State-owned fund that owes South Africans R40 billion is technically insolvent

The Road Accident Fund (RAF) continues to pay out claims, despite the fund’s financial position worsening significantly over the past few years.

Its current unpaid claims liability has been estimated at around R40 billion, while it recorded a deficit of R2.32 billion during the 2024/25 financial year, 45.9% higher than the previous year.

This has left the fund in a state of technical insolvency, with its total liabilities sitting at almost triple that of its total assets at the end of the 2024/25 financial year.

Despite this, the fund has managed to continue paying out substantial claim amounts, ranging from over R2 million to almost R10 million per claim.

While many claimants assumed their claims would not be paid out due to the fund’s dire financial situation, DSC Attorneys partner Kirstie Haslam said this was not the case.

“This perception that the RAF has no money and therefore cannot compensate victims is simply not accurate, despite the system being under significant pressure,” Haslam said.

“While claims can take time to finalise, valid claims continue to result in substantial compensation that can fundamentally change the lives of injured victims and their families.”

Haslam pointed to multiple recent claims paid out by the RAF, such as one in which a child injured in a motor vehicle accident received R7.5 million to cover medical expenses.

In another case, the RAF awarded R9.6 million to a child who suffered permanent cognitive damage following an accident, and promised to cover all their future medical expenses.

Haslam said the continued payout of claims such as these showed that the courts understood the financial impact that road accidents can have on victims and their families.

She also advised claimants not to accept unfair out-of-court settlements from the RAF, citing the fund’s controversial decision to stop using panel attorneys in 2020 in order to save on legal costs.

“It’s vital for claimants not to accept settlement offers that are unreasonably low, relative to the compensation that the courts would likely award,” Haslam said.

Reforms to turn the RAF around

While the fund continues to pay out claims, the Department of Transport (DoT) said it is looking at various reforms to save the RAF from its current financial situation.

This includes the potential for a hybrid funding model for the fund, which would see contributions from both the public and private sectors.

Currently, the RAF is funded through the RAF Levy, which is charged to South African motorists on fuel, reportedly collecting between R45 and R48 billion for the fund a year.

This model has been deemed insufficient, and Transport Minister Barbara Creecy said the DoT had considered introducing an additional fee on licence disc renewals to bolster this.

In an interview with Newzroom Afrika, Deputy Minister Mkhuleko Hlengwa said the adoption of electric vehicles, and the push for “road-to-rail”, were core reasons for the fee’s proposal.

“It is elementary that you are going to have a reduction in your revenue generation if your sole model of income is the levy at the pumps,” Hlengwa said.

“We are proposing a hybrid model, where there are public funds which will come through the levy, and the introduction of third-party insurance, which will be a responsibility borne by drivers.”

Hlengwa stressed that without the introduction of this hybrid model, the RAF in its current financial position would remain unsustainable.

This proposal has been seriously opposed by concerned parties such as the Democratic Alliance and the Automobile Association of South Africa.

In a statement, DA Transport Spokesperson Chris Hunsinger called for the RAF to be scrapped completely and replaced with a new fund which is more efficient and sustainable.

“The RAF is in crisis because years of mismanagement, corruption, waste and poor governance have left it financially crippled,” Hunsinger said.

“South Africans should not be forced to foot the bill for the government’s failures. The DA has consistently argued that the RAF has become an unsustainable burden on taxpayers and motorists.”