The Organisation Undoing Tax Abuse (OUTA) has warned that cutting the Road Accident Fund (RAF) fuel levy won't necessarily save motorists money. According to OUTA's CEO, Wayne Duvenage, changing how the RAF is funded won't solve the real problem of how the money is managed. The RAF is primarily funded by a levy included in the price of petrol, which recently reached record levels.
The Democratic Alliance (DA) has argued that scrapping the RAF could ease the burden on motorists and commuters. However, Duvenage said plans to replace or reduce the RAF fuel levy risked simply shifting the financial burden onto consumers. He explained that a hybrid model would mean less in the fuel levy, but it's got to come from somewhere, and eventually, we all pay.
The current RAF levy is R2.25 a litre, which has risen from just 47 cents in 2009, greater than the rate of inflation. Duvenage said the problem was not necessarily how much money the RAF collected, but how it was spent. He attributed the problem to the government's knee-jerk reaction to extract more as opposed to fixing the problem.
Duvenage also discussed the proposal of introducing an annual insurance payment. He said it could leave motorists facing another substantial bill when renewing their vehicle licences. According to Duvenage, paying a third-party insurance once a year could be a massive shock, compared to paying the fuel levy incrementally every time you buy petrol.
OUTA attributes years of poor management for the RAF's serious financial trouble. Duvenage said its salary bill has grown from around R500 million to R2.5 billion. He suggested that a more effective solution than simply raising more revenue would be to call in the country's experienced insurance professionals to fix the systems.
Duvenage believes what's needed at the RAF is better leadership, proper oversight, and experienced staff. He recommends that before trying to extract more money, the RAF should fix how it's managed. This could involve calling in experts from the country's insurance businesses to get the systems right.
The RAF is struggling with a large number of open claims, with more than half now older than 5 years. The fund's financial troubles have raised concerns about its ability to overcome its R43-billion claims load. OUTA's warnings come as the government considers changes to the RAF's funding model.
Key points
- The Organisation Undoing Tax Abuse (OUTA) warns that changing how the Road Accident Fund is funded won't solve the real problem of how the money is managed.
- The current RAF levy is R2.25 a litre, which has risen from just 47 cents in 2009, greater than the rate of inflation.
- OUTA attributes years of poor management for the RAF's serious financial trouble, including a salary bill that has grown from around R500 million to R2.5 billion.
