister entities (system /activities/ actions Uncertainties of labour force due to transition to RABS Part A Strategic Overview 35 35

38 PART A 6.7 Continuing Risks facing the RAF The Fund s Strategic Plan comprises seven strategic risks that have been identified by the Board which are regarded as those risks that will have a negative and positive impact on the achievement of the Fund s strategic goals, objectives and performance targets for the financial year. These strategic risks consider both risks to the strategy, which are threats that could prevent its achievement; and risks of the strategy, which are risks that might be brought by the strategy itself. Furthermore, the strategic risks are informed by the external and internal operating environment, regulatory framework and economic climate Review of the Strategic Risks i. R1 - Fraud and Corruption Fraud and Corruption Risk impacts on five strategic objectives of the organisation, namely (i) Efficient claims processing, (ii) Effective financial management, (iii) Optimised ICT services, (iv) Improved people management and (v) Sound governance practices. The Fund operates in an environment that is targeted by fraudsters, both internally and externally, through collusion, conflict of interest, non-compliance with policies and procedures, theft of information and fictitious accident reports. The Fund has to continuously deal with professional syndicates and individual fraudsters. Considering the transformational state of the organisation, there is a higher propensity for fraud and corruption. To reduce the Fund s exposure to fraud and corruption, business is in the process of capacitating the Forensics Unit with IT Forensics Specialists to assist in pro-actively detecting and preventing the latest fraud trends, e.g. cyber fraud and prediction of criminal dependencies. The ICT Security Strategy that is being rolled out is considered as key in mitigating cyber fraud. Other key initiatives that are in the process of implementation include the data analytics in order to develop mitigation measures that will result in improvement of processes, as well as identification and assessment of vulnerabilities and interdependencies across the business. A comprehensive Fraud Strategy, which encompasses fraud prevention, detection, investigation and reporting is being revised and will be implemented. ii. R2 Financial Management/ Health Financial Management Risk impacts on two strategic objectives, namely: (i) Efficient claims processing; and (ii) Effective financial management. The Fund is dependent on the fuel levy income in order to pay claims; however, the determination of the fuel levy has little regard for the main drivers of the Fund s claims expenditure. The prevailing disconnect between the fuel levy awarded by Government and the Fund s operational cash requirements is the primary cause of the poor liquidity that is being experienced by the Fund from time to time. Furthermore, due to the current national economic climate, there is a lower than expected petrol consumption. In addition, the increases in organisational performance and productivity have resulted in increased liquidity concerns for the RAF. Due to its unsustainable financial model, the Fund has been running at a substantial deficit for 33 years. Consequently, a number of outstanding (open and un- 36 Road Accident Fund Strategic Plan

39 paid) claims have accumulated over time, representing a liability to the Fund. The provision for unpaid claims grows annually due to the expected growth in the cost of settling these claims and interest factors. Since the provision for future claims exceeds the Fund s asset base, the Fund remains technically insolvent and this results in the Fund using its cash reserves to cover the shortfall. To manage this risk, a number of initiatives are in the process of implementation and they mainly include: (a) Implementation of the Five-year ICT plan which aims to achieve the following five core outcomes: (1) Improve claims processing and efficiency through ICT; (2) Optimise content and information management; (3) Strengthen governance and risk management; (4) Stabilise and ensure adequacy of ICT infrastructure; and (5) Prepare and ready ICT for RABS implementation. The Fund is implementing some mitigation measures to reduce the impact of the risk and these include (a) Requesting additional funds from Government (i.e. National Treasury and the Department of Transport) and propose sufficient funds via the RRM; (b) Implementing stringent cash flow management practices; (c) Implementing cost containment measures; (d) Implementing the Supply Chain Management (SCM) Turnaround Strategy; and (e) Replacing the current system with a more sustainable RABS. iii. R3 - ICT ICT Risk impacts on three strategic objectives, namely: (i) Efficient claims processing; (ii) Accessible services; and (iii) Optimised ICT services. The Fund is wholly dependent on ICT functions to enable the automation of business processes, ensuring data integrity and protection and ensuring maturity of IT governance in the organisation. ICT systems are also used to manage and protect the massive amount of claims transactions and data. Other key initiatives such as the Direct Claims Strategy, Hospital Service Centres (HSCs) and the expansion of regional offices depend on ICT to function optimally and to gain competitive advantage. Automation of processes and the ever-evolving nature of IT pose new risks to the Fund that requires pro-active identification and management. iv. R4 Stakeholder Pressure The Stakeholder Pressure Risk impacts on five strategic objectives, namely: (i) Efficient claims processing; (ii) Accessible services; (iii) Effective financial management; (iv) Enabling legislative environment; and (v) Sound governance practices. The Fund has a vast and broad spectrum of stakeholders and therefore needs to understand their expectations, needs and perceptions in order to deliver on its mandate. The Fund operates in a highly litigious and contested terrain, thus making it susceptible to pressure from various stakeholders. This poses an inherent risk around understanding and managing the various complex and ever-changing needs, expectations and interests of the stakeholders. A number of mitigation strategies are being implemented to mitigate risks including Stakeholder Policy, map and matrix as well as a pro-active Media Strategy and key stakeholder engagement strategies. v. R5 People Management The People Management Risk impacts on two strategic objectives, namely: (i) Efficient claims processing; and (ii) Improved people management. The Fund is a labour-intensive service organisation that relies on people to effectively deliver on its mandate. Therefore, the attraction and retention of leadership and a Part A Strategic Overview 37 37

40 PART A workforce that is appropriately skilled, motivated, performance-driven, customer-centric and committed to providing excellent service is crucial. The Fund invests in growing and developing employees and ensuring optimal staff capacity. The Fund is implementing various mitigation strategies to manage this risk through the Human Capital policies and processes, and other initiatives which include, among others: Automation of performance management and improved recruitment processes, implementation of change management strategies, implementation of absenteeism framework, succession planning, talent management and employee wellness services. vi. R6 Service Delivery Service Delivery Risk impacts on all strategic objectives as it addresses the core and the engine of the Fund to effectively deliver on its mandate. The Fund has a large number of outstanding claims, mainly because of underfunding over the past couple of years, and the complexities in the current claims process as a result of the current Act. However, due to insufficient funding, the business is unable to process and pay claims at the rate it receives them. The Fund is in the process of establishing itself as an organisation that is more customer-centric, effective and efficient. This ensures that customers receive high-quality service, claims are processed quickly and accurately, legal and administrative costs are contained and fraud is eliminated. The Fund is potentially faced with key challenges in trying to deliver on its mandate and these include, but are not limited to: (i) The number of direct claims becoming represented; (ii) Settlement turnaround times on all heads of damages; (iii) Increasing claims backlog; (iv) Increase in legal costs; and (v) Pillar 5 challenges (i.e. medical Undertakings). A number of mitigation strategies are being implemented to mitigate risks, including: (a) Analysis of key drivers for business targets; (b) Optimisation, standardisation and re-engineering the claims value chain; (c) Implementation of the Integrated Claims Management System; (d) Implementation of the rehabilitation processes; (e) Standardising the whole claims process value chain; and (f) Monitoring of staff, service providers, RAF panel attorneys, and implementation of Quality Assurance processes. vii. R7 Regulatory Framework The Regulatory Framework Risk impacts on four of RAF s strategic objectives, namely: (i) Efficient claims processing; (ii) Effective financial management; (iii) Enabling legislative environment; and (iv) Sound governance practices. The current fault-based scheme is complex and subjective in that it often requires time-consuming and expensive legal procedures to establish fault and the quantum of damages suffered. The Fund is therefore susceptible to a number of legal challenges against the RAF Act, adverse Court judgments against the Fund as a result of non-adherence to the provisions of the Act and a number of reported incidents of violations due to non-compliance with regulations. There is also an inherent risk of limited interpretation and application of the RAF Act and its sub-ordinate prescripts in improving business efficiency and the financial position of the Fund. While the development of RABS is aligned with the DoT s goals, it may take a few years before this new legislation is implemented and there is a possibility of a myriad of challenges against RABS. Non-compliance with policies and procedures also seem to be a challenge. However, the combined assurance model will be implemented, amongst other things, to audit the adequacy and effectiveness of controls and to monitor compliance to the policies. Business is implementing more initiatives which include monitoring of the RAF Act and RABS implementation and ensuring organisational readiness for its implementation. Engagement plans with various fraternities will be implemented. 38 Road Accident Fund Strategic Plan

41 7. The Fund s Strategic Journey 7.1 Evolution of the Fund and the Fund s Strategy FY FY 2009 Project Phetogo focused on: Client value and a higher proportion of revenue to claimants; An improved claims handling and processing; Superior levels of customer service; Reductions in fraudulent claims. FY FY 2012 Centralisation and Automation (NOM): Centralise processing of claims through the creation of Benefits Administration Unit (BAU); Originate claims through a distributed network of customer interface channels Customer Services Network (CSN); Implementation of a claims management system Fineos. FY FY 2015 Productivity and Efficiency: Decentralisation of claims processing; Re-alignment of the organisational structure; Semi-autonomous regional offices; Improved access to services; Increased compliance and governance; Ensuring financial sustainability of the Fund Phetogo In 2005, the Fund lauched a programme named Phetogo. This was a business change strategy aimed at streamlining the Fund s activities to ensure more client value and a higher proportion of revenue to claimants; improved claims handling and processing; superior levels of customer service; and reductions in fraudulent claims. To achieve this, the Fund required a new business model to deliver: Financial stability; An expanded geographic footprint and improved reach throughout South Africa; Implementation of the Road Accident Fund Amendment Act; A facilitated transition from fault-based to non-faultbased legislation; and A way to reduce and clear the claims backlog, as well as to stop it reappearing Centralisation and Automation (NOM): In 2009, the RAF adopted a strategy to centralise the processing of claims at head office through an automated system. The system that was chosen by the Fund for automation was Fineos. The main objectives of the strategy were to: Centralise the processing of claims through the creation of a Benefits Administration Unit (BAU); Originate claims through a distributed network of customer interface channels Customer Services Network (CSN); and Implementation of a claims management system Fineos. Some of the objectives set out in the strategy for the RAF during the period were not achieved because of various challenges with the chosen system within the current legislative enviroment. The RAF then decided to discontinue some aspects of the strategy which were not being achieved and take a new direction for the organisation. Part A Strategic Overview 39 39

42 PART A Productivity and Efficiency: In 2012, the Fund embarked on a strategy to improve efficiencies and productivity within the Fund. The main pillars of the strategy involved; Decentralisation of claims processing; Re-alignment of the organisational structures; Semi-autonomous regional offices; Improved access to services; Increased compliance and governance; and Ensuring financial sustainability of the Fund. The Fund achieved better performance during this period as evident in the 83% achievement of targets against pre-determined objectives in the 2012/2013 and 2013/2014 financial years. This led to the Fund consolidating its position as an efficient Government institution. To this effect, the Fund is reviewing its current strategy to identify areas of improvement and areas where the Fund can add more value to its customers. 7.2 Strategic Transformation of the Fund Following the review and execution of the strategy over the past three years, the Fund has seen a drastic transformation in its operations. The table below depicts some highlights of the results achieved over the past three (3) years. 2011/ / /2014 Strategic Plan Validity Not aligned to strategy and erroneous Aligned to strategy and SMART targets Strategy executed and matured APP Targets Met 54% 83% 83% Fuel Levy R16.9 bn R17.8 bn R20.2 bn Staff count 1,844 1,881 2,288 Open Claims Settled Claims Claims Payment R12.5 bn R15 bn R22 bn Legal Costs as % of Claims 29% 27% 21% Reopened Claims National footprint Offices Customer Service Centres (CSCs) National Footprint - HSC s Direct Claims Originated 15 % 23% 27% 40 Road Accident Fund Strategic Plan

43 2011/ / /2014 RAF on the Road N/R Writs Call Centre Agents Number of Calls % Abandoned calls 5 N/A N/A % % Fraud Arrests Audit Opinions Unqualified Clean Audit Award Clean Audit Internal Audit Findings N/A Risk Maturity (1-5) N/A 3/5 4/5 Compliance Unit N/A Planned Established Strategy and Reporting N/A Planned Established Verification and Validation N/A Planned Established Quality Assurance N/A Planned Established Complaints Management N/A Planned Established 7.3 The Strategic Planning Process The process followed in delivering the Fund s Strategic Plan is consistent with the guidelines that were issued by National Treasury with regard to the development of Strategic Plans and Annual Performance Plans. Accordingly, a three-step process was adopted in developing this strategic plan: Strategy Team Executive Board Convert Take current 3yr plan and convert into NT Framework and ensure alignment with AG requirements Edit and Format Confirm result in Strategic Session Final Sign-off Extend Consult with Divisional Managers and extend programmes from 3 to 5 years Consult and realign Confirm results in Strategic Session Final Sign-off Add Review of external documents + facilitate Strategic Session and write up Review, summarise, align, facilitate & write up Work with Board input to add further content to the Plan Provide high level guidance and direction Final sign-off Part A Strategic Overview 41 41

44 42 Road Accident Fund Strategic Plan

45 PART B STRATEGIC OBJECTIVES OF THE FUND 43

46 PART B 8. Part B: Strategic Objectives of the Fund 8.1 The Fund s Five-year Priorities to Achieve its Seven Outcomes Over the next five years, the Fund s strategy will be anchored on seven (7) main pillars. Each of these pillars aims to deal with specific challenges that the Fund faces. In addition, these will form the basis on which subsequent performance plans and operational plans will be developed. No. Pillars Key Institutional Challenges to be addressed 1. Efficient claims processing Service delivery. 2. Accessible services Accessibility of service offerings to all RAF claimants to increase the direct claiming base. 3. Effective financial management Limited funding and ability to pay claims Optimal ICT functionality Improved people management Administrative dispensation aligned to the RABS Bill Old ICT infrastructure and information technology not addressing service delivery expectations required by RAF claimants. Skills development and advancement of Government priorities to advance previously disempowered communities. Alignment of the Fund to the envisaged Road Accident Benefit Scheme (RABS). 7. Assured control environment Improved governance and compliance Efficient Claims Processing Outcome Description During the strategic planning period, the Fund will complete the implementation of measures to achieve operational efficiency and a seamless and appropriate customer experience. Such operational efficiencies will make the RAF s systems and processes more effective and efficient. In addition, the Fund s national footprint will be expanded and customer interaction points optimised to ensure that the total experience for the customer is of a consistently high standard. Strategic Goal 1 Strategic Goal Description Outcome Indicators Efficient claims processing To optimise the processing of claims in the early stage of a claim and minimise unnecessary further complications with a claim Effectively manage number of claims Reduce the average age of open claims Increase number of claims verified by objecting to or accepting within 60 days Increase percentage of direct claims originated Increased percentage of direct claims settled Reduction in legal costs as a percentage of total claims expenditure Implement Post-Crash Care Strategy (Pillar 6) 44 Road Accident Fund Strategic Plan

47 8.1.2 Accessible Services Outcome Description To ensure all strategic objectives of the Fund are achieved, business support functions should be effective in enabling the Fund to achieve its objectives. Strategic Goal 2 Strategic Goal Description Outcome Indicators Accessible Services Increase accessibility to RAF services through various channels to improve service delivery by increasing the reach of the Fund s service offerings to all motor vehicle accident victims Increase accessibility to RAF services Increase the number of claimants engaged at RAF events (RAF on the Road) and other events Improved Call Centre responsiveness Improved customer satisfaction Effective Financial Management (Health) Outcome Description The Fund will focus on financial sustainability and may seek and explore various options to capitalise the organisation. The Fund will actively engage with National Treasury and the DoT to determine fuel levy allocation increases annually. Furthermore, the Fund will also commence with the process of developing strategies for reducing legal and operating costs through internal cost management initiatives. Strategic Goal 3 Strategic Goal Description Outcome Indicators Effective Financial Management/Health Increasing revenue, reducing costs and implementing other means to re-capitalise the RAF Effective cash flow management Provision for claims incurred assessed quarterly Improve procurement outcomes Increase percentage of B-BBEE-rated suppliers Implement Enterprise Supplier Development (ESD) initiatives. Part B Strategic Objectives of the Fund 45 45

48 PART B Optimal ICT Funtionality Outcome Description The Fund is wholly dependent on ICT functions to enable the tion of the ICT environment to function optimally and gain Strategic Goal 4 Optimal ICT Services automation of business processes, ensuring data integrity and protection and ensuring maturity of IT governance in the organisation. ICT aims to evolve from simply being a business enabler to being an essential component in implementing competitive advantage. The outcomes that will be realised with the successful implementation of the Five-year ICT Strategy mainly include: (a) Establishment of the Enterprise Architecture for the RAF; (b) Strategic Goal Description To create a solid foundation through developing and deploying IT solutions to increase the efficiency and effectiveness of our systems and processes as well as Enterprise Risk Management capabilities the RAF business strategy and executing on its mandate. ICT thus plays an integral role in ensuring the achievement of the Stabilisation and availability of the ICT systems; (c) Rolling-out of ICT security management services; (d) Alignment of the ICT business strategy to the Outcome Indicators Ensure optimal ICT service availability Implement the Five-year ICT strategy (e-enablement Strategy) RAF strategy. A number of initia- current and future organisation- tives that the RAF is planning to al strategy; and (e) Capacitation undertake in the next five years of the ICT function with the are dependent on transforma- required skills Improve People Management Outcome Description The Fund will capacitate the organisation and promote accountability and a performance-driven ethos. The intention is to improve the efficiency and transparency of its internal processes, particularly Human Capital and Procurement processes. This will be done by improving internal workflows and with the appropriate allocation of resources, the Fund can improve its productivity by eliminating internal delays due to inefficiencies in processes, or mismatches in capacity. Strategic Goal 5 Strategic Goal Description Outcome Indicators Improve People Management Build an institution that is performance-driven and values the customer, and improve the awareness of the RAF brand Optimise organisational performance Improve workforce skills and placement for current and future requirements Maintain the RAF s contribution towards Government s social and economic transformation agenda Manage absenteeism 46 Road Accident Fund Strategic Plan

49 8.1.6 Administrative Dispensation Aligned to the RABS Bill Outcome Description Transition the RAF to the RABS by developing the RABS business architecture of the future organisation, as well as the RAF Funding Model. Strategic Goal 6 Strategic Goal Description Outcome Indicators Administrative Dispensation Aligned to the RABS Bill Transitioning RAF to RABS and implementation of programmes to ensure successful implementation of the proposed RABS business model Development and approval of the RABS funding model as well as the development and implementation of RABS enterprise architecture Assured Control Environment Outcome Description The RAF Board of Directors has formally adopted the King III Report on Corporate Governance. A part of its functions, Management needs to develop effective ways to better control the business and to help ensure that RAF objectives related to operations, reporting, and compliance are achieved. Control environment factors include the integrity, ethical values and competence of the RAF s people; Management s philosophy and operating style; the way Management assigns authority and responsibility, and organises and develops its people; and the attention and direction provided by the Board of Directors. The Fund is highly dependent on accurate, complete and timely motor vehicle crash data to fulfill its mission of rehabilitating persons injured, compensate for injuries or death in a timely, caring and sustainable manner; and to support the safe use of our roads. A comprehensive national crash database is in support of the current and future RAF business model, as it will ensure timely origination of claims, improve service delivery (i.e. reducing claims processing turnaround times) and minimise the levels of fraud. Strategic Goal 7 Strategic Goal Description Outcome Indicators Assured Control Environment Ensure compliance to standards and improve governance and accountability Raise ethical standards Increase % of fraud detected before undue payments are made Contribute to road safety by creating a database in a report that will inform preventative measures Part B Strategic Objectives of the Fund 47 47

50 PART B 8.2 Measuring the Fund s Delivery Alignment with Government and Best Practice The Fund needs to align its performance management approach to that of the Government s planning, performance monitoring and evaluation approach, with the emphasis on delivery and results-based management. INPUTS ACTIVITIES OUTPUTS OUTCOMES HOW WE DO WHAT WE DO WHAT WE PRODUCE WHAT WE WISH TO ACHIEVE Pool of resources required to meet desired outcomes How much do we need to invest in resources to achieve the desired outcomes. Determine optimal allocation of inputs given desired outputs Reallocate resources if necessary. Collection of functions (actions, jobs, tasks) that consume resources required to produce outputs What activities is the RAF going to do to achieve the outputs. Measures delivery of key activities. Direct products and services generated through processes or activities Which priority outputs would the RAF measure to achieve the desired outcomes. Measure key outputs that will show if the RAF is making progress in delivering the outcomes. Effects, benefits or consequences that occur (either in the short, intermediate, or long term) due to the produced outputs What are the key outcomes that the Fund needs to achieve its organisational goals. Table Measurement approach 48 Road Accident Fund Strategic Plan

51 In addition, the RAF has researched the measurement and reporting approaches of various social security cluster public entities. Lessons learned were also used to inform the planning and performance management approach. It should, however, be noted that moving towards an outcomes-based approach is no easy task. Numerous challenges are encountered, for example: Finding accurate measures of performance Outcome measures are technically more difficult to measure. They are complex and involve the interaction of many factors, planned and unplanned; hence, the use of a combination of outputs and outcomes. Establishing and maintaining systems of data collection Setting and using performance targets Performance targets help clarify performance expectations for a given time period. There are problems with setting targets too high or too low. Setting targets too low means that the Fund is not challenged to improve performance. Setting them too high, while it can serve as a motivation, also creates unrealistic expectations and situations where efforts put in place by the Fund can fail. It takes time to get the right levels and to get to the comparative data to realise that targets are set too high or too low. There is also an issue about a reasonable number of targets. Too many targets create information overload and make it difficult to select. Too few targets create distortion effects again. Achieving the right balance takes time and is an on-going focus. There needs to be a process by which data is verified and validated to ensure quality. However due to the claims system gaps, mainly caused by the RAF s old and obsolete claims database platform, setting up and maintaining these systems can be complex and requires some form of manual intervention. Part B Strategic Objectives of the Fund 49 49

52 PART B 8.3 The Fund s Outcome Measures and Five-year Targets Objective 1: Initiatives aligned to the strategic outcome of efficient processing of claims Strategic Outcome Performance Indicator Baseline Targets/Milestones 2015\ / / / /20 Efficient claims processing Effectively manage number of open claims Reduce the average age of open claims. Increase % of claims verified by objecting to or accepting originated claims within 60 days (increase by 10% annually) % increase in direct claims originated 185, ,230 net balance of open claims at FY-end. Average age of open claims is 1,450 days old 60% of claims verified are objected to or accepted within 60 days Expected performance for 2014/15 28% to 16,768 * (Net balance includes incoming and existing claims. Refer to Annexure B paragraph for explanation of claims numbers.) Reduce average age to 1,400 days Increase to 70% of claims verified are objected to or accepted within 60 days Increase by 2.5% from the previous year s reported results 193,728 net balance of open claims at FY-end. Reduce average age to 1,350 days 194,039 net balance of open claims at FY-end. Reduce average age to 1,300 days 195,451 net balance of open claims at FY-end. Reduce average age to 1,250 days 197,393 net balance of open claims at FY-end. Reduce average age to 1,200 days Increase to 80% Increase to 90% Increase to 100% Maintain 100% levels of 60 days verification Increase by 2.5% from the previous year s reported results Increase by 2.5% from the previous year s reported results Increase by 2.5% from the previous year s reported results Increase by 2.5% from the previous year s reported results 50

53 Strategic Outcome Performance Indicator Baseline Targets/Milestones 2015\ / / / /20 Increased percentage of direct claims settled as a % of total personal claims settled Reduction in legal costs (attorney and advocate fees, excluding expert and assessor payments) by 2% annually Implement Post-crash Care Strategy (Pillar 6) Estimated performance for 2014/15 FY 20% to 10,897 Expected performance 16% Approved Pillar 6 Strategy Increase by 2.5% from the previous year s reported results Reduce by 2% from the set baseline Payment of caregivers within 30 days. Increase by 2.5% from the previous year s reported results Reduce by 2% from the previous year s reported results Treatment plans introduced for all new Undertakings Increase by 2.5% from the previous year s reported results Reduce by 2% from the previous year s reported results Implement automated claims processing Increase by 2.5% from the previous year s reported results Reduce by 2% from the previous year s reported results Assess rehabilitation outcomes Increase by 2.5% from the previous year s reported results Reduce by 2% from the previous year s reported results Report on rehabilitation outcomes Road Accident Fund Strategic Plan Part B Strategic Objectives of the Fund 51

54 PART B Objective 2: Initiatives aligned to the strategic outcome of providing accessible services Strategic Outcome Performance Indicator Baseline Targets/Milestones 2015\ / / / /20 Accessible Services Increased accessibility to RAF services Increase the number of claimants engaged at RAF events, i.e. RAF on the Road & other events Improved Call Centre responsiveness Five Customer Service Centres (CSCs) and 86 Hospital Service Centres (HSCs ) (as at 31 December 2014) 25,000 claimants engaged at RAF events Improve customer satisfaction Develop and measure baseline Channel Review Report completed by 31 December 2015 Increase claimants engaged by 15% to 28,750 Open two (2) additional access points Increase claimants engaged by 15% to 33,100 5% abandoned calls 4% abandoned calls 3.5% abandoned calls Conduct a customer satisfaction survey to establish baseline and measure 10% improvement from the set baseline based on measure set in 15/16 FY Open one (1) additional access point Increase claimants engaged by 15% to 38,000 Open one (1) additional access point 15Increase claimants engaged by 15% to 43,700 3% abandoned calls 2.5% abandoned calls 10% cumulative improvement from the 16/17 FY 10% cumulative improvement from the 17/18 FY Open one (1) additional access point Increase claimants engaged by 15% to 50,255 2% abandoned calls 10% cumulative improvement from the 18/19 FY 52

55 Objective 3: Initiatives aligned to the strategic outcome of effective financial management Strategic Outcome Performance Indicator Baseline Targets/Milestones 2015\ / / / /20 Effective Financial Management Effective cash flow management Provision for claims incurred assessed quarterly Improve Procurement outcomes Current actuarial valuation methodology Approved cash management procedures Provision for claims incurred assessed quarterly and an annual assessment conducted by an independent actuary Signed off Five-year Supply Chain Management (SCM) Optimisation Strategy Develop and use actuarial forecast model to motivate for sufficient funding Manage creditors in accordance with approved cash management procedures Internal model for claims incurred assessment established and an annual assessment conducted Procurement turnaround times reduced to 120 days Develop and use actuarial forecast model to motivate for sufficient funding Manage creditors in accordance with cash management procedures Provision for claims incurred assessed quarterly and an annual assessment conducted by an independent actuary Procurement turnaround times reduced to 110 days Develop and use actuarial forecast model to motivate for sufficient funding Manage creditors in accordance with approved cash management procedures Provision for claims incurred assessed quarterly and an annual assessment conducted by an independent actuary Procurement turnaround times reduced to 100 days Develop and use actuarial forecast model to motivate for sufficient funding Manage creditors in accordance with approved cash management procedures Provision for claims incurred assessed quarterly and an annual assessment conducted by an independent actuary Procurement turnaround times reduced to 90 days Develop and use actuarial forecast model to motivate for sufficient funding Manage creditors in accordance with approved cash management procedures Provision for claims incurred assessed quarterly and an annual assessment conducted by an independent actuary Procurement turnaround times reduced to 80 days Increase percentage of B-BBEE-rated suppliers Implement Enterprise Supplier Development (ESD) initiatives 100% B-BBEE-rated suppliers Develop measure and baseline for ESD. Less than 10% of Procurement procedures unsuccessful 110% B-BBEE-rated suppliers Less than 10% of Procurement procedures unsuccessful 115% B-BBEE-rated suppliers Approved ESD plan 0. 1% allocated budget spend on ESD Less than 10% of Procurement procedures unsuccessful 120% B-BBEE-rated suppliers 0.2% allocated budget spend on ESD Less than 10% of Procurement procedures unsuccessful 125% B-BBEE-rated suppliers 0.3% allocated budget spend on ESD Less than 10% of Procurement procedures unsuccessful 130% B-BBEE-rated suppliers 0.3% allocated budget spend on ESD Road Accident Fund Strategic Plan Part B Strategic Objectives of the Fund 53

56 PART B Objective 4: Initiatives aligned to the strategic outcome of optimising ICT functionality Strategic Outcome Performance Indicator Baseline Targets/Milestones 2015\ / / / /20 Optimal ICT functionality Ensure optimal ICT service availability Implement Five-year ICT Strategy (e-enablement Strategy) 98% service availability on critical services Five-year ICT Strategy approved 98% service availability on critical services Year One initiatives met 25% back-scanning of claim content files 98% service availability on critical services Year Two initiatives met Functional e-forms and repositories in place by the end of 16/17 FY 98% service availability on critical services Year Three initiatives met 100% roll-out of ECM repositories 98% service availability on critical services Year Four initiatives met Integrated Claims Management System tested 98% service availability on critical services Go live on ICMS by 31 December

57 Objective 5: Initiatives aligned to the strategic outcome of improving people management Strategic Outcome Performance Indicator Baseline Targets/Milestones 2015\ / / / /20 Improved People Management Optimise organisational performance Improved workforce skills and placement for current and future requirements Maintain RAF s contribution towards Government s social and economic agenda Quarterly individual perfomance assessments Develop measure and baseline Gender equity with 10% variance Maintain gender equity within 10% varience Manage absenteeism 230 lost man-days as at 31 December 2014 Implement an automated performance management system Skills Assessment Report Maintain gender equity within 10% variance Lost man-days reduced by 10% to 2.07 days Implement 360 assessment at Executive level RABS Skills Requirement Report and Transformation Strategy Maintain gender equity within 10% variance Lost man-days reduced by 10% to 2.07 days Operationalise absenteeism management tool Implement 360 assessment at General Managers and Senior Management level Implement and track compliance to the Skills Development Plan. Implement RABS Change Management Plan. Maintain gender equity within 10% variance Lost man-days reduced by 10% to 2.07 days Implement 360 assessment at Management and Team Leads level Track compliance to the Skills Development Plan. Implement RABS Change Management Plan Maintain gender equity within 10% variance Lost man-days- reduced by 10% to 2.07 days Implement 360 assessment at all levels Redo skills assessement Maintain gender equity within 10% variance Lost man-days reduced by 10% to 2.07 days Road Accident Fund Strategic Plan Part B Strategic Objectives of the Fund 55

58 PART B Objective 6: Initiatives aligned to the strategic outcome of administrative dispensation aligned to the RABS Bill Strategic Outcome Performance Indicator Baseline Targets/Milestones 2015\ / / / /20 Administrative dispensation aligned to the RABS Bill Transitioning RAF to RABS Approved RABS business case Develop and approve RABS business architecuture Proposed funding model Board approval of RABS funding model Implement aspects of the approved RABS business architecture Submit Board approved funding model to the National Treasury for endorsement Monitor and track implementation of RABS business architecture Implement RABS funding model Monitor and track implementation of RABS business architecture Monitor and track implementation of RABS business architecture Objective 7: Initiatives aligned to the strategic outcome of an assured control environment Strategic Outcome Performance Indicator Baseline Targets/Milestones 2015\ / / / /20 Assured Control Environment Raise ethical standards Ethics Strategy and Implementation Plan Increase % of fraud detected before undue payments are made Contribute to Road Safety by creating a crash database, & report on road crashes that will inform preventative measures Develop measure and baseline Based on functional Information Collection Agents (ICAs) at the end of the 14/15 FY Report effectiveness of components of organisation s ethics programme 10% increase in the level of fraud detected before undue payments are made Design and develop internal road crash database Report effectiveness of components of organisation s ethics programme 15% increase in the level of of fraud detected before undue payments are made Internal road crash database functional by 31 March 2017 Report effectiveness of components of organisation s ethics programme 20% increase in the level of of fraud detected before undue payments are made Publish road crash forecasting report Report effectiveness of components of organisation s ethics programme 25% increase in the level of of fraud detected before undue payments are made Provide support in the development of national road crash databank Report effectiveness of components of organisation s ethics programme 30% increase in the level of of fraud detected before undue payments are made Provide support in the development of national road crash databank 56

59 8.4 Financial Plan Cash Flow Statement Cash flows from operating activities Receipts Fuel levies 19,651,219 21,682,820 30,492,246 33,359,741 33,693,338 34,030,272 34,370,574 Reinsurance claims received Other income 1, ,653,290 21,682,820 30,492,246 33,359,741 33,693,338 34,030,272 34,370,574 Payments Employee costs (907,172) (1,178,267) (1,296,094) (1,425,703) (1,511,246) (1,601,920) (1,698,036) Claims expenditure (22,184,827) (22,221,212) (28,614,848) (31,263,419) (31,483,281) (31,687,962) (31,888,163) Finance costs (28,946) (12,355) (13,022) (13,712) (14,535) (15,407) (16,332) Reinsurance premiums (22,571) (26,550) (27,983) (29,466) (31,234) (33,108) (35,095) Other expenditure (351,626) (466,711) (517,168) (543,571) (562,997) (596,777) (632,583) (23,495,142) (23,905,095) (30,469,116) (33,275,872) (33,603,293) (33,935,174) (34,270,208) Net cash flows from operating activities (3,841,852) (2,222,275) 23,131 83,869 90,045 95, ,366 Cash flows from investing activities Purchase of property, plant & equipment (30,516) (71,500) (78,650) (82,818) (86,959) (91,307) (95,873) Proceeds on disposal of property, plant & equipment Purchase of other intangible assets (19,640) (11,000) (12,100) (12,741) (13,378) (14,047) (14,750) Net cash flows from investing activities (50,156) (82,500) (90,750) (95,560) (100,338) (105,355) (110,622) Net increase/(decrease) in cash and cash equivalents (3,892,008) (2,304,775) (67,619) (11,690) (10,292) (10,257) (10,256) Cash and cash equivalents at the beginning of the year 6,143,817 2,504, , , , , ,256 Interest income 252,966 67,619 11,690 10,292 10,257 10,256 10,256 Cash and cash equivalents at the end of the year 2,504, , , , , , ,256 Table Cash Flow Statement Road Accident Fund Strategic Plan Part B Strategic Objectives of the Fund 57

60 PART B Statement of Financial Performance Revenue from non-exchange transactions Net fuel levies 20,278,011 22,175,823 32,630,007 34,055,588 33,774,291 34,112,034 34,453,155 Fl b/f 4,141,918 4,768,710 5,261,713 7,399,474 8,095,321 8,176,274 8,258,037 Fl Received 19,651,219 21,682,820 30,492,246 33,359,741 33,693,338 34,030,272 34,370,574 Fl c/f 4,768,710 5,261,713 7,399,474 8,095,321 8,176,274 8,258,037 8,340,618 Revenue from exchange transactions Other income 1, Reinsurance revenue Investment revenue 236,361 67,619 11,690 10,292 10,257 10,256 10, ,432 67,619 11,690 10,292 10,257 10,256 10,256 LESS EXPENSES Claims expenditure 36,442,094 30,979,064 33,559,058 35,729,946 37,976,971 40,648,022 43,774,603 Claims paid in cash 22,280,094 22,221,212 28,614,848 31,263,419 31,483,281 31,687,962 31,888,163 Claims accrual - processed but cannot be paid 7,842,594 9,415,867 14,658,669 23,967,641 29,713,491 8,254,270 due to cash constraints Provision for outstanding claims: Balance b/f -82,838,000-97,000,000-97,915,258-93,443,601-83,251,459-65,777,508-45,024,078 Provision for outstanding claims: Balance c/f 97,000,000 97,915,258 93,443,601 83,251,459 65,777,508 45,024,078 48,656,249 Reinsurance premiums 22,571 26,550 27,983 29,466 31,234 33,108 35,095 Employee costs 907,172 1,178,267 1,296,094 1,425,703 1,511,246 1,601,920 1,698,036 General expenses 377, , , , , , ,583 Depreciation and amortisation 38,132 48,835 59,628 72,621 83,601 88,617 93,935 Finance costs 28,946 12,355 13,022 13,712 14,535 15,407 16,332 Deficit for the year (17,299,566) (10,468,340) (2,831,256) (3,749,139) (6,396,036) (8,861,562) (11,787,172) Table: Statement of Financial Performance 58

61 8.4.3 Statement of Financial Position Assets Current Assets Cash and cash equivalents 2,504, , , , , , ,256 Receivables from non-exchange transactions 4,768,710 5,261,713 7,399,474 8,095,321 8,176,274 8,258,037 8,340,618 Receivables from exchange transactions 16,116 17,083 18,108 19,194 20,346 21,567 22,861 Other financial assets 132, , , , , , ,626 Consumable stock 3,603 3,819 4,048 4,291 4,549 4,822 5,111 7,426,178 5,691,187 7,782,730 8,487,473 8,579,303 8,672,631 8,767,472 Non-Current Assets Property, plant & equipment 246, , , , , , ,886 Intangible assets 21,172 23,049 24,211 24,103 22,625 19,528 20, , , , , , , ,586 Total Assets 7,694,347 5,993,021 8,115,686 8,843,368 8,951,934 9,053,372 9,171,058 Liabilities Current liabilities Payables from exchange transactions 139, , , , , , ,187 Other financial liabilities 460,579 8,330,808 17,775,968 32,465,687 56,466,241 86,214,620 94,505,872 Provision for outstanding claims 24,083,166 19,583,052 18,688,720 16,650,292 13,155,502 9,004,816 9,731,250 Other provisions 848, , ,443 1,010,650 1,071,289 1,135,566 1,203,700 25,531,315 28,960,684 37,574,322 50,292,191 70,868,527 96,541, ,638,008 Non-Current Liabilities Other financial liabilities Provision for outstanding claims 72,916,834 78,332,206 74,754,881 66,601,167 52,622,007 36,019,263 38,924,999 Employee benefit obligation 43,340 45,940 48,697 51,619 54,716 57,999 61,479 72,960,790 78,378,800 74,804,270 66,653,519 52,677,500 36,078,086 38,987,352 Total Liabilities 98,492, ,339, ,378, ,945, ,546, ,619, ,625,360 Net Deficit (90,797,758) (101,346,463) (104,262,905) (108,102,342) (114,594,094) (123,565,741) (135,454,303) Table: Statement of Financial Position Road Accident Fund Strategic Plan Part B Strategic Objectives of the Fund 59

62 PART B 8.5 Human Capital Management RAF Organisational Structure Review The creation and filling of leadership positions, e.g. the new Executive positions, the additional tier of General Managers and Senior Managers have opened more communication lines resulting in quicker response and turnaround times and ensuring that decisions are made timeously. The entrenchment of the new organisational structure, approval of new delegations, decentralisation of functions (especially in the regions) have allowed regions to be semi-autonomous and deliver services in an efficient and effective manner where they are actually required. The creation of Regional General Managers and Senior Managers for both Operations and Support in the Regions has allowed for more effective and efficient stakeholder relations with the provincial and local Government tiers. The Fund s organisational structure is illustrated in figure 3 on the next page Creating Value through Human Resource Capacity The RAF is in the process of a significant transformation and change in its strategic planning process and operational framework. The Human Capital function has primarily been perceived and criticised for its failure to meet expectations and to deliver value. The function is seen as slow, unresponsive and has failed to build trust, respect and credibility amongst its stakeholders. The team recognises the need to adapt its operating model and its role based on best practices. The Human Capital Strategy (HCS) describes how the RAF will achieve its role in contributing to the achievement of overall organisational goals. It describes how it will ensure the culture, capacity and capability of the organisation in such a way that there are necessary resources not just in terms of people and skills, but in respect of systems and processes to achieve the Fund s strategic objectives. The essence of the HCS is to have a real and sustainable impact on the achievement of the RAF s strategic objectives and on business performance. It further recognises the need for staff and the organisation to increase capacity for flexibility, learning and change in order to contribute most effectively to the achievement of the organisational goals and further employees learning and development within a framework of effective performance management Projected Human Resource Capacity The Fund has in the 2013 financial year undertaken an organisational structural re-alignment process. During this phase a different set of skills was acquired in different geographic areas throughout South Africa. The Human Resource Strategy and Plan are based on the strategic outcomes and performance indicators and targets detailed in this Plan. In the past financial year, the Fund increased the number of employees from 2,288 to 2,555. It is expected that the headcount will increase from a baseline of 2,555 as at 31/03/15 to 2,792 in the 2015/16 financial year as a result of the continuous implementation of the new organisa- 60 Road Accident Fund Strategic Plan

63 Figure 3: Top Structure of the Fund Executive Authority Minister of Transport Honourable Dipuo Peters, MP Board of Directors Chief Executive Officer Chief Corporate Secretariat GM: Monitoring and Assistance Chief Audit Executive SM: Internal Audit Chief Operations Officer Chief Strategy Officer Chief Financial Officer Chief Human Capital Officer Chief Information Officer Chief Marketing Officer SM: Analytical Reporting GM: Legal, Compliance and Regulation SM: Financial Accounting SM: Organisational Development SM: Application Development and Modernisation SM: Communications RGM: Johannesburg GM: Risk Management SM: Management Accounting SM: Capacity and Capability Building SM: Governance, Risk and Security SM: PR and Media RGM: Pretoria RGM: Durban RGM: Cape Town GM: Project Management Office GM: Stakeholder Relations Management GM: Forensic Investigations SM: Financial Reporting SM: Treasury SM: Supply Chain Management SM: Centre of Expertise SM: Shared Services SM: Learning and Development SM: New Service, Architecture and Process Management SM: Application Development and Support SM: Marketing SM: Call Centre SM: Social & Digital Media RGM: East London SM: Strategy, Risk and Compliance SM: Customer Service SM: Infrastructure SM: Strategy and Reporting SM: Facilities Management SM: Business Support Service tional structure, which seeks to rationalise the historic structure, control weaknesses and operational impediments. No staff increase is expected for the rest of the MTEF period. The increase in the 2014/15 financial year is aimed at ensuring that the Fund is fully capacitated to fulfil its mandate and achieve the proposed strategic objectives illustrated above. Part B Strategic Objectives of the Fund 61 61

64 62 Road Accident Fund Strategic Plan

65 PART C LINKS TO OTHER PLANS 63

66 PART C 9. PART C: LINKS TO OTHER PLANS 9.1 RAF Funding Requirements Over the past two years, the Fund has expressed its concern to Government that the RAF Fuel Levy is determined with little regard for the main drivers of the Fund s claims expenditure, i.e. the number of accidents on the roads, number of vehicles driven, the volume and quantum of the benefits payable by the Fund, and various other economic factors such as the inherent inflation of the benefit levels. To this end, the Fund has developed a Revenue Requirement Model (RRM) that incorporates all of the above in order to scientifically and objectively determine the required fuel levy for any given future accident year. The model projects the claim numbers, income statement, balance sheet and cash flow statements in order to estimate the future financial position of the Fund. It should be noted that, if there are no cash flow constraints, the actual cost of providing the benefits would not depend on the fuel levy. If the initial levy is lower, higher levies will be required in future. However, with cash flow constraints, the Fund cannot settle claims timeously. This leads to increased costs as more claims are referred to the Courts and expensive litigation processes. 9.2 Fuel Levy Increase The RAF Fuel Levy has been increased by 50 cents per litre per annum for the MTEF period. As can be seen in the explanatory narrative accompanying the database, this levy is insufficient to pay all the claims that the Fund can process. Expenditure Trends 9.3 Claims Payments The productivity in claims settlements is expected to remain constant over the MTEF period. The extra cash injection resulting from the 50 cents increase, will be used to reduce the amount of accounts payable from the previous year. Previous claims inflation is expected to be 15% for 2014/15 and for the rest of the MTEF period. This is the long-term average claims inflation over the period 2006 to This was derived at by comparing the Fund s average claim payments from year-toyear over this period. It must be noted that the full effect of these increases are not reflected in the claims payments in the above table due to cash constraints. Therefore, the claims payments reported above have been restricted to cash available for the current financial year and for the rest of the MTEF period. Considering all of the above, the Fund would ideally require income that would not place a constraint on its ability to settle claims. This would imply higher initial levies that could remain level or even reduce over time. It is worth noting that the increase in productivity in claims settlement per the Annual Performance Plan for the financial year 2013/14 was assumed to be 20% and the actual increase for the year was 19%. This document presents financial forecasts based on an average fuel levy increase of not more than 50c per litre. The assumption is based on the approved levies for the 2014 financial year and the discussions which have been taking place between the Fund and National Treasury. The fact that the settlement of claims must be limited to available funding has a material negative impact on the ability of the institution to execute its mandate successfully. The following table shows the shortfall between the claims operational capacity and cash available for claims payment: 64 Road Accident Fund Strategic Plan

67 R 000 R 000 R 000 R 000 R 000 R 000 Available for claims settlement Operational claims limit Claims Financial Shortfall The level of productivity that is maintained results in a reduction of the ORC over the MTEF period, but the IBNR increases. The following table illustrates how the provision reduces over the MTEF period: R 000 R 000 R 000 R 000 R 000 R 000 Provision for outstanding claims: Balance c/f Provision for Outstanding Claims (ORC & IBNR) The IBNR portion grows with inflation-related factors and ORC portion reduces as the Accounts Payable increases and a sustained reduction in new registrations persists. 9.5 Deficit The deficit increases throughout the MTEF period mainly due to the increase in claims settlements and shortage of cash. Part C Links to Other Plans 65 65

68 PART C 9.6 Goods and Services and Compensation of Employees Goods and Services The baseline for goods and services expenditure for the MTEF period is the approved budget for the financial year 2014/15. Furthermore, the expenditure increases by the CPI rate of 5.6%, 5.5% and 5.0% for 2015/16, 2016/17 and 2017/18 respectively as per the National Treasury guidelines. 9.8 Cash Balances The RAF is currently experiencing cash flow constraints and cannot pay all the claims it can process. The cash balances throughout the MTEF period are around R200 million, while our target is R2.1bn available cash per month. 9.9 Average Claim Amounts Average claim amounts, in current terms, are also taken from the latest actuarial valuation report as at 31 December 2014 and entered separately for pre- and post-amendment Act claims and per claim type. The averages change over time because, on average, larger claims take longer to finalise than smaller claims. Furthermore, a provision of R25 million per annum for 2015/16 to 2017/18 is included in this expenditure. This provision relates to ICT infrastructure enhancement, ICT additional staff and costs related to preparation for the implementation of RABS in the ICT environment. The total amount to implement the ICT strategy is R106 million, R60 million and R60 million for 2015/16 to 2017/18 respectively. The RAF will engage DoT and National Treasury regarding funding for the implementation of the strategy during the MTEF submission later this financial year Delay between Accident Date, Reporting Date and Settlement Date The assumed delay between the accident date, reporting date and date of settlement has a major influence on the Fund s cash flow. It is expected that, the sooner claims are settled, the lower the ultimate cost. However, the magnitude of the saving on earlier settlement (or extra cost in delayed settlement) has not been estimated. Historic average amounts are expected to be repeated with some efficiency improvements in the settlement delay between reported and settlement dates. 9.7 Compensation of Employees The staff complement is projected to increase to enable the Fund to achieve its service delivery requirements. It is expected that the headcount will increase from a baseline of 2,555 as at 31/03/15 to 2,792 in the 2015/16 financial year as a result of the continuous implementation of the new organisational structure, which seeks to rationalise historic structure, control weaknesses and operational impediments. No staff increase is expected for the rest of the MTEF period Finance Model: Based on an Average Increase of 50c per Litre Model Assumptions and Results The key inputs and outputs are based on the 50c increase as determined by the model for the 2016 to 2020 financial years. It is important to note that the model is based on the results of the actuarial valuation conducted in February 2015 and that the projections of the deficit were also made at that time with the information available then. Claims are paid as they become due, resulting in utilisation of all available cash reserves. 66 Road Accident Fund Strategic Plan

69 Table Cash Flow Statement Cash flows from operating activities Receipts Fuel levies Reinsurance claims received Other income Payments Employee costs ( ) ( ) ( ) ( ) ( ) ( ) Claims expenditure ( ) ( ) ( ) ( ) ( ) ( ) Finance costs (12 355) (13 022) (13 712) (14 535) (15 407) (16 332) Reinsurance premiums (26 550) (27 983) (29 466) (31 234) (33 108) (35 095) Other expenditure ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Net cash flows from operating activities ( ) Cash flows from investing activities Purchase of property, plant & equipment (71 500) (78 650) (82 818) (86 959) (91 307) (95 873) Proceeds on disposal of property, plant & equipment Purchase of other intangible assets (11 000) (12 100) (12 741) (13 378) (14 047) (14 750) Net cash flows from investing activities (82 500) (90 750) (95 560) ( ) ( ) ( ) Net increase/(decrease) in cash and cash equivalents ( ) (67 619) (11 690) (10 292) (10 257) (10 256) Cash and cash equivalents at the beginning of the year Interest income Cash and cash equivalents at the end of the year Part C Links to Other Plans 67 67

70 PART C Table Statement of Financial Performance Revenue from non-exchange transactions Net fuel levies Fl b/f Fl Received Fl c/f Revenue from exchange transactions Other income Reinsurance revenue Investment revenue LESS EXPENSES Claims expenditure Claims Paid In Cash Claims Accrual - processed but cannot be paid due to cash constraints Provision for outstanding claims: Balance b/f Provision for outstanding claims: Balance c/f Reinsurance premiums Employee costs General expenses Depreciation and amortisation Finance costs Deficit for the year ( ) ( ) ( ) ( ) ( ) ( ) 68 Road Accident Fund Strategic Plan

71 9.12 Materiality Framework The Materiality and Significance Framework that is required to be incorporated in the Strategic Plan (section 30) of the Treasury Regulations is listed below Definitions and Standards Audited Financial Statements: FY 2013/2014 (AFS) Approved Annual Budget: FY 2013/2014 (AAB) Approved Revised Strategic Plan: 1 April 2013 to 31 March 2017 (ASP) Event: An activity that has the elements of income and expenditure Trading venture: An activity that has the elements of buying and selling of products and/or services Total income: Total income excluding the income from events and trading ventures Total expenditure: Total expenditure excluding event and trading venture expenditure Applicable Sections of the PFMA Section 50(1) Section 54(2) Section 55(2) Section 66(3) Treasury Regulation Background The following overview seeks to provide the Materiality Framework of the Fund. The section, Materiality Framework Overview, below summarises the aspects which have been classified as material both qualitatively and quantitatively within the RAF Materiality Framework Overview: PFMA Reference Section 55(2) Section 54(2) Description Reporting in the annual report and financial statements of criminal conduct, irregular expenditure and fruitless and wasteful expenditure during the financial year. Approval by the executive authority of transaction involving significant partnerships, trusts, and unincorporated joint ventures or similar arrangements; acquisition and disposals of significant shareholdings in a company; commencement and cessation of significant business activity; significant change in the nature or extent of interest in a significant partnership, trust, unincorporated joint venture or similar arrangement. Materiality/ Significance R10 million 5% Part C Links to Other Plans 69 69

72 PART C Detailed Materiality Framework: PFMA Reference Description Materiality/ Significance 4.1 Section 50: Fiduciary Duties of Accounting Authority (1) Accounting authority must (c) on request, disclose to the executive authority responsible, all material facts which in any way may influence the decisions or actions of the executive authority 4.2 Section 54: Information to be submitted by the Accounting Authority (2) Before a public entity concludes any of the following transactions, the accounting authority for the entity must promptly and in writing inform the relevant treasury of the transaction and submit relevant particulars of the transaction to its executive authority for approval of the transaction (b) Participation in a significant partnership, trust, unincorporated joint venture or similar arrangement (c) Acquisition of disposal of a significant shareholding in a company (d) Acquisition or disposal of a significant asset Value (Quantitative) (a) Any unbudgeted transaction of which the amount exceeds 20% of the total value of assets per the AFS (b) Any budgeted event where income is a legitimate expectation (e.g. theatrical production) where the actual income is less than 20% of the total expenditure (c) Any trading venture where income is exceeded by expenditure by more than 20% of expenditure (d) Total actual income is less than budgeted income by more than 20% of budgeted income (e) Total actual expenditure is more than budgeted income by more than 20% of budgeted expenditure N/A Value (Quantitative) Any transaction of which the amount exceeds 5% of the total value of assets as per the AFS Any transaction of which the amount exceeds 5% of the total value of assets as per the AFS Any transaction of which the amount exceeds 5% of the total value of assets as per the AFS Nature of Event (Qualitative) (a) Any unplanned event that affects the core purpose or mandate of entity as per the ASP (b) Any activity that is outside the parameters of each public entity s enabling legislation Nature of Event (Qualitative) Any unplanned event per the ASP that may affect the core purpose or mandate of the entity Any unplanned event as per the ASP that may affect the core purpose or mandate of the entity Any unplanned event as per the ASP that may affect the core purpose or mandate of the entity 70 Road Accident Fund Strategic Plan

73 PFMA Reference Description Materiality/ Significance (e) Commencement or cessation of a significant business activity 4.1 Section 50: Fiduciary Duties of Accounting Authority (2) The annual report and financial statements must: (b) include particulars of: (i) any material losses through criminal conduct and, (ii) Any irregular and wasteful or fruitless expenditure that occurred during the year (iii) Any losses recovered or written off 4.4 Section 66: Restrictions on Borrowing, Guarantees and Other Commitments (3) Public entities may only through the following persons borrow money, or issue a guarantee, indemnity or security, or enter into any other transaction that binds or may bind that public entity to any future commitment: (b) A national Government business enterprise listed in Schedule 3 and authorised by notice in the National Government Gazette by the Minister: the accounting authority for that Government business enterprise, subject to any conditions the Minister may impose Value (Quantitative) (a) Any loss of which the amount exceeds 5% of the total value of assets as per the AFS Value (Quantitative) Any borrowings, guarantees and other commitments of which the amount exceeds 5% of the total value of liabilities as per the AFS Any unplanned event as per the ASP that may affect the core purpose or mandate of the entity Nature of Event (Qualitative) Any unplanned loss as per the ASP that may affect the core purpose or mandate of the entity Nature of Event (Qualitative) Any borrowings, guarantees and other commitments Part C Links to Other Plans 71 71

74 PART C Concluding Remarks This Five-year Strategic Plan was developed in alignment with the shift of Government to an outcomes-orientated monitoring and evaluation approach. The focus of the plan is therefore centred on results-based management. This approach involves people, resources and processes which are integrated in the delivery of the following key strategic outcomes, namely: Efficient claims processing Accessible services Effective financial management/health Optimal ICT functionality Improved people management Administrative dispensation aligned to the RABS Bill Assured control environment The Fund continues to form a vital part of the social protection fabric of our society. This Strategic Plan considers, in brief, the strategic context within which the organisation operates. Based on this context, the Fund, through engagement with various stakeholders, has made some strategic decisions. These strategic decisions relate to the seven (7) pillars mentioned above. This strategy is a key starting point in this regard. Aside from the considerable inefficiencies in the current scheme, the inevitable substitution of benefits between a mandatory social insurance scheme and the Fund necessitates its reform within the context of a comprehensive system of social security. An important outcome of this reform process should be: the removal of unnecessary inefficiencies associated with the provision of entitlements; the continued protection of access to medical care associated with all road accidents; and ensuring that families are protected from the loss of a breadwinner or caregiver. These protections are particularly important in relation to low-income groups. However, the mandating and pooling of third-party insurance for road accidents, where this covers any residual liability, after accounting for social security benefits, remains inherently rational. Without such central pooling, families could be exposed to severe losses resulting from accidents where these are resolved privately. In the absence of central pooling, inefficient private insurance products would become available, with variable coverage. A reform of the Fund holds many opportunities for improved social security protection within the context of a comprehensive system of social security. This could be achieved through the rationalisation of benefits, a reduced inefficiency driven by the fault system, and the improvement in medical protection. Such a reform should see the Fund change its focus away from assessments of fault and liability and toward protecting the most vulnerable, which would include those who do not have contributory protection against death and disability. Furthermore, it will contribute towards the establishment of a uniform national system for emergency services. 72 Road Accident Fund Strategic Plan

75 10. Part C: Links to Other Plans 10.1 Strategy Alignment to the National Development Plan (NDP) Focus Area Economic infrastructure Health care for all Social protection Building a capable and developmental state Fighting corruption Nation building and social cohesion NDP Outcome Behavioural change to reduce environmental, social and economic cost of road crashes Reduce injury, accidents and violence by 50% from 2010 levels Short-term reforms focusing on broadening coverage of existing social security benefits Make the public service careers of choice; Develop technical and specialist professional skills; Strengthen delegation, accountability and oversight; The developmental potential of SOEs. A corruption-free society, a high adherence to ethics throughout society and a Government that is accountable to its people A society where opportunity is not determined by race or birth right; where citizens accept that they have both rights and responsibilities A united, prosperous, non-racial, nonsexist and democratic South Africa Strategic Objective Accessible services Efficient claims processing Administrative dispensation aligned to the RABS Bill Improve people management Assured control environment Effective financial management and improve people management RAF Indicators Community campaigns (RAF on the Road); and Road safety initiatives with SANCO SDI. Implement Post-crash Care Strategy (Pillar 5). Participate in the amendment to the current RAF Act; Participate in the establishment of the RABS legislative framework; and Transition RAF to RABS. Improved performance management outcomes; Conduct skills assessment and develop skills strategy; Maintain EE targets; Manage absenteeism; and Implement Gender Policy. Raise ethical standards; Improve fraud detection and management; and Improve internal controls. Develop and implement B-BBEE policy and plan, with youth and women prioritised; and Maintain EE targets in accordance with the NEAP requirements. Part C Links to Other Plans 73 73

76 74 Road Accident Fund Strategic Plan

77 ANNEXURE A TECHNICAL INDICATOR DESCRIPTIONS 75

78 ANNEXURES ANNEXURE A: TECHNICAL INDICATOR DESCRIPTION AND EXAMPLES Objective 1: Efficient claims processing Indicator number and title 1. Reduce number of open claims Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility To improve service delivery and effectively deliver on the mandate, more emphasis is placed on reducing the backlog by increasing the number of claims finalised. Open claims are claims that still await payment of compensation and cost. The purpose of this indicator is to measure productivity of the Fund in relation to the finalisation of claims both personal and supplier Claims system. Count the number of claims outstanding at financial year-end. These claims are classified as O and R, RD VO V V & PS status. Claims that have been finalised can be reopened in subsequent financial years. Outcome. Cumulative. Annual. No. Reduced number of claims outstanding at the end of each financial year (FY ,935; FY ,991; and FY ,578). Chief Operations Officer. 76 Road Accident Fund Strategic Plan

79 Indicator number and title 2. To reduce the average age of open claims Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility This indicator is designed to enable the Fund to identify long outstanding claims for clearing through initiatives such as Siyenza. This indicator will also ascertain the successful implementation of the developed initiatives to clear long outstanding claims and determine whether further interventions are required. To identify long outstanding claims for follow-up and subsequent clearing. Claims system. Average age of all open files at reporting date, i.e. difference between registered on and reporting date. None. Outcome. Quantitative. Annual. Yes. Identify long outstanding claims to reduce the average age of open claims. Chief Operations Officer. Annexure A Technical Indicator Descriptions 77 77

80 ANNEXURES Indicator number and title 3. Increased % of claims verified by objecting to or accepting originated claims within 60 days Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Section 24 (5) of the Road Accident Fund Act, 1996 (Act No. 56 of 1996), as amended, states that: if the Fund or the agent does not, within 60 days from the date on which a claim was sent by registered post or delivered by hand to the Fund or such agent as contemplated in subsection (1), object to the validity thereof, the claim shall be deemed to be valid in law in all respects. Compliance to section 24 (5) of the Road Accident Fund Act, 1996 (Act No. 56 of 1996), as amended will ensure that all invalid claims are objected and valid claims are accepted within the prescribed period. Claims system. Number of claims where status moved from RD to VO or V V within 60 days. Target is measured as: Objected Claims: - Claims objected within 60 days divided by the number of total claims objected. Accepted Claims: - Claims accepted within 60 days divided by the number of total claims accepted. None. Outcome. Quantitative. Annual. Yes. Increased % of claims objected and/or accepted within 60 days as required by section 24 (5) of the Road Accident Fund Act, 1996 (Act No. 56 of 1996), as amended. Chief Operations Officer. 78 Road Accident Fund Strategic Plan

81 Indicator number and title 4. % increase in direct claims originated Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility The Fund has in the past years undertaken to expand its national footprint to improve accessibility and availability of its services directly to claimants in order to reduce legal costs and ensure that claimants are fairly compensated in respect of all benefits due to them. The Fund therefore aims to increase the percentage of personal claims registered directly (those claims that are not represented by an attorney) to 2,5% in comparison to registered personal claims represented by an attorney. With the increase in the number of origination centres, claimants are encouraged to register personal claims directly with the Fund, thereby increasing the number of personal claims registered directly in comparison to personal claims registered through attorneys. This will also induce a decrease in legal costs. Manual information collected through various origination centres and captured on claims system. Count of all direct personal claims registered during the financial year. Divide by the count of total number of (direct and represented) personal claims registered during the financial year. For the Fund to achieve the target, 30%of personal claims registered during the financial year should be made up of personal claims registered directly. None. Outcome. Cumulative. Annual. No. Increased direct claims originated over the five-year planning period, with direct personal claims as a percentage of total personal claims Increase by 2.5% from the previous years results. Year-on-year. Chief Operations Officer. Annexure A Technical Indicator Descriptions 79 79

82 ANNEXURES Indicator number and title 5. Increased % of direct personal claims settled as a % of total personal claims settled Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility To improve service delivery by improving the time taken to process personal injury claims registered directly with the Fund and reducing legal costs. To improve accessibility and availability of social services offered by the Fund, encourage direct claiming and reduce legal costs. Claims system. Count the number of direct personal claims settled in the financial year; divide by Count of total number of personal claims settled in the financial year (including direct personal claims) x 100. For the target to be achieved, 5% of total personal claims settled should be direct personal claims. None. Outcome. Cumulative. Annual. Yes. To increase the percentage of direct personal claims settled to improve service delivery of accident victims claiming directly with the Fund and ultimately reduce legal costs. Increase by 2.5% from the previous years results, year-on-year to the following approximated figures: FY ,713; FY ,034; and FY ,522 ). Chief Operations Officer. 80 Road Accident Fund Strategic Plan

83 Indicator number and title 6. Reduction in legal costs by 2% annually Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Reduce legal costs incurred and deemed by the Fund as avoidable. These costs reflect the inadequacies of the existing fault-based and common law system of compensation. Approximately 80% of registered claims are litigated, resulting in the increase in the cost associated with processing of claims. In order to pursue financial sustainability it is therefore imperative to reduce these costs. The purpose of this indicator is to measure the ratio at which the Fund pays legal costs (claim related costs) compared to actual compensation to claimants. The Fund aims to reduce the cost-to-compensation ratio through the reduction of costs that can be avoided and fairly compensate claimants. Road Accident Fund SAP financial data and claims data. Sum of all legal costs excluding expert, assessors fees etc. (all costs and expenses grouped as claimant and agent), excluding writs-related costs, relating to compensation. Divide by the sum of legal costs and capital payments multiplied by 100. A reduction of 2% is achieved by comparing cost-to-compensation ratio for the current period to the previous financial period s ratio. Instances of inaccurate capturing of legal cost payments on payment system, but the audit being conducted addresses the system-related gaps. Outcome. Cumulative. Annual. No. Reduction in legal costs over the 5-year strategic planning period, with reductions as a percentage of claims payments (FY 2016 target 16% (note that the base will be based on the actual audited results at the end of 2015 FY); FY %; and FY %). Chief Operations Officer. Annexure A Technical Indicator Descriptions 81 81

84 ANNEXURES Indicator number and title 7. Implement Post-Crash Care Strategy (Pillar 6) Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Post-crash care is designed to ensure that the injured are taken care of in an effective and efficient manner by resolving all the identified issues within Post-Claims Settlement through a tactical approach and ensuring that all Undertakings-related functions are prioritised. The strategy document aims to improve the effectiveness and efficiency of the Post-Claims Settlement Department hereinafter referred to as Pillar 6. To overhaul Pillar 6 and address the lack of capacity to the Pillar 6 mandate; caregiver compensation processing, variation and ICT/System-related challenges; process and policy implementation; and to defined demarcations (for the entire RAF). Post-Crash Care Strategy operational output. Based on valid quarterly caregiver submission documentation (HR Forms), calculate the number of days taken to pay caregivers on a monthly basis. For the target to be achieved, monthly payments (in a quarterly cycle) should be made on a monthly basis within 30 days from date of submission of quarterly forms (HR forms). None. Outcome. Non-Cumulative. Annually. Yes. Operationalised post-care strategy. Chief Operating Officer. 82 Road Accident Fund Strategic Plan

85 Objective 2: Initiatives aligned to the strategic outcome of providing accessible services Indicator number and title 8. Increase accessibility to the RAF Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Increase accessibility to the RAF services by establishing new access points as per the 2015/16 accessibility channel review report. To increase accessibility and availability of services offered by the Fund to all beneficiaries throughout South Africa. Number of new access points operational by year-end. 1 Report on recommended location (s)/access points to expand RAF s accessibility. Manual count. Output. Cumulative. Annual. Yes. Increased number of access points to RAF services. Chief Marketing Officer. Annexure A Technical Indicator Descriptions 83 83

86 ANNEXURES Indicator number and title 9. Increase the number of claimants engaged at RAF events (ROTR and other events) Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility 28,750 claimants engaged at road shows and various other RAF events in the 2015/16 FY. To increase awareness, accessibility and availability of services offered by the Fund to all beneficiaries throughout South Africa. Registration of number of attendees at road show events and other RAF events. Count the number of claimants engaged at road shows and other RAF events per financial year. Manual count. Outcome. Cumulative. Annual. No. Increased number of claimants engaged at road shows (FY ,750; FY ,000 and FY ,000). Chief Marketing Officer. 84 Road Accident Fund Strategic Plan

87 Indicator number and title 10. Improved Call Centre responsiveness Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility The average processing times taken to respond to claimant queries received through the Call Centre to be timely. Improve the efficiency and effectiveness of RAF services by providing timely response to questions, queries and information requests to RAF stakeholders received through the Call Centre. Call Centre system. Number of received calls vs. number of abandoned calls. Improved turnaround times on s. None. Activity. Quantitative. Quarterly. Yes. Improvement on the average processing time taken to respond to claimant queries received through s and telephone. Chief Marketing Officer. Annexure A Technical Indicator Descriptions 85 85

88 ANNEXURES Indicator number and title 11. Improve customer satisfaction (incl. brand awareness) Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Improve the customer satisfaction experience, responsiveness and awareness of the RAF brand to all the Fund s stakeholders. Improve customer satisfaction, experience and responsiveness. Brand awareness survey reports. % of brand awareness and improvements. None. Output. Qualitative. Annually. Yes. % improvement in the awareness of the RAF brand. Chief Marketing Officer. 86 Road Accident Fund Strategic Plan

89 Objective 3: Initiatives aligned to the strategic outcome of effective financial management Indicator number and title 12. Effective cash flow management Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Manage cash flow in order to reduce the number of claims awaiting payments. Manage claims-related payments in accordance with approved cash management procedures. SAP financial system and Cash Management Strategy. One Funding model report to reflect the Fund s financial position with respect to the claims liability. (i.e. actuarial forecasting of the Fund s liability). Compliance to the approved cash management procedures/strategy in relation to claims payment prioritisation taking into account the financial cash constraints. None. Activity. Qualitative. Quarterly. Yes. Timely payment of claims payments requested, but not paid. Claims awaiting payment paid in accordance with cash management procedures/strategy. Chief Financial Officer. Annexure A Technical Indicator Descriptions 87 87

90 ANNEXURES Indicator number and title 13. Provision for claims incurred assessed quarterly Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility To have accurate and updated assessments of outstanding liability so as to determine longterm income requirements and manage sustainability. An actuarial valuation depicts the Fund s liability of all registered claims that still need to be processed, i.e. the number of open claims. To have updated accurate evaluations of outstanding liability to improve the accounting and actuarial evaluation of the Fund. Internal (RAF) actuarial report and an annual independent statutory actuarial report. Actuarial claims evaluation method to determine outstanding claims provision. Inaccurate and incomplete claims data, but an audit of the claims data is undertaken annually to maintain and update claims data. Outcome. Cumulative. Quarterly. No. An annual assessment of the provision for outstanding claims by statutory actuary and independent peer review. Chief Financial Officer. 88 Road Accident Fund Strategic Plan

91 Indicator number and title 14. Improve procurement outcomes Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Enhance the overall effectiveness of the procurement systems. To ensure that the RAF obtains value for money in the procurement of goods and services, ensure compliance to SCM processes and improve service delivery to both internal and external stakeholders/vendors. SAP/procurement database/tender register. Calculate the number of days taken to finalise issued tenders (with the exclusion of tenders > R10m and complex tenders, however applicable to all standard tenders) from closing date of tender to the awarding date. Not more than 10% of all tenders issued should fail/be cancelled as a result of a breakdown and/or weaknesses in controls within the Procurement Department (% with the exclusion of items beyond SCM control such as breach of policy and processes). The target will be calculated from all tenders issued and still open on the 1st of April None. Activity. Non-cumulative. Quarterly. Yes. Effective and efficient procurement services. Chief Financial Officer. Annexure A Technical Indicator Descriptions 89 89

92 ANNEXURES Indicator number and title 15. Increase percentage of B-BBEE-rated suppliers Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Develop and implement B-BBEE policy and plan, with youth and women prioritised. To contribute to Government s socio-economic goals of redressing economic imbalances caused by unfair discrimination. B-BBEE Policy and Plan and SAP Procurement. Total procurement spent on Blacks, women and youth divided by the total amount of procurement multiplied by 100. None. Activity. Quantitative. Annually. Yes. B-BBEE Policy and Plan prioritising Blacks, women and youth signed off. Chief Financial Officer. 90 Road Accident Fund Strategic Plan

93 Indicator number and title 16. Implement Enterprise Supplier Development (ESD) initiatives Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Annual value of all Enterprise Supplier Development contributions and sector-specific programmes made by the Fund as a percentage of the target. To contribute to Government s socio-economic goals of redressing economic imbalances caused by unfair discrimination. Enterprise Supplier Development spend report. An approved Enterprise and Supplier Development Plan. None. Activity. Quantitative. Annual. Yes. 0.1% of the allocated budget /discretional spend on enterprise development. Chief Financial Officer. Annexure A Technical Indicator Descriptions 91 91

94 ANNEXURES Objective 4: Initiatives aligned to the strategic outcome of optimising ICT functionality Indicator number and title 17. Ensure optimal ICT service availability Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Ensure ICT services availability during official hours and improved network performance on all applications. To manage the ICT service availability in order to achieve ICT service availability to improve productivity. System monitoring tools or manually generated reports. Reports calculating percentage of ICT service availability and network performance reports for all applications. Manual count. Activity. Quantitative. Monthly. No. 98% ICT services availability. Chief Information Officer. 92 Road Accident Fund Strategic Plan

95 Indicator number and title 18. Implement Five-year ICT Strategy (e-enablement Strategy) Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Modernisation of the ICT system incorporating the ICT infrastructure requirements as set out in the Five-year ICT Strategic Plan. The transformation strategy will cover the modernisation of the database, application and presentation layers, as well as system integration. To enhance service delivery environment, i.e. efficient processing of claims, and an internal control environment. Previous changes requested by business, previous audit findings, workshop with stakeholders. Achievement of milestones as set out in the project plan developed to implement the transformation strategy within set timelines. None. Outcome. Non-cumulative. Quarterly. Yes. Sign-off of the ICT Transformation Strategy and Plan and an enhanced service delivery environment. Go live. Chief Information Officer. Annexure A Technical Indicator Descriptions 93 93

96 ANNEXURES Objective 5: Initiatives aligned to the strategic outcome of improving people management Indicator number and title 19. Optimise organisational performance Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Enhanced organisational performance outcomes for both core and support functions. To effectively fulfil the RAF mandate in accordance with its vision, mission and values. RAF performance management processes and systems. Number of performance contracts and assessments completed on the system on a quarterly and annual basis. None. Outcome. Non-cumulative. Annual. Yes. RAF performance management system optimised and automated. Chief Human Capital Officer. 94 Road Accident Fund Strategic Plan

97 Indicator number and title 20. Conduct skills assessment and develop skills strategy Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Conduct skills assessment to determine RAF skills needs and identify the skills gaps and develop Skills Development Strategy to put initiatives in place in order to address the identified gaps. Skills assessment will assist the RAF to determine the skills necessary to fulfil its mandate and identify gaps to be addressed through its Skills Strategy with the aim of increasing productivity. Skills Assessment Report and Skills Development Strategy. Number of activities achieved in relation to those planned. For the target to be achieved, all milestones set out in the Skills Development Strategy/Plan for the financial year 2015/16 should be completed. Accuracy of information reported. Outcome. Non-cumulative. Annually. Yes. Skills Assessment Report and Skills Development Strategy signed off. Chief Human Capital Officer. Annexure A Technical Indicator Descriptions 95 95

98 ANNEXURES Indicator number and title 21. Maintain the RAF s contribution towards Government s social and economic development Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility RAF to develop the Gender Policy in support of Government s social and economic transformation agenda. To maintain and monitor the Fund s compliance to key categories of Employment Equity (EE) targets. The implementation of the Gender Policy will give effect to the equal enjoyment of all rights and freedom by every person; the promotion of equality, specifically gender equality; and the values of non-racism and non-sexism contained in section 1 of the Constitution. To ensure that the Fund meets the overall national EE targets as required in the National Economic Active Population (NEAP) targets /RAF Board-specific targets through targeted HR programmes. Gender Policy and Gender Equality Enhancement Plan. NEAP targets from the Department of Labour and SAP HR employee data records. Gender Equity Advancement Plan outcomes in relation to achievements. For the target to be achieved, all milestones set out in the Enhancement Plan should be completed. Total number of female employees divided by the total number of employees in Management multiplied by 100. None. Outcome. Quantitative. Annual. No. Compliance to Gender Equality Advancement Plan. Compliance to EE targets with no more than 10% positive or negative variance on each EE category as per the NEAP targets. Chief Human Capital Officer. 96 Road Accident Fund Strategic Plan

99 Indicator number and title 22. Manage absenteeism Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Absenteeism has a potential of negatively impacting on productivity, work quality, morale and customer service and satisfaction. To manage absenteeism with the aim of increasing productivity. HR Exco dashboard. The average number of absent days taken per employee is calculated based on total sick leave days divided by the number of employees in that month or quarter. Accuracy of information. Outcome. Non-cumulative. Annual. Yes. Number of employees wellness interventions and initiatives to reduce absenteeism. Monitor, manage and report on absenteeism trends. Chief Human Capital Officer. Annexure A Technical Indicator Descriptions 97 97

100 ANNEXURES Objective 6: Initiatives aligned to the strategic outcome of administrative dispensation aligned to the RABS Bill Indicator number and title 23. Transitioning RAF to RABS Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Transitioning of the RAF from a fault-based to a no-fault based benefit scheme, i.e. the Road Accident Benefit Scheme. The transformation will address many of the challenges facing the Fund that are constraining its ability to deliver on its mandate in an effective and efficient manner. In addition, a no-fault, fixed benefit scheme will ensure smooth alignment with the Comprehensive Social Security System (CSSS) envisaged by Government. Road Accident Fund reports from the appointed service provider. Resolutions from committee meetings. Reports received on recommended funding model. Inputs from the committee members and other stakeholders consolidated. Recommendations submitted to the DoT and National Treasury of the proposed RABS funding model. None. Output. Non-cumulative. Annual. Yes. Monitor compliance to the RABS project plan. Chief Strategy Officer. 98 Road Accident Fund Strategic Plan

101 Objective 7: Initiatives aligned to the strategic outcome of an assured control environment Indicator number and title 24. Raise ethical standards Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Raise the standards through which we adhere to our commitments, display honesty and integrity and reaching the organisation s goals through honourable conduct. Integrating the RAF s ethical standards requires the RAF and all who act on its behalf to conduct their business in a manner consistent with the RAF s ethical standards. To provide assurance on the achievement of ethics objectives, the outcomes of ethics initiatives and the quality of the organisation s ethics performance. Ethics Awareness Implementation Plan and Report. Results on the review of the design, implementation and effectiveness of the organisation s ethics-related objectives, programmes and activities. None. Outcome. Non-cumulative. Annual. Yes. 100% implementation of ethics awareness initiatives and 100% annual declaration. Executive Corporate Secretary. Annexure A Technical Indicator Descriptions 99 99

102 ANNEXURES Indicator number and title 25. Increased % of fraud detected before undue payments are made Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Improve fraud detection and management tools before undue payments are made. The FID will develop and establish Cyber and Data Specialists capacity. The objective is to identify trends and patterns of fraud and corruption using the latest ICT. This will contribute to the reduction of undue payments to disentitled claimants and savings made to the Fund due to repudiations of claims submitted. An improved fraud detection and management process will protect customer and RAF information and assets, whilst enabling a high-performance environment. Fraud management information systems. Number of fraud cases detected before compensation. None. Outcome. Cumulative. Annual. Yes. Fraud corruption cases detected before compensation (10% - FY 2016, 15% - FY 2017, 20% - FY 2018). Chief Strategy Officer. 100 Road Accident Fund Strategic Plan

103 Indicator number and title 26. Contribute to road safety by creating a database that will inform preventative measures Short Definition Purpose/Importance Source/Collection of data Method of calculation Data limitations Type of indicator Calculation type Reporting cycle New indicator Desired performance Indicator responsibility Create a crash database based on the information sourced from the information collection agents that the Fund has partnered with, that possess the capacity and footprint to be present at accident scenes to gather the information on behalf of the Fund. The information gathered will assist the Fund to validate claims registered and expedite the claims process. The complete and accurate information will result in: Trend analysis and enable more accurate projections as to the outstanding claims liability in respect of claims incurred but not lodged. Identification of Hot Spots where road safety initiatives can be focused on. Validation of claims registered and detection of fraudulent claims. External and internal motor vehicle accident statistics. Report on activities completed as per project plan. None. Outcome. Cumulative. Annual. No. Internal crash database. Chief Strategy Officer. Annexure A Technical Indicator Descriptions

104 102 Road Accident Fund Strategic Plan

105 ANNEXURE B FUNDING MODEL 103

106 ANNEXURES ANNEXURE B: Funding Model Funding Model (with the cash injection assumption) Capacity ramp-up 10% 10% 5% 5% 0% 0% 10% 41% 9% 1% 1% 1% Cash Flow Statement Fuel Levy Fuel Sold (litres) ( 000) Inflationary fuel levy increase Ad hoc fuel levy increase 50, Total fuel levy increase Total fuel levy (cents per litre) 104,0 154,0 154,0 154,0 154,0 154,0 Gross fuel levy revenue ( 000) Refunds + Recoupment Net fuel levy revenue ( 000) Cash Injections Required injection to meet operational capacity Cash assets at start of year Expenses paid Available for claim settlement Available for claim settlement (allowing for float) Operational Claims Limit Claims Financial Shortfall Claims Paid Personal Old Act Personal New Act Supplier Undertakings Investment income Available funds at year-end Road Accident Fund Strategic Plan

107 Income Statement Income Fuel levy Other Outgo Claims incurred Expenses Incurred Investment profit Investment income Unwinding of liability Surplus (Deficit) Values for graph: Claims Paid 2013/4 2014/5 2015/6 2016/7 2017/8 2018/9 Scen Scen Scen Utilisation of claim payment capacity 2013/4 2014/5 2015/6 2016/7 2017/8 2018/9 Claim payment capacity 30,1 38,0 45,9 55,5 63,8 73,3 Claims paid -22,2-28,6-31,3-31,5-31,7-31,9 Capacity not utilised 7,8 9,4 14,7 24,0 32,1 41,4 Annexure B Funding Model

108 ANNEXURES Cashflow statement 2013/4 2014/5 2015/6 2016/7 2017/8 2018/9 Cash at start 2,5 0,3 0,2 0,2 0,2 0,2 Fuel Levy received 21,7 30,5 33,4 33,7 34,0 34,4 Expenses (including capital expenses) -1,8-1,9-2,1-2,2-2,4-2,5 Investment Income earned 0,1 0,0 0,0 0,0 0,0 0,0 Claims -22,2-28,6-31,3-31,5-31,7-31,9 Cash at end 0,3 0,2 0,2 0,2 0,2 0,2 Values for graph: Cash flow progression Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2017 Mar 2018 Scen Scen Scen Increase in claims liability 2013/4 2014/5 2015/6 2016/7 2017/8 2018/9 Claims liability at start 82,8 97,9 93,4 83,3 65,8 45,0 IBNR (Incurred But Not Reported) 22,5 30,1 32,2 34,0 35,9 38,5 ORC (Outstanding Reported Claims) 60,3 67,8 61,2 49,2 29,9 6,5 Claims liability at end 97,9 93,4 83,3 65,8 45,0 48,7 IBNR (Incurred But Not Reported) 30,1 32,2 34,0 35,9 38,5 41,7 ORC (Outstanding Reported Claims) 67,8 61,2 49,2 29,9 6,5 6,9 Increase in liability 15,1-4,5-10,2-17,5-20,8 3,6 106 Road Accident Fund Strategic Plan

109 * Explanation of Claims-Related Indicators. The table below illustrates how the number of open claims continues to increase over the years with a limited funding model taken into account. Limited funding also has an impact on the number of claims settled. Limited funding is based on the expected revenue from the approved fuel levy allocated by National Treasury, excluding ad hoc fuel levy increases referred to in table above Table claim numbers with limited funding Claim number overview Claim Number summary Number of outstanding Personal claims (Including IBNR) Number of outstanding Supplier claims (Including IBNR) Personal claim numbers ORC O/S at start Newly reported Settled O/S at end Supplier claim numbers ORC O/S at start Newly reported Settled O/S at end Annexure B Funding Model

110 ANNEXURES * The table below illustrates how the number of open claims can be reduced with adequate funding. This performance indicator seeks to reflect the number of claims that can be finalised with the assumed levels of productivity within the operations environment despite the financial constraints. Adequate funding refers to the cash injection (includes the 8c/L ad hoc fuel levy increase) that matches the productivity levels and places the organisation in a position to meet all claim-related liabilties as they become due. Table claim numbers with full funding Claim number overview Claim Number summary Number of outstanding Personal claims (Including IBNR) Number of outstanding Supplier claims (Including IBNR) Personal claim numbers ORC O/S at start Newly reported Settled O/S at end Supplier claim numbers ORC O/S at start Newly reported Settled O/S at end Total Number of claims Settled Closing Balance at the End Road Accident Fund Strategic Plan

111 Annexure B Funding Model