RAF Annual Report 2013/2014

INTEGRATED ANNUAL REPORT

2013/14We Care

TABLE OF CONTENTS

Executive Summary 2

PART A: GENERAL INFORMATION 3

RAF’s General Information 4

List of Abbreviations/Acronyms 5

Scope of the Report 6

Foreword by the Chairperson 8

Chief Executive Officer’s Overview 13

Statement of Responsibility and Confirmation of Accuracy for the Integrated Annual Report 23

Strategic Overview 24

Legislative and Other Mandates 25

Orgnisational Structure 27

PART B: PERFORMANCE INFORMATION 29

Auditor-General’s Report: Predertermined Objectives 30

Situational Analysis 31

Performance Information by Programme 78

Revenue Collection 91

Capital Investment 92

PART C: GOVERNANCE 93

Introduction 94

Portfolio Committee 94

Executive Authority 94

Accounting Authority/The Board 95

Risk Management 104

Internal Control Unit 110

Internal Audit and Audit Committee 110

Compliance with Laws and Regulations 112

Fraud and Corruption 112

Minimising Conflict of Interest 114

Code of Conduct 114

Health, Safety and Environmental Issues 114

Corporate Secretary 115

Social Responsibility 115

Report of the Audit Committee 125

PART D: HUMAN RESOURCE MANAGEMENT 129

Introduction 130

Human Resource Oversight Statistics 137

PART E: FINANCIAL INFORMATION 141

APPENDIX A: BRANCHES AND SATELLITE OFFICES 204

1INTEGRATED ANNUAL REPORT 2013/14

EXECUTIVE SUMMARY

Number of employees has increased from 1,881 to 2,288.

Revenue increased by 13%.

Claims processing improved by 47% to R22.2 billion.

Productivity improved due to the new organisational structure and business processes.

The organisation proactively engaged with road accident victims through our ‘RAF on the Road’ community

outreach campaign. During the year under review, we interacted with more than 16,000 claimants out

of the office and settled claims to the value of R376 million.

More than 220,000 calls were responded to by the Call Centre.

The organisation took proactive and decisive steps to render business operations more accessible

and efficient.

147,168 new claims were received and 240,783 claims were finalised.

Average value of a claim increased by 58% from R65,844 to R104,091.

Average RAF legal spend per claim increased by 29% from R16,015 to R20,645.

Average claimant legal spend per claim increased by 21% from R52,656 to R63,734.

Average funeral costs increased by 8% from R10,425 to R11,245.

Average loss-of-support claims increased by 13% from R347,861 to R392,744.

Average loss-of-earnings claims increased by 21% from R535,050 to R649,912.

Average general damages claims increased by 45% from R152,329 to R221,003.

Average medical claims increased by 25% from R7,761 to R9,740.

Open and reopened claims reduced by 13,945 from 212,085 to 198,140.

Audit findings were resolved and risk mitigation measures implemented.

The organisation adopted a performance management system for all staff and succession management plan for Management.

The number of staff grievances was reduced.

The organisation was awarded a Clean Audit by the Auditor-General of South Africa for the 2012/13

and 2013/14 financial years.

The draft Road Accident Benefit Scheme (RABS) Bill has been published for a second round of

public comments.

Cash expenditure on claims exceeded the net fuel levy by R1.9 billion (9%) due to a higher number

of claims being settled.

Cost-to-income ratio for the financial year increased to 29%.

Total cost as percentage of total expenditure decreased by 3%.

The fiscal unsustainability of a compulsory motor vehicle insurance scheme remains a

challenge.

2 ROAD ACCIDENT FUND

Part a: GENERAL INFORMATION


RAF’S GENERAL INFORMATION

Registered name Road Accident Fund

Physical address Eco Glades Office Park 2

420 Witch-Hazel Avenue

Centurion

0046

Postal address Private Bag X178

Centurion

0046

Telephone number(s) 0860 23 55 23 (Customer Care Share Call Number)

Website www.raf.co.za

External auditors Auditor-General of South Africa

Bankers Standard Bank

Corporate/Board Secretary Ms JR Cornelius


LIST OF ABBREVIATIONS/ACRONYMS

AGSA Auditor-General of South Africa

Amendment Act RAF Amendment Act, 2005 (Act No. 10 of 2005)

APP Annual Performance Plan

ATMP Advance Time Process Manager

BBBEE Broad-based Black Economic Empowerment

BEC Bid Evaluation Committee

BEE Black Economic Empowerment

BSC Bid Specification Committee

CEF Central Energy Fund

CEO Chief Executive Officer

CFO Chief Financial Officer

CoE Centre of Excellence

COO Chief Operations Officer

CPI Consumer Price Index

CRMP Compliance Risk Management Plan

CSN Customer Service Network

CSR Corporate Social Responsibility

CSSS Comprehensive Social Security System

DMP Demand Management Plan

DoT Department of Transport

EE Employment Equity

EWS Employee Wellness Services

EXCO Executive Management Committee

FAR Fixed Assets Register

FID Forensic Investigation Department

GAAP Generally Accepted Accounting Practices

GDP Gross Domestic Product

GIBS Gordon Institute of Business Science

GRAP Generally Recognised Accounting Practices

GRI Global Reporting Initiative

HC Human Capital

HR Human Resources

HSC Hospital Service Centre

IBNR The number of claims incurred, but not yet reported

ICA Information Collection Agent

ICAS Independent Counselling and Advisory Services

ICT Information and Communications Technology

IDTT Inter-departmental Task Team

IFRS International Financial Reporting Standards

IT Information Technology

King III King Code on Corporate Governance

LOE Loss-of-earnings

LOS Loss-of-support

MBA Master of Business Administration

MBL Master of Business Leadership

MoU Memorandum of Understanding

MTEF Medium-Term Expenditure Framework

MVA Motor Vehicle Accident

NPA National Prosecuting Authority

NT National Treasury

OECD Organisation for Economic Co-operation and Development

OHS Occupational Health and Safety

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)

PCC Procurement Control Committee

PCOT Portfolio Committee on Transport

PFMA Public Finance Management Act, 1999 (Act No. 1 of 1999)

PMO Programme Management Office

POPI Act Protection of Personal Information Act, 2013 (Act No. 3 of 2013)

PR Public Relations

RABS Road Accident Benefit Scheme

RABSA Road Accident Benefit Scheme Administrator

RAF Road Accident Fund

RAF Act Road Accident Fund Act, 1996 (Act No. 56 of 1996)

REMCO Remuneration and Human Resources Committee

RMEC Risk Management and Ethics Committee

RRM Revenue Requirement Model

SAP Enterprise Resource Planning System

SAPIA South African Petroleum Industry Association

SAPS South African Police Service

SARS South African Revenue Service

SCM Supply Chain Management

SCOPA Standing Committee on Public Accounts

SOE State-owned Company

TEC Total Employment Cost

Transitional Act RAF (Transitional Provisions) Act, 2012 (Act No. 15 of 2012)

UN United Nations

Unisa University of South Africa

ZAR South African Rand


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SCOPE OF THE REPORT

Introduction

The Road Accident Fund (RAF) welcomes the opportunity to present an Integrated Annual Report for the year ending 31 March

2014 in line with the National Treasury (NT) Annual Report Guide for Public Entities, the King Code on Corporate Governance

for South Africa 2009 (King III), the Protocol on Corporate Governance in the Public Sector (2002) and the Global Reporting

Initiative (GRI) Guidelines. In essence, corporate governance “embodies processes and systems by which corporate enterprises

are directed, controlled and held to account”1. Oversight entails “reviewing, monitoring and overseeing the affairs, practices,

activities, behaviour and conduct”2 of an administrative authority to ensure that it meets its objectives.

reporting Cycle

The RAF’s objective with this report is to provide its stakeholders with an integrated view of the RAF’s organisational, operational

and financial performance for the financial year 1 April 2013 to 31 March 2014. It furthermore demonstrates the RAF’s commitment

to integrity, transparency and accountability. It is the aim of the RAF to provide a complete and balanced view of its performance,

including both the challenges and the successes, for the 2013/14 financial year, as well as those likely to form part of its future.

The RAF remains committed to being accountable to its stakeholders. It defines stakeholders as “persons, groups or organisations

that have a direct stake in our business, since they can affect or be affected by our activities, objectives and policies”. The way

the organisation engages with and responds to its stakeholders is described under the heading, “Social Responsibility” (Part C),

of this report.

reporting Boundary

This Integrated Annual Report covers the organisational, operational and financial performance of the RAF, including the audited

financial results for the period 1 April 2013 to 31 March 2014 in terms of section 55(1) of the Public Finance Management Act,

1999 (Act No. 1 of 1999) (PFMA). The narrative of the report is structured around the NT Annual Report Guide for Public Entities.

In addition, the report covers the social, environmental and broader economic impacts of the organisation’s activities in Part C:

Social Responsibility. The RAF acknowledges that its sustainability platform represents the beginning of a journey towards the

maturation of its sustainability management and is inextricably linked to its business objectives.

reporting Principles

The reporting principles applied are in line with the PFMA, South African Standards of Generally Recognised Accounting Practice

(SA Standards of GRAP), including any interpretations, guidelines and directives issued by the Accounting Standards Board, NT

Guidelines, King III (to the extent possible) and the GRI Guidelines.

During the current financial year, no new GRAP standards were applied for the first time.

Significant restatements

The provision for diesel rebate was incorrectly calculated in the prior period. When the adjustments to the provision for the

last three months of the 2012/13 financial year were posted, the provision that had already been raised was not reversed and

therefore the provision for diesel rebate was overstated (refer to Notes 13 and 35 of the Annual Financial Statements).

The Incurred But Not Reported (IBNR) claims were incorrectly disclosed as a contingent liability in the past three financial years

(refer to Notes 12 and 35 of the Annual Financial Statements).

1 Department of Public Enterprises. 2002. Protocol on Corporate Governance in the Public Sector, p. 3.

2 National Treasury. 2005. Governance Oversight Role Over State-Owned Entities, pp. 5–6.


Supporting Documentation

In accordance with the NT template and guidelines, the RAF’s Integrated Annual Report 2013/14 includes the following

information:

• General Information;

• Performance Information;

• Governance;

• Human Resource Management; and

• Financial Information.

audience

The stakeholders addressed by this report include, among others, the Parliament of the Republic of South Africa, the Executive

Authority, national, provincial and local government, industry-related organisations, trade unions, employees, suppliers, existing

and prospective customers (local and foreign), the media, and the public.


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FOREWORD BY THE CHAIRPERSON

Introduction

On behalf of the Board of Directors of the Road Accident Fund (RAF),

it is my privilege to present the organisation’s Integrated Annual

Report and the Annual Financial Statements for the financial year

ending 31 March 2014.

This report differs vastly from those of previous financial years due to

a new Annual Report specimen and guidelines issued by the South

African NT. The report has been prepared in accordance with the

King Report on Corporate Governance for South Africa 2009 (King

III), which states that “Integrated reporting should be focused on

substance over form and should disclose information that is timely,

relevant, accurate, honest and accessible and comparable with past

performance. It should also contain forward-looking information.”

We trust that the RAF’s Integrated Annual Report for 2013/14 provides

a holistic and integrated view of the RAF’s performance in terms of

its finances, operations and sustainability.

As with any other business, the RAF is affected by general economic

conditions and other environmental factors, as well as the extent to

which it manages its costs effectively.

According to a recently published Organisation for Economic

Co-operation and Development (OECD) Economy Report3, South

Africa is making progress. Per capita incomes are growing, public

services are growing, health indicators are improving, crime rates

3 Organisaton for Economic Co-operation and Development (OECD) Economy Report.


are falling and demographic trends are favourable. The public finances are in better shape than those of many OECD countries,

the financial system is healthy and core inflation is stable and within the Reserve Bank’s target zone.

However, a high proportion of the population is out of work, as has been the case for most of the past three decades. Moreover,

income inequality, educational outcomes and a greater demand for public service delivery warrant closer attention. Environmental

challenges such as climate change and water scarcity threaten the sustainability of economic growth, while high current account

deficits represent a point of macroeconomic vulnerability.

According to this report, at a macroeconomic policy level, the country’s deficit expanded rapidly in cyclically adjusted terms

during the global economic crisis and has reduced gradually since. Much of the increase in public spending came through large

increases in the public sector wage bill, while public investment has fallen as a share of total expenditure. With core inflation

remaining well contained, monetary policy has been eased cautiously.

Education remains a critical problem. Skill mismatches represent one aspect of the persistently high unemployment rate, especially

for the youth. If South Africa is to achieve full employment, the quality of basic and vocational education has to be improved.

The policy framework for addressing “green” issues, including climate change and water scarcity, is sound, but implementation

has been slow, in part due to limited administrative capacity. In the electricity and water sectors, there are similar problems:

supply is struggling to keep up with demand in a setting in which prices, where they exist, do not cover total costs, let alone

reflect environmental externalities.

It is against this background that fuel consumption for road use decreased by 2.9% to 18,907 mega litres in the 2013/14 financial

year from 19,473 mega litres in the previous financial year. The implied net fuel consumption experienced by the RAF showed

an increase of 3.9% to 21,123 mega litres based on the average net fuel levy income received, divided by an average levy in

cents per litre.

The RAF received an 8c per litre increase in its fuel levy, lifting the levy from 88c in the previous financial year to 96c in the year

under review. The expectation is that this trend will continue in the medium-term.

Strategy and Performance of the raF

The 2013/14 financial year saw the RAF efficaciously continuing on its path of change. Overall, change was well received within

the organisation owing to a number of factors, inter alia, alignment of organisational systems to support needed changes, which

included a sound change and succession management plan, a well-executed performance management system, rewards for

and recognition of top performers, stringent disciplinary approaches, fair compensation, internal promotions and the hiring of

new staff in critical positions. This was augmented by frequent and honest communication, operational efficiency, leadership

commitment, and the perceived need for change to design appropriate strategies in order to avoid change failures or resolve

troubled change projects.

It was an eventful year in which the RAF’s leadership inserted passion

and passionate people into the organisation’s processes and outcomes.

Productivity and excellence became the hallmarks of the institution,

with leadership, employees and even customers becoming fervent

about the brand and what it does. It was a year in which two more

values, i.e. “excellence” and “efficiency” were approved by the Board and

added to the longstanding values of the organisation. Goals became

specific, measurable and linked to time limits. The organisation won

an award for a clean audit by the Auditor-General, implying that there

were no governance findings during the 2012/13 financial year, and

the long-awaited Road Accident Benefit Scheme (RABS) Bill was

approved for a second round of publication.

We bid farewell to the old Board and welcomed the new Board. The need for a review of Board Committee structures was

identified and Committees were refined to align focus areas to the new strategic structure. To this end, the following Committees

were established: The Operational and Information Technology Committee (OPSIT); the Remuneration Committee and Human

“The RAF’s leadership inserted passion and passionate people into

the organisation”


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Resources Committee (REMCO); the Audit Committee; and the Risk Management and Ethics Committee (RMEC). OPSIT is responsible

for overseeing the efficient and cost-effective payment of claims; rendering quality services; expanding and ensuring optimal

access to services; ensuring optimal capacity; and processes, equipment and infrastructure. REMCO is responsible for overseeing

and ensuring optimal capacity; people and performance. The Audit Committee is responsible for overseeing financial reporting,

ensuring adequate financial resources, maintaining a sound system of internal controls, and setting of controls and addressing

of weaknesses. RMEC is responsible for overseeing and introducing RABS, assessing and treating risks, ensuring that significant

operational exceptions are managed, and maintaining compliance.

In addition, the Board realised that it was important and necessary to ascertain what the priority areas of work are, as the RAF’s

success depends on these areas being attended to. Subsequently, a refined set of strategic priorities was identified. It was decided to:

• Determine and execute the strategy by maintaining operational plans to achieve the Annual Performance Plan (APP)

targets, using scorecards to determine performance standards and monitoring, evaluating, performing and reporting at

all times. To this effect, 83% of the targets outlined in the 2013/14 APP were achieved; and the 2014/15 APP was approved

by the Board and the Minister of Transport.

• Pay claims efficiently and cost-effectively by maintaining the organisational structure and processes; maintaining

an available and practical Information Communication Technology (ICT) infrastructure; maintaining and implementing

regulations, as well as proposing changes; implementing projects and business plans (e.g. outstanding claim reduction plans;

Project Siyenza); driving production through result-oriented performance management; managing litigation – internally

and externally, directly and indirectly – and monitoring outputs through objective Business Intelligence tools. Successes in

respect of the aforementioned include the following: Daily, weekly and monthly performance reporting and management

took place. The full financial year showed a reduction in personal, supplier and awaiting-cost claims. More than R22 billion

worth of claims payments were made in 2013/14, an all-time high.

• Render quality services by establishing and maintaining (qualitative and quantitative) quality assurance functions;

and surveying and testing services and perceptions. To this end, Quality Assurance Managers in the regions have tested

operational performance and compliance across all regional teams. The Compliance business unit conducted reviews of all

business processes. The Complaint experience has reduced when compared to prior quarters. An independent customer

satisfaction survey has shown a material improvement in satisfaction and service perceptions. Overall service perception

increased to 64% from 52% and customer satisfaction went up to 72.8% from 66%.


• Expand access by promoting and marketing the mandate, brand and service offering; expanding the number of access

points, intermittent and permanent; and maintaining available and accessible access across all modes. A hugely successful

‘Four Cities RAF on the Road’ took place in in Soweto, Mthatha, Umlazi and Secunda simultaneously on 15 March 2014 and

saw the RAF servicing 7,638 claimants and settling claims to the value of R164,715 million on the day. Leases for the four

Customer Service Centres (CSCs) in Kimberley, Polokwane, Bloemfontein and Mahikeng have been concluded and staffing

of the four offices is almost complete. Over 26,000 calls are now attended to by the Call Centre on a monthly basis.

• Ensure optimal capacity in terms of people and performance by recruiting, remunerating, managing and retaining

skilled staff; identifying talent and managing succession; training and developing, while managing outliers; and recognising

and rewarding performers within the organisation. Highlights in this regard include the following: The staff complement

now stands at 2,288 and work is underway to conclude the final appointments of 252 vacant posts; the vacancy rate has

now reduced to below 10% and the APP target has been met; succession plans for Executives, General Managers, Senior

Managers and Managers have been developed; the new Chief Strategy Officer has taken office and the new Chief Financial

Officer will commence her duties on 1 June 2014.

• Ensure adequate financial resources by accounting accurately; reporting systematically; forecasting revenue and expenditure;

modelling cash flows; quantifying the provision; and engaging stakeholders such as the Department of Transport (DoT), the

NT and the Financial Services Board (FSB). To this end, financial management has continued in line with approved processes.

A Finance Functional Review was conducted by Internal Audit and the Finance function was found to be of an acceptable

maturity level, save for Procurement where a clear turnaround strategy is required. Continued engagements with the DoT,

NT and FSB have taken place on legislative, budgetary and operational requirements, as well as emerging risks.

• Maintain a sound system of internal controls by setting of controls in terms of maintaining a policy environment,

Delegation of Authority (DoA) framework, and implementing combined assurance. Achievements in this regard include the

following: The Policy business unit has been formally established in the Legal division and a Policy Development framework

has been implemented. Combined Assurance Forum meetings have taken place and this function is being bedded down.

• Address weaknesses by evaluating controls and identifying weaknesses; resolving and reporting these timeously.

Weaknesses have been addressed. Comprehensive audits were conducted in Finance, Procurement, IT and HR during the

year under review.

• Introduce RABS by drafting, consulting and proposing legislation; engaging stakeholders; and supporting the DoT. The

RAF developed draft rules and forms for the new RABS administrator, which have been published concurrently with the

revised draft RABS Bill and Regulations for a second round of public comment.

• Assess and treat strategic risks by maintaining an Enterprise-wide Risk Management Framework; preventing, detecting

and managing fraud; identifying and treating emerging risks within the confines of the Risk Appetite (RA) and Risk Bearing

Capacity (RBC). Achievements in this regard include the following: The Enterprise-wide Risk Management Framework has

been maintained. An internal audit revealed that the RAF’s risk maturity level has improved to Level 4. Fraud management

has continued and work is underway to reduce the accumulated backlog of referrals. The RAF’s risk appetite was adopted

and reporting against the appetite takes place on an on-going basis. The most prominent risk during the period under review

related to the outcome of the Court case on the panel of attorneys tender which was declared invalid and the subsequent

correspondence by the outgoing panel of attorneys. The risk was treated, stakeholders were timeously informed and legal

advice was utilised to respond to each challenge. At this juncture, the old panel is handing over claim files.

• Ensure that significant operational exceptions are managed by managing the business across all portfolios; monitoring

and evaluating key indicators; proactively identifying and reporting exceptions; and keeping a close eye on the materiality

framework, risk appetite, Delegation of Authority, reputational exposure and appeals. To this end, daily, weekly and monthly

operational and financial reporting takes place. Irregular, fruitless and wasteful expenditure is reported and corrective action

is taken where any employee’s conduct, performance, or behaviour is inappropriate.

• Maintain compliance by managing operational, administrative, financial, governance and legal matters; and testing and

reporting compliance. Achievements in this regard include the following: Compliance to laws, policies, and procedures is

closely monitored by the new Compliance unit.


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Strategic relationships

During the year under review, the Board met with a number of strategic partners, inter alia, the Minister and Deputy Minister

of Transport, DoT officials, the Portfolio Committee on Transport (PCOT), Transport sister entities, the Statutory Actuary, the FSB,

representatives of the insurance industry, the Judiciary and various other Provincial and Local Government stakeholders.

Challenges

Some high-level challenges which have been attended to include, but are not limited to, the following: The number of open

claims transiently returned to previous levels during the year, but this was rectified by year-end. Despite a predictable fuel levy

increase, the fuel levy income has grown below the Consumer Price Index (CPI). The RAF only received an 8c per litre fuel levy

increase, which is fast becoming a predictable trend. It is also noteworthy that the RAF’s liability is growing faster than the CPI.

Finally, the panel of attorneys tender which was challenged before it was even adjudicated posed another challenge to the

continuity of the RAF’s litigation work.

the Year ahead

There is growing recognition of the RAF’s mandate and contribution to society as Government’s consoling arm. Great expectation

rests on our shoulders based on recent performance. It is important that optimal focus is placed on the strategic priorities that

the Board has identified; and that Management executes the required work effectively.

acknowledgements

I wish to express my sincere gratitude to the outgoing Board for their sterling contribution to the RAF over the past couple of

years and a warm word of welcome to the newly appointed Board.

On behalf of the new Board, I wish to thank the Honourable Minister of Transport, Ms Dipuo Peters, and the Deputy Minister

of Transport, Ms Sindisiwe Chikunga, as well as the entire DoT team for their unwavering support during the 2013/14 financial

year. Furthermore, we would like to thank the PCOT, together with our partner stakeholders, for the assistance and guidance

offered to the RAF during this financial year.

Finally, we would like to thank the Chief Executive Officer, Dr Eugene Watson, for his tireless efforts in turning the RAF into the

excellent organisation we all know it can be. Our thanks also go to the Management and staff of the RAF for their on-going

loyalty and dedication.

Dr NM BhenguChairperson of the Board

Date: 31 July 2014


CHIEF EXECUTIVE OFFICER’S OVERVIEW

Introduction

The RAF’s Integrated Annual Report 2014 is centred on the principles

and recommendations of King III and NT’s Regulations. The report

focuses on putting the financial results in perspective by reporting

on how the RAF has impacted, both positively and negatively, on

the socio-economic life of all users of South African roads. This

overview of the 2013/14 financial year forms part of the Annual

Financial Statements of the RAF for the year ended 31 March

2014 in accordance with section 55(1)(d) of the Public Finance

Management Act, 1999 (Act No. 1 of 1999) (as amended by Act

No. 29 of 1999) (PFMA).

The RAF, as established by the Road Accident Fund Act, 1996 (Act

No. 56 of 1996), (RAF Act), is listed as a National Public Entity in

accordance with Schedule 3A of the PFMA. The Board of Directors is

the Accounting Authority in terms of the PFMA.

achievements

During the year under review, the RAF departed from a legacy of less

than stellar performance. Employees are now well aware that the RAF

exists to render support to victims of car crashes and their families,

providing support financially, medically and by way of indemnification.

Change management is no longer a programme, but is viewed as a

way of life, setting the organisation apart and seeing performance

improve despite changes to the Board, Executive, the structure and

operating environment during the year under review.

Business processes have been laid down and now shape the team’s

daily work. Our physical and virtual presence has been expanded and


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access to the RAF is now greater than it ever has been. Our national footprint has been expanded with 83 hospital service centres

(HSCs) in place and an officer present in every province. The four customer service centres (CSCs) in Kimberley, Bloemfontein,

Mahikeng and Polokwane, where no presence existed, are almost ready for ribbon cutting and official opening. Over 16,000

claimants were engaged at our highly revered ‘RAF on the Road’ road shows and more than 220,000 telephone calls were

managed by our Call Centre.

Claims are efficiently administered and the number of open claims has reduced year-on-year to what is now less than half of

what it was five years ago. The number of open and reopened claims reduced to 198,140 from 212,085 (2012/13) and the total

awaiting compensation or legal cost payments reduced by 47,627 from 279,912 (2012/13) to 232,285 during the period under

review. Claim payments are almost twice what they were two years ago and now exceed an unprecedented R22 billion for the

year under review. Beyond the money, the value of our claim payments touches lives – like the fact that over 7,000 funeral claims

were paid by the RAF (in the context of 14,000 road fatalities per annum).

A segregated organisational structure was rolled out and over 211,000 claim payments were made under the structure, with

greater control and accountability. Complaints are transparently measured, assessed, investigated and resolved, whilst extracting

lessons for business to learn. Our team has grown by almost 22% in number and a large number of the appointments that have

been made are internal resources, who are growing, developing and shining. Recognising its role as part of our public service,

equity and female gender representation distinguish the RAF from many organisations.

At a corporate level, our governance framework complies with King III, our risk maturity level is higher than that of many public

and private entities, and our credibility as a recognised authority on road safety and road accident insurance mechanisms is

growing, especially since our assistance to the families of those who lost their lives in the horrific Pinetown and Moloto crashes

during the year under review.

Our tireless support at crash scenes sees us often leading Government’s support initiatives.

Over 20,000 people follow our social media footprint – eager to keep track of what the RAF is doing, when and where.

Performance is entrenched as the primary internal driver, where even our social partner, the South African Transport and Allied

Workers Union (SATAWU), has placed a great emphasis on ensuring that we have a solid performance management system in

place. A culture of performance accountability has been ingrained in the employees of the RAF, where they understand that if they

perform, they are rewarded. Where they don’t, they are managed with a view to lifting performance. Standards of accountability

have been set. It is clear that the RAF is on the move, that the RAF is performing and that a new legacy is being written.

Notwithstanding the provisions of the 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. At 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.

“Beyond the money, the value of our claim payments

touches lives”


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.”

The ruling by the Constitutional Court paves the way for road accident victims to pursue claims amounting potentially to millions of

rand where fees in excess of the law were charged. Future road accident victims will also be far more cautious in approaching personal

injury lawyers rather than the RAF directly. This is indeed a major feat for the RAF and a great step forward for the rights of claimants.

In addition to other marketing events, exhibitions and promotions, our ‘RAF on the Road’ community outreach programme

remains the organisation’s flagship marketing campaign. During the year under review, the RAF took its service offering to more

than 16,000 claimants in disadvantaged communities countrywide – and settled claims to the value of R376 million.

The RAF is changing, and it is changing for the better. Our current mantra is: “Let’s finish what we have started…”

General Financial review and Spending trends of the raF

Total revenue for the year grew by 13%, from R18.1 billion to R20.5 billion, as a result of 8 cents per litre increase in the RAF Fuel

Levy, despite a moderate decrease in the volume of fuel sold over the previous financial year. Net fuel levies accounted for 99% or

R20.3 billion of total revenue. The RAF recorded a deficit of R17.3 billion in the financial year under review compared to a deficit of

R8.5 billion in the previous year. The deficit is directly related to the provision for outstanding claims, which increased from R83 billion

(2012/13) to R97 billion in the current year, as well as an increase in settlements relating to a higher cash pay-out on claims.

The Statement of Financial Position reflects the extent to which the RAF remains under-capitalised. A net deficit of R90.8 billion

was recorded for 2013/14 (2012/13: R73.5 billion). It remains noteworthy that the RAF has been technically insolvent for over

three decades, yet it continues to honour its obligation to claimants. This is due to the fact that non-current liabilities have not

been funded at any point in the scheme of arrangements’ existence.

Claims expenditure (excluding the increase in the provision for outstanding claims) has increased by 47% to R22.3 billion

(2012/13: R15.2 billion). During the year under review, 109% of fuel levy income was used to pay claims expenditure, compared

to 85% in 2012/13. The RAF had to use its cash reserves to pay claims, reflecting an efficiency gain.

Total expenditure for the year, excluding the increase in the provision for outstanding claims, increased by R7.2 billion to

R23.6 billion (2012/13: R16.4 billion) as a result of improved productivity and higher claim costs. Actual cash claims expenditure

of R22.2 billion accounted for 94% of total expenses, with the balance being made up of employee costs, i.e. R907 million (4%)

and administration and other costs, i.e. R467 million (2%).

The RAF recorded cash reserves of only R2.5 billion on its Statement of Financial Position at year-end (R3.6 billion decline versus

R2 billion growth in the previous financial year) as resources were utilised to pay claims. Cash reserves related to the nature and

volume of claims received and processed. Management interventions have been implemented to optimise claim payments,

efficient business processes are in place, additional staff members have been provided for and alternative claim administration

measures have been implemented. These interventions have led to improved claims processing during the year which have

impacted heavily on the RAF’s cash reserves.

The inequitable allocation of economic resources, as a result of the legislative framework, continues under the current compensation

arrangement. Of the R22 billion paid out towards claims:

• More than R1.2 billion was paid in medical costs;

• Over R4.6 billion was spent on legal and expert costs;

• R5.9 billion was paid in general damages – primarily to persons not seriously injured; and

• R10.4 billion was paid for loss-of-earnings and -support.

Success fees (contingency fees) paid to attorneys were estimated to be in excess of 25% of compensation, exacerbating the

hardship victims of accidents suffer. In addition, the average time taken to settle a claim still ranged between 12 and 60 months,

primarily because of the need to prove fault and the subjectivity in determining loss-of-earnings and -support benefits.


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During the year under review, the RAF was able to reduce the number of outstanding claims where no payments were made.

This was reduced significantly to 198,140 from 212,085 in the previous financial year despite constrained income.

The detailed review of the results of the RAF for the year ended 31 March 2014 is included under the Situational Analysis

contained in Part B of this report.

During the current financial year, no new GRAP standards were applied for the first time.

The Annual Financial Statements are prepared in accordance with the prescribed SA Standards of GRAP issued by the Accounting

Standards Board as the prescribed framework by NT.

Changes in the Application of GRAP 19

In the RAF’s 2011/12 Annual Financial Statements it changed its application of GRAP 19, which deals with liabilities and provisions.

Specifically, the RAF accounted for Incurred But Not Reported (IBNR) claims as a contingent liability rather than as a provision,

because in terms of its founding legislation the legal obligating event had not materialised. In the RAF’s 2012/13 audited

Annual Financial Statements, the same treatment of the IBNR was applied. On 25 July 2014, following previous engagements,

the Auditor-General advised that the IBNR does meet the GRAP 19 definition of a provision and should have been reflected in

the Statement of Financial Position as such, and to now comply with this, that the RAF needs to amend the prior periods in line

with GRAP 3 as with prior period error disclosures to ensure compliance with fair presentation. The Auditor-General, in keeping

with two opinions the RAF solicited from major Accounting and Professional Services Firms, asserts that the obligation to make

a claim payment arises when an accident happens.

The RAF has complied with the Auditor-General’s position and presents its Financial Statements in this Integrated Annual Report

accordingly.

It must, however, be noted that the legal obligation, under the Road Accident Fund Act, No. 56 of 1996 (the Act), is to make a

payment determined solely by section 17 of the Act which states: “subject to any regulation made under section 26, in the case

of a claim for compensation under this section arising from the driving of a motor vehicle where the identity of neither the owner

nor the driver thereof has been established, be obliged to compensate any person (the third party) for any loss or damage which

the third party has suffered as a result of any bodily injury to himself or herself or the death of or any bodily injury to any other

person, caused by or arising from the driving of a motor vehicle by any person at any place within the Republic, if the injury or

death is due to the negligence or other wrongful act of the driver or of the owner of the motor vehicle or of his or her employee

in the performance of the employee’s duties as employee.”


At its core, the RAF operates a common law, delictual system of compensation, which has been codified by the Act. The common

law principles of delict apply to claims against the RAF. These principles require the claimant to prove (a) that someone else was

responsible for, or contributed to, the road accident (fault); (b) the other person must have acted unlawfully, i.e. there must not

be a reason in law to ‘forgive’ the other person for causing, or contributing to, the road accident; (c) the other person must have

acted negligently or intentionally, i.e. the other person must not have observed the level of care of a reasonable person that the

law requires; (d) the injury and/or loss (damage) of the claimant must be proven; and (e) there must exist a link between the road

accident and the damage. If any one or more of the aforementioned elements are not proven, liability in delict does not arise.

Capacity Constraints and Challenges

Adversarial Compensation System

During its lifespan, the motor vehicle accident (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.

Vacancy Rate

In 2012/13, the organisational structure was revised with the introduction of segregated functions and expansion of teams in

the claims processing environment. 833 appointments were made during the reporting period and the vacancy rate has now

reduced to below 10%. The staff complement now stands at 2,288 and work is underway to conclude the final appointments

of 252 vacant posts.

Information Communication Technology Environment

The Information Communication Technology (ICT) Master Systems Plan (MSP) serves as the strategic document that guides the

ICT Department to obtain its strategic objectives. The current ICT MSP was approved by the Board for the period 2013–2015.

Subsequent to the approval of the ICT MSP, there have been significant changes that transpired within the department. These

included the appointment of new ICT senior leadership, a realignment of the ICT organisational structure, and an increased

demand of ICT services by the business.

During this time it was also noted that there was a pressing need to modernise the ailing and obsolete technology infrastructure of

the RAF, in order to cater for business growth and to ensure increased availability of ICT systems. A combination of these factors has,

in turn, necessitated a review of the current ICT MSP. A resolution was adopted to utilise the current ICT MSP as a base from which

to formulate a longer-term five-year ICT Strategic Plan, which will encapsulate all ICT-related requirements, including budget and

human resources, that are essential to meet the current challenges of the ICT environment within the RAF, and to better position

the ICT Department to provide superior service to its clients and to create optimal alignment to the RAF business strategy.

Legal Costs

It is untenable that 21% of total payments of R22 billion (an improvement on 25% in the prior year) are still being spent on legal

fees with R1.7 billion spent on RAF’s legal costs and R2.9 billion spent on claimant’s legal costs. 90% of claims are still represented

by attorneys and are subjected to a litigious finalisation process.

RAF Fuel Levy

It is necessary to reiterate that the RAF operates in an environment where:

• Funding, or contributions via the RAF Fuel Levy are not associated with claim frequencies and costs, which sees an acute

disjuncture when productivity improves.

• The beneficiary base is not constituted by past, present or future contributors to the RAF Fuel Levy;

• The benefit available to beneficiaries or claimants is not defined and in some instances is not limited to a maximum value; and

• Social security is not limited to protecting income, providing support or funding healthcare needs, but extends to all of

these key elements of social security.


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Compensation for Loss-of-support/earnings

Compensation for loss-of-income/earnings and -support seems to be on an upward trend. The reasons for this are as follows:

• The introduction of the Amendment Act increased passenger claims to the average of any other claim where the driver

was the sole cause of the accident. These claims were previously limited to R25,000. As a result of the Amendment Act

decreasing claims volumes materially, plaintiff attorneys are increasingly finding any possible way, even if the injuries are

not that serious, to prove future loss-of-earnings capacity. The result is that claims that could have been settled for less than

R100,000 are now being proven as fairly material claims, with medical reports to substantiate the loss-of-earnings. Offers

made by claims handlers are no longer accepted at previous levels and matters are brought to the Courts where substantial

awards are being made on loss-of-earnings. This has also escalated legal fees.

• It appears that Courts are less stringent on the requirements for loss-of-earnings considerations. Minimal proof of loss-of-

earnings is accepted, particularly where the testimony of self-employed road accident victims, who are not paying taxes and

have no income and expenditure statements as evidence, is heard and judgment is made on the basis of victims’ testimonies.

• Previously, loss-of-support claims were quantified on the basis of the agreement between the RAF and the attorney. More

recently, a new trend has developed whereby industrial psychologists’ reports are introduced, with career progression and

promotions factored in, to inflate the loss-of-support claim.

• In the past, claims for minor children were projected, based on the parents’ educational background. This impacted negatively

on the previously disadvantaged sectors of the population, which represent the majority. With social and political changes,

these claims are no longer settled on this basis and have become million-rand settlements.

Cost of Service Delivery

A matter of extreme concern for the RAF is that the cost of service delivery remains disproportionately high in relation to the

compensation paid in comparison with the RAF Fuel Levy received, more so because the bulk of the cash that the RAF pays is

in respect of loss of amenities of life and general damages, as opposed to medical costs and loss-of-income and -support. The

RAF’s administration costs remained at 7% of income.

A further challenge presented itself in the form of a Panel of Attorneys tender that was issued by the RAF during the year under

review. Joubert Galpin Searle Inc., Z Abdurahman Attorneys and Rehana Khan Parker Attorneys brought an application in the

Port Elizabeth High Court in November 2013, seeking to set aside the awarding of a tender to provide specialist litigation services

to the RAF. The Court ruled in favour of the plaintiffs on 25 March 2014, compelling the RAF to recommence the tender process.

The focal point of the application was the process followed by the RAF in correcting an administrative error related to the duration

of the tender process in question, rather than the unfairness of the process itself. The order of invalidity of the tender process

has been suspended until 1 December 2014 and, until such time, the newly appointed panel is allowed to continue acting on

the RAF’s mandate and the old panel’s contracts remain terminated by effluxion of time.

The principles of administrative justice are held in high regard by the RAF and the RAF has therefore designed a handover plan

that seeks to avoid any interference with the administration of justice. As a point of reference, there has already been a successful

handover of some files in the Eastern and Western Cape provinces.

Efficient handover processes were recognised by the Court ruling and this serves as sound assurance for claimants whose matters

are under consideration in the various Courts. Costs associated with this handover exercise are attributed to the copying of and

perusal of a file by a new panel attorney and the legal fees of the handing over panel. These are necessary costs that are incurred

whenever a file changes hands. It is inevitable in a changing business environment that every three years such costs may be

incurred when a new panel is appointed and an old one is phased out.

Another aspect of service delivery is the fact that delays in claims finalisation prejudice victims and increase the RAF’s liability as

historical trends have shown that generally the later a claim is finalised, the higher the liability of the RAF. In light of the above,

the RAF has resolved to place more focus on settling long outstanding claims.

Other challenges include, but are not limited to, issues common to all delictual systems; environmental issues; issues specific to

the South African system and internal challenges. The programmes contained in the Revised Strategic Plan 2013–2017 seek to

mitigate the negative effects that the challenges have on the ability of the RAF to deliver on its mandate in line with its vision

and mission.


The fiscal unsustainability of the current scheme of compulsory motor vehicle insurance remains a fundamental challenge for the

RAF, primarily due to failed attempts to link income to expenditure since the implementation of the scheme more than 60 years ago.

The unsustainability, unreasonableness, unaffordability and inequity of a fixed fuel levy income-based scheme providing (in

most instances) unlimited compensation was recognised by government and resulted in amendments to the RAF Act (2008).

Through these legislative amendments, universal limits and thresholds were placed on the RAF’s liability. The amendments have

had mixed results, including:

• A reduction in the number of claims received;

• A reduction in the RAF’s expenditure on general damages;

• An increase in the quantum of settlements in respect of loss-of-support and loss-of-earnings claims due to the focus shifting

from general damages to the aforementioned heads of damages; and

• An increase in litigious matters to pursue maximum compensation.

Discontinued activities

In line with a directive issued by NT in January 2014 regarding cost-containment measures, the RAF complied by issuing an

internal directive and discontinuing a large number of initiatives, inter alia, SADC sports events, social and team-building events,

curbing travelling and accommodation costs, purchasing of newspapers for all units, reduction of electricity by switching off all

unused appliances and lights after hours, single-page printing, etc.

New or Proposed activities

Project Siyenza is an initiative aimed at partially outsourcing the processing of approximately 40,000 files to private sector companies

with a view to speeding up the settlement of claims. Two bidders were appointed and the first batch of files was dispatched to

the winning bidders in February 2014. By March, the project had seen 2,259 files handed over, 128 assessed, and 3 settled. Project

Siyenza also sees the cost of administration fixed, thereby creating an incentive for the service providers to provide efficiently.

The year under review also saw the initiation of the procurement of new panels of attorneys, assessors and funeral parlours for the RAF.

request for roll-over of Funds

The RAF submitted a request to the NT at the start of the current financial year for the retention of an amount of R6.1 billion

from surplus funds accumulated in the 2012/13 financial year to be carried over to the 2013/14 financial year for the purpose of

improving on the number of claims settled during the current financial year. The RAF improved on its claims settlement initiatives

during the current financial year and the number of outstanding claims awaiting compensation and legal cost payment has

improved to 232,285 from 279,912 at the end of the previous financial year.

Supply Chain Management

Supply Chain Management (SCM) systems are in place in accordance with the PFMA; NT Regulations, Instructions and Notes;

the Preferential Procurement Policy Framework Act; the Broad-based Economic Empowerment Act; as well as the SCM Policy

Framework.

78 bids were issued during the 2013/14 financial year. Of the 78 bids, a total of 28 bids were finalised, 11 were cancelled by

business, 12 resulted in non-awards, and 3 were awaiting approval by the Board and/or CEO at year-end. A total of 2 were handed

over for contracting, another 2 were advertised, 4 were under evaluation, another 4 were at the adjudication stage and a total

of 12 were awaiting evaluation.

In order to optimise the SCM function, a full diagnostic assessment was conducted by an independent audit firm to ensure that

weaknesses are remedied. Challenges faced by the RAF’s SCM during the financial year included the following:

• The department lacked capacity. Consultants were employed to address the challenge, whilst new positions were created

and filled.

• Lack of specific SCM skills within the Procurement business unit. A directive was issued to include relevant staff training on

SCM policies and procedures in personal development programmes of staff. Training will be monitored on an on-going basis.


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• Procurement processes are outdated when compared to current needs.

• The department lacked a clear vision, mission and strategy.

Definitive action has been taken which has seen the team expanded, new Senior Managers appointed, a new Revised Process

Manual developed and expanded automation being rolled out.

audit report Matters in the Previous Year

The RAF received a clean audit by the Auditor-General in the previous financial year and the organisation received an award in

this regard.

addressing Financial Challenges

The Board and Management are committed to implementing plans to curb the growing deficit caused by the rising provision

for outstanding claims. As part of these plans, the RAF engages with NT and the DoT on an on-going basis to resolve the short-,

medium- and long-term funding position of the RAF.

Revenue and productivity have not been matched. The RAF has put all available cash to efficient use, which has seen the number

of open claims reduce. Continued productivity is dependent on the availability of cash.

The RAF manages liquidity on a day-to-day basis and claims are paid from available cash reserves. In addition, the RAF constantly

focuses on cost-reduction measures to improve efficiencies and to avail more cash for the payment of compensation.

Measures are being introduced internally, such as the roll-out of enhancements to operational claims systems and processes, as

well as the ‘RAF on the Road’ campaign to deal with claimants directly rather than through third parties. These interventions have

already yielded cost reductions and are expected to reduce costs even further in the medium to longer term. At this juncture

one in five claims registered is a direct claim.

Seven years ago, the RAF’s number of outstanding claims (i.e. open and unpaid claims) increased to 450,000. This was, inter alia,

caused by legislative challenges, inefficiencies in the claims processing environment and the fact that the main source of revenue

for the RAF, the fuel levy, had increased in relation to inflation and not the claims experience. However, over subsequent years,

the RAF has realised a reduction in the number of outstanding claims where no compensation was paid at all and by 31 March

2014 the number had decreased to 198,140.

Management successfully introduced a number of interventions designed to optimise claims processing and to reduce the

number of accumulated open claims. Some of these measures included the following:

• Designed, documented and implemented operational business processes across the organisation.

• Rolled out a re-aligned organisational structure with clear segmentation and segregation of claims processing at the core.

• Improved claims processing in terms of turn-around times and adherence to defined processes.

• Introduced the highly revered community outreach programme, ‘RAF on the Road’ – taking the RAF’s service offering to

far-flung communities of the country.

• Performed a full review and staging of all claim files.

• Implemented a performance management system.

Cash holdings at the end of March 2014 were R2.5 billion, down from R6.1 billion at the end of March 2013. This significant reduction

in cash holdings is directly associated with an improved productivity and an increase in the average cost of settling claims.

The RAF performed a cash flow forecast with the assistance of its Statutory Actuary. The cash payments are mainly driven by the

initiatives undertaken in the claims environment to speed up the rate at which claims are settled and paid. The increasing trend

in the amounts of claims paid per quarter shows an increase in the rate at which claims are settled. Furthermore, the increase

in cash payments is associated with an increase in the number of payments made.

As the organisation continues its efforts to improve the rate at which claims are settled, more claims will be paid out each month.

Assuming that the trend in claim settlements is maintained over the next few quarters, there is a real risk of the organisation

depleting its surplus cash resources. It is anticipated that early in 2014/15 this risk will materialise.


With readily available cash reserves, the organisation can continue its efforts to improve the claims settlement rate and reduce

the number of open and unpaid claims without any liquidity concerns. However, if the available cash resources are limited to

the currently projected cash inflows from the fuel levy, then there is a real risk that by late 2014 (or earlier) cash outflows will

have exhausted cash holdings which accumulated over the last few years. As a result of improved efficiencies in the operating

environment, there is a real risk that the RAF will find itself without the necessary funds to honour its commitments to claimants.

At that point, the RAF will be forced to slow down the claims settlement process or prioritise the payment of claims, which

may be counter-productive and contrary to its statutory mandate. The consequences of a slow-down in claims processing are

mainly threefold:

• The number of outstanding claims may increase, thereby reversing the benefits the RAF has realised;

• Claimants may be deprived of the benefits afforded to them by the RAF Act; and

• The legal industry may resort to legal action to force the RAF to settle claims and incur unwarranted legal and associated

costs.

It is important to set an appropriate level of funding for the RAF which will obviate the constant liquidity challenges that have

impacted on the RAF for decades. Establishing an appropriate funding level where productivity against statutory obligations

is seen is critical.

Events after the reporting Date

No undisclosed material events took place between the Statement of Financial Position date and the authorisation of the Annual

Financial Statements.

Economic Viability

As at 31 March 2014, the RAF had an accumulated deficit of (R90,925,544,000) and the RAF’s total liabilities exceeded its assets

by (R90,797,758,000). The key factor here is the actuarial provision for claims incurred which projects future payments for claims

which may have arisen.

The Annual Financial Statements of the RAF are largely influenced by the actuarial provision for claims incurred. This figure

provides a view of what future payments will be made for claims that have been lodged. Government agencies that provide

social benefits need not include this provision on their Statement of Financial Position in accordance with GRAP 19.

The principle of ‘going concern’ was used in preparing the Annual Financial Statements. This basis presumes that funds will be

available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and

commitments will occur in the ordinary course of business.

On an annual basis, following the Minister of Finance’s Budget Speech in Parliament, the Taxation Amendment Act indicates

what the applicable fuel levy will be for the financial year. The National Budget, inclusive of the fuel levy amount, is submitted

and approved by the South African Parliament via the Taxation Amendment Act.

Government also commits to the RAF budget in its Medium-Term Expenditure Framework (MTEF). The RAF will manage the cash

resources to ensure that short-term liabilities are met.

In the past, the RAF received additional financial support from NT in the form of cash injections over and above the normal fuel

levy income as and when it faced liquidity problems. During the 2006 financial year, it received a cash injection of R2.502 billion

and in the 2009 financial year it received R2.550 billion. The Board and Management are committed to implementing plans to

contain the growing deficit caused by the rising provision for outstanding claims.

As part of these plans, the RAF has engaged NT and the DoT in discussions to resolve the short-, medium- and long-term funding

position of the RAF. It is clear that productivity has improved.

In light of the profound negative impact of road traffic accidents on its victims from a health, vocational and social perspective, these

victims not only require, but deserve to have their claims against the RAF assessed and finalised in a speedy and efficient manner.


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Conclusion

During the year under review, the RAF aimed to be an accessible organisation that pro-actively interacts with victims in a caring,

supportive and solution-orientated manner and where liability attaches to it, to provide compensation in a time-efficient and

cost-effective manner, while continually exhibiting the highest standard of financial and risk management.

Productivity improved due to the new organisational structure and business processes – and claims processing, in particular,

increased by 47% to R22.2 billion. RAF staff interacted with more than 16,000 claimants in remote areas of the country and

settled claims to the value of R376 million out of the office, while 220,000 calls were responded to by the Call Centre. 147,168

new claims were received and 240,783 claims were finalised.

The number of open claims reduced, audit findings were resolved, risk mitigation measures were implemented, a performance

management system for all staff and a succession management plan for Management were implemented, and the organisation

received a Clean Audit award from the Auditor-General for the 2012/13 financial year.

A shift was made in respect of the RAF’s focus on the socio-economic impact of crashes on families, homes and communities, and

people were put first – exactly as intended where the Constitution speaks to the principle of Batho Pele. Importantly, seriousness

was introduced in respect of what the RAF is, what it should be and what its employees, as loyal officers, are required to do.

acknowledgements

I wish to express a sincere word of thanks to the Minister of Transport, Ms Dipuo Peters, and the Deputy Minister, Ms Sindisiwe

Chikunga, for their on-going assistance in seeking solutions to the challenges faced by the RAF during the period under review,

as well as all the officials at the DoT.

As the Executive Management of the RAF, our gratitude is also extended to the Chairperson and Members of the Portfolio

Committee on Transport for the unfettered guidance provided throughout the year.

A warm message of thanks is extended to the outgoing Board, and the Chairman, Vice-Chairman, and members of the new

Board for the candid guidance, leadership, enthusiasm and dedication shown since their appointment.

A word of appreciation also goes to the RAF Executives and staff for their continued support, loyalty and diligence. We have

met 83% of our 2013/14 Annual Performance Plan (APP) targets, showing that the RAF, as an organisation, will not cower when

faced with challenges.

In conclusion, we recognise those who have lost their lives, been injured or who have lost a loved one in a motor vehicle accident

in the financial year under review. Our responsibility going forward remains firmly fixed on alleviating the suffering which has

arisen and continues to result from negligence on our roads.

Dr EA WatsonChief Executive Officer

Date: 31 July 2014


STATEMENT OF RESPONSIBILITY AND CONFIRMATION OF ACCURACY FOR THE INTEGRATED ANNUAL REPORT

To the best of my knowledge and belief, I confirm the following:

All information and amounts disclosed in the Integrated Annual Report are consistent with the Annual Financial Statements

audited by the Auditor-General.

The Integrated Annual Report is complete, accurate and is free from any omissions.

The Integrated Annual Report has been prepared in accordance with the guidelines on the Annual Report as issued by NT.

The Annual Financial Statements (Part E) have been prepared in accordance with the GRAP standards applicable to the RAF.

The Accounting Authority is responsible for the preparation of the Annual Financial Statements and for the judgements made

in this information.

The Accounting Authority is responsible for establishing and implementing a system of internal control that is designed to

provide reasonable assurance as to the integrity and reliability of the performance information, the human resources information

and the Annual Financial Statements.

The external auditors are engaged to express an independent opinion on the Annual Financial Statements.

In our opinion, the Integrated Annual Report fairly reflects the review of operations, the performance information, the human

resources information and the financial affairs of the RAF for the financial year ended 31 March 2014.

Yours faithfully

Dr EA WatsonChief Executive Officer

Date: 31 July 2014


Date: 31 July 2014


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STRATEGIC OVERVIEW

Vision

To provide the highest standard of care to road accident victims and to restore balance in the social system.

Mission

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.

Values

The following values drive everything that we do and the manner in which we do it:

We care for and support our customers.We care for and support each other.

We offer solutions.We take responsibility for our actions.

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 commitment to delivery.

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 commit to and demonstrate integrity, honesty, consistency and fairness in our actions and decisions.

We model the highest standards of personal and professional behaviour.

UBUNTU

SOLUTION FOCUSED

EXCELLENCE

EFFICIENCY

PRIDE


LEGISLATIVE 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 RAF, 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 RAF 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 RAF, therefore, comprises not only the South African public, but all foreigners within

the borders of the country. The RAF provides two types of cover, namely personal insurance cover to accident victims or their

families, and indemnity cover to wrongdoers.

road accident Fund (transitional Provisions) act, 2012

The RAF Act of 1996 was amended in 2005, and the RAF Amendment Act, 2005 (Act No. 19 of 2005) (the Amendment Act) came

into effect on 1 August 2008.

However, soon after promulgation of the Amendment Act, a number of claimants challenged the constitutionality of section 18

thereof (related to the R25,000 passenger claims limit in the RAF Act). 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 2013.

Claimants whose claims arose under the RAF Act, prior to it being amended by the Amendment Act, and whose claims were

limited by the R25,000 passenger limitation section and which claims have not prescribed or been finally determined by

settlement or court order, have an election under the Transitional Act to have their claim 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.

This brought about three different frameworks which the RAF currently administers, namely the RAF Act, the Amendment Act

and the Transitional Act.

road accident Benefit Scheme Bill

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 RAF 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 fully funded 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 and

reducing disputes by removing the ‘fault’ requirement and by providing pre-determined benefits;

• Making available timely and appropriate healthcare benefits based on a reasonable tariff;

• Simplifying claims procedures;

• Wider cover to persons injured in road accidents;


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• Fewer exclusions from benefits;

• Defined benefits which promote affordability; and

• Alleviating the burden on our Courts through the establishment of an internal appeal procedure. (It is important to note

that almost 50% of Court matters relate to road accidents.)

The DoT published a revised version of the Road Accident Benefit Scheme Bill, 2014 (the Bill) in Government Gazette No. 37612

after year-end.

The Gazette includes the Department’s RABS Regulations and the draft RABS Rules and Forms of the Road Accident Fund Board.

Interested persons have been invited to submit comments within 60 days of publication.

An earlier version of the Bill was published for public comment on 8 February 2013 in Government Gazette No. 36138. 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 Bill provides for a new no-fault benefit scheme and a new Administrator called the Road Accident Benefit Scheme Administrator

(RABSA), which will replace the current RAF and compensation system administered by it.

In terms of a fundamental overhaul, the legislation proposes that the RAF be replaced by the RABSA and that the current adversarial

system be replaced with a scheme which is based on principles of social security and social solidarity.

The key change proposed by the draft legislation is a move away from the insurance based system of compensation which has

been largely unchanged in South Africa since its inception in 1946, to a system of defined and structured benefits.

The RABS Bill forms part of an initiative to replace the third party compensation system currently administered by the RAF with

a new scheme that is reasonable, equitable, affordable and sustainable.

The Bill, Regulations, Rules and Forms are available from the Government Printer and on the websites of the DoT and the RAF

at www.transport.gov.za and www.raf.co.za.


ORGANISATIONAL STRUCTURE

Executive Authority

Board of Directors

Chief Executive OfficerExecutive Corporate Secretariat

Chief Operations Officer

SM: Analytical Reporting

RGM: Johannesburg

RGM: Pretoria

RGM: Durban

RGM: Cape Town

RGM: East London

Chief Human Capital Officer

SM: Organisational Development

SM: Capacity and Capability Building

SM: Centre of Expertise

SM: Shared Services

SM: Learning and Development

SM: Customer Service

SM: Facilities Management

Chief Information Officer

GM: Application Development & Modernisation

SM: Governance, Risk and Security

SM: New Service, Architecture and

Process Management

SM: Application Development and

Support

SM: Infrastructure

SM: Business Support Service

Chief Audit Executive

SM: Internal AuditGM: Assurance and Monitoring

Chief Financial Officer

SM: Financial Accounting

SM: Management Accounting

SM: Treasury

SM: Financial Reporting

SM: Supply Chain Management

Chief Strategy Officer

GM: Risk Management

GM: Corporate Legal Service

GM: Programme Management Office

GM: Stakeholder Relations

GM: Forensic Investigations

SM: Strategy and Reporting

SM: Strategy, Risk and Compliance

Chief Marketing Officer

SM: Communications

SM: Public Relations and

Media

SM: Marketing

SM: Call Centre


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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 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 entrenchment of the new organisational structure, approval of new delegations, decentralisation of functions (especially

in the regions) have allowed regions to be autonomous, deliver services in an efficient and effective manner where they are

actually required.


Part B: PERFORMANCE INFORMATION


AUDITOR-GENERAL’S REPORT: PREDERTERMINED OBJECTIVES

The Auditor-General of South Africa (AGSA) currently performs the necessary audit procedures on the performance information to

provide reasonable assurance in the form of an audit conclusion. The audit conclusion on the performance against predetermined

objectives is included in the report to Management, with material findings being reported under the Predetermined Objectives

heading in the Report on Other Legal and Regulatory Requirements section of the Auditor-General’s report.

Refer to page 143 of the Integrated Annual Report for the Auditors Report, published in Part E: Financial Information.

30 ROAD ACCIDENT FUND30 ROAD ACCIDENT FUND

SITUATIONAL ANALYSIS

Service Delivery Environment

The RAF 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

Cost

Financial Position

Volume of claims

Levy on fuel

Number and severity of accidents

Value of claims

Grants and investment revenue

Fuel sold

Road activity

Third-party costs

Administrative costs

Figure B1 – Factors influencing the RAF’s financial position

The nexus of all these factors is road activity in South Africa:

• The number of vehicles on the road influences the amount of fuel sold, which in turn affects the revenue granted to the

RAF by NT. This revenue comprises the RAF Fuel Levy, together with ad hoc government grants and minor income from

investments, to equal the RAF’s total revenue.

• The number of vehicles on the road also influences the number of accidents, although many other factors influence this

statistic, particularly the relative severity of accidents. Volume and severity of accidents influence the volume and average

value of claims made against the RAF. Claims, combined with the cost of third parties, such as attorneys and medical/legal

experts, and the RAF’s administration costs, equal the RAF’s total costs.

Key Value Drivers

Revenue

• RAF 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 B2 – Key value drivers of the RAF

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 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

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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 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.

Over the next three financial years, the RAF Strategy will be anchored on four main pillars, i.e.:

• A legislative dispensation that is aligned to the principles of social security;

• Effectively manage the RAF’s finances and pursue sustainability;

• A customer-centric, operationally effective and efficient RAF; and

• A transformed and capacitated RAF.

Each pillar aims to deal with specific challenges that the RAF faces. In addition, these will form the basis on which subsequent

performance and operational plans will be developed.

Benefits realised by the organisational structure during the review period include:

• Manageable span of control from CEO to supervisor levels;

• Unambiguous reporting lines;

• Enhanced capacity to manage, especially in the regions;

• Delegation of authority to enhance swift decision-making;

• Consolidation of operational processes;

• Consolidation of risk mitigation functions into one business unit;

• Stakeholder management elevated and managed by one function;

• Clear segregation of responsibilities, which optimises controls;

• Management of complaints is centrally co-ordinated; and

• Enhanced business reporting is now evident.

Organisational Environment

At a management level, the RAF saw a large number of audit findings resolved and many risk mitigation measures implemented,

as captured in the risk register. Leadership Forum meetings involving top leadership levels were held and there is a better

appreciation of the need for leaders to lead.

The Corporate Secretariat established the Ethics Office and the RAF now sees more pointed visibility of action lists, draft minutes

and resolutions. New procedures and policies were introduced, and a new modus operandi was set in the bargaining chamber

in respect of employee relations, where significant effort went into ensuring that legitimate grievances are addressed.

At a staff level, the RAF saw the adoption of a performance management system, a reduction in the number of grievances and

an improved recognition of what standards are required of RAF employees. Communication between divisions and within

divisions has also improved.

The Human Capital Department cleared many of the grievances and disputes which existed within the RAF, whilst also setting

in place procedures and protocols in respect of escalating and lodging matters. An extensive recruitment drive saw over 800

appointments made in 2013/14.

The Risk team put in place a new policy framework, register and reporting framework.

In 2013/14, a total of 478 arrests and 573 convictions were made for proven fraud.

The Legal team established the Compliance, Complaint and Promotion of Access to Information Act, 2000 (Act No. 2 of 2000)

(PAIA) functions.


The RAF’s Programme Management Office (PMO) re-established the governance framework and the Road Safety team made

the RAF’s presence felt within the Transport fraternity.

Following the need to modernise the ailing and obsolete technology infrastructure of the RAF, the Information and Communication

Technology (ICT) unit assessed IT capacity, people and infrastructure, and reviewed all projects to work towards successful

completion. Numerous system updates were made and a set of clearer strategic and operational plans were approved. Downtime

and system availability improved and necessary updates and upgrades were and are being rolled out.

The Finance team performed well, as is evident by the Clean Audit Award the RAF received from the Auditor-General in the

2012/13 financial year. The establishment of an actuarial audit function was seen and outsourced.

Procurement administrators were brought on board to expedite the procurement of goods and services.

The Claims team processed claims under the new structure, and early signs of the value of the segregated structure are visible.

The regional units were established under the newly created role of General Managers and regional support functions were put

in place. A spatial plan was approved for the next five years and a number of teams were moved to Head Office.

The Marketing and Communications team put the RAF on the map. The highly revered ‘RAF on the Road’ community outreach

campaign continued to raise brand awareness and showed citizens that the RAF is indeed writing a new legacy of service delivery

for and to claimants. At a corporate level, the RAF enjoyed good media coverage, including the profiling of the Executive team

in a number of publications.

The RAF recognises that it is imperative to capacitate the entity 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.

Operationally, the RAF took proactive and decisive steps to render its business operations more accessible and efficient. The

organisational structure was aligned to current and future service requirements, while the national service footprint has been

expanded and functional areas segregated.

Operating Environment

Of the 240,783 total claims finalised in the financial year, a large number of claims payments were at values less than R1,000 and

less than R10,000 (Graph B1). 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. (It is important to note that the graph that follows reflects payments per category

and not finalised claims.)

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Category

Number of claims 2013 (supplier)Number of claims 2013 (personal)

Number of claims 2014 (supplier)Number of claims 2014 (personal)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

>R5,000,000R1,000,000 –R4,999,999

R500,000 –R999,999

R250,000 –R499,999

R100,000 –R249,999

R50,000 –R99,999

R20,000 –R49,999

R10,000 –R19,999

R1,000 –R9,999

<R1,000

Num

ber o

f Cla

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Paym

ents

per

Cat

egor

yAverage Size of Claims Paid

38,4

1877

,643

18.0

2037

,028

88,3

8651

,422

41,5

4355

,829

37,2

594,

100

18,0

592,

536

30,1

974,

662

12,5

442,

736

12,7

061,

562

3,79

41,

107

10,2

9855

6 3,36

063

6 4,92

665

2,28

684 2,

417

4 1,30

217 1,

227

1 599

8 20 - 4 -

Graph B1 – Average size of claims paid

During the financial year, the RAF continued to receive and settle high volumes of small claims, with more than 95% (average

of pre- and post-Amendment Act claims) being for settlement values below R50,000 (Graph B2).

0

20

40

60

80

100

120

Category

>R5,000,000R1,000,000 –R4,999,999

R500,000 –R999,999

R250,000 –R499,999

R100,000 –R249,999

R50,000 –R99,999

R20,000 –R49,999

R10,000 –R19,999

R1,000 –R9,999

<R1,000

Cum

ulat

ive

% o

f Cla

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Paid

per

Cat

egor

y

Cumulative % of Claims Paid

5849

32 30

8368

81

8690

8190

93 9592

95 96 97 9596 98 98 98 98 99 99 99 99 10

010

010

010

0

100

100

100 10

0

100 10

010

010

0

% of claims 2013 (post-Amendment Act)% of claims 2013 (pre-Amendment Act)

% of claims 2014 (post-Amendment Act)% of claims 2014 (pre-Amendment Act)

78

Graph B2 – Cumulative % of claims paid


Claims Values

The composition of claims payments continues to reflect the inadequacies of the existing fault-based, common law system of

compensation. The planned introduction of a no-fault system (RABS) should address these wastages over the longer term. In

the short term, Management believes that interim legislative changes could address some of the wastages. Of the R22.2 billion

(2012/13: R15.1 billion) cash paid out in respect of claims for the 2014 financial year, R17.6 billion (i.e. 79%) (2012/13: R11.4 billion

(i.e. 75%) represented compensation pay-out. The balance of 21% (2012/13: 25%) comprised legal and other expert fees (Graph B3).

The year also saw a positive reduction in legal and other expert fees when compared to total expenditure.

0

5,000

10,000

15,000

20,000

25,000

Financial Year

Compensation and medical costs RAF and claimant legal costs

20142013201220112010

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Composition of Claim Payments

2,686

3,417 3,559

8,685 9,368 8,948

3,691

11,398

4,633

17,552

Graph B3 – Composition of claims payments

Operational Statistics

The RAF’s operational statistics for the current and previous financial years are reflected below.

Reference Units 31 March 2014 31 March 2013 31 March 2012

New claims registered 1 No. 147,168 150,312 172,859: Personal claims No. 53,230 47,159 52,445: Suppliers No. 93,938 103,153 120,414

Total: Increase/(decrease) % -2 -13 -22Personal claims: increase/(decrease) % 13 -10 -29Supplier claims: increase/(decrease) % -9 -14 -19

Claims finalised 2 No. 240,783 162,130 170,043: Personal claims No. 115,736 53,537 68,637: Suppliers No. 125,047 108,593 101,406

Total: Increase/(decrease) % 49 -5 -9Personal claims: increase/(decrease) % 116 -22 13Supplier claims: increase/(decrease) % 15 7 -20

Definitions 1. New claims registered: Claims received and registered by the RAF during the financial year. 2. Claims finalised: Claims processed in the supplier and personal-claim categories with finalised status.

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Financial Year

Total lodged Personal claims Supplier claims

Num

ber o

f Cla

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Claims Lodged (Registered)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

201420132012

172,

859

52,4

45

120,

414

150,

312

47,1

59

103,

153

147,

168

53,2

30

93,9

38

Graph B4 – Claims lodged/registered

0

50,000

100,000

150,000

200,000

250,000

300,000

Financial Year

Total �nalised Personal claims Supplier claims

Num

ber o

f Cla

ims

Claims Finalised

201420132012

170,

043

68,6

37

101,

406

162,

130

53,5

37

108,

593

240,

783

115,

736

125,

047

Graph B5 –Claims finalised


During the 2013/14 financial year, 147,168 claims (personal claims: 53,230, supplier claims: 93,938) were registered (Graph B4).

• 240,783 claims were finalised (personal claims: 115,736, supplier claims: 125,047) (Graph B5); and

• 232,285 were still outstanding (personal claims: 215,665, supplier claims: 16,620) (Graph B6) .

A total of 62% of the finalised claims were claims that were registered in the 2013/14 financial year. A total of 12% were claims

(which were repudiated during the current year, but registered during the current and previous financial years) finalised during

the reporting period. 7% were claims that were finalised and which were moved to undertakings status. 19% were claims which

represented the reduction in the 2013/14 outstanding claims.

Financial Year

Total outstanding Personal claims Supplier claims

Num

ber o

f Cla

ims

Claims Outstanding

201420132012

264,

579

220,

907

43,6

72

279,

912

236,

165

43,7

47

232,

285

215,

665

16,6

20

0

50,000

100,000

150,000

200,000

250,000

300,000

Graph B6– Claims outstanding

Outstanding claims are comprised of claims where compensation has not been paid and claims where compensation has been

paid, but legal cost payments are awaited (which are not solely under the control of the RAF). Outstanding claims decreased by

17% from 279,912 at the end of the previous financial year to 232,285 at the end of the reporting period.

This was mainly influenced by a reduction in the number of open and reopened claims totalling 198,140 where compensation

had not been paid and legal cost claims totalling 34,145 were still outstanding at the end of the 2014 financial year compared

to the number of open and reopened claims of 212,085 and legal cost claims of 67,827 at the end of the previous financial year.

The number of open and reopened claims at the end of the 2014 financial year decreased by 7% to 198,140 compared to 212,085

claims at the end of the previous financial year. A further total of 34,145 were awaiting legal cost payments. This is indicative of

the large number of compensation payments now being made.

Reopened claims at the end of the current financial year decreased by 11% to 14,899 from 16,648 at the end of the previous

financial year. This serves as tangible confirmation that claims are not being classified as “finalised” prematurely.

Outstanding claims are further broken down into supplier, non-supplier, direct and represented claims, as well as post- and

pre-Amendment Act claims, as per the tables that follow.

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Outstanding claims (supplier and non-supplier)

No compensationCompensation paid,

legal costs awaited

Total awaiting compensation or

legal cost payment Open Reopened Sub-total

Outstanding claims as at 31 March 2013Personal claims 167,316 16,203 183,519 52,646 236,165Supplier claims 28,121 445 28,566 15,181 43,747Total 195,437 16,648 212,085 67,827 279,912

Movement of claims during the yearPersonal claims 962 (1,446) (484) (20,016) (20,500)Supplier claims (13,158) (303) (13,461) (13,666) (27,127)Total (12,196) (1,749) (13,945) (33,682) (47,627)

Outstanding claims as at 31 March 2014Personal claims 168,278 14,757 183,035 32,630 215,665Supplier claims 14,963 142 15,105 1,515 16,620Total 183,241 14,899 198,140 34,145 232,285

Outstanding claims (direct and represented)

No compensationCompensation paid,

legal costs awaited



Outstanding claims as at 31 March 2013Personal claimsDirect claims 29,235 1,110 30,345 1,392 31,737Represented claims 138,081 15,093 153,174 51,254 204,428Supplier claimsDirect claims 22,712 87 22,799 1,977 24,776Represented claims 5,409 358 5,767 13,204 18,971Total 195,437 16,648 212,085 67,827 279,912

Movement of claims during the yearPersonal claimsDirect claims 1,213 (2) 1,211 (288) 923Represented claims (251) (1,444) (1,695) (19,728) (21,423)Supplier claimsDirect claims (9,661) (51) (9,712) (1,257) (10,969)Represented claims (3,497) (252) (3,749) (12,409) (16,158)Total (12,196) (1,749) (13,945) (33,682) (47,627)

Outstanding claims as at 31 March 2014PersonalDirect claims 30,448 1,108 31,556 1,104 32,660Represented claims 137,830 13,649 151,479 31,526 183,005SupplierDirect claims 13,051 36 13,087 720 13,807Represented claims 1,912 106 2,018 795 2,813Total 183,241 14,899 198,140 34,145 232,285


Outstanding claims ( Post- and Pre-amendment Act)

No compensationCompensation paid,Legal costs awaited



Outstanding claims as at 31 March 2013Personal claimsPost-amendment Act claims 102,446 1,545 103,991 7,766 111,757Pre-amendment Act claims 64,870 14,658 79,528 44,880 124,408Supplier claimsPost-amendment Act claims 23,694 29 23,723 10,897 34,620Pre-amendment Act claims 4,427 416 4,843 4,284 9,127Total 195,437 16,648 212,085 67,827 279,912

Movement of claims during the yearPersonal claimsPost-amendment Act claims 21,120 874 21,994 2,764 24,758Pre-amendment Act claims (20,158) (2,320) (22,478) (22,780) (45,258)Supplier claimsPost-amendment Act claims (10,422) (8) (10,430) (9,768) (20,198)Pre-amendment Act claims (2,736) (295) (3,031) (3,898) (6,929)Total (12,196) (1,749) (13,945) (33,682) (47,627)

Outstanding claims as at 31 March 2014PersonalPost-amendment Act claims 123,566 2,419 125,985 10,530 136,515Pre-amendment Act claims 44,712 12,338 57,050 22,100 79,150SupplierPost-amendment Act claims 13,272 21 13,293 1,129 14,422Pre-amendment Act claims 1,691 121 1,812 386 2,198Total 183,241 14,899 198,140 34,145 232,285

Repudiated claims

Repudiated claims ended 31 March 2014

Opening balance 1 April 2013 29,937Personal claims 25,928Supplier claims 4,009Movement during the year (14,201)Personal claims (16,096)Supplier claims 1,895Closing balance 31 March 2014 15,736Personal claims 9,832Supplier claims 5,904

Repudiated claims decreased from 29,937 in the 2012/13 financial year to 15,736 in the current 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 completed during the previous financial year 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.

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During the number of outstanding claims audit, claims were identified for immediate settlement to eliminate the number. A

dedicated unit was established and tasked with the elimination during the year under review. Plaintiff attorneys also engaged

with the RAF with regard to block settlement of claims.

Individual claim payments per claims category

Reference Units 31 March 2014 31 March 2013 31 March 2012

Claims paymentsAll claims 1 R'm R22,000 R15,000 R12,500 Rand value per claim Ave. R104,091 R65,844 R54,808 Total individual claim payments No. 211,099 227,855 225,905Personal claims 2 R'm R21,500 R14,400 R12,100 Rand value per claim Ave. R194,676 R138,345 R99,614 Total individual claim payments No. 110,168 104,016 120,728Supplier claims 3 R'm R500 R600 R400 Rand value per claim Ave. R5,215 R4,950 R3,379 Total individual claim payments No. 100,931 123,839 105,177

Claims payments per heads of damageGeneral damages 4 R'm R5,900 R4,000 R3,900 Rand value per claim Ave. R221,003 R152,329 R83,534 Total individual claim payments No. 26,511 26,363 46,174Loss-of-earnings 5 R'm R7,700 R4,600 R3,200 Rand value per claim Ave. R649,912 R535,050 R433,739 Total individual claim payments No. 11,865 8,636 7,191Loss-of-support 6 R'm R2,700 R1,600 R1,100 Rand value per claim Ave. R392,744 R347,861 R295,970 Total individual claim payments No. 6,760 4,684 3,783Medical compensation 7 R'm R1,200 R1,100 R800 Rand value per claim Ave. R9,740 R7,761 R5,870 Total individual claim payments No. 103,620 127,305 113,975Funeral costs 8 R'm R90 R70 R50 Rand value per claim Ave. R11,245 R10,425 R9,259 Total individual claim payments No. 7,630 6,303 5,339Claimants' legal costs 9 R'm R2,900 R2,300 R2,300 Rand value per claim Ave. R63,734 R52,656 R38,534 Total individual claim payments No. 45,561 43,841 60,402RAF's legal costs 10 R'm R1,700 R1,400 R1,200 Rand value per claim Ave. R20,645 R16,015 R14,878 Total individual claim payments No. 84,739 85,846 83,786

Definitions 1. All claims: All claims settled by the RAF. 2. Personal claims: A personal claim is a claim submitted by any person (the third party) for any loss or damage which that person has suffered as a

result of any bodily injury to himself/herself, or the death of, or any bodily injury to any other person.3. Supplier claims: A supplier claim is a claim submitted directly to the RAF by a person/institution that provided medical treatment and accommodation

to the victim of the accident.4. General damages: General damages represent compensation paid by the RAF for loss of amenities of life, pain and suffering, disability and disfigurement.5. Loss-of-earnings: Loss-of-earnings represents past and future loss in earnings incurred by the accident victim as a result of a motor vehicle accident.6. Loss-of-support : Loss-of-support represents past and future loss-of-support incurred by the accident victim’s family as a result of a motor vehicle

accident.7. Medical compensation: Medical compensation represents past and future medical costs incurred by the accident victim as a result of a motor vehicle

accident.8. Funeral costs: Funeral costs represent cost of interment or cremation of the accident victim arising from a motor vehicle accident.9. Claimants’ legal costs: Claimants’ legal costs are expenses paid to accident victims’ attorneys and experts for their assistance provided to the accident

victim in lodging a claim with the RAF.10. RAF’s legal costs: The RAF’s legal costs are expenses paid to the RAF’s panel attorneys to represent the RAF in legal cases against it.


Composition of Claim Payments

13%

6%

0%

8%

12%26%

35%

Claimant legal and expert costClaimant medical cost

Loss-of-support

General damages

Loss-of-earnings

RAF's legal and expert cost

Funeral costs

Graph B7 – Composition of claim payments

Age Analysis of Claims

Claims younger than one year decreased from 38% in 2013 to 29% in 2014. 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 (Graphs B8 and B9).

0

5

10

15

20

25

30

35

40

45

20142013201220112010

Financial Year

% of claims younger than one year

% of claims between 2 and 3 years % of claims older than 3 years

% of claims between 1 and 2 years

Perc

enta

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f Tot

al O

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andi

ng C

laim

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Claims Age Analysis as at 31 March 2014 (%)

3634

15 15

35

24

2021

42

26

15

18

38

23

12

2729

18

13

40

Graph B8 – Age analysis of claims in percentage

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20142013201220112010

Financial Year

Number of claims younger than one year

Number of claims between 2 and 3 years Number of claims older than 3 years

Number of claims between 1 and 2 years

Num

ber o

f Tot

al O

utst

andi

ng C

laim

sClaims Age Analysis as at 31 March 2014 (Number of Claims)

0

20,000

40,000

60,000

80,000

100,000

120,000

77,8

10

74,8

00

33,2

67

33,0

06

79,7

18

54,4

99

46,1

89

49,0

28

110,

207

69,8

45

38,4

71 46,7

38

91,8

37

54,5

09

29,2

84

66,2

71

58,3

21

35,3

24

26,1

58

78,3

37

Graph B9 – Age analysis of claims in numbers

Operations and Finance remain the core business functions of the RAF. Below, follows a comprehensive overview of both

historical and current trends.


Financial Overview

The RAF’s summarised financial and operational results for the current and past financial years are reflected below.

Statement of Financial Position

31 March2014

R’million

Restated 31 March

2013R’million

Restated 31 March

2012R’million

AssetsCurrent assetsCash and cash equivalents 2,505 6,144 4,245Receivables from non-exchange transactions 4,769 4,153 3,884Receivables from exchange transactions 16 33 19Other financial assets 133 132 145Consumable stock 3 3 3

7,426 10,465 8,296Non-current assetsProperty, plant and equipment 247 243 214Intangible assets 21 9 62

268 252 276Total assets 7,694 10,717 8,572

LiabilitiesCurrent liabilitiesPayables from exchange transactions 139 140 84Other financial liabilities 460 334 324Provision for outstanding claims 24,083 20,361 16,399Other provisions 849 860 604

25,531 21,695 17,411Non-current liabilitiesOther financial liabilities 1 1 1Provision for outstanding claims 72,917 62,477 56,208Employee benefits 43 46 40

72,961 62,524 56,249Total liabilities 98,492 84,219 73,660

Net liabilities (90,798) (73,502) (65,088)

Reserves Revaluation reserve 128 124 72Accumulated deficit (90,926) (73,626) (65,160)Total net deficit (90,798) (73,502) (65,088)

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Statement of Financial Performance

31 March2014

R’million

Restated 31 March

2013R’million

Restated 31 March

2012R’million

RevenueRevenue from exchange transactions- Investment income and other revenue 238 260 115Revenue from non-exchange transactionsTransfer revenue- Net fuel levies 20,278 17,883 16,989

Total revenue 20,516 18,143 17,104

Expenditure- Claims expenditure (excluding provision for outstanding claims) 22,280 15,202 12,216- Reinsurance premiums 23 25 23- Employee costs 907 763 657- Depreciation, amortisation and impairments 38 61 64- Finance costs 29 27 24- General expenses 377 300 238Total expenses 23,654 16,378 13,222

(Deficit)/surplus before provision for outstanding claims (3,138) 1,765 3,882Provision for outstanding claims (14,162) (10,230) (24,961)(Deficit)/surplus for the year (17,300) (8,465) (21,079)

Cash Flow Statement

31 March2014

R’million

31 March2013

R’million

31 March2012

R’million

Net cash flows from operating activities (3,589) 1,914 3,114

Cash flows from investing activities (50) (15) (6)Net increase/(decrease) in cash and cash equivalents (3,639) 1,899 3,107Cash and cash equivalents at the beginning of the year 6,144 4,245 1,138Cash and cash equivalents at the end of the year 2,505 6,144 4,245


Financial Ratios Reference Units 31 March 2014Restated

31 March 2013Restated

31 March 2012

Profitability(Deficit)/surplus to revenue 1 % -84 -47 -123Operating (deficit)/surplus to revenue 2 % -15 10 23Return on average equity 3 % -21 -12 -39Return on average total assets 4 % -188 -88 -321Cost to income ratio 5 % 29 27 27Liquidity Cash to claims cover ratio 6 Months 1.35 4.85 4.17Current ratio 7 Ratio 0.29 0.48 0.48Net working capital 8 R'm (18,105) (11,230) (9,115)Net working capital excluding claims provision 9 R'm 5,977 9,131 7,284Solvency Total assets to total liabilities 10 % 8 13 12

Definitions 1. Surplus/(deficit) to revenue: Total surplus or deficit as a percentage of revenue.2. Operating surplus/(deficit) to revenue: Total surplus or deficit before provision for outstanding claims as a percentage of revenue.3. Return on average equity: Total surplus or deficit for the financial year as a percentage of average net deficit at year-end.4. Return on average total assets: Total surplus or deficit for the financial year as a percentage of average total assets during the financial year.5. Cost-to-income ratio: Total administration and human resources costs including RAF and claimant legal and expert costs as a percentage of total

income during the financial year.6. Cash-to-claims cover ratio: Cash and cash equivalents at the end of the financial year divided by average monthly claims expenditure for the financial

year (compensation and legal costs).7. Current ratio: Total current assets divided by total current liabilities.8. Net working capital: Current assets minus current liabilities.9. Net working capital excluding claims provision: Current assets minus current liabilities excluding provision for outstanding claims.10. Total assets to total liabilities: Total assets as a percentage of total liabilities.

Financial Position

Provision for outstanding claims

R’m

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Analysis of Important Financial Indicators

Financial Year

0

20,000

40,000

60,000

80,000

120,000

100,000

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Accumulated de�cit Net fuel levy income Total cash claims expenditure

Graph B10 – The widening gap between income and deficit

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Financial Health

Profitability

The RAF recorded a net deficit for the 2013/14 financial year of R17.3 billion (2012/13: net deficit R8.5 billion) (Graph B11). This was

mainly due to an increase in the provision for outstanding claims of R14.2 billion (2012/13: increase of R10.2 billion). Operating

and HR costs increased during the year under review and a higher fuel levy was realised. This contributed to a net deficit of

R3.1 billion before catering for the provision for outstanding claims.

Efforts to reduce the number of outstanding claims resulted in higher claims expenditure (in cash), together with an increase

in the provision for outstanding claims. These totalled an amount of R36.4 billion (2012/13: R25.4 billion) and far exceeded the

revenue received from fuel levies of R20.3 billion (2012/13: R17.9 billion).

Cash and cash equivalents decreased from R6.1 billion during the previous financial year to R2.5 billion at the end of the reporting

period. Cash balances were substantially lower at the end of the period due to mostly higher (cash) claims expenditure.

Financial Year

(De�cit)/Surplus before provision for outstanding claims

(De�cit)/Surplus for the year

Provision for outstanding claims

R’m

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Pro�tability

(30,000)

(25,000)

(20,000)

(15,000)

(10,000)

(5,000)

0

5,000

10,000

201420132012

1,76

53,88

2

(21,

079)

(24,

961)

(8,4

65)

(10,

230)

(3,1

38)

(17,

300)(14,

162)

Graph B11 – Profitability of the Fund

Solvency and Capitalisation

The RAF remains grossly under-capitalised with liabilities exceeding assets by R90.8 billion (2012/13: R73.5 billion) (Graph B12). The

only assets of substance, other than cash, are land and buildings worth R152 million. Similar organisations to the RAF elsewhere

in the world have, as one of their major assets, investments that cover as much as 110% of the full outstanding liability. Funding

for the RAF has historically focused on only the current liability, and not on funding the non-current liability. It is on this basis that

the RAF has continued to trade for three decades, despite being technically insolvent. Several discussions took place between

the RAF and NT during the reporting period and NT intends to continue to fund the RAF on a pay-as-you-go basis.


The net deficit of the RAF has continued to grow (Graph B12) despite the increase in the RAF Fuel Levy determined by NT. It

is clear that there is no correlation between the annual increase in the Fuel Levy and the increase in the need to settle claims.

Total assets are lower mainly due to lower cash balances, although a higher net fuel levy receivable. The total liabilities are higher

mainly as a result of the increase in the provision for outstanding claims. Overall, the net deficit is substantially larger compared

to the previous reporting period. The RAF achieved an operational deficit of R3.1 billion for 2013/14 prior to the increase in the

provision for outstanding claims had been taken into account. This is mainly due to an increase in claims expenditure as a result

of an increase in both productivity and the average cost to settle a claim.

(120,000)

(100,000)

(80,000)

(60,000)

(40,000)

(20,000)

0

20,000

201420132012

Solvency

10,7

17

(73,

502)

(84,

220)

8,57

2

(65,

089)

(73,

661)

7,69

4

(90,

798)

(98,

492)

Total liabilitiesTotal assets

Financial Year

R’m

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Graph B12 – Solvency of the Fund

Liquidity and Cash Holdings

As at 31 March 2014, current liabilities of the RAF exceeded current assets by R18.1 billion (2012/13: R11.2 billion) (Graph B13).

Liquidity is managed on a day-to-day basis. Claims are paid from available cash reserves. The cash reserve that was built up

during the 12 months prior to the reporting period in relation to previous financial years has been reduced. The ideal scenario

is to have cash holdings sufficient to pay claims for at least two months in advance at any given point in time. From the graphs

that follow, it is evident that the RAF cash resources are not sustainable.

Current results reflect that liquidity is declining, and that the high cash balance of R6.1 billion accumulated during the 2012/13

financial year was only temporary in nature. For the period ended 31 March 2014, the cash balance declined to R2.5 billion. This

was mainly due to increased claims expenditure during the year under review (Graph B14).

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(30,000)

(25,000)

(20,000)

(15,000)

(10,000)

(5,000)

0

5,000

10,000

15,000

201420132012

Financial Year

Liquidity

8,2

96

(9,1

15)

(17,

411)

10,4

65

(11,

230)

(21,

695)

7,42

6

(18,

105)

(25,

531)

Net current liabilitiesTotal current liabilitiesTotal current assets

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Graph B13 – Liquidity of the RAF

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

201420132012

Financial Year

Cash Holdings

R’m

illio

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6,144

2,505

4,245

Graph B14 – Cash holdings of the RAF


Cost of Service Delivery

The RAF constantly focuses on cost-reduction measures to improve efficiencies and to avail more cash for the payment of

compensation.

The cost-to-income ratio for the financial year increased to 29% (2012/13: 27%). Administration costs remained at 7% (2012/13: 7%),

RAF legal and expert costs decreased to 8% (2012/13: 9%) and claimants’ legal and expert costs increased to 14% (2012/13: 13%)

(Graph B15). It is clear that the costs within the RAF’s control are well contained.

Internal measures, such as the roll-out of enhancements to operational claims systems and processes, as well as ‘RAF on the

Road’ campaigns to deal with claimants directly rather than through third parties, have already yielded cost reductions and are

expected to reduce costs even further in the medium to longer term.

20142013201220112010

Financial Year

Claimants' legal and expert costs as % of total income

RAF's admin costs as % of total income Total costs as % of total income

RAF's legal and expert costs as % of total income

Perc

enta

ge

Cost-to-income Ratio

13

8

7

28

15

8

7

30

14

7

6

27

13

9

7

27

14

8

7

29

0

5

10

15

20

25

30

35

Graph B15 – Cost-to-income ratio

Revenue Collection

The RAF obtains its funding from several sources, namely:

• RAF Fuel Levy;

• Government grants paid by NT when there is a pressing need (not during the year under review);

• Borrowings/loans, which are an allowed source of funding according to the RAF Act (this option has not been used to date);

• Investment income, acquired from invested funds that occasionally result when the RAF’s operational capacity prevents it

from paying out all its funds; and

• Reinsurance income.

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2013/14 2012/13

Sources of revenueEstimate

Actual amount

collected(Over)/under

collection Estimate

Actual amount

collected(Over)/under

collectionR’000 R’000 R’000 R’000 R’000 R’000

Net fuel levy 20,930,664 20,278,011 652,653 17,853,056 17,883,806 (30,750)Investment 668,035 236,361 431,674 159,075 254,802 (95,727)Other income - 1,918 (1,918) - 3,581 (3,581)Reinsurance revenue - 153 (153) - 1,577 (1,577)Total 21,598,699 20,516,443 1,082,256 18,012,131 18,143,766 (131,635)

As indicated in Graph B16 below, the total revenue of the RAF has increased over the years. For the period ending 31 March

2014, an increase of R2.4 billion (13%) in total revenue was recorded when compared to the corresponding period last year. This

is primarily attributable to:

• The net RAF Fuel Levy which increased by 13% to R20.3 billion (2012/13: R17.9 billion);

• Investment income which decreased by 7% to R236 million (2012/13: R255 million); and

• Reinsurance and other income which decreased by 60% to R2 million (2012/13: R5 million).

0

5,000

10,000

15,000

20,000

25,000

20142013201220112010

Financial Year

Total revenue

Government grant Reinsurance and other income

Investment incomeNet fuel levies

R’m

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Composition of Total Revenue

12,5

6612

,683

48 60 - - -9

20,2

7820

,516

236

- 2

14,5

2614

,474

40 12

17,1

0416

,989

113

2

18,1

4417

,884

255

5

Graph B16 – The increase in total revenue over the past five years

Fuel Levy

The growth in the RAF Fuel Levy income (Graph B16) arose primarily as a result of the 8 cents per litre fuel levy increase, from

88c/ι (2013) to 96c/ι (2014), effective from the beginning of the financial year. The volume of total petrol and diesel usage in the

country decreased by 2% to 22,7 mega litres for the period April 2013 to March 2014 (April to March 2012/13: 23,2 megalitres)

(Graph B17).


19,500

20,000

20,500

21,000

21,500

22,000

22,500

23,000

23,500

20142013201220112010

Fuel Volumes per Financial Year

Financial Year

Meg

alitr

es

23,26323,155

22,690

20,889

21,874

Total fuel sales

Graph B17 – Growth in fuel levy incomeSource: Statistics on “Fuel Sales Volume SA: Petrol and Diesel” – Department of Energy (DoE)

At these levels, the RAF Fuel Levy represents 6.7% of the total fuel price at the pump, which averaged more than 1,331 cents per

litre in Gauteng for the year under review (Graph B18 and Figure B3).

0

200

400

600

800

1,000

1,200

1,600

1,400

3/20

132/

2013

1/20

1312

/201

211

/201

210

/201

29/

2012

8/20

127/

2012

6/20

125/

2012

4/20

12

3/20

142/

2014

1/20

1412

/201

311

/201

310

/201

39/

2013

8/20

137/

2013

6/20

135/

2013

4/20

13

3/20

112/

2011

1/20

1112

/201

011

/201

010

/201

09/

2010

8/20

107/

2010

6/20

105/

2010

4/20

10

3/20

122/

2012

1/20

1212

/201

111

/201

110

/201

19/

2011

8/20

117/

2011

6/20

115/

2011

4/20

11

Cent

s

Historical Analysis of RAF Fuel Levy vs. Fuel Price and Basic Fuel Levy

Date

167.5 177.5 197.5 212.5

858

1,025

1,222

1,320

72 80 88 96

Gauteng fuel price c/ι RAF Fuel Levy c/ι Basic fuel levy c/ι

1,3551,432

1,239

212.5

96

Graph B18 – Historical analysis of the RAF Fuel Levy versus fuel price and basic fuel levy

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Gauteng Petrol 95 ULP (c/ι)31 March 2014

R14.32/liter

Transport cost2.0%

BFP60.3%

Fuel levy14.8%Wholesale margin

2.2%

Secondary storage1.2%

Customs and excise duty0.3%

RAF Fuel Levy6.7%

Petroleum products levy0.0%

Demand side management levy

0.7%

Incremental inland transport recovery levy

0.2%

Slate levy1.1%

Levies and taxes23.8%

Pump rounding0.0%

Dealer margin9.7%

Secondary distribution0.8%

Figure B3 – Breakdown of petrol price (Gauteng) 31 March 2014 Source: South African Petroleum Industry Association (SAPIA)


Diesel Refund

The refund on diesel provided to certain industrial sectors of the economy increased by 35% to R2.7 billion (2012/13: R2 billion).

The refund, which represents more than 11% of the RAF Fuel Levy income, is a major concession on income due to the RAF. The

refund has continued to grow steadily over the years (Graph B19).

0

500

1,000

1,500

2,000

2,500

3,000

20142013201220112010

R’m

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Diesel Refund

Financial Year

1,189

1,547

1,981

2,676

1,092

Graph B19 – Refund on diesel

Investment Income

Investment income decreased by 7% to R236 million (2012/13: R255 million), mainly due to lower average cash holdings during

the year caused by an increase in claims expenditure owing to higher claims processing during the year. The cash expenditure

on claims has exceeded the net fuel levies by R1.9 billion or 9% for the current financial year. The average interest rate on cash

investments remained stable at 5.07% (2012/13: 5.15%). Cash holdings for the period ended 31 March 2014 was R2.5 billion

compared to R6.1 billion in the previous financial year (Graph B16).

Reinsurance Income

The RAF enters into reinsurance treaties with major international reinsurance companies to cover catastrophic accidents. During

the review period, the RAF recovered reinsurance claims to the value of R153,000 (2012/13: R1.6 million) from reinsurance

companies. This trend has resulted in fewer claim incidents qualifying for reinsurance claim recoveries. The RAF’s reinsurance

recoveries derive from a portion of the total claims per incident that is in excess of the retention limit. In view of the aforesaid,

reinsurance recoveries are expected to show a general decrease from prior financial years (Graph B16).

RAF Fuel Levy

The primary source of income for the RAF 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 NT on an annual basis, whereas total fuel sales are influenced by a number of macro-economic factors. The

RAF annually requests an increase in the RAF Fuel Levy from NT 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 NT has historically set the levy

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on a pay-as-you-go basis rather than with the purpose of establishing a fully funded position for the RAF. During the 2013/14

financial year, the RAF Fuel Levy was set at 96 cents per litre.

The South African Revenue Service (SARS) administers the collection of the fuel levy and pays it to the RAF 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 RAF 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 legislation. The RAF Fuel Levy collection process is depicted in the figure below.

Petrol and diesel consumption

RAF Fuel Levy collected by SARS (One to two months after the fuel leaves the refinery)

RAF Fuel Levy deposited with National Treasury

RAF Fuel Levy paid to the RAF via the Department of Transport (50% paid one month after receipt by National Treasury. The remaining 50% two months after receipt by National Treasury)

Diesel rebate refunded to SARS (Set-off)

Diesel rebate refunded to industrial customers

Oil Refineries / Companies

Fuel Retailers

Motoring Public

Industry Consumers

Figure B4 – RAF Fuel Levy collection process


Fuel Levy Statistics

RAF Fuel Levy statistics for the past five years are reflected below:

Financial year Units31 March

201431 March

201331 March

201231 March

201131 March

2010

Fuel consumption for road use:* Megalitres 18,907 19,473 19,636 18,543 17,792

* Estimated fuel sales for road used (based on Council for Scientific and Industrial Research (CSIR) Report CR-2002/79 which recommended that 98% of all petrol sales and 70% of all diesel sales should be allocated for road use purposes

Financial year Units31 March

201431 March

201331 March

201231 March

201131 March

2010

RAF Fuel Levy:

Petrol c/ι 96 88 80 72 64

Diesel c/ι 96 88 80 72 64

Gross fuel levy: R/m 22,954 19,865 18,536 15,663 13,658

Diesel refund: R/m (2,676) (1,981) (1,547) (1,189) (1,092)

Net fuel levy: R/m 20,278 17,884 16,989 14,474 12,566

Diesel refund % of gross fuel levy % 11.66% 9.97% 8.35% 7.59% 8.00%Implied average fuel consumption (Gross fuel levy/RAF Fuel Levy c/ι) Megalitres 23,910 22,574 23,170 21,754 21,341Implied average fuel consumption subject to diesel refund (Diesel refund/RAF Fuel Levy c/ι) Megalitres (2,787) (2,252) (1,934) (1,651) (1,706)Implied average net fuel consumption (Net fuel levy/RAF Fuel Levy c/ι) Megalitres 21,123 20,323 21,236 20,103 19,634

Source: South African Petroleum Industry Association (SAPIA), Department of Energy (DoE), Road Traffic Management Corporation (RTMC)

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0

10

20

30

40

50

60

70

80

90

100

20142013201220112010

Cent

sRAF Fuel Levy Cents/Litre

Financial Year

64

72

80

88

96

Graph B20 – RAF Fuel Levy cents/litre

20142013201220112010

Net Fuel Levy

R’m

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n

13,658

12,566

(1,092)

15,663

14,474

(1,189)

18,536

16,989

(1,547)

19,865

17,884

(1,981)

22,954

20,278

(2,676)

Financial Year

Net fuel levyDiesel refundGross fuel levy

Graph B21 – Net fuel levy


Total Expenditure

Total RAF expenditure increased by 42% to R37.8 billion (2012/13: R26.6 billion).

Staff and administration costs, at 3% and 1%, respectively, remained a relatively small portion of total expenses.

Total claims expenditure, inclusive of the provision for outstanding claims at 96% of total expenditure, increased by 43% to

R36.4 billion (2012/13: R25.4 billion) (Graphs B22 and B23).

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

20142013201220112010

Financial Year

Claims expenditure including provision Total expenditure

Admin and other

R’m

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Analysis of Total Expenditure

763

414

37,8

16

907

467

36,4

42

26,6

09

25,4

33

595

318

14,2

64

15,1

77

621

355

15,2

22

16,1

98

657

349

37,1

77

38,1

83

Graph B22 – Expenditure

Composition of Total Expenditure

95%

3% 2%2014

Sta� costsClaims expenditure Administrative and other expenses

96%

20133% 1%

Graph B23 – Composition of expenditure

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Staff Costs

Staff costs for the financial year, at R0.90 billion, were 18% higher compared to the previous reporting period (2012/13: R0.76 billion).

The main reasons for the increase were:

• Increases in the total cost component of salaries averaging 8%.

• Staff numbers increased by 22% to 2,288 (2012/13: 1,881) (Graph B24).

0

500

1,000

1,500

2,000

2,500

20142013201220112010

1,9601,872 1,881

2,288

1,844

Num

ber o

f Per

man

ent S

ta�

Sta� Count

Financial Year

Graph B24 – Staff numbers increased in the 2013/14 financial year

Administration and Other Costs

Total administration and other costs for the 2014 financial year, at R0.47 billion, were 13% higher compared to the previous

reporting period (2012/13: R0.41 billion). The increased variance was mainly due to inflation, as well as an increase in administration

costs related to staff numbers.


Claims Expenditure and the Growth in the Claims Provision

Total claims expenditure (inclusive of the provision for outstanding claims) for the reporting period, at R36.4 billion, was 43%

higher than the corresponding period last year (2012/13: R25.4 billion).

The increase was mainly attributable to higher claims expenditure (in cash) of more than R7 billion over the previous financial

year, together with an increase of R14.2 billion in the provision for outstanding claims, due to the following:

• Higher Claims Processing and Payment Amounts

Claims expenditure (excluding the provision for outstanding claims and inclusive of year-end accruals) for the year is 47%

higher than the 2013 financial year. This was due to an upward trend in claims processing (productivity) throughout the

year, as well as an increase in average cost of settling claims. This was despite an overall increase of R14.2 billion in the

provision for outstanding claims.

• Change in the Composition of the Claims Expenditure

The increase in the provision for outstanding claims during the 2014 financial year was mainly driven by a 15% increase in

the outstanding claims liability for personal claims and a 45% increase in the provision for undertaking claims liability when

compared to the 2012/13 financial year provision for outstanding claims. This is as a result of an increase in the average

cost of settling personal claims. The total value of the provision for outstanding claims arising from the actuarial valuation

performed for the 2013/14 financial year increased to R97 billion.

At an individual claim level, it was found that over 80% of the total expenditure was for claims less than R50,000 in value, but

that this represented less than 10% of the overall spend (Graphs B25 and B26).

Perc

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)

Number of Claims Compensation Payments as % of Total

Financial Year

0

10

20

30

40

50

60

70

80

90

100

2014201320122011

Less than R50k R50k – R100k R100k – R125k

R500k – R1 million R1 million – R3 million >R3 million

R125k – R500k

Graph B25 – Number of claims as a % of compensation payments

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0

5

10

15

20

25

30

35

2014201320122011

Perc

enta

ge (%

)R Value Total Claims Payments % of Total

Less than R50k R50k – R100k R100k – R125k

R500k – R1 million R1 million – R3 million >R3 million

R125k – R500k

Graph B26 – Value of claims payments – % of total

The total cash pay-out for claims (excluding year-end accruals) increased by 47% to R22.2 billion (2012/13: R15.1 billion) mainly as

result of improved productivity in claims operations during the year under review. Higher average claims values were experienced

as a result of the increased movement towards higher-cost loss-of-earnings claims, as well as higher-than-inflation increases in

tariffs, costs and compensation. This, in turn, was influenced by an increase in the outstanding claims provision of R14.2 billion,

being 39% more than the increase in the previous financial year (2012/13: R10.2 billion). Total claims expenditure also included

a net accrued value totalling R95 million of payments accrued at the end of the financial year, together with the reversal of the

accrual for payments in the previous financial year (2012/13: R113 million) (Graph B27).


(5,000)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

20142013201220112010

Financial Year

R’m

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Composition of Claims Expenditure

(291)

Net increase/(decrease) in provisionAccruals Claims paid in cash

24,961

12,507

113

10,230

15,090

95

14,162

22,185

2,281

12,786

1552,866

11,370

29

Graph B27 – Composition of claims expenditure

Total Liability for Outstanding and IBNR Claims

Consistent with previous years, the RAF made use of statutory actuaries to estimate the provision for outstanding claims, which

includes and is informed by both the liability for claims reported and the claims which have not been reported. The actuaries

estimated that the RAF could still expect to pay an estimated total amount of R97 billion (in March 2014 monetary terms) in

respect of accidents that occurred prior to 1 April 2014. If the RAF held assets of R97 billion, this, together with interest earned on

the assets, was estimated to be sufficient to cover these future payments. R97 billion is, therefore, the total estimated discounted

liability for outstanding claims.

This estimated liability, including IBNR, was determined by separately considering the following four components:

• Personal claims (non-undertakings, non-supplier);

• Supplier claims;

• Undertaking payments; and

• Allowance for legal cases (such as Mvumvu, Paixao, Van Zyl, etc.)

Each component contributed as follows to the total liability:

ComponentLiability

(R’billion) %

Personal claims 87.1 89.8Supplier claims 0.6 0.6Undertaking payments 7.3 7.5Allowance for legal cases 2.0 2.1

The accounting treatment of the total liability for outstanding claims is explored further in Notes 12 and 35 of the Financial

Statements for the year under review.

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The expected future payments in respect of personal claims were arrived at by first estimating the number of outstanding claims

for each accident year, grouping these claims into seven homogeneous groups and then multiplying the estimated outstanding

number of claims in each group by the average amount (in March 2014 monetary terms) expected to be paid per claim. These

average amounts per group differed per accident year because, on average, larger claims take longer to settle. On the assumption

that the investment return on notional assets could have been equal to claims inflation, the total estimated discounted liability

equals the liability in March 2014 money terms, which is R97 billion.

Graph B28 reflects the estimated number of outstanding personal claims for each accident year, split up into settled claims,

unsettled reported claims and incurred but not reported (IBNR) claims. The Amendment Act was introduced on 1 August 2008,

and the accidents periods before and after this date are shown separately.

0

50,000

100,000

150,000

200,000

250,000

2013 20142012201120102009 (8 months)

2009 (4 months)

20082007200620052004200320022001200019991998

New ActOld Act

Estimated Number of Ultimate Personal Claims

81,7

29

0

91,2

92

519

10

108,

606

781

25

128,

625

1,11

9 4

6

143,

565

1,58

2 6

8

115,

827

1,58

1 8

6

123,

531

2,25

5 1

23

109,

312

3,22

8 15

9

114,

935

5,01

6 2

39

133,

569

8,33

1 3

95

177,

763

15,0

40

711

76,5

91

8,15

4 3

66

28,7

09

13,6

22 4

77

28,8

29

25,2

83 1,

097

15,7

85

24,3

11 2,

019

10,3

47

23,8

43 9,

382

5,03

7 21

,104

18,4

73

1,39

2 10

,730

41,6

51

IBNRUnsettled reportedSettled

Num

ber

311

Graph B28 – Estimated ultimate personal claims


The estimated number of ultimate personal claims is expected to fall into the groups as shown in Graph B29 and Graph B30

below. The split for accident years 2008 and 2011 is shown separately to illustrate the impact of the RAF Amendment Act.

Breakdown of Ultimate Personal Claims for the Accident Year Ending 31 March 2008, Subdivided into Groups

Group A: No payments

Group C2: Injury: General damages and no loss-of-earnings

Group C3: Injury: General damages and loss-of-earnings

Group B: Only costs

Group D2: Death funeral only

Group C1: Injury: No general damages

Group D1: Death with loss-of-support

5%8%

2%1%

2% 2%

79%

Graph B29 – Ultimate pre-Amendment Act claims by type

Breakdown of Ultimate Personal Claims for the Accident Year Ending 31 March 2011, Subdivided into Groups

Group A: No payments

Group C2: Injury: General damages and no loss-of-earnings

Group C3: Injury: General damages and loss-of-earnings

Group B: Only costs

Group D2: Death funeral only

Group C1: Injury: No general damages

Group D1: Death with loss-of-support

11%

41%

6%13%

12%

11%

5%

Graph B30 – Ultimate post-Amendment Act claims by type

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For post-Amendment Act claims, there were not enough claims settled to allow a similar analysis. Therefore, the RAF calculated

the average cost per new Act claim settled to date, and assumed the same future increases or decreases (as above) per group

would apply to these amounts for new Act claim settlements.

Most other statistics pertaining to claim payments in this Integrated Annual Report are broken down into “heads of damage” as

opposed to the “groups” breakdown used for estimating the liability of outstanding claims. Claims falling into any “group” could

have payments in respect of different “heads of damage”. The table below demonstrates the relationship between the “groups”

and the “heads of damage”.

Group: B C1 C2 C3 D1 D2 Supplier TotalR’million R’million R’million R’million R’million R’million R’million R’million

Heads:Medical - 35 177 565 5 121 394 1,297Loss-of-earnings - 50 696 4,460 34 3 - 5,243Loss-of-support - - - - 689 - - 689Funeral - - - - 3 355 - 358General damages - - 5,495 2,995 16 1 - 8,507RAF legal 25 12 915 547 53 130 6 1,688Claimant legal 22 14 1,541 782 63 198 17 2,637Other - - (18) (36) (9) - - (63)Total 47 111 8,806 9,313 854 808 417 20,356

The discounted provision in respect of outstanding personal claims (excluding the provision for outstanding liability in respect

of undertakings issued and supplier claims) was estimated to be R89,149 million, made up as per Graph B31 for the different

accident years. It is clear that the liability is largely constituted of a provision for claims over the last six accident years, which

still needs to materialise.

0

5,000

10,000

15,000

20,000

20142013201220112010200920082007200620052004200320022001200019991998Pre-1998

Estimated Liability for Outstanding Personal Claims per Accident Year

Accident Year

R'm

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136

127

208

311

462

630

623

825 1,10

1

1,66

0 2,78

0

4,99

6

9,24

8

11,1

33

10,6

79

12,6

89

17,3

35

14,

208

Graph B31 – Estimated liability for outstanding claims, excluding undertakings and supplier claims


The discounted provision in respect of outstanding undertaking payments was estimated to be R7,255 million, made up as

shown in Graph B32 for the different accident years.

0

200

400

600

800

1,000

20142013201220112010200920082007200620052004200320022001200019991998Pre-1998

Estimated Liability in Respect of Undertakings

772

191 20

5 235 27

1 311

292

279 29

6 341

449

550

495

486

476 48

3

606

519

Accident Year

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Graph B32 – Estimated liability for undertakings

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Contingency Fees

Contingency fees charged by plaintiff attorneys have long exceeded the 25% maximum cap as stipulated by the Contingency

Fees Act.

For illustrative purposes, assuming that attorneys’ contingency fees amounted to 50% of compensation during the year under

review, only R8.8 billion of the cash paid out by the RAF for the period ended 31 March 2014 (2012/13: R5.7 billion) actually reached

the victims of accidents. This means that as much as 60% of all claims disbursements made by the RAF are paid to attorneys,

as opposed to the claimants. This is precisely why the RAF believes that the current legislative model is wasteful, since the cost

of service delivery is disproportionately high in relation to the compensation paid and the RAF Fuel Levy received (Graph B33).

0

5,000

10,000

15,000

20,000

25,000

20142013201220112010

Financial Year

Compensation and medical costs RAF and claimant legal costs Contingency fee

R’m

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Composition of Claim Payments Including Estimated Contingency Fees

4,343

4,684 4,474

2,6863,417 3,559

4,343 4,684 4,474

5,699

3,691

5,699

8,776

4,633

8,776

Graph B33 – Composition of claim payments including estimated contingency

Composition of Claims Payments

The composition of the compensation portion of the claims (Graph B34) indicates that a major component of the claims (in

cash) that the RAF pays out is in respect of general damages and loss of amenities of life, as opposed to medical and funeral

costs. For accidents that occurred after 1 August 2008, general damages are only paid out if a serious injury has been sustained,

which is in line with the RAF Amendment Act.

During the 2014 financial year, R5.9 billion (2012/13: R4.0 billion) was paid out as general damages. This represents 33%

(2012/13: 35%) of the compensation paid (excluding legal fees). In proportion to total pay-outs, general damages have shown

a decrease over the past three financial years. It is expected that the RAF Amendment Act will result in further decreases in

general damages claim payments. The Minister of Transport prescribed a list of non-serious injuries on 15 May 2013, which also

simplifies the serious injury assessment process.

Medical payments, at R1.2 billion (2012/13: R1.1 billion), represented 7% (2012/13: 10%) of compensation paid. Loss-of-income

and -support payments of R10.4 billion (2012/13: R6.2 billion) represented 59% (2012/13: 55%) of compensation paid, and funeral

costs, at R0.09 billion (2012/13: R0.07 billion), represented 0.5% (2012/13: 0.6%) of compensation paid.


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

20142013201220112010

Financial Year

Total compensation

Claimant medical costs Funeral costs

General damagesLoss-of-earnings and -support

R’m

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Composition of Compensation

8,68

53,

177 4,

751

733

768

24

9,36

94,

108

4,46

7

26

8,94

84,

263

3,85

178

549

11,3

986,

216

3,97

81,

138

66

17,5

5210

,368

5,85

61,

242

86

Graph B34 – Composition of compensation

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Undertakings

Medical cost payments are inclusive of certificates issued to claimants by the RAF to cover future medical treatments, known as

“undertakings”. An undertaking is regarded as active if a claim is made against it during the year. The total number of undertakings

certificates issued increased to 137,925 (2012/13: 120,986). The number of active undertakings in respect of which payments

were made stabilised at ±3% of all undertakings issued (2012/13: 3%) (Graph B35). This is in line with the nature of the instrument

issued, since most injuries arising from motor vehicle accidents heal and do not represent chronic illnesses.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

20142013201220112010

Financial Year

Total undertakings Active undertakings

137,

925

4,46

7

103

,791

2,4

38

107

,209

2,1

64

111

,628

2,8

50

120,

986

4,12

2

Undertakings

Num

ber

Graph B35 – Undertakings (future medical treatment)


Payments in respect of all undertakings issued for the 2014 financial year amounted to R234 million (2012/13: R168 million) (Graph B36).

0

50,000

100,000

150,000

200,000

250,000

20142013201220112010

Financial Year

Undertakings – Amount Paid

82,009 85,984

124,265

167,941

234,035

R’00

0

Graph B36 – Undertakings paid out

In keeping with the need to provide support to road crash victims, the increase in the number of total active undertakings is

seen as a positive change.

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Foreign Claims

Claims by foreign visitors to South Africa continued to form a large proportion of high-value claims due to an increasing influx

of foreign visitors to the country. Since the bulk of payments to foreign nationals are made in their currency of origin and they

are accustomed to unlimited benefits with regard to loss-of-earnings in their own countries, foreigners’ claims have dominated

high-value claims in the pre-Amendment Act dispensation.

With the promulgation of the RAF Amendment Act, loss-of-earnings and loss-of-support payments to foreigners have been

capped at R160,000 per annum, adjusted for inflation on a quarterly basis since August 2008. The current cap at financial year-

end was R215,320.

As at 31 March 2014, 14% (2012/13: 14%) of the value of the estimated liability of claims in excess of R5 million comprised claims

by foreign nationals (Graph B37).

It is important to note, however, that the actual claimed amounts can exceed the estimated value of the claim.

Estimated Outstanding Liability for Claims in Excess of R5 Million

75%

25%

as at 31 March 2014

Total foreignersTotal RSA

86%

as at 31 March 2013

14%

86%

14%

Graph B37 – Estimated outstanding liability for claims >R5 million


High-value Claims

Although the number of high-value claims (claims where compensation paid is greater than R500,000) as a percentage of the

total claims finalised increased during the year, these claims still represent a relatively small proportion of total claims finalised

by the RAF during the current financial year, i.e. 3.80% of the total number finalised (2012/13: 2.49%) (Graph B38).

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

20142013201220112010

Finalised Number of Claims where Compensation Paid is Greater than R500,000 (in Real Terms) as Percentage of Total Finalised Claims

Perc

enta

ge

Financial Year

3.80%

2.49%

1.69%

0.72%

0.50%

Graph B38 – Number of claims compensated >R500,000 as a % of total claims finalised

In terms of total Rand value paid, these claims constituted 51.4% of the total compensation paid out during the reporting period

(2012/13: 47.4%) (Graph B39).

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

20142013201220112010

Rand Value of Compensation Claim Payments Greater than R500,000 as Percentage of Total Compensation Paid

Perc

enta

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Financial Year

24.83%

31.28%

38.23%

47.40%

51.38%

Graph B39 – Rand value of claims >R500,000 compensated as a % of total compensation paid

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Claims Categories and Averages

Claims settled by the RAF differ materially when the composition of the claims is considered. The following graph (Graph B40)

and analysis provides insight into the average number of claims paid during the year, as well as the composition of these claims.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Claimant Legal and

Other

RAF Legal and

Other

FuneralMedicalLoss-of-Support

Loss-of-Earnings

General Claims

Total Claims

Supplier Claims

Personal Claims

Financial Year 2014

Tota

l Ind

ivid

ual C

laim

Pay

men

ts

Average Rand value Total individual claims

Aver

age

Rand

Val

ue o

f Cla

im P

aym

ents

OperationsHead of Damage – Average Cost per Claim

0

50,000

100,000

150,000

200,000

250,000

110,

168

194,

676

100,

931

5,21

5

211,

099

104,

091

26,5

1122

1,00

3

11,8

6564

9,91

2

6,76

039

2,74

4

103,

620

9,74

0 7,63

0

84,7

3920

,645

45,5

61

11,2

45 63,7

34

0

100,000

200,000

300,000

400,000

500,000

600,000

Claimant Legal and

Other

RAF Legal and

Other

FuneralMedicalLoss-of-support

Loss-of- earnings

General Claims

Total Claims

Supplier Claims

Personal Claims

Financial Year 2013

Tota

l Ind

ivid

ual C

laim

Pay

men

ts

Average Rand value Total individual claims

Aver

age

Rand

Val

ue o

f Cla

im P

aym

ents

OperationsHead of Damage – Average Cost per Claim

0

50,000

100,000

150,000

200,000

250,000

104,

016

138,

345

123,

839

4,95

0

227,

855

65,8

44

26,3

6315

2,32

9

8,63

653

5,05

0

4,68

434

7,86

1

127,

305

7,76

1 6,30

3

85,8

4616

,015

43,8

41

10,4

25 52,6

56

Graph B40 – Heads of damage – Average cost per claim


Total Claim Payments

The average Rand value of all claims paid increased by 58% during the financial year from R65,844 to R104,091 (2012/13:

increase of 20% from R54,808 to R65,844). The average increase in payments per claim from 2010 to 2014 has been 27% per

annum. This increase was due to the increase in both productivity and average cost to settle a personal claim especially

those in respect of loss-of-earnings, loss-of-support and general damages when compared to lower-value supplier claims.

The total number of individual claims payments decreased by 7% during the financial year from 227,855 to 211,099 (2012/13:

increase of 1% from 225,905 to 227,855). The average decrease in the number of claims settled between 2010 and 2014 has

been 9% per annum.

Personal Claims

The average Rand value of all personal claims paid increased by 41% at the end of the financial year from R138,345 to R194,676

(2012/13: increase of 39% from R99,614 to R138,345). The average payment of personal claims has increased by 30% per

annum from 2010 to the end of the 2014 financial year. The main reasons for this are unpacked below under the different

heads of damages.

The total number of individual personal claim payments increased by 6% at the end of the 2014 financial year from 104,016 to

110,168 (2012/13: decrease of 14% from 120,728 to 104,016). The average decrease in the number of payments per claim from

2010 to the 2014 financial year has been 11% per annum.

Supplier Claims

The average Rand value of all supplier claims paid increased by 5% at the end of the review period from R4,950 to R5,215

(2012/13: increase of 46% from R3,379 to R4,950). The average payment of supplier claims has increased by 16% from 2010 to

the end of the 2014 financial year. The decrease in the average payment per supplier claim is attributable to higher amounts

claimed during the financial year.

The total number of individual supplier claim payments decreased by 18% at the end of the 2014 financial year from 123,839

to 100,931 (2012/13: increase of 18% from 105,177 to 123,839). The average decrease in the number of claims from 2010 to the

end of the review period has been 4% per annum.

General Damages

The average Rand value per general damages claims paid increased by 45% during the financial year from R152,329 in the previous

financial year to R221,003 (2012/13: increase of 82% from R83,534 to R152,329). The average payment for general-damages claims

has increased by 45% per annum between 2010 and the current financial year.

The number of individual general-damages claims showed a slight increase of 0.6% from 26,363 in the previous financial year

to 26,511 (2012/13: decrease of 43% from 46,174 to 26,363). On average, the number of claims in respect of general damages

has decreased by 26% per annum since 2010. This claims category continues to be abused, as most of the claims for general

damages are not for serious injuries. The RAF Amendment Act should address this anomaly over time.

Loss-of-earnings

The average Rand value of all loss-of-earnings claims paid increased by 21% at the end of the 2014 financial year from R535,050

to R649,912 (2012/13: increase of 23% from R433,739 to R535,050). The average loss-of-earnings payment per claim has increased

by 15% from 2010 to the end of the 2014 financial year.

The total number of individual loss-of-earnings claim payments increased by 37% at the end of the 2014 financial year, from

8,636 in the previous reporting period to 11,865 (2012/13: increase of 20% from 7,191 to 8,636). On average, the number of

claims in respect of loss-of-earnings has increased by 13% per annum since 2010. Only 11,865 out of a total of 110,168 individual

claim payments were paid towards loss-of-earnings. This represents 11% of the total number of claims paid, but accounts for a

significant proportion of the overall expenditure. This emphasises the level of abuse of the current dispensation.

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The average settlement over the past few years has increased far in excess of the growth in gross national income and average

wage and salary increases throughout the country. The introduction of the RAF Amendment Act will, however, not result in a

material reduction in the payment of loss-of-earnings, despite the cap being set at R160,000 per annum adjusted for inflation,

currently at R215,320. This is due to most South Africans earning an annual income of less than the capped amount. In addition,

more accident victims will become entitled to claim for loss-of-income and loss-of-support as a result of the removal of the

R25,000 limit on passenger claims.

Loss-of-support

The average Rand value of loss-of-support claims paid increased by 13% at the end of the 2014 financial year from R347,861 to

R392,744 (2012/13: increase of 18% from R295,970 to R347,861). The average loss-of-support payment per claim has increased

by 16% per annum since 2010.

The average number of individual loss-of-support claims payments increased by 44% at the end of the 2014 financial year from 4,684

to 6,760 (2012/13: increase of 24% from 3,783 to 4,684). The average number of claims has increased by 19% per annum since 2010.

Medical Compensation

The average Rand value of all medical cost claims paid increased by 25% at the end of the 2014 financial year from R7,761 to

R9,740 (2012/13: increase of 32% from R5,870 to R7,761). The average medical cost payment per claim increased by 14% per

annum since 2010.

The average monthly individual medical cost claim payments decreased by 19% at the end of the 2014 financial year from

127,305 to 103,620 (2012/13: increase of 12% from 113,975 to 127,305). The average number of claims for medical costs has

decreased by 8% per annum since 2010.

Funeral Costs

The average Rand value of funeral costs claims paid increased by 8% at the end of the 2014 financial year from R10,425 in 2013

to R11,245 (2012/13: increase of 13% from R9,259 to R10,425). The average payment per claim for funeral costs has increased by

11% per annum since 2010.

The average number of individual claims payments for funeral costs increased by 21% at the end of the 2014 financial year from

6,303 in the previous reporting period to 7,630 (2012/13: increase of 18% from 5,339 to 6,303). On average, the number of funeral

cost claim payments increased by 19% per annum over the past five years.

RAF’s Legal Costs

The average Rand value of the RAF’s legal cost payments per claim increased by 29% at the end of the financial year from R16,015

in the previous financial year to R20,645 (2012/13: increase of 8% from R14,878 to R16,015). The average increase in the RAF’s

legal cost payments per claim has been 16% per annum from 2010 to the end of March 2013.

The average number of individual RAF legal cost payments per claim for the 12 months decreased by 1% at the end of the

2014 financial year from 85,846 at the end of the previous reporting period to 84,739 (2012/13: increase of 2% from 83,786 to

85,846). There has been an average decrease of 3% per annum in the number of RAF legal cost payments per claim since 2010.

Claimants’ Legal Costs

The average Rand value of claimants’ legal costs settled increased by 21% at the end of the 2014 financial year from R52,656 in

the previous reporting period to R63,734 (2012/13: increase of 37% from R38,534 to R52,656). The average claimants’ legal cost

payments per claim increased by 42% per financial year since 2010. This is mainly as a result of increases in the tariffs being set

by an independent Rules Board. The RAF contributes significantly to litigation costs in the country and should be granted the

opportunity to provide its inputs with regard to the calculation and setting of new tariffs.


The average total of individual claimant’s legal cost claim payments increased by 4% at the end of the 2014 financial year from

43,841 to 45,561 (2012/13: decrease of 27% from 60,402 to 43,841). The average number of individual claimant’s legal cost

payments per claim decreased by 19% per annum over the five-year period.

The current system benefits attorneys who, despite being paid their legal costs in full by the RAF, continue to charge a contingency

fee to the claimants. The current fault-based system of compensation results in vast legal costs being incurred in determining

fault and the quantum of the payment. A properly defined no-fault compensation system in the future should see significant

savings in this regard.

Key Policy Developments and Legislative Changes

The NT Instruction 01 of 2013/2014: Cost Containment Measures was issued by the Acting Accountant-General on 19 December

2013, and came into effect from 1 January 2014. The RAF had to ensure that its Accounting Authority instituted appropriate

expenditure control measures, and is now compliant with the mandatory provisions of the NT Instruction.

The enactment of the Protection of Personal Information Act, 2013 (Act No. 3 of 2013) (POPI Act) in the latter part of November

2013 meant that the RAF had to review the manner in which it manages the personal information of its customers and employees,

as well as its system’s ability to protect such personal information. An implementation plan was developed and implemented

to ensure compliance with the Act by April 2015.

The Use of Official Languages Act, 2012 (Act No. 12 of 2012), which came into effect on 2 May 2013, promotes inclusive linguistic

diversity and recognition of the use of previously suppressed official languages. The RAF is adapting its operations, policies and

other documentation to comply with the prescripts of this Act.

Parliament’s promulgation of the Transitional Act, which came into effect on 13 February 2013, means that the RAF now administers

three different frameworks, namely the RAF Act, the Amendment Act and the Transitional Act. The current legislative environment

hinders rather than enables the RAF’s attainment of its vision.

The draft RABS Bill was published for comment on 8 February 2013. The RABS Drafting Team, which includes RAF representatives,

considered the comments received of the draft Bill, and consulted with certain organs of state regarding their comments. A number

of commentators indicated that the RABS Bill lacked detail and that commenting on the proposed scheme was therefore challenging.

In order to address this comment, it was decided to include a set of draft Regulations, draft Rules and draft Forms for comment

when the revised RABS Bill is again published for a second round of comments – ensuring widespread and effective consultation.

The RAF, as a member of the RABS Drafting Team, will continue to support the DoT in reviewing the comments received following

the next round of public consultation and with the legislative process that will follow.

Appreciating the need for the RABS Bill to be converted into enacted legislation, a number of the RAF’s performance indicators

and targets are aimed at amending the legislative and regulatory environment, so as to align these to principles of social security

and ultimately bring into being legislation to govern a no-fault benefit scheme for victims of road accidents.

At the point in time when the RAF ceases to exist, the then Board of the RAF will be deemed to have been appointed as members

of the Board of the new Road Accident Benefit Scheme Administrator (RABSA) and the CEO and staff will be deemed to have

been appointed by RABSA. All claims that arose prior to the date on which RABS comes into effect shall be administered by

RABSA in accordance with the legislation applicable at the time of the claim arising.

Claims under the RAF Act will be possible for many years after RABS has come into effect, e.g. the claim of a minor injured in an

accident before RABS comes into effect may be lodged up to 21 years into the future; the claim of a person who is subject to a

legal disability (e.g. a person under curatorship or admitted to mental health establishments) will be possible for as long as the

legal disability persists; and an undertaking certificate issued under the RAF Act to compensate a claimant in respect of future

medical treatment cost incurred as a result of injuries sustained in the accident may, depending on the terms of the undertaking,

have to be honoured for as long as the claimant is alive.

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Therefore, the different legislative schemes that RABSA will be required to administer are:

• Claims arising prior to 1 August 2008 under the RAF Act;

• Claims arising on or after 1 August 2008 under the RAF Amendment Act;

• Claims in terms of the Transitional Provisions Act; and

• The new claims arising from the effective date of RABS.

The introduction of RABS will go a long way in addressing some of the key challenges that the RAF is faced with to allow it to

achieve its strategic objectives.

Strategic Outcome-oriented Goals

The RAF’s Revised Strategic Plan 2013–2017, is anchored on four strategic outcomes aimed at addressing the numerous challenges

faced by the RAF, mainly due to the nature of its business.

The diagram below illustrates the strategic outcomes that will guide the RAF over the next four years, as well as the key focus

areas per strategic outcome.

• Amend current legislation• Publication of Amendment Act to

revise medical tariffs• Provision of input to RABS

Steering Committee towards a comprehensive social security system

• Improved customer service• Improved stakeholder relations• Improved claims processing and

reduce turnaround times• Reduced prevalence of fraud• Active participation in Road

Safety Initiatives

• Reduced deficit and improved sustainability

• Provision for claims assessed quarterly and independently peer reviewed

• Reduction in legal costs• Compliance to applicable

legislation and policy on claims payments

• Managed operational costs

• Reduction in sick leave abuse and vacancy rate

• Performance management fully implemented

• Recognition of employees committed to demonstrating RAF values

• Achievement of Broad-Based Black Economic Empowerment targets

• Achievement of Employment Equity targets

A legislative dispensation that is aligned to

principles of social security

Effectively manage the Fund’s finances and pursue sustainability

A customer-centric, operationally effective and

efficient RAF by 2017

A transformed and capacitated RAF by 2017

Figure B5 – Strategic outcomes


The outcome indicators for each strategic goal are as follows:

Strategic Goal 1: A legislative dispensation that is aligned to principles of social securityDescription Contribute towards legislative enablement by:

• Amending the current RAF Act;• Establishing a legislative framework to give effect to the approved RABS Policy; and • Defending challenges against the RAF.

Outcome indicators Achieve the promulgation of an amendment to section 18 of the RAF Act:

• Publish a maximum fee for serious injury assessment;• Publish a single medical tariff;• Publish an increase to the emergency medical tariff;• Revise the assessment methodology to determine serious injury; • Amend the current Road Accident Fund Act, 1996 (Act No. 56 of 1996), as amended by Act

No. 19 of 2005;• Legislation to bring into being a no-fault fixed benefit scheme; and• Provide input on the Inter-departmental Task Team (IDTT) to align RAF and RABS for

integration into the Comprehensive Social Security System (CSSS).Strategic Goal 2: Effectively manage the Fund’s finances and pursue sustainabilityDescription Increasing revenue, reducing costs and implementing other means to recapitalise the RAF.

Outcome indicators • Percentage reduction in the deficit;• Provision for claims incurred assessed quarterly and annually;• Annually review claims records and data;• Percentage reduction in legal costs (year-on-year);• Increase the number and percentage of direct claims (direct claims as a % of total personal

claims);• Reduce the conversion rate of direct personal claims to represented personal claims;• Manage and monitor operational cost to improve sustainability of the RAF;• Number of writs received; and• Prevalence of accidents accurately forecasted.

Strategic Goal 3: A customer-centric, operationally effective and efficient RAF by 2017Description Positive, direct relationships with customers based on an optimised operating model, which is

more accessible and efficient and reduces the need for third party legal support.

Outcome indicators • Reduce the number of open claims;• Reduce processing turnaround times of supplier, personal, funeral and undertakings claims

(from date lodged to payment date); • Reduce processing turnaround times of claims for loss-of-earnings/support and general

damages (from date lodged to payment date);• Optimise hospital service centres and expand the RAF’s footprint;• Operationalised information collection agents;• Reduce the prevalence of litigated cases;• Improved conviction rate;• Number of claimants attended to at road shows and service centres;• Implement claim system enhancements;• Manage and monitor system availability and uptime; and• Increase the percentage of direct personal claims settled (direct claims settled as a % of total

personal claims).Strategic Goal 4: A transformed and capacitated RAF by 2017Description Build an institution that is performance-driven and values the customer, and improve the

awareness of the RAF brand.

Outcome indicators • Level of adequacy of talent to fill mission critical positions and improved leadership capacity and capability;

• Performance assessments conducted quarterly;• Recognise employees who exhibit RAF values through performance; and• Contribute towards government’s social and economic transformation agenda.

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PERFORMANCE INFORMATION BY PROGRAMME

Information by Programme

Strategic Objective: A Legislative Dispensation that is Aligned to the Principles of Social Security

In facilitating legislative enablement, the RAF is responsible for motivating and proposing amendments to the current legislation

and supporting legislative processes that the DoT embarks on, as well as participating in relevant structures.

In measuring achievement of targets under this strategic programme, the following assumption should be considered: The RAF

does not have any control over the legislative process. The National DoT is responsible for driving the legislative process. The

RAF, therefore, contributes and supports the process.

Contribution to the Organisation’s Key Strategic Outcomes

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 2008. Shortly thereafter, the Law Society of South Africa and 10 other applicants brought

an application challenging the constitutional validity of a number of the provisions of the Amendment Act and Regulations to

that Act and also reviewing certain actions of the Minister of Transport taken in terms of the Amendment Act.

The legislative changes proposed and undertaken are critical for the achievement of key measures linked to other strategic

outcomes. Any significant changes or shifts in terms of the underlying factors in this regard may result in significant changes as

to how the other measures are crafted and targets set.

A list of other amendments to the current legislation was proposed to the Minister of Transport during the 2013/14 financial year

and Ministerial approval is awaited. Legislative amendments awaiting approval include proposals to develop a single tariff, which

will cover both non-emergency and emergency tariffs charged by service providers. This is in response to the judgement that

was delivered by the Constitutional Court on 25 November 2010 in the matter brought about by the Law Society of South Africa

and Others vs. the Minister of Transport and the RAF. The Court held the non-emergency medical tariff to be inconsistent with

the Constitution and made an order that the Minister should prescribe a new tariff.

The Regulation to prescribe a period for acceptance or rejection of the RAF 4 form, 90 days from date of registration was published

by the Minister of Transport on 15 May 2013 and implemented.

The target of publishing a maximum fee for serious injury assessment was also completed in the first quarter of the 2013/14

financial year.

Furthermore, the RAF provides support and assists the DoT with the process to have the legislation enacted and establish RABS

that conforms to the government’s Comprehensive Social Security System (CSSS) plans. The RABS Policy will see the current

system being transformed into a no-fault fixed benefit scheme based on the principles of social security, and will best meet the

needs of all users of South African roads by providing a reasonable, equitable, affordable and sustainable scheme that focuses

on medical requirements and rehabilitation.

Strategy to Overcome Areas of Under-performance

Not applicable under this strategic programme.

During the 2013/14 financial year, the RAF met all the targets contained under this strategic objective. The RAF continually

provided support to the DoT in relation to the legislative process.

Changes to Planned Targets

Not applicable – There has been no in-year change in the performance indicators or targets under this strategic programme.


A LEGISLATIVE DISPENSATION THAT IS ALIGNED TO THE PRINCIPLES OF SOCIAL SECURITY

Performance indicator

Actual achievement 2012/13

Planned target 2013/14


Deviation from planned target to actual achievement for 2013/14

Comment on deviations

1. To motivate and support the DoT, to effect changes to the current legislation, law and regulations to reduce areas of wastage and inequities by:

1(a) Amending the Road Accident Fund Act 56 of 1996, as amended.

The target to commence the process in terms of publishing the proposed process and requesting comments regarding the promotion of Administrative Justice Act (PAJA) was achieved.

In the third and fourth quarter additional requests were received to motivate for comprehensive amendments to the RAF Act to establish a new “no fault” dispensation.

Support DoT in submission of Draft Bill to be certified by the Office of the Chief State Law Advisor and Government consultation process commenced.

The RAF provided support to the DoT to commence the Chief State Law Advisor and Government consultation processes.

The Bill was approved by the RAF Board in the meeting held on 29 January 2014 for submission to the DoT.

The Bill is awaiting Ministerial approval.

The Board reviewed and approved the RAF Amendment Bill 2014 for submission to the Minister of Transport. The Bill was submitted to the Minister of Transport on 30 January 2014.

1(b) Publishing a maximum fee for serious injury assessments.

The target to support the DoT in developing and proposing a tariff for serious injury assessment and medical-legal reports was met.

Regulation awaits Ministerial approval.

Publish Regulation and implement tariff.

The task of publishing a maximum fee for serious injury assessment was completed in the first quarter of the 2013/14 financial year.

The Amendment Regulation 2013 was published on 15 May 2013 and implemented.

Task completed with the publication of the Regulation dated 15 May 2013.

A maximum fee for serious injury assessment was published in the Government Notice dated 15 May 2013. Proposed serious injury assessment tariff should not exceed R2,650.00 (excluding VAT), or adjusted fees determined by the Minister.

1(c) Publishing a Regulation to prescribe a period for acceptance or rejection of RAF 4 form within 90 days from date of registration.

Publication drafted and awaiting Ministerial approval.

Redraft Regulation if required and have Regulation published by Minister of Transport.

The task to redraft the Regulation and have it published by the Minister of Transport was completed in the first quarter of the 2013/14 financial year.

The Amendment Regulation 2013 was published on 15 May 2013 and implemented.

Task completed with the publication of the Regulation dated 15 May 2013.

Regulation 3 (e) published in the Government Gazette dated 15 May 2013 prescribes that the RAF must within 90 days from the date on which the serious injury assessment report was sent to the RAF, handle, accept or reject the report or direct the third party to submit himself/herself to a further assessment.

Legend

Target achieved or exceeded Target partially achieved Target not achieved

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1(d) Publishing a non-emergency medical tariff.

The target to develop a proposed non-emergency tariff, submit to DoT on the proposed tariff was met.

The proposal and consultation took place in the current year, and the procurement process to appoint a service provider has commenced.

Appoint service providers; submit proposed tariff to DoT for publication and commence consultative process by 31 March 2014.

The RAF provided support to the DoT to commence the Chief State Law Advisor and Government consultation processes.

A service provider was appointed and the proposed tariff was tabled in the Board meeting that was held on 29 January 2014.

The tariff is included in the Bill under 1(a) above.

The tariff was approved by the RAF Board in the meeting held on 29 January 2014 for submission to the DoT.

The Bill is awaiting Ministerial approval.

The Board reviewed and approved a single medical tariff for submission to the Minister of Transport. The tariff was submitted to DoT on 30 January 2014 to embark on an inter-Governmental consultative process.

1(e) Conducting annual reviews of emergency medical tariff.

The annual emergency tariff was reviewed.

Review emergency medical tariff annually by Quarter Three.

The annual emergency medical tariff was reviewed in the first quarter of the 2013/14 financial year.

The Board notice giving effect to the new adjustment was published in the Government Gazette published on 28 June 2013.

Task completed with the publication of the Board notice published on 28 June 2013, giving effect to the new adjusted medical tariff.

Government Board Notice dated 28 June 2013 pronouncing the annual increase of the medical tariff by 6.3% retrospectively with effect from 1 April 2013.

1(f ) Review “serious injury” assessment and amend Road Accident Fund Act, 1996 (Act No. 56 of 1996) and 2008 Regulations Act if a more speedy and less costly assessment method established.

Specification was done and inputs were received from DoT, incorporated and approved by the Board to formally request the DoT to publish the final regulation.

Appoint service providers and obtain approval for alternate assessment method.

A service provider was appointed during the 2013/14 financial year. The RAF Amendment Bill 2014 was drafted in line with the recommendations of service providers.

These recommendations were considered and approved by the RAF Board for submission to the DoT to amend the RAF Act as in 1(a) above.

The draft Amendment Bill approved by the RAF Board is awaiting Ministerial approval.

The RAF Amendment Bill 2014 includes amendment of section 1, 17 and 26. Section 17(1A) which specifically states that “ Assessment of serious injury shall be based on a prescribed method adopted after consultation with medical service providers and shall be reasonable in ensuring that injuries are assessed in relation to the circumstances of the third party.”

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2. To support the DoT to enact legislation to bring into being a no-fault fixed benefit dispensation (RABS).

The bill was finalised and the DoT is preparing submission to the Minister to publish the bill for comments.

Support DoT in publishing the Bill for comments and commence Parliamentary legislative process by 31 March 2014.

The published RABS Bill has been revised and specific provision has been made in this Bill for the Minister of Transport to consult on draft RABS Regulations. Prior to the Bill coming into effect, approval is being sought from the Minister to re-publish the Bill. Provision is also made for the Board of the RAF to develop and consult on draft RABS Rules and draft RABS Forms, prior to the Bill coming into effect. The RAF has in the interim developed draft RABS Rules and draft RABS Forms to publish for comment concurrently with the next publication of the revised RABS Bill and draft RABS Regulations.The Bill was approved by the Board in a meeting held on 29 January 2014 for submission to the DoT.

Public comments received, necessitated the revision of the Bill in order to mitigate the risk of potential future legal challenges which may be brought about by perceived lack of public consultation and participation.

Parliamentary process will only commence after the re-publishing of the Bill for public comments.

The DoT is seeking the mandate from the Minister of Transport to republish the Bill for a second round of public comments.

Legend


Strategic Objective: A Solvent, Liquid and Sustainable RAF

The RAF’s focus is on financial sustainability and seeking options to capitalise the organisation. The RAF actively engages with

the NT and the DoT to determine fuel levy allocation increases annually. Furthermore, the RAF commenced with the process

of developing strategies aimed at reducing legal and operational costs through internal cost management initiatives. These

interventions and strategies have yielded positive results, leading to a reduction of the legal and expert cost-to-compensation

paid ratio to 20.9% compared to the 27% recorded in the 2012/13 financial year. Contributory factors leading to the improved

legal and expert cost-to-compensation paid ratio is the drive undertaken by the RAF to increase direct claims.


The net deficit has increased by 24% compared to the net deficit recorded in the previous financial year. This is as a result of,

amongst others, improved productivity resulting in an increase in claims expenditure (excluding accruals and provisions) of more

than R22 billion, an increase in the provision for claims due to an increase in the average cost of claims payments.

Strategies to manage under-performance in this area has been to continuously monitor the deficit by conducting a quarterly

actuarial assessment of the deficit, an annual review and a clean-up of the claims database, as well as accident forecasting.

The Board will give consideration to whether this is a strategic aspiration, rather than one based solely on actuarial forecasts.



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A SOLVENT, LIQUID, SUSTAINABLE RAF





Deviation from planned target to actual achievement for 2013/14 Comment on deviations

3. Reduced deficit and improved sustainability.

R51.5 billion, revised to R73.5 billion as at 31 March 2013.

5% annual reduction of the net deficit.

Net deficit for the 2012/13 financial year (R73.5) billion.*As per prior year error on reporting provision for outstanding claims as per GRAP 19.

Net deficit for the year ending 31 March 2013 was R73.5 billion*.

Net deficit for the period ended 31 March 2014 was R90.8 billion.

An increase of 24% in the net deficit has been recorded.*Prior year net deficit has been revised from R51.5 billion to R73.5 billion due to the prior year errors on the provision for the diesel rebate and the provision for outstanding claims.

For the target to be achieved, net deficit should have been reduced by 5% to R69.8 billion.

Net deficit grew to R90.8 billion – a deviation of R21 billion.

An annual actuarial valuation of the claims incurred was received and accounted for in the 2014 Annual Financial Statements.

The provision for outstanding claims for the 2013/14 fiscal year is evaluated at R97 billion.

The sharp increase in the net deficit during the 2013/14 financial period is due to a net increase in claims provision by R14.2 billion compared to the R10.2 billion recorded in the previous financial year.

There has also been a sharp increase in claims (cash) paid in the 2013/14 financial year to R22.2 billion – a 47% increase compared to the R15.1 billion reported in the previous financial year.

This is attributable to increased productivity in the claims processing environment, which led to a reduction in cash holdings of the RAF during the period as well as an increase in the personal claims liability which is as a result of an increase in the average cost to settle personal claims which increased by 41% due to the popularity of loss-of-earnings brought about by the MVA litigation environment.

An annual peer review/ independent actuarial valuation is currently underway.

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4. Provision for claims incurred assessed quarterly and an independent peer review conducted.

Provision for claims incurred was assessed for the year 2012/13 by the Statutory Actuary and an annual assessment conducted by an independent actuary.

Provision for claims incurred assessed annually by Statutory Actuary and an annual assessment conducted by an independent actuary.

An annual provision of claims incurred has been conducted by a Statutory Actuary. An assessment by an independent actuary is currently underway.

An annual actuarial valuation of the claims incurred has been conducted.

The annual target to have an actuarial valuation of the claims provision has been met.

A peer/independent review is currently underway.

5. RAF claims data and records audited.

Management completed a review of claims files and data.

Complete management review of claims files and records during the second quarter.

Management review of claims files and records is complete. An audit report on gaps identified was issued to Management and an action plan has been developed to correct identified weaknesses.

One review of claims files and data was required for the year and was conducted and finalised in the third quarter.

The gaps identified by Internal Audit on the audit of claims files and records necessitated a comprehensive clean-up exercise that will be conducted in the 2014/15 financial year.

A project plan has been developed and will be approved in the first quarter of the 2014/15 financial year.

6. Reduction in legal costs year-on-year – legal costs as a percentage of claims payments.

Legal costs as a percentage of total claims expenditure excluding medical costs for the 2011/12 financial year: 29%.

Total legal costs (claimants and the RAF’s legal costs) for the 2012/13 financial year: R3.691 billion and the total claims expenditure excluding claimant medical costs for 2012/13: R13.951 billion.

Legal costs as a percentage of the total claims expenditure 26.45%.

2% year-on-year reduction in legal costs.

Legal costs as a percentage of total claims expenditure excluding medical costs for the 2012/13 financial year: 26.45%.

Total legal costs (claimants’ and RAF’s legal costs) for the period ending 31 March 2014: R4.633 billion and total claims expenditure excluding claimant medical costs for the 2013/14 financial year: R20.943 billion

Legal costs as a percentage of total claims expenditure 22.12%.

Target exceeded by *4.33% from the set baseline of 26.45%.

*(26.45 – 22.12 = 4.33%)

The annual target to reduce legal costs as a percentage of total claims payments by 2% year-on-year from the baseline of 26.45% has been achieved.

7. Increased percentage of direct claims originated (direct personal claims as a percentage of total personal claims).

20% 20% annual increase Direct claims originated in the 2013/14 financial year were 14,205.

Total personal claims originated in the 2013/14 financial year were 53,231.

Direct claims constitute 25.25% of total personal claims lodged.

The 25.25% is greater than 20%.

Target is exceeded by 26.7%.

The annual target to increase direct claims registered by 20% annually has been achieved.

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8. Reduced % of direct personal claims becoming represented, i.e. % reduction in baseline.

The number of direct claims that became represented in the 2012/13 financial year was 1,768 with a quarterly average of 442. *A baseline has been established at 6%.

20% reduction from set baseline of 6% i.e. (6 x 80% = 4.8%).

Number of direct personal claims that became represented for the 2012/13 financial year was 1,215.

Number of open direct claims for the 2013/14 financial year was 30,676.

3.9% of the total number of open direct claims was converted to represented claims.

The target to reduce direct claims from being converted to represented claims has been exceeded by 1%.

The conversion of direct claims is closely managed by the Operations Department with support from the Forensic Investigation Department. All converted direct claims are investigated immediately and claimants are contacted immediately by the Forensic team to determine the rationale for the change in mandate. It is however, noteworthy that a number of claimants contacted, claimed not to have consented to the change in mandate. Subsequently, the majority of claimants contacted agreed to being converted back to direct claimants.

A Direct Claims unit has been established within the claims processing environment. The institutionalisation of the Direct Claims unit in Operations will drastically reduce the number of direct claims being converted as the team aims to improve service delivery for direct claimants.

9. Managed and monitored operational costs to improve the sustainability of the Fund.

OPEX had a favourable variance of 18.3% and CAPEX had a favourable variance of 72%.

10% negative variance per expenditure grouping, but not exceeding the overall organisational budget.

Overall organisational operations and capital expenditure budget for the period ending 31 March 2014: R1.562 billion.

Overall actual CAPEX and OPEX spending for the 2013/14 financial year: R1.379 billion.

There was a 12% saving against the budget.

Target has been achieved, although the negative spending is above the targeted 10%, the overall organisational budget has not been exceeded.

10. Reduction in the number of writs of execution.

Total number of writs in the year 2011/12 : 11,656.

Total number of writs in the year 2012/13: 7,842.

32% decrease in the number of writs of execution had been achieved.

20% reduction in the number of writs of execution year-on-year.

Average number of writs for the 2012/13 financial year: 7,844.

Number of writs for the 2013/14 financial year: 5,595.

Percentage reduction: 28.6%.

Target exceeded by 8.6%.

The annual target of 20% reduction in the number of writs of execution year-on-year has been achieved.

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11. Accurate forecasting of prevalence of accidents.

Not scheduled in the 2012/13 financial year.

One (1) forecast by 31 December 2013.

An accident forecasting report was finalised during February 2014. The report is intended to be used to forecast the prevalence of accidents.

A forecasting report of prevalence of accidents has been finalised and approved at Executive Management (EXCO) level.

The report will be used internally to forecast the prevalence of accidents and assist the RAF with the claims valuation process.

Legend


Strategic Objective: A Customer-centric, Operationally Effective and Efficient RAF by 2017

In the 2013-2017 Revised Strategic Plan, the RAF has undertaken to implement measures to achieve operational efficiency and a

seamless and appropriate customer experience. Intended operational efficiencies aim to make the RAF’s systems and processes

more efficient. In addition, the RAF’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.

An organisational realignment embarked upon during the 2012/13 financial year sought to improve operational efficiency,

improve internal controls, streamline business processes and segregate duties, primarily focusing on reducing the time taken

to settle claims and reduce the number of outstanding claims.

Improving customer experience still remains a priority in the remaining Medium-Term Strategic Framework period. The RAF has

in the current year increased the number of hospital service centres (HSCs) and has taken its service offering to more than 20,000

claimants through its ‘RAF on the Road’ campaigns, as well as other RAF events. The improved brand awareness is assisting the

RAF in encouraging direct claiming as opposed to attorney represented claiming.


The target to decrease the turnaround times for funerals, general damages, loss-of-earnings and medical costs has not been

achieved in the 2013/14 financial year. This is a result of the targeted intervention by Management to reduce long outstanding

claims. It should also be taken into consideration that the litigation process linked to these claims also contributes to the lengthy

turnaround times in processing these claims.

Highlighted below, are some of the implemented interventions aimed at reducing turnaround times and improving service delivery.

• Case-flow management aimed at managing litigated claims. The preferred method of conducting litigation by the Judiciary

is within a case management regime. Judges encourage pre-trial conference wherein issues are narrowed;

• Block settlements on non-litigated matters that have not been placed on the Court-roll yet is on-going; and

• Regular block settlements (meetings with plaintiff attorneys).



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Linking Performance with Budgets

2013/14 2012/13

Sub-programme name

BudgetActual

expenditure(Over)/under expenditure Budget

Actual expenditure

(Over)/under expenditure

R’000 R’000 R’000 R’000 R’000 R’000

Claims expenditure (excluding provision for outstanding claims) 18,144,000 22,280,094 (4,136,094) 12,607,682 15,202,388 (2,594,706)Provision for outstanding claims 25,931 14,162,000 (14,136,069) 1,063,040 10,230,436 (9,167,396)Total 18,169,931 36,442,094 (18,272,163) 13,670,722 25,432,824 (11,762,102)

A CUSTOMER-CENTRIC, OPERATIONALLY EFFECTIVE AND EFFICIENT RAF BY 2017






12. Reduced number of open claims, i.e. claims where payment of compensation and/or legal costs must still be made.

212,085 open and re-opened claims (O&R status) for the year ending 31 March 2013.

200,000 Number of open claims (O&R status) as at 31 March 2014: 198,140.

Number of open claims at (S status) as at 31 March 2014: 34,145.

Target has been exceeded by 1,860 claims.

During the first and second quarter of 2014, an increase in the number of open claims was experienced. This was mainly due to the roll-out of the organisational re-alignment process.

With the new structure, claims are now processed within specific pillars and increased volumes of claims are now attended to due to streamlined segregation of duties.

Management has in the last three quarters of the 2013/14 financial year implemented various outstanding claims initiatives to improve performance on this primary target.

Individual performance has been closely monitored on a daily and weekly basis, and interventions implemented where necessary.

Management has also implemented recognition awards, which assisted in improving the performance culture, as well as motivated and encouraged outstanding performance.

Improved productivity and claims processing has led to an overall increase in total claims expenditure, which is 22% above the budget and 4% higher than forecasted for the financial year.

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13. Reduced turnaround times for the processing of supplier and funeral claims, as well as undertakings (from date lodged to date of payment).

249 days 300 days - Funeral claims: 599 days

- Supplier claims: 211 days

*Weighted average number of days: 238 days.

*Weighted number of days is used to calculate reported achievement. This is due to the fact that more than 90% of claims in this pool relate to supplier claims and less than 10% to funeral claims.

Target exceeded by 62 days.

The target of 300 days turnaround time for processing of funeral and supplier claims has been achieved.

Interventions to improve the turnaround times for processing funeral claims will be implemented and closely monitored in the 2014/15 financial year.

14. Reduced turnaround times for the processing of claims for medical costs, loss-of-earnings/support and general damages (from date lodged to date of payment).

1,336 days 1,200 days - Medical costs: 1,304 days.

- Loss-of-earnings: 1,343 days.

- Loss-of-support: 1,110 days.

- General damages: 1,648 days.

Average number of days 1,351 days.

Target not achieved by 151 days.

The target for the listed heads of damages has not been met. However there has been a significant improvement during the year under review.

The positive performance results recorded are due to various Management interventions implemented during the financial year. Management implemented stricter measures to monitor performance and implemented corrective actions on a weekly basis.

It should also be taken into account that this target is highly impacted by the initiative to reduce the outstanding claims implemented by Management. These initiatives focused on long outstanding claims, resulting in increased turnaround times.

15. All Hospital Service Centres (HSCs) optimised and national footprint expanded.

75 functional HSCs were in place, and an assessment was conducted in the current HSCs.

Quality assurance reviews conducted in 75 HSCs; additional 10% introduced and national footprint expanded as per indicators of review undertaken in the 2012/13 financial year.

83 HSCs are currently in operation. Quality assessment reviews in existing hospitals have been conducted by the Compliance unit.

ICT also conducted an independent quality assessment in respect of network accessibility to the service centres.

83 HSCs are operational across the nine provinces.

Quality assessments were conducted in existing hospitals.

The RAF’s initiative to expand its national footprint and improve its service offering to all MVA victims will see the opening of four additional customer service centres during the first quarter of the 2014/15 financial year.

Target to have 83 operational HSCs has been exceeded by one additional HSC.

The national footprint has been expanded by opening seven additional HSCs in the current financial year. The HSCs are located across the nine provinces.

Quality assessments were conducted in the existing centres to ensure that the centres comply with level 1 standards (basic RAF office requirements).

Legend


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16. All operational procedures reviewed and compliance tested annually.

All operational procedures were reviewed.

Annual review completed by 31 July 2013.

All operational procedures were reviewed during the 2013/14 financial year.

Operational and support processes have been reviewed and tested for compliance.

Task has been completed.

Operational and support services processes have been reviewed and tested for compliance.

Target for an annual review of operational procedures has been completed and a draft compliance report has been submitted to Management.

17. Twenty functional Information Collection Agents (ICAs) appointed.

Not scheduled in 2012/13.

20 functional ICAs operational by 31 March 2014.

22 ICA MoUs have been signed with various collection agents within the MVA value chain.

Target exceeded by 2 MoUs. 22 ICA MOUs have been signed to date and are currently being operationalised.

Target has been achieved.

Accident/crash information is already sourced and received from various agents that are involved in the MVA value chain.

The process to identify stakeholders that will contribute to the collection of accident information commenced in the 2013/14 financial year. A number of agents have been brought on board to assist the RAF in compiling a comprehensive database with the intention of speeding up the processing of claims and eradicating fraud.

18. Reduced prevalence of litigated cases (i.e. number of claims expressed as a percentage of open claims at the end of the financial year) where the claimant referred the matter to the Courts.

Total number of claims that had summonses (trigger of litigation) was 27,083 as at 31 March 2013.

Total number of open claims as at 31 March 2013 was 195,437.

*The baseline is established at 14%.

Baseline revised to 13%. This was due to non-inclusion of R status claims in the number of open claims. The baseline should have been calculated as:

Number of litigated claims in the 2012/13 FY: 27,083 divided by total number of open claims (O&R status) 212,085 = 13%

Litigated cases reduced by 10% year-on-year.

Number of litigated cases for the 2013/14 financial year: 36,379.

Number of open claims for the 2013/14 financial year (O&R status): 198,140.

Litigated claims represent 18.36% of open claims to date.

18.36% is higher than the set target of 11.7% (13% x 90%).

The claims process is litigious in nature. It should be noted that more than 80% of claims are represented claims.

It is envisaged that increased direct claiming will contribute towards the reduction in the number of litigated cases. With the drive undertaken by the RAF to improve brand awareness and the initiatives to expand the national footprint and expand on the RAF service accessibility to all claimants across the country, the number of litigated cases should decrease.

Litigation management processes are continually being enhanced by the regions. Block settlement meetings with plaintiff attorneys are on-going to settle matters without trial dates being set.

Legend









19. Improved fraud conviction rate (i.e. number of convictions during financial year as a % of number of investigations during financial.

Number of convictions was 234 and the number of cases investigated and closed: 4,572.

*Baseline for the conviction rate established at 5.1%.

10% improvement in the conviction rate recorded annually.

Number of convictions for the 2012/13 financial year: 234.

Number of convictions reported for the 2013/14 financial year: 573. Thus an improvement of 145% (573 – 234 = 339 / 234).

For the target to be met there should have been (234 + 10% = 258) convictions recorded in the 2013/14 financial year.

Conviction rate target has improved by more than 100% compared to convictions recorded in the 2012/13 financial year.

20. Number of claimants engaged at road shows per annum.

Number of claimants engaged at road shows was 13,155.

20,000 The number of claimants engaged at road shows, including other RAF events and all ‘RAF on the Road’ campaigns: 20,490 for the 2013/14 financial year.

Target exceeded by 490 claimants engaged.

The number of claimants engaged at road shows and activations undertaken by regional offices were not taken into account throughout the financial year. Verifiable registers have subsequently been obtained from regional offices and the count included in the total number of claimants engaged at various road shows held during the 2013/14 financial year.

The ‘four cities RAF on the Road’ campaign that was held on 15 March 2014 contributed to the achievement of this target, as this campaign attracted more than 7,600 claimants.

Legend


Strategic Objective: A Transformed and Capacitated RAF by 2017

The RAF has recognised that effective communication, people and leadership are critical to ensure that the highest standard of

care is provided to accident victims to restore balance in the social system, as is the RAF’s vision.

The RAF aims to capacitate the organisation and promote accountability and a performance-driven ethos. Furthermore, the RAF

will continue to promote and comply with legislation and policies relating to employment equity and preferential procurement.


Not applicable – All the targets under this strategic objective have been met.



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Linking Performance with Budgets

2013/14 2012/13

Sub-programme name

BudgetActual


Actual expenditure


R’000 R’000 R’000 R’000 R’000 R’000

Employee costs 974,232 907,172 67,060 828,241 762,641 65,600Total 974,232 907,172 67,060 828,241 762,641 65,600

A TRANSFORMED AND CAPACITATED RAF BY 2017






21. Reduction in the vacancy rate.

Vacancy rate baseline established at 14% for the 2012/13 financial year.

2% less than previous year’s vacancy rate.

Approved budgeted posts: 2,540.

Number of filled positions: 2,288.

Number of vacant positions: 252.

*Vacancy rate at 31/03/14: 9.9%.

*Vacancy rate at 31/03/13: 14%.

An annual reduction of more than 5% from the set baseline of 14%.

For the target to be achieved, the vacancy rate should be no more than 12% (14–2).

Target has been achieved.

22. Number of performance assessments to measure operational efficiency.

95% of staff formally assessed for the year to 31 March 2013.

Formal performance assessments of all staff quarterly.

99% of employees were formally assessed in the fourth quarter of the 2013/14 financial year.

Target to formally assess employees has been achieved. The 1% of employees not assessed relates to employees who are currently on suspension, maternity leave and newly appointed employees.

Fourth quarter assessments are currently underway, as well as contracting for the 2014/15 financial year.

An annual target of 95% of staff formally assessed has been achieved.

23. Recognition of employees who exhibit RAF’s values through performance.

41 50 employees recognised through staff e-mail notifications and certificates awarded.

Total number of employees recognised in the 2013/14 financial year was 417.

Targeted number of employees recognised has been exceeded by 367.

More than 417 employees have been formally recognised.

Legend



A TRANSFORMED AND CAPACITATED RAF BY 2017






24. RAF’s contribution towards Government’s social and economic transformation agenda.

89% B-BBEE total spend.

100% B-BBEE total spend.

B-BBEE spend was assessed at 100% for the 2013/14 financial year.

Target was achieved at 100% compliance in respect of B-BBEE.

Overall B-BBEE spend for the period ended 31 March 2014 increased by 3% when compared to the third quarter. Favourable results were attributable to:

- The accounting for B-BBEE spending relating to the panel of attorney’s B-BBEE certificate that expired during the year.

- 10% increase in panel of assessors due to additional B-BBEE certificates received from the panel of assessors.

- Female staff (RAF: 59% of the total employees versus 50/50 national target as per the Department of Labour).

- Black staff (RAF: 74% of total employees versus national target of 79.2%).

- Staff with disabilities (1.7% of total employees versus 2% Board target).

Achieve/exceed Employment Equity (EE) target of 90%.

Total number of employees with an equity status* employed: 2,215.

Total number of employees: 2,288.

Number of employees not classified with an equity status: 73.

97% of employees fall within the designated group of employees with an equity status.

*Designated groups classified as blacks inclusive of both genders, as well as white females.

The target requires the RAF to reach/exceed 90% employment of people with an equity status.

Method of calculation as per the Annual Performance Plan:

Number of employees with an equity status employed/ total number of employees x 100.

The RAF exceeded the target by more than 6%.

The target to achieve/exceed 90% of employees with an equity status has been achieved.

Less than 4% of employees do not fall under the equity designated groups, i.e. white males.

The RAF also recorded 100% compliance to the plan as per the Annual EE Report submitted to the Department of Labour.

REVENUE COLLECTIONRevenue collection is discussed in detail under Organisational Environment on page 49 of this report.

Legend


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CAPITAL INVESTMENTThe table below outlines progress made on capital investment and asset management plans.

Progress made on implementing the Asset Management Plan

The Asset Management Plan was implemented and communicated on 22 November 2013 to all regions. Timelines for the finalisation of the annual asset verification was 7 February 2014, whereafter all anomalies were finalised before the Fixed Assets Register (FAR) was updated. The asset verification process was completed by the middle of March, and an Executive Summary submitted to the CEO for endorsement.

Infrastructure projects completed in the current year and progress in comparison to what was planned at the beginning of the year

Office alterations and tenant installation included:

Tenant installation, Head Office: R4,547,188

Eco Glades Block F, HR area: 31 January 2014

Eco Glades Block F, Risk, Legal, Compliance, Stakeholder Management, PMO areas: 15 February 2014

Eco Glades Block F, COO, Marketing and Security office areas: 31 March 2014

Eco Glades Block F, Financial Manager office area construction to be finalised by end of April 2014

Menlyn offices: Construction of carports was initiated and will be completed in November 2014. The reception area was assessed to be refurbished and completed in November 2014.

Infrastructure projects in progress and expected completion date

None – All completed within financial year.

Plans to close down or downgrade any current facilities

One lease for file storage (800 m²) was terminated.

Progress made on infrastructure maintenance

All buildings are kept in good condition. Additional human resources were appointed to cater for maintenance per region.

Developments relating to the above expected to impact on the RAF’s current expenditure

Maintenance-related costs escalated due to an increase in office space at Head Office.

Details as to how asset holdings have changed over the period under review, including disposals, scrapping and loss due to theft

Fixed assets acquisitions amounted to R31.40 million (nationally). The carrying value of assets disposed due to being obsolete or redundant amounted to R884,000, which excluded losses due to theft amounting to about R240,000 (these assets will be scrapped upon the finalisation of the insurance claims process).

Measures taken to ensure that the RAF’s FAR remain up-to-date during the period under review

Asset Verification Plan implemented in November 2013 which was due to be completed by all regions by end February 2014. Responsibilities migrated and the Internal Audit Unit did an assessment and made recommendations to improve.

Current state of the RAF’s capital assets e.g. what % is in good, fair or bad condition

Estimate condition of assets: 33% of assets are in a good condition, 58% in a fair condition and 9% are in a poor condition and are currently being disposed of or are being prepared for disposal.

Major maintenance projects undertaken during the period under review

None.

Progress made in addressing the maintenance backlog during the period under review

There is no significant maintenance-related backlog.

2013/14 2012/13

Infrastructure projects*

BudgetActual


Actual expenditure


R’000 R’000 R’000 R’000 R’000 R’000

Property, plant and equipment 51,069 31,400 19,669 48,405 8,402 40,003 Intangibles 29,737 19,640 10,097 19,339 6,940 12,399 Total 80,806 51,040 29,766 67,744 15,342 52,402

* The RAF has no Infrastructure projects


Part C: GOVERNANCE


INTRODUCTION

Corporate governance embodies processes and systems by which public entities are directed, controlled and held to account. In

addition to legislative requirements based on a public entity’s enabling legislation, and the Companies Act, corporate governance

with regard to public entities is applied through the precepts of the Public Finance Management Act (PFMA) and run in tandem

with the principles contained in the King Report on Corporate Governance (King III).

Parliament, the Executive Authority and the Accounting Authority of the public entity are responsible for corporate governance.

PORTFOLIO COMMITTEE

Parliament exercises its oversight role of the RAF by evaluating its performance by interrogating its Annual Financial Statements

and other relevant documents which have to be tabled, as well as any other documents tabled from time to time. This oversight

role is fulfilled by the Portfolio Committee on Transport (PCOT) and the Standing Committee on Public Accounts (SCOPA).

PCOT oversees service delivery and performance in accordance with the mandate and Corporate Strategy of the RAF. It reviews

financial and non-financial information, such as efficiency and effectiveness measures, and therefore reviews the non-financial

information contained in the Integrated Annual Report of the RAF. PCOT is also concerned with service delivery and enhancing

economic growth.

SCOPA oversees the financial performance and accountability of the RAF in terms of the PFMA. It therefore reviews the Annual

Financial Statements and audit reports of the RAF’s external auditor.

EXECUTIVE AUTHORITY

As illustrated below, the National Assembly has legislative power and maintains oversight of the National Executive Authority

and the RAF as an organ of state. In addition, Parliament oversees the Executive Authority, who is required to provide it with full

and regular reports concerning matters under its control.

Figure C1- Executive Authority reporting structure

The Minister of Transport is the Executive Authority of the RAF and is concerned with the financial viability and risks of the RAF,

as well as policymaking and monitoring of policy implementation to ensure that the RAF effectively delivers on its mandate.

The Financial Services Board, in terms of the Financial Supervision of the Road Accident Fund Act, 1993 (Act No. 8 of 1993),

performs a supervising role over the financial position of the RAF.

Oversight by the Executive Authority rests by and large on the prescripts of the PFMA, which governs/gives authority to the

Executive Authority for oversight powers.

Minister of Transport

Being the Executive Authority

Board of Directors

Being the Accounting Authority

Parliament of the Republic of South Africa

Representing the South African Public


The RAF Act provides that the Executive Authority can appoint or dismiss members of the Board, including the Chairperson,

Vice-chairperson and Non-executive Directors. The Minister also appoints the CEO on such terms and conditions as may be

determined by the Board.

Whenever it is necessary to appoint a member to the Board, the Minister shall, by notice in the Government Gazette and national

news media, invite persons or bodies who have an interest in the operations of the RAF to nominate candidates who comply

with the criteria mentioned in subsection 1(b) of the RAF Act, as amended. The Minister will then publish a list of nominees

received in response to such invitation, which will include the names of the relevant nominators. The name and expertise of the

newly appointed (or reappointed) Board member will be published in the Government Gazette.

Whenever a position on the Board becomes vacant before the expiry of the term of office, the Minister may appoint any other

competent person to serve for the unexpired portion of the term of office of the previous member, irrespective of when the

vacancy occurs.

The RAF Board submits quarterly reports, including management accounts, a report on actual performance against predetermined

objectives, PFMA compliance checklist, BEE report and an Audit Committee report, to the Executive Authority in accordance

with NT Regulations 26.1.1 and 30.2.1 within 30 days of the end of a quarter.

ACCOUNTING AUTHORITY/THE BOARD

Introduction

The Board acts as the Accounting Authority of the RAF and is accountable to the Executive Authority for the performance and

affairs of the RAF. It constitutes a fundamental base for the application of corporate governance principles in the RAF.

The processes and practices of the Board are underpinned by the principles of transparency, integrity and accountability and an

inclusive approach that recognises the importance of all stakeholders and of managing stakeholder relationships and perceptions

to ensure the viability and sustainability of the RAF.

the role of the Board

In line with King III, the Board is tasked with providing ethical leadership, managing the organisation’s ethics effectively and

ensuring that the entity is not only a responsible citizen, but is manifestly so. Corporate governance principles should be adhered

to, while fully appreciating that strategy, risk, performance and sustainability are integrated. Broadly speaking, the Board is

expected to act in the best interests of the entity.

With the prescripts of King III and NT in mind, the role of the RAF Board comprises the following:

• It holds absolute responsibility for the performance of the RAF;

• It retains full and effective control over the RAF;

• It ensures that the RAF complies with applicable laws, regulations and government policy;

• It is responsible for formulating and implementing policies that are necessary to achieve the RAF’s strategic goals and

maintain good governance;

• It has unrestricted access to information of the RAF;

• It formulates, monitors and reviews corporate strategy, major plans of action, risk policy, annual budgets and business plans;

• It is responsible for the integrity of the sustainability report, based on the principles of transparency and accountability;

• It ensures that the Executive Authority’s performance objectives are achieved;

• It monitors the efficiency and effectiveness of management and supports management in implementing Board strategies

and policies;

• It manages potential conflicts of interest;

• It develops a clear definition of levels of materiality;

• It attends annual meetings;

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• It ensures that the Annual Financial Statements are prepared;

• It appraises the performance of the chairperson;

• It ensures effective Board induction; and

• It maintains integrity, responsibility and accountability.

This means that the Board is responsible for determining the overall direction of the RAF. This is guided by a five-year Strategic

Plan and Annual Performance Plan, both of which were submitted to the Executive Authority, the Minister of Transport, by the

end of January 2014, as prescribed in terms of NT Instruction Note No. 33.

During the period under review, the Board adopted its Performance Information Management Policy governing performance

responsibilities and reporting. In addition, the Board annually revises the Delegation of Authority Framework, which defines the

delegation of powers, duties and functions to management.

The RAF Board reviews its processes and practices on an on-going basis to:

• Ensure compliance with legal obligations;

• Ensure the maintenance of appropriate internal controls, as well as risk management policies and practices;

• Ensure the use of RAF funds in an economical, efficient and effective manner;

• Ensure that IT governance is aligned with the RAF’s performance and sustainability objectives;

• Ensure adherence to good corporate governance practices that are continuously benchmarked; and

• Assess the impact of the RAF’s operations on society, the economy and the environment.

Board Charter

As recommended by King III, the Board is governed by the RAF Corporate Charter, which details the roles, structures and functions

of the Board, its various sub-committees, chairpersons and the CEO.

Composition of the Board

The RAF is headed and controlled by an effective and efficient Board, comprising independent Non-executive Directors

representing the necessary skills to strategically guide the RAF. The Board consists of 11 Non-executive Directors, including a DoT

representative. The RAF Board is diverse in respect of origin, gender, race and education. Together, the members bring a wealth

of experience and expertise to the RAF and reflect the nature of its business. 36% of the Board members are women, while 81%

are from historically disadvantaged communities.

The standard term of a Non-executive Director is three years. Non-executive Directors are eligible for re-appointment for a further

two terms. The Executive Management team is appointed by the CEO after consultation with the Board. Executive Management is

employed on the basis of a fixed-term contract. The maximum duration of fixed-term contracts is five years. The Board is required

to meet as often as the business of the RAF requires, but at least four times a year.


Dr NM BhenguNon-executive Director

(Chairperson)

Mr JN MasekoamengNon-executive Director*

Mr DK SmithNon-executive Director

Mr T MoyoNon-executive Director*

Ms A SteynNon-executive Director

Adv. DS QochaNon-executive Director

Mr LED HlatshwayoNon-executive Director

Ms NZ QuntaNon-executive Director*

Adv. MJ RalefataneNon-executive Director*

Dr KLN LindaNon-executive Director

Mr TP MasobeNon-executive Director

Ms R MokoenaNon-executive Director

Mr AM PandorNon-executive Director

Mr TB Tenza Non-executive Director

Dr EA WatsonCEO (Ex officio)

Mr V Mahlangu Non-executive Director

(Vice-chairperson)*

Mr D CoovadiaNon-executive Director

(Vice-chairperson)

RAF Board

* Term expired 30 September 2013

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Name DesignationDate appointed

Date resigned Qualifications

Area of expertise

Board directorships

Board committees

No. of meetings attended*

Dr NM Bhengu Non-executive Director (Chairperson)

01/10/2010Re-appointed 01/10/2013

MBChB (University of Natal), Diploma in Anaesthetics (College of Medicine of South Africa), MBA (Wales University, Cardiff ), Master of Public Health, Healthcare Management (Harvard University)

Medical Nestlé Non-executive Director

Chairpersons’ Committee (Chairperson)

5 of 7

Mr V Mahlangu Non-executive Director (Vice Chairperson)

01/10/2010 Term expired 30/09/2013

Diploma in Public Relations (Damelin), National Certificate in Business Administration (Technikon SA), Small Business Development Programme (Unisa), Certificate in Public Sector Governance (Unisa), Certificate in Management Studies (MANCOSA), MBA (General) (MANCOSA)

Human resources

None Remuneration and Human Resources CommitteeOperations CommitteeInformation Technology CommitteeChairpersons’ Committee

4 of 4

Mr JN Masekoameng Non-executive Director

01/10/2010 Term expired 30/09/2013

BCom (University of the Witwatersrand), Higher Diploma in Tax Law (University of Johannesburg), Certificate in Labour Law (Unisa), MBL (Unisa School of Business Leadership)

Financial sector

Matlotlo Trading CC and Epistar

Operations Committee (Chairperson)Audit CommitteeRisk Management and Ethics CommitteeChairpersons’ Committee

4 of 4

Mr T Moyo Non-executive Director

01/10/2010 Term expired 30/09/2013

BCom (Accounting) (ROMA), Post-graduate Diploma in Strategic Management (Baruch College City University of New York), MBA (Finance) (Cardiff Business School, Wales University), Risk Management (University of Stellenbosch), Graduate Diploma in Company Direction (Graduate Institute of Management), Executive Development Programme (Harvard Business School), AIRMSA

Risk management

Orion SA (Pty) Ltd, Yokoyo Investments (Pty) Ltd, Alpha Tours Africa (Pty) Ltd, Innovida SA Dubai (Pty) Ltd, Innovida South Africa (Pty) Ltd, Push Umlozi (Pty) Ltd

Risk Management and Ethics Committee (Chairperson)Audit CommitteeRemuneration and Human Resources CommitteeInformation Technology CommitteeChairpersons’ Committee

4 of 4




Area of expertise

Board directorships

Board committees


Adv. DS Qocha Non-executive Director

01/10/2010 Re-appointed 01/10/2013

BA (Law) (National University of Lesotho), LLB (National University of Lesotho), Strategic Leadership Programme (GIBS), Broadcasting Policy and Regulation (LINK Centre, University of the Witwatersrand), Telecoms Policy Regulation and Management (LINK Centre, University of the Witwatersrand), General Intellectual Property Course (WIPO)

Law None Remuneration and Human Resources Committee (Chairperson)Operations CommitteeRisk Management and Ethics CommitteeChairpersons’ Committee

6 of 7

Ms NZ Qunta Non-executive Director

01/10/2010 Term expired 30/09/2013

BAdmin (University of Zululand), BCom (Hons) (University of Pretoria), MCom (Economics) (University of Pretoria), MBA (University of Oxford Brookes, UK) and Corporate Governance Certificate (Unisa)

Finance Mintek, KwaZulu-Natal Tourism Authority

Information Technology Committee (Chairperson)Audit CommitteeRemuneration and Human Resources CommitteeChairpersons’ Committee

3 of 4

Adv. MJ Ralefatane Non-executive Director

01/10/2010 Term expired 30/09/2013

BProc (UNIN), LLB (UNIN), LLM (Labour Law) (Rand Afrikaanse Universiteit), Certificate in Labour Relations (University of Pretoria) and Certificate in Human Rights (University of Pretoria)

Law Risk Management and Ethics Committee Audit CommitteeRemuneration and Human Resources Committee

4 of 4

Mr DK Smith Non-executive Director

01/10/2010 Re-appointed 01/10/2013

BSc (University of Stellenbosch) FASSA, International Senior Management Programme (Harvard Business School)

Actuarial Sanlam Ltd, Mediclinic International Ltd, Reinsurance Group of America (SA)

Audit CommitteeOperations CommitteeOperations and Information Technology Committee

5 of 7

Ms A Steyn Non-executive Director

01/10/2010 Re-appointed 01/10/2013

BSc (University of Stellenbosch) and various other related courses

Medical None Risk Management and Ethics CommitteeRemuneration and Human Resources CommitteeOperations CommitteeOperations and Information Technology Committee

7 of 7

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Area of expertise

Board directorships

Board committees


Mr LED Hlatshwayo Non-executive Director

01/10/2011Re-appointed 01/10/2013

BCom (University of Zululand), BCompt (Unisa), BCompt/CTA (Hons) (Unisa), CA (SA) and MBA (University of North West, Potchefstroom)

Finance Central Energy Fund, PetroSA

Audit Committee (Chairperson)Risk Management and Ethics CommitteeInformation Technology CommitteeChairpersons’ Committee

6 of 7

Mr D Coovadia Non-executive Director (Vice Chairperson)

01/10/2013 BCompt, BCompt (Hons) (Unisa), FCIS, CA (SA)

Sanlam Ltd, Mediclinic International Ltd, Reinsurance Group of America (SA), member of various audit committees

Chairpersons’ CommitteeAudit Committee

4 of 4

Dr KLN Linda Non-executive Director

01/10/2013 MBChB (University of Natal) Healthcare Service Management Certificate Advanced Management Programme (Manchester Business School UK), Postgraduate Diploma in Healthcare Information (Winchester University)

Childsafe South Africa

Remuneration and Human Resources CommitteeOperations and Information Technology Committee

3 of 4

Mr TP Masobe Non-executive Director

01/10/2013 BA (Hons) Economics, MSc Health Economics (University of London), International Executive Development Diploma, Advanced Health Leadership

Medical Liberty Health, Health Systems Trust, Council for Medical Schemes

Audit CommitteeOperations and Information Technology Committee

4 of 4

Ms R Mokoena Non-executive Director

01/10/2013 BJuris (University of Zululand), LLB (University of Natal), various certificates

Law ARMSCOR, ACSA Regulation Committee, ATNS Regulation Committee, Gauteng Rental Housing Tribunal

Risk Management and Ethics Committee (Chairperson)Remuneration and Human Resources CommitteeChairpersons’ Committee

4 of 4




Area of expertise

Board directorships

Board committees


Mr AM Pandor Non-executive Director

01/10/2013 BCompt Accounting (Unisa), BCompt Accounting Hons (Unisa), Certificate in Theory of Accounting, CA (SA), MBA (Henley Management College (UK), Certified Information Systems Auditor, Certified in the Governance of Enterprise IT

Auditing Operations and Information Technology Committee (Chairperson)Risk Management and Ethics CommitteeChairpersons’ Committee

4 of 4

Mr TB Tenza Director-General (DG) representative

2010/01/01 Secondary Teachers Diploma (Indumiso College), BCom (Unisa), BCom (Hons) (Unisa), Master of Arts in Applied Economics (University of Michigan, USA), Executive Development Programme (Vaal University of Technology)

None Audit CommitteeRisk Management and Ethics CommitteeRemuneration and Human Resources CommitteeOperations CommitteeInformation Technology CommitteeOperations and Information Technology Committee

7 of 7

Dr EA Watson CEO (Ex officio) 7 of 7

* A total of 6 Board meetings took place during the financial year. (Three meetings were held during the previous Board’s term and three during the current Board’s term). The Annual General Meeting between the Stakeholder and the Accounting Authority took place on 27 September 2013.

Board Committees

The RAF Board is fully constituted and supported by various committees, which perform oversight over Management’s tactical

operations.

Each committee has an approved annual work plan based on the roles and responsibilities as contained in the respective terms of

reference, King III, applicable provisions of the PFMA, and various Institute of Directors in Southern Africa (IoDSA) position papers.

Quarterly progress reports pertaining to the annual work plans are considered by the respective committees and reported on to

the Board. Independent assurance on compliance with annual work plans is provided by Internal Audit, and the sub-committees

have achieved substantive compliance in terms of their work plans.

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Committees: 1 March 2013 to 30 September 2013

CommitteeNo. of meetings held

No. of members Name of members

Audit Committee 4 7 Mr LED Hlatshwayo (Chairperson)Mr T MoyoAdv. MJ RalefataneMr JN MasekoamengMs NZ QuntaMr DK SmithMr TB Tenza (DG representative)Dr EA Watson (CEO (Ex officio))

Risk Management and Ethics Committee 3 7 Mr T Moyo (Chairperson)Mr JN MasekoamengAdv. DS QochaMs A SteynAdv. MJ RalefataneMr LED HlatshwayoMr TB Tenza (DG representative)Dr EA Watson (CEO (Ex officio))

Remuneration and Human Resources Committee

4 7 Adv. DS Qocha (Chairperson)Mr V MahlanguMr T MoyoMs NZ QuntaAdv. MJ RalefataneMs A SteynMr TB Tenza (DG representative)Dr EA Watson (CEO (Ex officio))

Operations Committee 2 6 Mr JN Masekoameng (Chairperson)Mr V MahlanguAdv. DS QochaMr DK SmithMs A SteynMr TB Tenza (DG representative)Dr EA Watson (CEO (Ex officio))

Information Technology Committee 4 5 Ms NZ Qunta (Chairperson)Mr V MahlanguMr T MoyoMr LED HlatshwayoMr TB Tenza (DG representative)Dr EA Watson (CEO (Ex officio))

Chairpersons’ Committee 2 7 Dr NM BhenguMr V MahlanguMr LED HlatshwayoMr JN MasekoamengMr T MoyoAdv. DS QochaMs NZ Qunta

Committees: 1 October 2013 to 31 March 2014



Audit Committee 2 4 Mr LED Hlatshwayo (Chairperson)Mr D CoovadiaMr TP MasobeMr DK SmithMr TB Tenza (DG representative)Dr EA Watson (CEO (Ex officio))

Risk Management and Ethics Committee 1 5 Ms R Mokoena (Chairperson)Mr AM PandorAdv. DS QochaMr LED HlatshwayoMr TB Tenza (DG representative)Dr EA Watson (CEO (Ex officio))




Remuneration and Human Resources Committee

1 5 Adv. DS Qocha (Chairperson)Dr KLN LindaMs R MokoenaMs A SteynMr TB Tenza (DG representative)Dr EA Watson (CEO (Ex officio))

Operations and Information Technology Committee

1 6 Mr AM Pandor (Chairperson)Dr KLN LindaMr TP MasobeMr DK SmithMs A SteynMr TB Tenza (DG representative)Dr EA Watson (CEO (Ex officio))

Chairperson’s Committee 1 6 Dr NM BhenguMr D CoovadiaMr LED HlatshwayoMs R MokoenaMr AM PandorAdv. DS Qocha

Board Member remuneration

The Minister of Transport determines the remuneration of RAF Directors, taking cognisance of NT guidelines, as well as the RAF’s

ability to attract and retain the leadership necessary for the turnaround of the organisation. NT annually determines a cost of

living increment. Remuneration is fixed at a monthly scale and not based on a per meeting framework.

Board members are remunerated for private kilometres travelled in course and scope of their duties.

RemunerationOther

allowance Other re-

imbursements TotalName R’000 R’000 R’000 R’000

Dr NM Bhengu 764 - 12 776Mr V Mahlangu 293 - 11 304Mr JN Masekoameng 280 - 11 291Mr T Moyo 255 - 21 276Adv. DS Qocha 535 - 7 542Ms NZ Qunta 280 - 2 282Adv. MJ Ralefatane 255 - 3 258Mr DK Smith 509 - 2 511Ms A Steyn 509 - 1 510Mr LED Hlatshwayo 535 - 40 575Mr D Coovadia 293 - 3 296Dr KLN Linda 255 - - 255Mr TP Masobe 255 - 1 256Ms R Mokoena 255 - 7 262Mr AM Pandor 255 - 1 256Mr TB Tenza (DG representative) - - - -Total 5,528 - 122 5,650

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RISk MANAGEMENT

Background to Enterprise risk Management

The RAF, as a Schedule 3A public entity, is required in terms of section 51(a)(i) of the Public Finance Management Act (PFMA) to

implement and maintain an effective, efficient and transparent system of financial management, risk management and internal control.

To fulfil this responsibility, the RAF has adopted (a) the ISO 31000 international risk management standards, (b) the public

sector risk management framework and (c) risk management principles and guidelines as outlined by King III as its enterprise

risk management framework. Combined, these risk management standards are applied through a Board-approved enterprise

risk management framework, in identifying critical events and opportunities, assessing risks, monitoring and reporting on risks,

implementing controls, decision-making and in all other business processes.

Fraud and Corruption

The Risk Management and Ethics Committee provides oversight of the fraud and corruption prevention controls and mechanisms

within the RAF’s operating environment. To this effect:

• Risk incidents are logged in an operational risk register and monitored;

• There is sufficient forensic capability in the Forensic Investigation Department; and

• The RAF has a toll-free whistle-blowing hotline operated by KPMG and employees are encouraged to report any suspected

corrupt, fraudulent, criminal or unethical practices.

There were no material losses due to criminal conduct during the year under review.


risk Philosophy

RAF views risk management as a key strategic and business driver that enables the organisation to accurately predict and take

advantage of future trends, as it faces a myriad of risks in pursuit of its strategic objectives. Risk management is an essential

part of the business strategy and operations that impacts business performance, socio-economic status, service delivery and

financial results of the organisation. Risks are viewed and assessed holistically and not in isolation, since a single transaction/

event might have a number of risks and one category of risk can trigger other risks. To this end, the risk management processes

at RAF are implemented and embedded into the day-to-day operations of the organisation through various initiatives outlined

in the Annual Risk Management Plan.

Below is a high-level view of risk management in the RAF:

Figure C2 – Risk management in the RAF

Risk Management in the RAF

• The RAF Board is accountable for risk management.• The EXCO and management are responsible for risk management.• The Risk Management Department facilitates risk management processes in the RAF.• Business Unit Risk Champions facilitate risk identification and are enablers of the risk management process.• Staff are responsible for identifying risks and implementing treatment strategies to deal with these risks.

Accountable

Responsible

Responsible

Responsible

Business Unit Objectives

Strategic Objectives

Risk Champions

Facilitate, enable and report

Facilitate and enable

Strategic Risks

Operational Risks

Risk Management Department

Board

EXCO

Business Units

Sections/Regions

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risk Governance

The RAF Board has promoted the “risk matured” culture and set the risk management tone through the approval of the Risk

Management Policy and Framework. The Board, in discharging its risk management responsibilities, is supported by the Risk

Management and Ethics Committee (RMEC), whose main responsibilities, amongst others, are to ensure that the RAF has

implemented an effective Risk Management Policy and Plan that will enhance the RAF’s ability to achieve its strategic objectives.

Furthermore, the Board has demonstrated its governance oversight role over the entire system of risk management by monitoring

of the strategic risk profile, tactical risk profile, mitigation plans, emerging risks, materialised risks, accepted risks, avoided risks

and key risk indicators in relation to risk bearing capacity, risk tolerance and risk appetite. In fulfilling its governance oversight

responsibility, the Board identified seven (7) strategic risks which could threaten the achievement of the RAF’s strategic goals

and performance targets for the 2013/14 financial year. These are depicted below according to their risk ratings:

Figure C3 – Current rating of strategic risks

5

4

3

2

1 2 3 4 5

R1

R2R3

R4

R6R7

R5

Top 7 Strategic Risks

R1 Fraud and Corruption

R2 Information Communication Technology

R3 Financial Management

R4 Regulatory Framework

R5 Service Delivery

R6 Stakeholder Pressure

R7 People Management

Likeli

hood

Impact

Current Rating of Strategic Risks

Strategic Risks Mapped According to the Consequence and Likelihood


An annual risk assessment is conducted for both strategic and operational risks and is aligned with the strategic planning process

of the RAF. The risks are documented utilising risk management software and monitored on an on-going basis in relation to risk

mitigation strategies, relevance of existing risks and the identification of additional and new risks.

The table following provides an overview of mitigation measures implemented and actions still outstanding regarding the

RAF’s strategic risks.

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Impacted strategic objective Risk Mitigations implemented

Actions under way or still to be implemented

A solvent, liquid and sustainable RAF.A customer-centric, operationally effective and efficient RAF.

R1. Fraud and CorruptionThe RAF operates in an environment that is targeted by fraudsters, both internally and externally. The RAF 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.

• Identified fraud hotspots and implemented fraud awareness initiatives.

• Appointed the Forensic Advisory Panel to direct and determine focus areas in terms of forensic investigations.

• Published the Code of Conduct Policy, which encompasses the Declaration of Interest and Ethics Commitment Forms, to support the Code of Ethics and to entrench acceptable ethical standards.

• Conducted an Ethics Assessment Survey.

• Capacitation of Forensics Unit with IT Forensics Specialists to enable detection of the latest fraud trends, and prediction of criminal dependencies.

• Develop and implement the Fraud Prevention Strategy and Plan.

• Trend analysis, quantification of losses/risks and data analytics in order to develop mitigation measures.

A legislative dispensation that is aligned to principles of social security.A solvent, liquid and sustainable RAF.A customer-centric, operationally effective and efficient RAF.A transformed and capacitated RAF.

A customer-centric, operationally effective and efficient RAF.A transformed and capacitated RAF.

R2. ICT IT evolved from simply being a business enabler to being an essential component in implementing the RAF Strategy. The business relies heavily on IT systems to effectively and efficiently deliver on its core function (claims administration) and other key support functions such as Finance (payment of claims). ICT systems are also utilised to manage and protect the large amount of claim transactions and data. Other functions and initiatives, such as the Direct Claim Strategy, 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 RAF that requires pro-active identification and management.

• Aligned the ICT Strategy and budget with the Business Strategy.

• Revised the Citrix architecture.• Defined the ICT infrastructure

and application roadmap in line with the Business Strategy.

• Introduced high availability and redundancy on all systems.

• Development and implementation of IT 5 year strategy and plans.

• Integration, stabilisation and availability of the ICT systems.

• Develop and implement the RAF Security Strategy and latest and relevant IT security tools.

• Develop and implement a revised ICT Governance Strategy.

A solvent, liquid and sustainable RAF.A customer-centric, operationally effective and efficient RAF.

R3. Financial ManagementThe RAF Fuel Levy is determined with little regard for the main drivers of the RAF’s claims expenditure. The prevailing disconnect between the fuel levy awarded by Government and the RAF’s operational cash requirements is the primary cause of the poor liquidity that is being experienced by the RAF from time to time. Due to its unsustainable financial model, the RAF runs at a substantial deficit each year. Consequently, a number of outstanding (open and unpaid) claims have accumulated over time, representing a liability to the RAF. 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 RAF’s asset base, the RAF is technically insolvent.

• Investigated fuel sales forecasts, benchmarking with similar organisations globally to determine their funding models, and other sources of income.

• On-going engagement with NT and the DoT in respect of the Revenue Requirement Model.

• Implement a suitable funding model.

• Accurate prevalence of accidents and implementation of the Road Safety Strategy.

• Actively manage cash flows and efficient monitoring of claims expenditure.


Impacted strategic objective Risk Mitigations implemented

Actions under way or still to be implemented


R4. Regulatory FrameworkThe current 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. While the development of RABS is aligned with the DoT’s goals, it may take a few years before this new legislation is implemented. Therefore, the RAF considers recommending amendments to the RAF Act.

• RAF resource seconded to the DoT to support RAF matters and provide capacity.

• Regulation Unit that deals with policy and legislation established within the RAF.

• On-going stakeholder engagement.

• Implement and monitor RABS.• On-going monitoring,

scanning, advising of changes in the legislative landscape.

• Trend analysis and Court challenges to inform/improve business processes.

• Stakeholder relations management.

A solvent, liquid and sustainable RAF.A customer-centric, operationally effective and efficient RAF.A transformed and capacitated RAF.

R5. Service DeliveryThe RAF has a large number of outstanding claims, mainly because of underfunding over the past couple of years. It is therefore unable to pay claims at the rate it receives them. The RAF is busy overhauling its business. The process will lead to the establishment of an organisation that is more customer-centric, effective and efficient. Changes were designed to ensure that customers receive high-quality service, where claims are processed speedily and accurately, costs are contained and fraud eliminated.

• Developed and implemented a Backlog Strategy aligned with APP deliverables across the regions.

• Employees signed performance management contracts with clearly defined targets. Performance is reviewed on a quarterly basis.

• Reviewed the Direct Claims Strategy and identified focus areas, including setting up of dedicated Direct Claims Departments to improve turn-around times.

• Appointed Information Collection Agents to facilitate collection of outstanding documents and fast-tracking of settlements.

• Continuously engaged with the public through the ‘RAF on the Road’ campaign in all the provinces to enhance accessibility to the RAF’s services.

• Signed MoUs with various stakeholders.

• Improve turn-around times throughout the claims process.

• Optimise, standardise and re-engineer claims value chain.

• Prioritise direct claims.• Monitoring of staff, service

providers, RAF Panel Attorneys and implementation of quality assurance processes.

• Implement pro-active litigation management processes.

• Review the RAF Act and its sub-ordinate prescripts to identify opportunities in improving business efficiency and the financial position of the RAF.


R6. Stakeholder PressureThe current 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. While the development of RABS is aligned with the DoT’s goals, it may take a few years before this new legislation is implemented. Therefore, the RAF considers recommending amendments to the RAF Act.

• Continued to sign MoUs with relevant stakeholders.

• Developed and implemented the ‘RAF on the Road’ campaign calendar. Similar road shows also took place.

• Proactively engaged with media, stakeholders, customers and plaintiff attorneys.

• Conducted country-wide fraternity engagements, especially with the medical, social, justice and security sectors.

• Consider and implement pro-active media strategies.

• Implement and monitor the Stakeholder Relations Strategy and Plan.

• Proactive engagement and prioritisation of stakeholders.

A customer-centric, operationally effective and efficient RAF.A transformed and capacitated RAF.

R7. People ManagementThe RAF 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 workforce that is appropriately skilled, motivated, performance-driven, customer-centric and committed to providing excellent service is crucial. The RAF invests in growing and developing employees and ensuring optimal staff capacity.

• Implemented leadership development programmes and forums to ensure a capacitated leadership and achievement of RAF goals.

• Developed and implemented the Change Management Strategy.

• Implemented the Recognition and Reward Policy to ensure staff retention.

• Implement and monitor staff retention policies.

• Review all Human Capital policies.

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risk Maturity

The RAF is striving to have a risk matured and intelligent culture by 31 March 2016. In the last financial year, an independent

maturity assessment was conducted to establish the maturity levels of risk management within the RAF. The RAF achieved a

maturity level of 4 (managed), which is the second highest maturity level. The RAF has elevated risk management as a strategic

enabler and has implemented the following:

• There are fully operational risk governance structures in place, namely a Risk Management and Ethics Committee (RMEC),

Executive Management Committee (EXCO) where risk management is a standing agenda item, Risk Management division,

and a Risk Champion Forum (where all Risk Champions from all business units throughout the RAF discuss cross-functional

risks).

• There is a three-year plan developed to assist the RAF to achieve the desired maturity level and maturity is monitored

quarterly.

• Risk Management is part of the performance contracts for all employees within the RAF.

• All business units and regions have been allocated Risk Champions and Risk Advisors, who monitor and report on emerging,

materialised, avoided and accepted risks to the Business, EXCO and RMEC.

• A Risk Appetite Framework (which includes a Risk Bearing Capacity) has been established, which forms part of the risk-taking

philosophy and establishes principles of managing risks. This also includes the escalation process for risks within the RAF.

INTERNAL CONTROL UNIT

Although the RAF does not have an Internal Control Unit, its Compliance Unit (refer to the Compliance with Laws and Regulations

section below) fulfils the function of ensuring that all business units comply with the necessary legislation applicable and relevant

to public entities, including internal policies, processes and procedures.

INTERNAL AUDIT AND AUDIT COMMITTEE

Key activities and Objectives of Internal audit

The RAF’s Internal Audit function is an integral part of its corporate governance system. Its purpose is to evaluate whether the

RAF’s systems of control are effective and to adequately mitigate business risks. Ultimately, the assurance provided by Internal

Audit serves to assist the Board in fulfilling its disclosure obligations under its corporate governance codes and to report annually

to the Minister of Transport and PCOT on the effectiveness of the RAF’s systems of control.

Internal Audit assists Management in identifying, evaluating and assessing significant organisational risks and provides reasonable

assurance as to the adequacy and effectiveness of related internal controls, i.e. whether controls are appropriate and functioning

as intended. Where controls are found to be deficient or not operating as intended, recommendations for enhancement or

improvement are provided.

The Internal Audit Plan was developed and implemented after taking into account the top risks identified by Management

and Internal Audit. A risk-based approach was followed in developing this plan. The plan provides coverage across all major

processes of the RAF.

Internal Audit also attends to requests from Management. All Management requests during the reporting period were attended to.

Key activities and Objectives of the audit Committee

Among others, the Audit Committee is responsible for monitoring and reviewing the effectiveness of the RAF’s Internal Audit

function. Each year it considers and approves the Internal Audit Plan, receives and reviews Internal Audit progress reports and

approves any changes or shortfall in the Internal Audit Plan.


audit Committee Meeting attendance

The table below discloses relevant information on the Audit Committee members.

Name QualificationsInternal/external

Position if internal member

Date appointed

Date resigned/term expired

No. of meetings attended

Mr LED Hlatshwayo

(Chairperson)BCom (University of Zululand), BCompt (Unisa), BCompt/CTA (Hons) (Unisa), CA (SA) and MBA (University of North West, Potchefstroom)

External - 01/10/2011Re-appointed 01/10/2013

6/6

Mr D Coovadia2 BCompt, BCompt (Hons) (Unisa), FCIS, CA (SA)

External - 01/10/2013 2/6

Mr TP Masobe2 BA (Hons) Economics, MSc Health Economics (University of London), International Executive Development Diploma, Advanced Health Leadership

External - 01/10/2013 2/6

Mr T Moyo1 BCom (Accounting) (ROMA), Post-graduate Diploma in Strategic Management (Baruch College City University of New York), MBA (Finance) (Cardiff Business School, Wales University), Risk Management (University of Stellenbosch), Graduate Diploma in Company Direction (Graduate Institute of Management), Executive Development Programme (Harvard Business School), AIRMSA

External - 01/10/2010 30/09/2013 4/6

Adv. MJ Ralefatane1 BProc (UNIN), LLB (UNIN), LLM (Labour Law) (Rand Afrikaanse Universiteit), Certificate in Labour Relations (University of Pretoria) and Certificate in Human Rights (University of Pretoria)

External - 01/10/2010 30/09/2013 2/6

Mr JN Masekoameng1 BCom (University of the Witwatersrand), Higher Diploma in Tax Law (University of Johannesburg), Certificate in Labour Law (Unisa), MBL (Unisa School of Business Leadership)

External - 01/10/2010 30/09/2013 4/6

Ms NZ Qunta1 BAdmin (University of Zululand), BCom (Hons) (University of Pretoria), MCom (Economics) (University of Pretoria), MBA (University of Oxford Brookes, UK) and Corporate Governance Certificate (Unisa)

External - 01/10/2010 30/09/2013 4/6

Mr DK Smith BSc (University of Stellenbosch) FASSA, International Senior Management Programme (Harvard Business School)

External - 01/10/2010Re-appointed 01/10/2013

3/6

Mr TB Tenza (DG representative)

Secondary Teachers Diploma (Indumiso College), BCom (Unisa), BCom (Hons) (Unisa), Master of Arts in Applied Economics (University of Michigan, USA), Executive Development Programme (Vaal University of Technology)

External - 01/01/2010 4/6

Dr EA Watson (Ex officio)

Internal CEO 6/6

1 Term expired on 30 September 2013 2 Appointed as from 1 October 2013

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COMPLIANCE WITH LAWS AND REGULATIONS

The RAF Board and Management recently established an adequately resourced Compliance business unit within the RAF. The

unit provides a strong legal governance component to assist the RAF in accurately assessing compliance risks and efficiently

monitoring legal compliance.

The Compliance Unit works closely with Executive Management and other business units to align goals and ensure proper

communication. The Board is responsible for ensuring compliance with all laws and regulations applicable to the RAF. For this

reason, Compliance has unfettered access to the Board and the CEO on any compliance-related issues.

A Compliance Policy, Charter and Framework are in place to assist the Compliance unit in executing its mandate. Further governing

documents that will assist the unit to ensure compliance within the RAF are the RAF Regulatory Universe, the Compliance Risk

Management Plan (CRMP), compliance reporting templates and the Compliance Risk Universe.

To ensure compliance with legislation, codes, regulations, policies and standards, the Compliance Unit embarked on a compliance

review of various departments to determine their level of compliance. The compliance review reports highlighted areas of non-

compliance and recommended actions to ensure compliance is achieved or improved.

Both monthly and quarterly compliance reports are submitted to the Board and its committees, highlighting all identified

compliance risks and transgressions within the RAF.

A compliance culture is yet to be embedded within the RAF, hence a compliance programme was developed to ensure the

achievement of a compliance mature organisation and to ensure continual improvement on the compliance culture.

FRAUD AND CORRUPTION

Fraud Prevention Policy

The Fraud Prevention Policy was updated and approved by the Board in 2013. A new strategy was also approved, the aim of

which is to close down the marketplace for touts by focusing on legal and medical practitioners to discourage them from

dealing with touts.

Mechanisms in Place to report Fraud and Corruption

The RAF has a Whistle Blowing Policy in place which resides in the Ethics Office. The Forensic Investigation Department (FID) is

in charge of the Fraud Tip-off Line through which fraud and corruption can be recorded and in several policies a duty is placed

on employees to report suspicious activities to the FID.

Officials are required to confidentially disclose suspected fraud and corruption. In the case of a whistle-blower, the incident is

reported to the Corporate Secretary or the Chief Audit Executive who then decides which channel to follow.

Statistics obtained from the FID for the period 1 April 2013 to 31 March 2014 are evident of the extent of fraud experienced by

the organisation, as well as of the RAF’s commitment to combatting fraud and corruption.

Fraud tip-off Line

The Fraud Tip-off Line is the RAF’s confidential and independent reporting hotline which enables employees, customers, suppliers,

managers and other stakeholders to raise concerns about conduct that is considered to be contrary to the RAF’s values on a

confidential basis.


When a tip-off is received through the hotline, it is sent to the FID Senior Manager who then allocates it to the relevant FID

Manager for investigation. Where investigations are finalised and fraud is detected, a criminal docket is registered with the

National Prosecuting Authority (NPA)/RAF Fraud Investigation Task Team. The South African Police Service (SAPS) and NPA then

takes the matter further whereafter arrests and convictions are made.

The Audit Committee holds the oversight responsibility of ensuring the adequacy of the Tip-off Line procedures, while Internal

Audit is responsible for the day-to-day monitoring of the process, and ensures that Management is informed about reported

issues, and that risks are adequately managed.

Political Donations, Gifts and Bribes

The RAF is opposed to corruption and illegal practices in all forms. It does not tolerate the giving and receipt of bribes; nor does it

condone anti-competitive practices in dealings with government and in the marketplace. The RAF does not permit contributions

or donations for political purposes, and requires any lobbying undertaken to be in line with the RAF’s ethics and internal policies.

The policies with regard to these matters are set out in the Donations Policy.

Fraud Cases reported and actions taken

The table below outlines activities within the RAF’s FID for the year under review.

External investigations

Files carried over 6,468

Files received 6,102

Files closed 6,467

No. of arrests 478

No. of convictions 573

Repudiations 798

Repudiations claimed amount R113,178,482

Repudiations estimate amount R44,016,588

Total claims no estimate amount 286

Internal investigations

Investigations carried over 109

Investigations received 121

Investigations finalised 128

Claim files carried over 305

Claim files on investigations received 213

Claim files on investigations finalised 256

Claim files at hand (month end) 247

Investigations where misconduct/fraud was identified 63

Cases where disciplinary action was recommended 41

Investigations where disciplinary action was instituted 13

Resignations due to or during investigations 5

Suspensions 20

Convictions (internal) 16

Cases registered with SAPS 20

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MINIMISING CONFLICT OF INTEREST

Management, employees and the RAF’s business partners are guided by its Code of Business Ethics, which is supported by its

Declaration of Interest Policy which relates to the minimising of conflict of interest.

Supply Chain Management (SCM) employees, as well as the members of the Procurement Control Committee (PCC), Bid

Specification Committee (BSC) and the Bid Evaluation Committee (BEC), are required to declare any conflict of interest by signing

a declaration of interest document. Staff members in the Procurement Department also declare business interests through an

approved Human Capital process adhering to the RAF’s Internal Conflict of Interest Policy. In cases where a potential conflict

of interest may arise, the respective members are requested to excuse themselves from the specific meeting in order not to

influence the process.

All members of staff are also required to sign the Code of Ethics and the Declaration of Interest forms.

CODE OF CONDUCT

During the reporting period, a reviewed Code of Conduct was implemented in the organisation. The reviewed Code of Conduct

applies to the Board, Management team and employees to guide their conduct, and for them to exercise care and diligence in

the course of their work at the RAF.

To ensure consultative participation from labour representatives, the reviewed Code of Conduct was presented to and approved

by the Collective Bargaining Council. The council recommended that employees should be encouraged to sign the Code of

Conduct and Code of Ethics respectively. Breach of the Code of Conduct is dealt with in line with the RAF’s Disciplinary Policy.

At the RAF Leadership Forum held in January 2014, all members of the RAF Management signed the Code of Ethics and pledged

to adhere to the Code of Conduct and live up to the RAF’s values.

To demonstrate the RAF’s commitment to transparency and accountability, the Code of Conduct is available to the public on

the RAF’s website and is subjected to annual review in line with legislative amendments.

HEALTH, SAFETY AND ENVIRONMENTAL ISSUES

In the 2012/13 financial year, the RAF sourced Authority for Safety, Health, Risk and Environmental Quality (ASHREQ) Health and

Safety Management (Pty) Ltd to conduct an annual occupational health and safety (OHS) compliance audit. The results indicate

general improvements across the board, as outlined in the table below:

Region

2012/13

%

2013/14

% Status

Eco Glades 80% 89% 9% improvement

Menlyn 73% 77% 4% improvement

Walk-in Centre (Pretoria) 59% 79% 20% improvement

Johannesburg 71% 90% 19% improvement

Durban 70% 74% 4% improvement

East London 74% 78% 4% improvement

Cape Town 90% 96% 6% improvement


CORPORATE SECRETARY

The Corporate Secretary’s role and responsibilities include, but are not limited to the following:

• Providing a central source of guidance and support to the Board on matters of good governance.

• Assisting with the Board induction and training programmes;

• Ensuring Board and Committee Charters are kept up to date;

• Preparing and circulating Board documents;

• Eliciting responses for Board and Board Committee meetings;

• Drafting annual work plans;

• Ensuring preparation and circulation of minutes of Board and Board Committee meetings; and

• Assisting with the evaluation of the Board, Committees and individual Board Members.

SOCIAL RESPONSIBILITY

Key to the overall strategic objectives of the RAF is its various corporate social responsibility (CSR) initiatives in place across

the country. The RAF’s CSR approach is defined as an integration of social, environmental and economic contributions

towards society.

accountability for Sustainability

Accountability for our sustainable development policies, systems, practices, commitments and actions was guided through

various committees of the Board, which ensure that the RAF’s sustainable development approach, policies and commitments

are aligned with global best practice.

The governance responsibility for environmental, labour, human rights, society; and product responsibility aspects at the RAF lie

with the Board and its committees, while the management responsibility of these aspects lies with the CEO and his Executive team.

The RAF considers four key areas of its performance and impacts when it comes to incorporating sustainability aspects into its

business, namely:

• Economic factors;

• Environmental factors;

• Social factors; and

• Governance factors.

GRI’s Sustainability Reporting Framework is a reporting system that enables all companies and organisations to measure,

understand and communicate this information. The RAF strives to comply with this international norm, supported by its values,

mission, vision, operational and strategic intent. It must, however, be noted that the RAF does not fully comply with the new

GRI 4 reporting framework, but measures are being put in place to improve on this in the next financial year.

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For ease of reference, the table below contains the page numbers on which relevant sustainability reporting information can

be found.

GRI reference DescriptionReference in the Integrated Report Page

Strategy and analysis Statement of senior decision-makers, description of impacts, risks and opportunities

Messages from the Chairperson and CEO 8 and 13

Organisational profile Organisational profile and details, and scale of organisation, ownership and significant changes introduced

Part A: General Information

Appendix A: Branches and Satellite Offices

3–28

204

Report parameters Report profile, scope and boundaries Part A: General Information 6Governance, commitments and engagements

Governance, commitments to external initiatives and stakeholder engagement

Part A: General Information

Part C: Governance

3–28

93–128Management approach and key performance indicators

Economic performance, service offering, role and impact on SA economy, human resources

Messages from the Chairperson and CEO

Part B: Performance Information

Part D: Human Resource Management

Part E: Financial Information

8 and 13

29–92

129–140

141–203Environmental framework Environmental impact Health, Safety and

Environmental Issues

114Social performance indicators, labour practices and decent work

Employment, labour/management relations, occupational health and safety, training and skills

Part D: Human Resource Management

129–140


Social Impact on Society

Labour Practices

Labour practice aspects are discussed in Part D: Human Resource Management.

Economic Empowerment

As a state entity, the RAF is mandated to contribute towards the transformation of the country through the creation of jobs and

a better life for all.

Through its partnership with the South African Civic Organisation (SANCO) Development Institute (SDI) and its Pothole Service

Delivery Project for co-operatives, the RAF gave impetus to the Presidential proclamation on job creation and advanced the

incorporation of women and youth into the broader transport sphere. The project is focused on assisting municipalities (in the

main) with their road infrastructure maintenance initiatives through an extensive community upliftment programme delivering

job security, public mobilisation and involvement, as well as the transfer of skills.

To date, the project has assisted in training and permanently supporting about 65 young people and women, and has seen

the repair of more than 5,250 potholes during its launch phase, covering more than 5,000 m² of roads and extending to more

than 200 streets.

Broad-based Black Economic Empowerment

During the period under review, the RAF underwent a Broad-based Black Economic Empowerment (B-BBEE) verification process

for the first time since its establishment. The process resulted in the RAF earning a Level 5 B-BBEE status. Work is underway to

put in place a B-BBEE Policy and plan, which will improve the RAF’s current B-BBEE level.

Stakeholder Relations

In line with best practice, the institutionalisation of stakeholder relations and engagements is a key focus area of the RAF. To

this end, a Stakeholder Engagement Policy and Integrated Stakeholder Strategy were approved by the Board. In terms of key

governance tenets, the policy is anchored by King III as well as the South African Inter-governmental Relations Policy of 1996.

Implementation of the policy is done through the Integrated Stakeholder Strategy, which is aligned with the RAF’s strategic

objectives, a stakeholder map, as well as a stakeholder engagement plan.

Stakeholder relations within the RAF context are aimed at the following outcomes:

• Equitable and sustainable social development by giving those who have a right to be heard the opportunity to be considered

in decision-making processes;

• Enabling better management of risk and reputation;

• Allowing for the pooling of resources (knowledge, people, money and technology) to solve problems and reach objectives

that cannot be reached by single organisations;

• Enabling understanding of the complex operating environments, including market developments and cultural dynamics;

• Enabling learning from stakeholders, resulting in product and process improvements;

• Informing, educating and influencing stakeholders to improve their decisions and actions that will have an impact on the

RAF and on society; and

• Contributing to the development of trust-based and transparent stakeholder relationships.

The broader achievements for stakeholder relations for the year under review included:

• An accurate forecasting report on the prevalence of road accidents, which was approved by the Board in February

2014; and

• Signing up 20 information collection agents to enhance the functionality of the RAF’s crash data repository.

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During the reporting period, the RAF’s stakeholders were categorised in accordance with their level of impact and influence

on the organisation. Below, is a graphical representation of a 360 degree network of stakeholders which have been identified

as vital to the RAF’s business.

C-BRTA Freight asso ciations Claimants

Towing services

Employees

FSB

FPI

Provinces

NDoT

DGs & HODs

SAMA

HPCSA

HASA

SACC

CSIR

SAPAE SA

Bus associations

PCOTDept. of Labour

DoJ & CDTaxi associations

Home affairs

Advocacy groups

NPA

Traffic police

SAPS

Justice

National Treasury

SASSA

Social develop-

ment

Dept. of Health

SAMSA

PRASA

RTIA

ACSA

SADC-MVAs

Medical aid schemes

Toll industry

RTMC

SANRALSATAWU

Figure C4 – Stakeholder map

The map reflects the RAF’s continuous effort to establish and grow strategic and sustainable relations. The global stakeholder

map (as depicted) was developed in response to various business needs.

Building Key Relationships

In the context of the United Nations (UN) Decade of Action for Road Safety 2011–2020, the RAF established relationships with

significant partners in its quest to meet the conditions of the UN for each signatory country to halve road accidents by 2020.

These partnerships include relationships in all spheres of government.


During the period under review, the Stakeholder Relations team entered into more than 40 meaningful relationships, 20 of

which (through MoUs) contributed towards sustainable business activities. Some of the relationships that the RAF has entered

into have led to direct interventions in respect of the reduction of road carnage and saving the lives of South African road users.

These stakeholder relationships also allowed the RAF to establish additional business enablers, which ensured the enhancement

of its core business. The RAF was also able to respond to the challenges identified in the Stakeholder Perception Survey Report.

Peripheral and far-flung stakeholders are now starting to understand what the RAF brand represents and what its business

proposition is. This has resulted in existing relationships being enhanced and new ones created in areas where the RAF was

never given an opportunity to share its business offerings.

Road Safety Programmes

The RAF conducts a number of road safety programmes that aim to change general road user behaviour and to provide a

safe infrastructure for vulnerable road users. Its Road Safety Strategy focuses on both a proactive and reactive approach. Its

proactive approach aims to educate road users about the safe use of our roads, which includes programmes such as education

for pedestrians, motorists, cyclists and passengers. The reactive approach is based on the infrastructure engineering aspects of

road safety, whereby hazardous locations are identified and are remedied through the implementation of low-cost engineering

infrastructure interventions.

Road Safety in Schools Programme

Through the Road Safety in Schools Programme, the RAF visited a number of schools throughout the country to educate

learners about road safety. The “Child in Traffic” section teaches learners the basic rules of crossing the road safely. The “Scholar

Patrol” section provides facilities for learners to assist other learners to cross busy roads to and from schools, and the RAF also

contributes scholar patrol uniforms to the learners to enhance visibility.

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Road Safety Begins with Us Campaign

The “Road Safety Begins with Us” campaign was launched on 28 June 2013 in all RAF regional offices. The objectives of the

campaign are:

• To enhance driving skills amongst the RAF workforce;

• To create safe and responsible road user behaviour;

• To encourage compliance with the National Road Traffic Act, 1996 (Act No. 93 of 1996); and

• To encourage the workforce to take ownership and responsibility for road safety and to become road safety ambassadors.

The campaign comprised a vehicle and driver fitness check, defensive driving presentation and a drivers’ competition. The winner

from each region was awarded a full-day advanced driving training. In addition, drivers from four bus companies in North West

received defensive driver training.

Campaigns among Taxi Drivers

As part of the “Road Safety Begins with Us” campaign, road safety awareness was raised among taxi drivers and operators. The

aim was to encourage taxi drivers to take responsibility for their own safety and that of their passengers. Road safety aspects

emphasised included visibility, wearing of safety belts, fatigue and driver and vehicle fitness.

The Hlokomela Kick-off Campaign, in partnership with the South African National Taxi Council (SANTACO), was also focused on

creating road safety awareness and was conducted in a number of taxi ranks.

Global Road Safety Week

The UN General Assembly called for a Global Road Safety Week as part of its Decade of Action for Road Safety Campaign. The

aim of the Road Safety Week was to draw attention to the urgent need to better protect pedestrians worldwide and to generate

action on the measures needed to do so. Pedestrians comprise around one quarter of the annual global road deaths. In South

Africa, 40% of road fatalities are pedestrians. During Road Safety Week, the RAF participated in a number of activities, particularly

road safety walks.


Cyclist Safety Campaign

Cyclists form a large proportion of South African road users. Many use bicycles to transport them to and from work, while others

cycle as a sport or leisure activity. Since this group is highly vulnerable to road accidents, the RAF initiated this campaign to promote

safe cycling by providing cyclists with helmets, reflective bags and stickers at identified sites. The Cyclists Safety Campaign was

piloted in Gauteng where the RAF, in partnership with the AA, distributed 1,000 helmets and reflective packs. Since the launch

in 2013, an additional 1,500 helmets were distributed. The RAF aims to intensify this initiative in the coming financial year and

will partner with more stakeholders to maximise its impact.

The RAF also identified motorcyclists as a vulnerable road user group, and is in the process of establishing partnerships with a

number of biker clubs to promote road safety among their members. MoUs will be signed in the 2014/15 financial year.

Road Safety Summit

The Road Safety Summit, hosted by the Honourable Minister of Transport, Ms Dipuo Peters, took place on 4–5 October 2013.

With the theme, “Together Championing Road Safety 365 Days”, the aim was to address the carnage on South Africa’s roads.

The summit was an inclusive call to all road users and stakeholders to contribute towards ensuring a reduction in road deaths,

a decrease in crashes, a change in road user behaviour and voluntary compliance to road traffic rules by road users. Dr Eugene

Watson, RAF CEO, did a presentation on the RAF’s activities, while staff members participated in a secretariat and co-ordination

capacity.

Road Safety and Traffic Officials’ Training

Road Safety and Traffic Officers interact with road users on a daily basis in the course of their duties. It is therefore imperative

that they are empowered with knowledge about the RAF which they can share with the public.

For this reason, the RAF conducted training seminars for these officers in KwaZulu-Natal, North West, Free State, Limpopo and

Mpumalanga on the RAF Act and the RAF’s activities. The training initiative formed part of the Hlokomela Kick-off Campaign.

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Impolompolo Project

In partnership with Ngembuka Trading, the RAF is involved with the Impolompolo Project, aimed at truck drivers in KwaZulu-

Natal. This annual road safety event has been running since the 1990s, with the SABC also on board to instil the culture of respect,

compliance to traffic laws and tolerance among road users.

Through the project, truck drivers get to interact on a daily basis on Ukhozi FM, where they share information regarding road

accidents throughout the province. The annual event took place on 17 November 2013 and was attended by 3,500 people,

including truck drivers, members of the general public, officials from the KwaZulu-Natal Department of Transport, RAF officials

and representatives from Ukhozi FM.

Seatbelt Campaign

Approximately 450 South Africans suffer spinal cord injuries through road accidents on an annual basis. Unfortunately, no statistics

are available on how many of those were not wearing seatbelts, but there is well documented research available which indicates

that wearing a seatbelt significantly reduces the chances of a spinal cord injury should you be in a road accident.

In partnership with the QuadPara Association of South Africa, the RAF launched the Seatbelt Campaign under the theme, “Buckle

Up, We Don’t Want New Members”. The campaign was promoted at fuel stations on all of South Africa’s main routes and more

than 9,618 road users pledged to use their seatbelts.

Don’t Text and Drive Campaign

Texting while driving has a detrimental impact on concentration and can have a detrimental impact on driving abilities. Since

young drivers between the ages of 18 and 35 are most often guilty of this offence, the “Don’t Text and Drive” campaign is focused

on this group of road users. The campaign aims to raise awareness about the risks of distracted driving associated with the use

of mobile phones. The first event took place at Park Station in January 2014, with a second event at Baragwanath Taxi Rank.

Attendees of the event signed a pledge not to text whilst driving.

Infrastructure Interventions

The reactive side of the RAF’s road safety initiatives is an intervention at hazardous road infrastructure locations to reduce and

prevent road accidents.

Through these interventions, the RAF partners with local and provincial road engineering authorities to invest in implementing

speed calming measures, such as speed bumps and clear road signs, as well as the repair of dangerous potholes. The RAF is in

the process of erecting 19 speed bumps and road signs across the country. Most of these speed bumps are used by learners

for scholar patrol crossings.

One key infrastructure project is the RAF’s partnership with SANRAL, RTMC, the DoT in the Eastern Cape and Mnquma Local

Municipality to curb the high number of road accidents at the Ndabakazi–N2 intersection with a R5 billion infrastructure injection.

As part of the project, the RAF launched a community awareness campaign to educate residents on road safety. Since the

campaign was launched in Women’s Month, it was appropriately themed “Women for Road Safety”. The event called on the

women of Ndabakazi to take responsibility for road safety in their area. The prayer and road block event attracted more than 800

community members and was also attended by the MEC: Roads and Transport, Honourable Thandiswa Marawu; Chairperson of

Transport Portfolio Committee: Busisiwe Makaula and a number of RAF Executives. The RAF also visited several schools and taxi

ranks in the area to raise awareness about the dangerous intersection.


Investing in our Community

The RAF’s CSR initiatives can be defined as an integration of social, environmental and economic contribution towards our society.

The RAF is committed to investing in high impact projects that bring about significant social security to the needy. It continues

to channel its investment into five focus areas:

• Poverty alleviation;

• Education;

• Health (post-crash care);

• Road usage awareness; and

• Environment management.

Projects are aligned to the broader national government agenda and are aimed at empowering communities for years to come.

The RAF is mindful of the fact that being a responsible corporate citizen is more than ticking off a compliance box or handing

over a cheque. It believes in equipping society with the relevant skills and information that enable growth and development.

Employee Participation Programmes

At the RAF, CSR is not only the responsibility of the corporate organisation, but rather the responsibility of every stakeholder

associated with the RAF. Fundamentally, CSR is an enabling pillar to connect the organisation with its employees, and enhancing

employee participation in line with the organisation’s strategic objectives. The RAF’s commitment to CSR enables its employees

to jointly participate in eradicating poverty by creating social security to society.

CSR Projects

The RAF spent more than R2.4 million on its Corporate Social Responsibility during the year under review. The table below

reflects the status of the various CSR projects:

Project name Description Number of beneficiaries Actual spendPayment of battery powered wheelchair (repairs) A claimant in Lentegeur

received a wheel chair donation from the RAF. Upon arrival, it was broken, thus RAF undertook to repair it

1 R1,913

Revamp – Kalafong hospital Enhanced access to quality post-crash care

About 2,500 crash victims seen per annum

R1,000,000

Back to school campaign Assistance to disadvantaged learners as part of CSR

4,420 school-going children benefited

R718,000

Soweto Drift A road safety promotion initiative for youth with an interest in vehicle drifting

2,500 young people in Soweto attended the event that was partly sponsored by the RAF

R9,854

Food Security Poverty alleviation 360 families R563,070

Procurement of container – Balfour Provision of a kitchen facility for Siph’uculo crèche in Balfour

50 children R96,161

Bursary payment (7 individuals) The RAF contribution to a schools’ debating competition aimed at promoting Road Safety in schools

7 matriculants were awarded bursaries for their tertiary qualifications

R50,000

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RAF on the Road

The Marketing and Communications Department launched the ‘RAF on the Road’ campaign in 2012 as a platform to take the

RAF’s service offering to the people, educate road users about the RAF and create brand awareness.

The campaign has significantly strengthened the RAF’s relationship with its customers, stakeholders from the three tiers of

government and the media. It provides a platform to market direct claims and, most importantly, it gives RAF staff the opportunity

to meet the faces behind the files.

‘RAF on the Road’ integrates all functions within the RAF, the focus being on service delivery. Services offered to the public on the

day include: checking one’s claims status, claims originations, settlement of offers, education around the general claims process,

complaints and fraud and corruption referrals.

During the year under review, 16,074 claimants were engaged and R376 million were made in settlement offers.

‘RAF on the Road’ was taken to the following areas during the financial year:

Place visited Date Place visited DateBalfour 20 April 2013 Polokwane 28 September 2013Mamelodi 4 May 2013 Kimberley 12 October 2013Cape Town – Nyanga 25 May 2013 Bloemfontein – Mangaung 26 October 2013Venda – Thohoyandou 15 June 2013 KwaZulu-Natal – Ntuzuma (mini) 19 October 2013Welkom – Thabong 27 July 2013 Cape Town – Paarl (mini) 30 November 2013Mafikeng – Barolong 17 August 2013 Port Elizabeth – Kwa-Zakhele (mini) 7 December 2013Mount Frere 31 August 2013 Bushbuckridge 7 December 2013Port Shepstone 7 September 2013 Upington 8 February 2014


REPORT OF THE AUDIT COMMITTEE

The Audit Committee is pleased to present its report for the financial year ended 31 March 2014.

The Audit Committee is an independent statutory committee appointed by the Board of the RAF. The duties and responsibilities

of the Audit Committee as delegated by the Board of the RAF are included in this report.

audit Committee terms of reference

The Audit Committee has adopted formal terms of reference in the form of its Audit Committee Charter that has been approved

by the Board of the RAF. The Committee has conducted its affairs in compliance with this Charter and has discharged its

responsibilities contained therein. The Charter is available on request.

audit Committee Members and attendance

The Audit Committee consists of four independent Non-Executive Directors. It meets at least four times per year, as specified

in the Audit Committee Charter.

The Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Chief Audit Executive, external auditors and other

assurance providers (legal, compliance, risk, health and safety) attend meetings by invitation only.

During the year under review six meetings were held.

Audit Committee25 Apr

201328 May

201325 Jul 2013

26 Sep 2013

28 Nov 2013

28 Jan 2014 Total

Mr LED Hlatshwayo Yes Yes Yes Yes Yes Yes 6Mr D Coovadia2 N/A N/A N/A N/A Yes Yes 2Mr TP Masobe2 N/A N/A N/A N/A Yes Yes 2Mr T Moyo1 Yes Yes Yes Yes N/A N/A 4Adv. MJ Ralefatane1 Yes Yes X X N/A N/A 2Mr JN Masekoameng1 Yes Yes Yes Yes N/A N/A 4Ms NZ Qunta1 Yes Yes Yes Yes N/A N/A 4Mr DK Smith Yes Yes X X X Yes 3Mr TB Tenza3 Yes Yes X X Yes Yes 4Dr EA Watson (Ex Officio) Yes Yes Yes Yes Yes Yes 6

1 Audit Committee members’ term expired on 30 September 20132 Audit Committee members appointed as from 1 October 20133 DG representativeX Apologies were rendered for meetings not attendedN/A Not a member at the time of the specific meeting

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roles and responsibilities

Statutory Duties

The Audit Committee’s roles and responsibilities include its statutory duties as per the Public Finance Management Act, 1999

(Act No. 1 of 1999) (PFMA), as well as the Treasury Regulations issued in terms of the PFMA and the responsibilities assigned to

it by the Board. The Audit Committee executed its duties in terms of the requirements of King III and in instances where King III

requirements have not been applied; explanations are outlined in the Corporate Governance Statement included elsewhere in

this Integrated Annual Report.

The Committee was responsible for performing its duties as set out in the Audit Committee Charter, which included reviewing

the following:

• The effectiveness of the RAF’s internal control systems;

• The risk areas of the RAF’s operations to be covered in the scope of the internal and external audits;

• The accounting and auditing concerns identified as a result of the internal or external audits;

• The RAF’s compliance with legal and regulatory provisions, in particular the Road Accident Fund Act, 1996 (Act No. 56 of

1996); the Road Accident Fund Amendment Act, 2005 (Act No. 19 of 2005); the PFMA, as well as the NT Regulations;

• The activities of the Internal Audit function, including its work programmes, co-ordination with the External Auditors, the

reports of significant investigations and the responses of Management to specific recommendations;

• The independence and objectivity of the External Auditors;

• The review of the Financial Statements with specific attention to:

- Underlying accounting policies or changes thereto;

- Major estimates and managerial judgements;

- Significant adjustments flowing from the year-end audit;

- Compliance with effective South African Standards of Generally Recognised Accounting Practice (SA Standards of

GRAP), the PFMA and other statutory precepts; and

- The appropriateness of the going concern assumption.

The Audit Committee also undertook the following activities during the year under review:

• Reviewing and approving the Internal Audit function’s Charter and Internal Audit Plan;

• Conducting investigations within its Terms of Reference; and

• Encouraging communication between Members of the Board, Senior and Executive Management, the Internal Audit

Department; and the External Audit partner.

External Auditors

During the year, the Audit Committee met with the External Auditors and with the Chief Audit Executive without Management

being present. The Audit Committee is satisfied that it complied with its legal, regulatory or other responsibilities.

The Audit Committee, in consultation with Executive Management, agreed to the engagement letter, terms, audit plan and

budgeted audit fees for the 2014 financial year.

Financial Statements and Accounting Policies

The Audit Committee has evaluated the Accounting Policies and Financial Statements of the RAF for the year ended 31 March

2014 and concluded that these comply, in all material respects, with the requirements of the PFMA, and were prepared in

accordance with the effective SA Standards of GRAP issued by the Accounting Standards Board (ASB).

The Audit Committee has established a process to receive and deal appropriately with any concerns and complaints relating to

the reporting practices of the RAF. No matters of significance have been raised in the past financial year.


Unauthorised, Irregular and Fruitless and Wasteful Expenditure

The Audit Committee is satisfied with the processes in place to detect and disclose unauthorised, irregular and fruitless and

wasteful expenditure. Any unauthorised, irregular and fruitless and wasteful expenditure that exceeds the materiality limit

documented in the Materiality Framework will be disclosed. For the year under review, there was no expenditure which breached

the materiality limit.

Internal Financial Controls

The Audit Committee’s assessment of the internal financial controls in the claims environment is that the systems, although

enhanced, should still be improved. Despite this, and based on the information and explanations given by Management and

the Internal Audit function, together with discussions held with the Auditor-General of South Africa on the result of their audits,

the Audit Committee is of the opinion that the internal financial controls are adequate to ensure that the financial records may

be relied upon for preparing the Financial Statements, and accountability for the assets and liabilities is maintained.

Based on the results of the formal documented review of the design, implementation and effectiveness of the RAF’s system of

internal financial controls conducted by the Internal Audit function during the 2014 financial year and, in addition, considering

information and explanations given by Management and discussions with the External Auditor on the results of their audit, the

Audit Committee is of the opinion that the RAF’s system of internal financial controls is effective and forms a sound basis for the

preparation of reliable Financial Statements.

Whistle-blowing

The Audit Committee receives and deals with any concern or complaints, whether from within or outside the RAF, relating to

the accounting practices and Internal Audit of the RAF, the content or auditing of the RAF’s Financial Statements, the internal

financial controls of the RAF and related matters.

Duties Assigned by the Board

In addition to the statutory duties of the Audit Committee, as reported above, the Board has determined further functions for

the Audit Committee to perform, as set out in the Audit Committee Charter. These functions include the following:

Integrated Reporting and Combined Assurance

The Audit Committee fulfils an oversight role regarding the RAF’s Integrated Report and the reporting process, including the

system of internal financial control. Furthermore, the Audit Committee oversees co-operation between the Internal and External

Auditors and other assurance providers. A Combined Assurance Forum has been formed which is chaired by the Chief Audit

Executive and reports to the Audit Committee on a quarterly basis.

The Audit Committee considered the RAF’s sustainability information as disclosed in the Integrated Annual Report and has

assessed its consistency with operational and other information known to the Audit Committee Members, and for consistency

with the Annual Financial Statements. The Audit Committee discussed the sustainability information with Management and

has considered the conclusion of the Auditor-General of South Africa. The Audit Committee is satisfied that the sustainability

information is reliable and consistent with the financial results, whilst noting that sustainability reporting will be enhanced.

The Office of the Auditor-General of South Africa performed an assurance engagement on annual performance indicators

included under the heading “Performance Information by Programme” that forms part of the RAF’s integrated sustainability

reporting. It is envisaged that such assurance of sustainability information will become more encompassing in line with the

recommendations of King III.

Going Concern

The Audit Committee reviewed a documented assessment by Management of the going concern premise before agreeing that

the adoption of the going concern premise is appropriate in preparing the Financial Statements.

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Governance of Risk

The Board has assigned oversight of the RAF’s risk management function to the Risk Management and Ethics Committee.

Some members of the Audit Committee are also members of the Risk Management and Ethics Committee to ensure that

information relevant to these Committees is transferred regularly. The Audit Committee fulfils an oversight role regarding

financial reporting risks, internal financial controls, fraud risk as it relates to financial reporting and information technology risk

as it relates to financial reporting.

Internal Audit

The Audit Committee is responsible for ensuring that the RAF’s Internal Audit function is independent and has the necessary

resources, standing and authority within the RAF to enable it to discharge its duties.

The Audit Committee considered and recommended the Internal Audit Charter for approval by the Board. The Internal Audit

function’s Annual Audit Plan was approved by the Audit Committee.

The Internal Audit function reports centrally with responsibility for reviewing and providing assurance on the adequacy of the

internal control environment across all of the RAF’s operations. The Chief Audit Executive is responsible for reporting the findings

of the Internal Audit work against the agreed Internal Audit Plan to the Audit Committee on a regular basis.

The Chief Audit Executive has a functional reporting line to the Audit Committee, primarily through its Chairperson and reports

administratively to the CEO. The Audit Committee is also responsible for the assessment of the performance of the Chief Audit

Executive and the Internal Audit function.

Evaluation of the Expertise and Experience of the Chief Financial Officer and Finance Function

The Audit Committee has satisfied itself that the Chief Financial Officer has appropriate expertise and experience.

The Audit Committee has considered, and has satisfied itself with the appropriateness of the expertise and adequacy of the

resources in the finance function and the experience of the senior members of Management responsible for the finance function.

Mr LED HlatshwayoChairperson of the Audit Committee

Date: 31 July 2014


Part D: HUMAN RESOURCE MANAGEMENT


INTRODUCTION

The main strategic objective of the Human Capital Department is to ensure a transformed and capacitated RAF. The department’s

human capital programme remains on course to support the organisation in achieving its overall organisational objectives.

The function creates an enabling environment in which employees are positioned to effectively execute on the RAF mandate

through attraction, continuous learning, development and retention of talent.

The structure of the department consists of the following work streams: Organisational Development, Learning and Development,

Centre of Excellence, Capacity and Capacity Building, Shared Services and Customer Services.

Hr Priorities and Outcomes

Priority Outcomes for the 2013/14 financial yearRecruit, remunerate, manage and retain staff

• Accelerated the recruitment drive, including finalisation of two Executive appointments.• Embarked on a benchmark exercise on salary increases with all DoT entities and

recommended the approval of salary scales for 2014/15 based on survey results.Identify talent and manage succession

• Commenced career pathing consultations with Line Managers.• Arranged quarterly review sessions for divisional talent forums to review progress on

planned interventions for identified performers.• Several change management initiatives, including value entrenchment.

Train and develop while managing outliers

• Optimising operational performance with specific focus on technical skills, training and customer service enhancement.

• Leadership development programmes were prioritised and initiated as part of development and talent management.

• Officers were held accountable for poor performance and Managers received guidance and training on workplace discipline.

Recognise and reward performers

• Employees were recognised in the form of spot, monthly and quarterly awards.• Employees were awarded the Ethics Award for completion of the ethics survey.

Organisational Development

Performance Management

The RAF considers performance management as a strategic business enabler. The overriding purpose of the RAF’s performance

management strategy is to enable the management of team and individual performance to ensure the achievement of strategic

objectives and business results.

A key objective of the RAF performance management comprises a systematic process for performance planning, monitoring

and review of employee performance appraisals. It promotes shared accountability and responsibility amongst employees for

achieving organisational objectives.

The following key activities were embarked on during the reporting period to bolster a culture of high performance and excellence:

• Aligning Executive, Managerial and employee performance objectives to the Annual Performance Plan (APP) targets. This

included adopting a process of defining objectives from the APP, in order for Management and employees to agree on

objectives and understand what they need to do in the organisation to achieve these;

• New performance management contracting and appraisal templates were developed and implemented;

• The new performance templates are based on the understanding that the achievement of employee targets plays a major

role in meeting the RAF’s objectives, exceeding its targets and improving overall performance.

The RAF performance management system is directly linked to other Human Capital processes and is aligned with the department’s

reward, recognition and development opportunities to retain and motivate employees and address poor performance. The

performance cycle commences with the planning phase on 1 April each year, followed by quarterly reviews in July, October

and January, with the final assessment conducted in April the following year.


As at 31 March 2014, 93% of employees attended training on Performance Management. It must be noted that this is a moving

target with new employees joining the organisation on a monthly basis.

Maintaining a Skilled and Capable Workforce

Succession Management

Succession planning is a major priority within the RAF. In order for succession planning to succeed, a talent pervasive mindset,

starting at Board and Executive Management level, is cascaded down to all management levels within the RAF.

The RAF has embarked on a rigorous process to identify critical positions and proactively identify and develop a pool of potential,

high performing successors at each management level. Its learning and development interventions are directly linked to the

RAF competence framework and learning and development training solutions.

Talent forums have been established in all business divisions, ensuring that talent pools are identified at each level and

communicated upward to the Executive Talent Forum.

Change Management

During the period under review, the RAF trained change champions on being values and brand ambassadors and introduced

a Value Entrenchment Programme with the aim of encouraging employees to depict the RAF’s values. The change champions

meet twice per annum as part of building change capacity, to reflect on organisational cultural issues and to support Managers

to implement change programmes and manage resistance.

Learning and Development

During the year under review, Learning and Development focused on the following core interventions:

• Operational training: Training was conducted on a continuous basis for the hospital-based consultants. This training

consisted of the MVA Intermediate/Foundation Course, designed to empower hospital-based consultants to understand

and communicate the RAF product. Ad hoc training was also offered for specific interventions requested by Operations.

• MVA Intermediate/Foundation Course: A compulsory course aimed at all new staff that join the RAF and who enter the

claims environment. It covers the RAF’s product offering – from the origination of a claim through to its finalisation. The

course includes both theoretical and practical assessments that test the new recruits’ competency to proceed into the

claims environment.

• Targeted selection training: A critical intervention in upskilling staff members who conduct recruitment interviews in

the methodology of targeted selection. The recruitment process has been fraught with inconsistencies and confusion, as

interviewing panels did not understand the targeted selection methodology.

• PAIA training: The last sessions of the PAIA training were rolled out across the regions. The training was aimed at empowering

all staff to deal with the dissemination of information, both within and outside the RAF. The impact of this training has been

significant, as staff now have a clear understanding of the PAIA process within the RAF.

• ‘On-boarding’ of new recruits: The On-boarding Programme continues on a monthly basis nationwide. Through this

programme, newly appointed staff members are enabled to enter the organisation with not only a sound knowledge and

understanding of the core values, but also the service offerings of the RAF.

• Disciplinary skills training: The RAF identified a skills gap in its managerial team in terms of the preparation for and

conducting of disciplinary hearings. Training was conducted nationwide to empower the management team with practical

skills in dealing with such hearings.

• SAP system training: This training was aimed at all staff members with access to the Enterprise Resource Planning System

(SAP), and supports the practical business processes within the SAP environment. The dedicated SAP trainers, together

with the various departments, identify gaps in the knowledge of SAP users and address them accordingly.

• Claims viewing training: The RAF claims viewing system was recently enhanced to create a more modern and up-to-date

look and feel with more user-friendly applications to support the claims handling process. Training was offered on all system

changes.

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2013/14 Training Statistics

Cape Town Durban East London Head Office Johannesburg Pretoria Total

Leadership 32 25 11 133 40 27 268Operations 487 386 332 353 648 1,277 3,483Soft skills 244 441 251 647 378 570 2,531Systems training 218 273 101 351 218 224 1,385Workshop 1 157 14 106 66 58 402Total 982 1,282 709 1,590 1,350 2,156 8,069

Centre of Excellence

The Centre of Excellence (CoE) was established flowing from Human Capital’s re-alignment project during the 2013/14 financial

year. The unit has focused on building a collaborative team that will drive excellence within the RAF. The following achievements

must be noted:

Remuneration and Recognition Programmes

The CoE finalised the Remuneration Implementation Guidelines for the RAF in line with the approved policies. Road shows were

held to communicate the policies and guidelines to ensure compliance with policy and internal equity.

The CoE embarked on a benchmark exercise on salary increases for 2014/15 with all DoT entities. The benchmark report was

submitted to Remuneration and Human Resources Committee (REMCO) for consideration. The unit participated in the salary

adjustment project team in order to ensure that the RAF is ready for implementation of these adjustments as of 1 April 2014.

The Annual Salary Adjustment Guidelines have been developed in support of the task team that was responsible for the

determination of salary adjustments.

An aggregate of 548 employees have been recognised as at 28 March 2014, excluding regional awards and the month of March

monthly and quarterly awards.

A survey was conducted on how total benefits are comparing with the market. The results of this survey will be used to further

enhance our remuneration practices in the near future.

Policy Development and Research

The Centre of Excellence has reviewed 16 Human Capital Policies and out of these only six have been vetted by Compliance and

are now with Internal Audit for final sign-off. The six policies that have been vetted for final sign-off are as follows:

• Transfer;

• Relocation;

• Incapacity;

• Incident and Grievance Policy;

• Internship and Learnership; and

• Leave.

Seven policies out of the 16 are recommended for removal from the Human Capital Policy Register due to content, cost

containment and relevance to Human Capital.

The remaining three are still with Compliance for vetting and will be prioritised in the first quarter of the new financial year.

The Disability Management Policy has been benchmarked with the Department of Public Service and Administration for

submission to the REMCO.


Knowledge Management

The unit has been working on the profiling project for purposes of partnering with the Centre for Public Service Innovation in

the new financial year.

The costs of absenteeism, incapacity and disability are at an all-time high in the South African workplace. Human Capital regards

absence from work as a strong indication of the presence of underlying issues related to health, social circumstances and well-

being. The Human Capital Department, through its Employee Wellness Services (EWS), has adopted an integrated health and

wellness approach to contribute to, inter alia, staff retention, productivity and prompt solution of health and psycho-social issues

amongst the organisation’s staff.

The EWS unit focuses on the following:

Employee Wellness Programmes

• Proactive• Maintain health • Behavioural change

Occupational Health

• Occupational health sites (primary healthcare)

• Advisory services to OHS

Employee Assistance Programmes

• Reactive• Counselling• Rehabilitation

HIV/AIDS

• Preventative• Support• Advocacy

Figure D1 – EWS focus

During the reporting period, the unit provided the following services:

0

500

1,000

1,500

2,000

2,500

Q4Q3Q2Q1

Financial Year

EWP Exec-care ICAS utiliHIV

Num

ber o

f Ser

vice

s

534

763

539

15

737

825

363

35

546

898

539

37

656

10111 0

539

37

Figure D2 – Combined in-house and outsourced utilisation

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Managing Absence

Amongst others, EWS focuses on staff retention, productivity and prompt solution of health and psycho-social issues to maximise

return on investment.

Line Management has a significant role to play in managing absenteeism and promoting productivity. During the reporting

period, 90% of Line Managers were trained on HIV/Aids and the stigma related to the illness, as well as absence and behavioural

problem management. The training provided empowered Line Managers to identify health and wellness problems that might

impact on productivity and referral of such issues. The procedures and process mapping was designed and approved in July

2013. This will be implemented in collaboration with the Shared Services SAP enhancement project, which will be going out

on tender in the new financial year.

EWS Initiatives

Wellness Seminar

In October 2013, EWS hosted a Wellness Seminar to address health and wellness issues in the workplace.

National Health Calendar

EWS commemorates and celebrates important days on the national health calendar. One such event was the Women’s Day

celebrations hosted by the Deputy Minister of Transport. In recognising gender equality, the EWS also co-ordinated the celebration

of International Men’s Day, focusing on issues that affect men in our society. In December 2013, EWS commemorated World

Aids Day and Disability Day.

National Sports Day

This annual event is organised by EWS in line with the government agenda on sports and recreation in the workplace. The

National Sports Day was attended by 900 employees from all regions and included sport events for employees with disabilities.


Inter-fund Games

This is an annual tournament between the RAF and the MVA funds of Swaziland, Namibia and Botswana. The CEOs Forum,

comprising the CEOs of all four funds, also met during the games to discuss and share strategies and challenges facing MVA

victims. Due to cost-containment measures, the RAF’s participation has come to an end.

Financial Wellness

Financial challenges impact on the stress levels of employees, and in a business environment with a high propensity for fraud,

EWS found it imperative to investigate this matter further. ICAS, an independent service provider, was commissioned to conduct

a garnishee order audit to establish the authenticity and legality of garnishees on the RAF payroll system, over-charging on

interest and paid up garnishees.

Capacity and Capability Building

MVA Funds Human Capital Multi-lateral Agreement

The RAF entered into a Human Capital Multi-lateral Agreement with the MVA funds from Botswana, Namibia and Swaziland

during the year under review.

The agreement recognises the commonality of the MVAs corporate aims and objectives and the need for mutual co-operation.

The agreement emphasises, among other things, benchmarking best practices on all human capital practices, sharing of expertise,

skills and competencies. The agreement further provides the funds with an opportunity to:

• Exchange ideas and opinions;

• Work collaboratively to share expertise and experiences;

• Identify and address training needs; and

• Build the capability of the various professions within the funds.

Shared Services Centre

Employee Benefits and Administration

Employees continue to enjoy the benefit of two medical schemes. A third medical scheme is being sourced.

Pension Fund Board meetings were held quarterly and status reports were submitted to REMCO.

A personnel file audit was completed. A report recommending enhancements of the document management system was

submitted to the Executive Management.

Human Capital Information System

An organisational structure clean-up project commenced during the year. A personnel data clean-up commenced on SAP. This

process will allow for greater management of personnel information and storage. Salary analysis and verification for annual

salary adjustments were finalised.

SAP Human Resources access and training on employee engagement was rolled out to the regions. Unpaid leave on the Employee

Self-Service (ESS) and Manager Self-Service (MSS) SAP system have been implemented to enable Managers to process unpaid leave.

Application of overtime on the ESS/MSS SAP system has also been implemented.

This unit’s main focus has been to capacitate the RAF by reducing the vacancy rate. Adequate human resources were attracted

and retained through the implementation of various resourcing initiatives. The vacancy rate decreased to less than 10% as at

31 March 2014. The number of vacancies to be filled in the 2014/15 financial year is slightly more than 200.

During the year under review, online recruitment was implemented. The RAF Careers tab has been replaced with the Talent Tech

Tab and RAF vacancies now appear on Careers 24 and Jobs Indeed. Job seekers are now able to respond to RAF job adverts online.

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Customer Services

During the year under review, Employee Relations and Capacity Building conducted training for 14 Managers on Chairing of

Disciplinary Hearings; 14 Employee Relations opinions were provided and implemented; and various one-on-one coaching

sessions were held with Managers/Senior Managers on managing workplace issues.

Incidents and Complaints Management

Over 164 employee-related matters were referred for intervention and resolved; and these interventions led to a reduction in

the number of formal grievances.

Litigated Matters (CCMA and Labour Court)

Five matters went to the Labour Court including one of a former Executive. Another matter of a former Executive was referred

to the High Court.

Human Capital Priorities and Future Plans

The following priorities have been identified for the 2014/15 financial year:

• The implementation of the RAF Management Development Programme for entry level Managers to ensure that they possess

the necessary confidence and ability to lead, and behavioural skills to mobilise people and groups to turn the organisation’s

strategic objectives into reality.

• Implementation of the Human Capital Multi-lateral Agreement engagements with the sister MVA funds of Botswana,

Namibia and Swaziland.

• Decentralisation of the Human Capital functions to the regions for more effective and efficient service delivery.

• Reinforcing a high-performance culture through on-going performance management training and coaching.

• Continued talent and succession management ensuring capacity availability of leaders to fill strategic and critical positions.

• Building capacity in relation to key organisation tools, such as job evaluations, the Tuned Assessment of Skills Knowledge

(TASK) grading system and salary structures.


HUMAN RESOURCE OVERSIGHT STATISTICS

Personnel Cost by Programme

Programme

Total expenditure for the entity

(R’000)

Personnel expenditure (TEC and Non- TEC HR

related costs) (R’000)

Personnel exp. as a % of total exp. No. of employees

Average personnel cost per employee

(R’000)

All 37,816,009 907,172 2.4% 2,288 396

Personnel Cost by Salary Band (tEC)

Level

Personnel expenditure

(R’000)

% of personnel exp. to total

personnel cost No. of employees

Average personnel cost per employee

(R’000)

Top management 3,834 0.6% 1 3,834

Senior management 24,152 3% 18 1,342

Professional qualified 191,217 25% 297 644

Skilled 404,533 53% 1,255 322

Semi-skilled 131,443 18% 697 189

Unskilled 2,058 0.4% 20 103

Total 757,237 100.00% 2,288 331

Performance rewards

Programme

Performance rewards

(R’000)

Personnel expenditure

(R’000)

% of performance rewards to total personnel cost

(R’000)

Top management 1,202 3,834 31%

Senior management 2,177 24,152 9%

Professional qualified 20,366 191,217 11%

Skilled 35,419 404,533 9%

Semi-skilled 11,846 131,443 9%

Unskilled 126 2,058 6%

Total 71,135 757,237 9%

training Costs

Business unit

Personnel expenditure (TEC

and Non-TEC HR-related costs)

(R’000)

Training expenditure

(R’000)

Training expenditure as a

% of personnel cost

No. of employees trained

Average training cost per employee

RAF learning and development 907,172 12,337 1.4% 8,103 1,522

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Employment and Vacancies

Programme2012/13

No. of employees2013/14

Approved posts2013/14

No. of employees2013/14

Vacancies % of vacancies

Top management 1 1 1 0 0%

Senior management 7 21 18 3 14%

Professional qualified 198 252 297 (45) -18%

Skilled 879 1,339 1,255 84 6%

Semi-skilled 770 900 697 203 23%

Unskilled 26 27 20 7 26%

Total 1,881 2,540 2,288 252 10%

Employment Changes

Quarters

Sta� Complement per Quarter

Num

bers

1,8801,971

2,147

2,288

0

500

1,000

1,500

2,000

2,500

4th3rd2nd1st

Graph D1 – Staff complement per quarter


Quarters

Sta� Turnover Rate per Quarter

Rate

s

0.00

0.50

1.00

1.50

2.00

2.50

4th3rd2nd1st

1.91

1.27

0.98

1.40

Graph D2 – Staff turnover rate per quarter

Salary band

Employment at beginning of

period Appointments Terminations Employment at

end of the period

Top management 1 0 0 1

Senior management 7 13 1 18

Professional qualified 198 122 21 297

Skilled 879 412 76 1,255

Semi-skilled 770 274 15 697

Unskilled 26 12 1 20

Total 1,881 833 114 2,288

reasons for Staff Leaving

Reason Number% of total no. of

staff leaving

Death 6 5%

Resignation 90 79%

Dismissal 10 9%

Retirement 4 3%

Ill health 1 1%

Expiry of contract 3 3%

Other 0 0%

Total 114 100%

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Labour relations: Misconduct and Disciplinary action

Nature of disciplinary action Number

Verbal warning 16

Written warning 27

Final written warning 19

Dismissal 10

CCMA casesTotal number of CCMA cases 16

Settled 9

Equity target and Employment Equity Status

MaleAfrican Coloured Indian White

Levels Current Target Current Target Current Target Current Target

Top management 0 0 1 0 0 0 0 0

Senior management 3 7 2 1 1 0 0 1

Professional qualified 110 120 12 17 14 6 30 19

Skilled 429 511 27 73 24 24 34 80

Semi-skilled 216 284 25 40 11 13 9 45

Unskilled 1 8 0 1 0 0 0 0

Total 759 930 67 132 50 43 73 145

FemaleAfrican Coloured Indian White

Levels Current Target Current Target Current Target Current Target

Top management 0 0 0 0 0 0 0 0

Senior management 11 6 0 1 0 0 1 1

Professional qualified 95 101 12 15 8 3 16 15

Skilled 540 429 59 63 56 14 86 61

Semi-skilled 344 238 47 35 16 8 29 34

Unskilled 18 7 1 1 0 0 0 1

Total 1,008 781 119 115 80 25 132 112

Disabled staffMale Female

Levels Current Target Current Target

Top management 0 0 0 0

Senior management 0 0 0 0

Professional qualified 1 3 2 2

Skilled 5 10 9 14

Semi-skilled 8 5 7 9

Unskilled 0 0 0 0

Total 14 18 18 25


Part E: FINANCIAL INFORMATION


TABLE OF CONTENTS

The reports and statements set out below comprise the Financial Statements presented to Parliament:

Report of the Auditor-General to Parliament on the Road Accident Fund 143

Statement of Responsibility by the Board of Directors 145

Report of the Board of Directors 146

Corporate Secretary’s Certification 150

Statement of Financial Position 151

Statement of Financial Performance 152

Statement of Changes in Net Assets 153

Cash Flow Statement 154

Statement of Comparison of Budget and Actual Amounts 155

Notes to the Financial Statements 156


REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE ROAD ACCIDENT FUND

Report on the Financial Statements

Introduction

1. I have audited the Financial Statements of the Road Accident Fund set out on pages 151 to 203, which comprise the Statement

of Financial Position as at 31 March 2014, the Statement of Financial Performance, Statement of Changes in Net Assets, Cash Flow

Statement and the Statement of Comparison and Actual Amounts for the year then ended, as well as the notes, comprising

a summary of significant accounting policies and other explanatory information.

accounting authority’s responsibility for the Financial Statements

2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance

with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements

of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA), and for such internal control as the accounting

authority determines is necessary to enable the preparation of Consolidated and Separate Financial Statements that are

free from material misstatement, whether due to fraud or error.

auditor-General’s responsibility

3. My responsibility is to express an opinion on these Financial Statements based on my audit. I conducted my audit in accordance

with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), the general notice issued in terms thereof and

International Standards on Auditing. Those standards require that I comply with ethical requirements, and plan and perform

the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.

The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement

of the Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal

control relevant to the RAF’s preparation and fair presentation of the Financial Statements in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the RAF’s

internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements.

5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

6. In my opinion, the Financial Statements present fairly, in all material respects, the financial position of the Road Accident

Fund as at 31 March 2014 and its financial performance and cash flows for the year then ended, in accordance with SA

Standards of GRAP and the requirements of the PFMA.

Emphasis of Matters

7. I draw attention to the matters below. My opinion is not modified in respect of these matters.

Going Concern

8. The accounting authority’s report on page 146 and Note 36 to the Financial Statements indicate that the Road Accident

Fund has accumulated deficits of R90,925,544,000 and that the public entity’s total liabilities exceeded its total assets by

R90,797,758,000 as at 31 March 2014. These conditions, along with other matters as set forth in the accounting authority’s

report and Note 36, indicates the existence of a material uncertainty that may cast significant doubt on the public entity’s

ability to operate as a going concern.


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Irregular Expenditure

9. As disclosed in Note 27 to the Financial Statements, irregular expenditure occurred as a result of non-compliance with supply

chain management processes. The total irregular expenditure disclosed amounted to R18,457,000 (2013: R4,327,000) for

the financial year under review which constitutes an increase of 327% in comparison with the previous year.

Restatement of Corresponding Figures

10. As disclosed in Note 35 to the Financial Statements, the corresponding figures for 31 March 2013 have been restated as a

result of an error discovered during 2014 in the Financial Statements of the Road Accident Fund at, and for the year ended,

31 March 2013.

additional Matters

11. I draw attention to the matter below. My opinion is not modified in respect of this matter.

Report on other Legal and Regulatory Requirements

12. In accordance with the PAA and the general notice issued in terms thereof, I report the following findings on the reported

performance information against predetermined objectives for selected objectives presented in the annual performance

report, non compliance with legislation as well as internal control. The objective of my tests was to identify reportable findings

as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, I do

not express an opinion or conclusion on these matters.

Predetermined objectives

13. I performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the

following selected objectives presented in the annual performance report of the public entity for the year ended 31 March 2014:

• Objective: A legislative dispensation that is aligned to the principles of social security on pages 78 to 81.

• Objective: Achieving a customer-centric, operationally efficient and effective RAF by 2017 on pages 85 to 89.

14. I evaluated the reported performance information against the overall criteria of usefulness and reliability.

15. I evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with

the National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned

objectives. I further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable,

time bound and relevant, as required by the National Treasury’s Framework for managing programme performance information.

16. I assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

17. I did not raise any material findings on the usefulness and reliability of the reported performance information for the selected

objectives.

Auditor-General

Pretoria

31 July 2014


STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS

The Annual Financial Statements have been prepared in accordance with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board (ASB).

The Public Finance Management Act (PFMA) requires the Accounting Authority to ensure that the Road Accident Fund (RAF) keeps full and proper records of its financial affairs. The Financial Statements should fairly present the state of affairs of the RAF, its financial results, its performance against predetermined objectives and its financial position at the end of the year in terms of the effective SA Standards of GRAP.

The Financial Statements are the responsibility of the Board of Directors (Board). The External Auditors are responsible for independently auditing and reporting on the Financial Statements.

These Financial Statements are based on appropriate accounting policies, supported by reasonable and prudent judgements and estimates, and have been prepared on the going concern basis.

The Board has reviewed the RAF’s cash flow forecast for the year ending 31 March 2015 and considered the risks and challenges for the future. In light of this review and the current financial position, the Board is satisfied that the RAF has access to adequate resources to continue in operational existence for the short-term.

To enable the Board to meet the above-mentioned responsibilities, the RAF Board sets standards and implements systems of internal control. The controls are designed to provide cost-effective assurance that assets are safeguarded, and that liabilities and working capital are efficiently managed.

Policies, procedures, structures and approval frameworks provide direction, accountability and division of responsibilities, and contain self-monitoring mechanisms. The controls throughout the RAF focus on the critical risk areas identified by operational risk management and confirmed by Executive Management. Both Management and the Internal Audit function closely monitor the controls and actions taken to correct deficiencies as they are identified.

Based on the information and explanations given by Management and the Internal Audit function, and discussions held with the Auditor-General of South Africa on the result of their audits, the Board is of the opinion that the internal accounting controls are adequate to ensure that the financial records may be relied upon for preparing the Financial Statements, and accountability for the assets and liabilities is maintained.

Nothing significant has come to the attention of the Board to indicate that any material breakdown has occurred in the functioning of these controls, procedures and systems during the year under review.

In the opinion of the Board, based on the information available, the Financial Statements fairly present the financial position of the RAF at 31 March 2014 and the results of its operations and cash flow information for the year.

The Board believes that funds will be available to fund future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business and that it is appropriate to adopt a going concern approach.

On an annual basis following the Minister of Finance’s Budget Speech in Parliament, the Taxation Amendment Act indicates what the RAF Fuel Levy will be for the applicable financial year.

The Financial Statements of the RAF for the year ended 31 March 2014, which have been prepared on the going concern basis, have been approved by the Board and signed on its behalf by:


Date: 31 July 2014145INTEGRATED ANNUAL REPORT 2013/14

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REPORT OF THE BOARD OF DIRECTORS

1. Introduction

The Board of Directors presents its report which forms part of the Annual Financial Statements of the Road Accident Fund (RAF)

for the year ended 31 March 2014 to the Minister of Transport, who is the Executive Authority in terms of section 55(1)(d) of the

Public Finance Management Act, 1999 (Act No. 1 of 1999) (as amended by Act No. 29 of 1999) (PFMA).

The RAF, as established by the Road Accident Fund Act, 1996 (Act No. 56 of 1996), (RAF Act), is listed as a National Public Entity

in accordance with Schedule 3A of the PFMA. The Board of Directors acts as the Accounting Authority in terms of the PFMA.

2. Board of Directors and Secretary of the Road Accident Fund

The Board of Directors and Corporate Secretary as at the date of this report are as follows:

Board of Directors, Non-executive Board Members

Dr NM Bhengu (Chairperson)

Mr D Coovadia (Vice Chairperson) – Appointed on 1 October 2013

Dr KLN Linda – Appointed on 1 October 2013

Adv DS Qocha

Mr TP Masobe – Appointed on 1 October 2013

Mr AM Pandor – Appointed on 1 October 2013

Mr DK Smith

Ms R Mokoena – Appointed on 1 October 2013

Ms A Steyn

Mr LED Hlatshwayo

Mr TB Tenza (DG representative)*

* The Director-General of the Department of Transport or any other Senior Officer in the Department of Transport, designated by him or her for a particular purpose, serves as an ex officio member of the Board.

Chief Executive Officer

Dr EA Watson

Chief Financial Officer

Ms LJ Fosu

Corporate Secretary

Ms JR Cornelius

3. Review of Activities

Principal activities and results

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.

The detailed review of the results of the RAF for the year ended 31 March 2014 is included under the Situational Analysis in

Part B of this report.

4. Solvency and Going Concern

We draw attention to the fact that at 31 March 2014, the RAF had accumulated deficits of R90,925,544,000 and that the RAF’s

total liabilities exceed its assets by R90,797,758,000.

The going concern basis was used in preparing the Annual Financial Statements. This basis presumes that funds will be available to


finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments

will occur in the ordinary course of business.

On an annual basis, following the Minister of Finance’s Budget Speech in Parliament, the Taxation Amendment Act indicates what

the applicable fuel levy will be for the financial year. The National Budget, inclusive of the fuel levy amount, is submitted and

approved by the South African Parliament via the Taxation Amendment Act. Government also commits to the RAF budget in its

Medium-Term Expenditure Framework (MTEF). The RAF will manage the cash resources to ensure that short-term liabilities are met.

It should further be noted that the RAF can only be dissolved by an Act of Parliament which repeals the current Act and will

result in the common law residual claim being revived. Once triggered common law delictual claims may be instituted against

the wrongdoer, it is also likely that claims would be instituted against the State on the basis that the State is required to ensure

that the RAF is funded to pay claims. There has been no indication of this.

In the course of this financial year increased productivity saw the number of claims settled reach highs never seen before,

however the result was that the cash balance that the RAF closed the year on was significantly reduced from that with which

the financial year started. Though the available funding for the 2014/15 financial year remains at levels similar to that of the past

and the impact of the Diesel Rebate has also had a material impact, the levels of productivity as seen in the 2013/14 financial

year is being maintained. As a result the RAF is in the process of implementing a number of initiatives to ensure its expenditure

and commitments can be managed within the available funding while engagements with NT and DoT are ongoing to secure

additional funding for short-, medium- and long-term purposes.


levy income as and when it faced liquidity problems. During the 2006 financial year, it received a cash injection of R2,502 billion

and in the 2009 financial year it received R2,550 billion. The Board and Management are committed to implementing plans to


As part of these plans, the RAF has engaged NT and the Department of Transport in discussions to resolve the short-, medium-

and long-term funding position of the RAF.

The following table depicts the total assets and the total liabilities of the RAF over the past five years. From the table it is clear that the

RAF has not been solvent for a number of years. The net liabilities have increased by R17,295,394,000 in the 2013/14 financial year.

2014

R’000

Restated 2013

R’000

Restated 2012

R’000

Restated 2011

R’000

2010

R’000

Total assets 7,694,347 10,717,258 8,572,312 4,566,637 3,878,585

Total liabilities (98,492,105) (84,219,622) (73,660,604) (48,583,820) (32,308,577)

(90,797,758) (73,502,364) (65,088,292) (44,017,183) (28,429,992)

5. Subsequent Events

No undisclosed material events have taken place between the Statement of Financial Position date and the authorisation of

the Annual Financial Statements.

6. Accounting Policies

During the current financial year, no new Generally Recognised Accounting Practices (GRAP) standards were applied for the first time.

The Annual Financial Statements are prepared in accordance with the prescribed SA Standards of GRAP issued by the Accounting

Standards Board as the prescribed framework by NT.

7. Materiality Framework

A materiality framework has been developed for reporting losses through criminal conduct and irregular, fruitless and wasteful

expenditure or for significant transactions that require approval by the Executive Authority, as envisaged in section 54(2) of the

PFMA. The framework was finalised by the RAF and approved by the Board on 6 February 2014.


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8. Fruitless and Wasteful and Irregular Expenditure

Fruitless and Wasteful Expenditure

Fruitless and wasteful expenditure of R30,440,500 (2012/13: R20,226,000), relating to interest and sheriff costs, has been disclosed

in Note 26 of the Annual Financial Statements.

Interest and Sheriff Costs

Interest cost is the cost paid for the late payment of the claim compensation as agreed to in a settlement agreement or an order

of the court, and taxed legal bills settled through taxation as these costs are due immediately. The interest is charged under the

Prescribed Rate of Interest Act of 1975 at 15.5% as per Government Gazette No. 15143 issued on 1 October 1993.

Sheriff cost is the cost paid to the Sheriff for its service with regard to serving the warrant of execution (writs) on the RAF.

As per the definition in the PFMA, fruitless and wasteful expenditure means “expenditure which was made in vain and could

have been avoided had reasonable care been exercised”. The amounts listed above are costs incurred in the settlement process

of claims influenced by external legal processes and time limits legally enforced on the RAF in the settlement of claims.

During the financial year, the number of finalised claims has increased to 240,783 (2012/13: 162,130) which is a 49% increase and

the settlement of the legal costs has been affected by the higher finalisation rates. The legal costs create operational constraints

as there are no legal obligations for plaintiff attorneys to submit the bill within stipulated timeframes and the majority of legal

cost bills are disputed because their content or the items billed are incorrect or invalid. The process of taxation of legal cost bills

through the office of the Taxation Master is the only option to settle these disputes.

The taxation of legal cost bills exposes the RAF to a risk of non-compliance to court processes despite an instruction note from NT

that all payments from legal settlements must be paid within 30 days from the date of settlement. Court rules require that taxed

bills must be paid immediately after taxation and plaintiff attorneys issue warrants of execution immediately after settlement.

As a result payments may comply with the PFMA but not the court rules.

The following information relates to the legal cost bills settled through taxation for 2013/14:

• Number of bills settled through taxation: 26,698 (2012/13: 21,137) and it has increased by 26%.

• Number of bills where a saving is made through taxation: 25,677 (2012/13: 20,653) and it has increased by 24%.

• Amount saved through taxation: R966,168,695 (2012/13: R386,559,115) and it has increased by 150%.

• The success rate in terms of saving legal cost bills is 96% (2012/13: 98%).

RAF officials are required to diligently apply the process of the legal cost bills assessment. Writs Standard Operating Procedures

(SOPs) are in place to ensure that all taxed bills are paid timeously to minimise the impact of the interest cost at a rate of 15.5%.

It must be noted that the sheriff costs from the taxation process cannot be minimised as timeframes are not in place as per

court rules requirements.

The number of writs received in 2013/14 was 5,595. It is 28.67% lower than in 2012/13.

The fruitless and wasteful expenditure is monitored closely by the Executive and Board. There are processes which have

been undertaken to ensure that this risk is mitigated. A process to review the applicable interest rate was undertaken by RAF

Management with the objective of aligning the current rate to the public sector rate. The Department of Justice has called for

public commentary on the proposal.

Disciplinary action has been taken against staff members as a result of negligence resulting in the payment of sheriff and

interest costs, as well as duplicate payments. During the financial year, 19 final written warnings, 27 written warnings and 16

verbal warnings were issued.


Irregular Expenditure

Irregular expenditure of R18,457,000 (2012/13: R4,327,000) was condoned during the financial year and is disclosed in Note 27

of the Annual Financial Statements.

Irregular expenditure arose as a result of:

• Non-compliance with supply chain management practices, which resulted in irregular expenditure being incurred;

• Failure to comply with procurement processes when procuring goods or services as stipulated in the Supply Chain

Management Policy, and also committing acts that contravened or failed to comply with a provision of the PFMA and the

RAF Act; and

• Non-compliance with the provisions of the RAF Financial Misconduct Policy and PFMA, which constituted financial misconduct

and warranted disciplinary actions.

Any employee who committed an act which undermined the financial management and internal control systems of the RAF,

as required by relevant legislation and policies, is dealt with in terms of the Disciplinary Policy.

Employees who make or permit an irregular expenditure or fruitless and wasteful expenditure, as required by section 57 of the

PFMA, expose themselves to appropriate disciplinary measures.

In 2013/14, the RAF instituted disciplinary steps that included the recovery of wasted revenue and dismissals where employees

were found to have contravened provisions of the Acts and internal policies.

The increase in irregular expenditure was as a result of:

• ICT licences of R13.9 million that had not been renewed in line with the approved procedures and where instances of

under-licensing were detected by management during the year; and

• The use of recruitment agencies by the Human Capital Department which did not comply with approved procedures.

Upon review, the number and type of irregular expenditure had improved from 260 in 2012/13 to 92 at the end of the 2013/14

financial year. This reduction confirms the efficiency of management interventions and a continued reduction is expected.

9. Addresses

Business address:

Eco Glades Office Park 2

420 Witch-Hazel Avenue

Centurion

0046

Postal address:

Private Bag X178

Centurion

0046

Website address:

www.raf.co.za

10. Approval

The Annual Financial Statements which have been prepared on the going concern basis, were approved by the Accounting

Authority on 31 July 2014 and were signed on its behalf by:

Dr NM Bhengu Dr Ea WatsonChairperson of the Board of Directors Chief Executive Officer

Date: 31 July 2014 Date: 31 July 2014


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CORPORATE SECRETARY’S CERTIFICATION

I hereby certify that the RAF has lodged all returns as required by the Public Finance Management Act, 1999 (Act No. 1 of 1999),

as amended by Act No. 29 of 1999.

Ms Jr CorneliusCorporate Secretary

Date: 31 July 2014


STATEMENT OF FINANCIAL POSITION as at 31 March 2014

2014Restated

2013

Note(s) R‘000 R‘000

AssetsCurrent assetsCash and cash equivalents 3 2,504,775 6,143,817

Receivables from non-exchange transactions 4 4,768,710 4,153,511

Receivables from exchange transactions 5 16,116 32,721

Other financial assets 6 132,974 132,224

Consumable stock 7 3,603 3,012

7,426,178 10,465,285

Non-current assetsProperty, plant and equipment 8 246,997 242,960

Intangible assets 9 21,172 9,013

268,169 251,973

total assets 7,694,347 10,717,258

LiabilitiesCurrent LiabilitiesPayables from exchange transactions 10 139,009 139,741

Other financial liabilities 11 460,579 333,934

Provision for outstanding claims 12 24,083,166 20,361,308

Other provisions 13 848,561 860,152

25,531,315 21,695,135

Non-current LiabilitiesOther financial liabilities 11 616 1,207

Provision for outstanding claims 12 72,916,834 62,476,692

Employee benefit obligation 14 43,340 46,588

72,960,790 62,524,487

total Liabilities 98,492,105 84,219,622

Net Liabilities (90,797,758) (73,502,364)

reservesRevaluation reserve 127,786 123,614

Accumulated surplus/(deficit) (90,925,544) (73,625,978)

total Net Liabilities (90,797,758) (73,502,364)


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2014Restated

2013

Note(s) R‘000 R‘000

Revenuerevenue from Exchange transactionsOther income 16 1,918 3,581

Reinsurance revenue 17 153 1,577

Investment revenue 18 236,361 254,802

total revenue from Exchange transactions 238,432 259,960

Revenue from Non-exchange Transactionstransfer revenueNet fuel levies 15 20,278,011 17,883,806

total revenue 20,516,443 18,143,766

ExpenditureClaims expenditure 19 (36,442,094) (25,432,823)

Reinsurance premiums 20 (22,571) (25,222)

Employee costs 21 (907,172) (762,641)

Depreciation and amortisation 22 (38,132) (61,138)

Finance costs 23 (28,946) (27,448)

General expenses 24 (377,094) (299,932)

total Expenditure (37,816,009) (26,609,204)

Deficit for the Year (17,299,566) (8,465,438)

STATEMENT OF FINANCIAL PERFORMANCE for the year ended 31 March 2014


STATEMENT OF CHANGES IN NET ASSETS for the year ended 31 March 2014

Revaluationreserve

Accumulatedsurplus/(deficit)

Total netassets

R‘000 R‘000 R‘000

Opening balance as previously reported 72,249 (46,471,680) (46,399,431)

Adjustments

Correction of errors - (18,688,860) (18,688,860)

Balance at 1 april 2012 as restated 72,249 (65,160,540) (65,088,291)Changes in net assets

Revaluation of land 7,704 - 7,704

Revaluation of buildings 43,661 - 43,661

Deficit for the year - (8,465,438) (8,465,438)

Total changes 51,365 (8,465,438) (8,414,073)

Balance at 1 april 2013 123,614 (73,625,978) (73,502,364)Changes in net assets

Revaluation of land 626 - 626

Revaluation of buildings 3,546 - 3,546

Deficit for the year - (17,299,566) (17,299,566)

Total changes 4,172 (17,299,566) (17,295,394)

Balance at 31 March 2014 127,786 (90,925,544) (90,797,758)


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CASH FLOW STATEMENTfor the year ended 31 March 2014

2014 2013

Note(s) R‘000 R‘000

Cash Flows from Operating Activities

receiptsFuel levies 19,651,219 17,870,297

Interest income 252,966 240,768

Reinsurance claims received 153 1,577

Other income 1,918 3,477

19,906,256 18,116,119

PaymentsEmployee costs (907,172) (762,641)

Claims expenditure (22,184,827) (15,089,532)

Finance costs (28,946) (27,448)

Reinsurance premiums (22,571) (25,222)

Other expenditure (351,626) (297,271)

(23,495,142) (16,202,114)

Net Cash Flows from Operating activities 28 (3,588,886) 1,914,005

Cash Flows from Investing Activities

Purchase of property, plant and equipment 8 (31,400) (8,402)

Proceeds from sale of property, plant and equipment 8 884 104

Purchase of other intangible assets 9 (19,640) (6,940)

Net Cash Flows from Investing activities (50,156) (15,238)

Net Increase/(Decrease) in Cash and Cash Equivalents (3,639,042) 1,898,767Cash and cash equivalents at the beginning of the year 6,143,817 4,245,050

Cash and Cash Equivalents at the End of the Year 3 2,504,775 6,143,817


STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS for the year ended 31 March 2014

Budget on Cash BasisApproved

budget AdjustmentsFinal

budget

Actual amounts

on comparable

basis

Differencebetween

finalbudget and

actual Reference

R‘000 R‘000 R‘000 R‘000 R‘000

Statement of Financial Performance

revenueRevenue from exchange transactionsOther income - - - 1,918 1,918

Reinsurance revenue - - - 153 153

Investment revenue 668,035 - 668,035 236,361 (431,674) 37

Total revenue from exchange transactions 668,035 - 668,035 238,432 (429,603)

Revenue from non-exchange transactionsTransfer revenueNet fuel levies 20,930,664 - 20,930,664 20,278,011 (652,653)

Total revenue 21,598,699 - 21,598,699 20,516,443 (1,082,256)

ExpenditureEmployee costs (974,232) - (974,232) (907,172) 67,060

Claims expenditure (18,169,931) - (18,169,931) (36,442,094) (18,272,163) 37

Depreciation and amortisation (39,011) - (39,011) (38,132) 879

Finance costs (11,722) - (11,722) (28,946) (17,224)

Reinsurance premiums (22,571) - (22,571) (22,571) -

General expenses (444,975) - (444,975) (377,094) 67,881 37

Total expenditure (19,662,442) - (19,662,442) (37,816,009) (18,153,567)

Actual amount on comparable basis as presented in the Budget and Actual Comparative Statement 1,936,257 - 1,936,257 (17,299,566) (19,235,823)


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1. Accounting Policies

Presentation of Financial Statements

The Financial Statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice

(SA Standards of GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board.

These Financial Statements have been prepared on an accrual basis of accounting and are in accordance with historical cost

convention unless specified otherwise. They are presented in South African Rand.

A summary of the significant accounting policies, which have been consistently applied, are disclosed below. These accounting

policies are consistent with the previous period.

1.1 Significant Judgements and Sources of Estimation Uncertainty

In preparing the Financial Statements, management is required to make estimates and assumptions that affect the amounts

represented in the Financial Statements and related disclosures. Use of available information and the application of judgement

is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to

the Financial Statements. Significant judgements include:

Impairment Testing

A non-cash generating asset is impaired when the carrying amount of the asset exceeds its recoverable service amount. These

calculations require the use of estimates and assumptions.

The RAF reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying

amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the

lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are

indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets.

Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and

could materially change over time.

Outstanding Claims Provision

The estimation of the ultimate liability arising from claims incurred but not settled at the reporting date, is the RAF’s most critical

accounting estimate. There are several sources of uncertainty that need to be considered in the estimation of the liability that

the RAF will ultimately pay for such claims. The provision for outstanding claims is actuarially determined on an annual basis. The

measurement of the obligations in respect of this liability requires actuarial estimates and valuations. An actuary is engaged to

perform these calculations. More detail on the actuarial assumptions can be found in Note 12 - Provision for Outstanding Claims.

Post-retirement Benefits

The RAF provides a defined benefit pension plan and a post-retirement medical plan to some of its employees. The measurement

of the obligations (and assets) in respect of this liability requires actuarial estimates and valuations. An actuary is engaged to

perform these calculations.

Other key assumptions for pension obligations are based on current market conditions. Additional information is disclosed in

Note 14.

Allowance for Doubtful Debts

On debtors an impairment loss is recognised in surplus or deficit when there is objective evidence that it is impaired. The impairment

is measured as the difference between the debtors carrying amount and the present value of estimated future cash flows discounted

at the effective interest rate, computed at initial recognition. Additional information is disclosed in Note 6 and Note 24.

NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2014


Revenue Recognition on the Road Accident Fund Fuel Levy

With effect from 1 April 2006, the responsibility for the collection of the fuel levy was devolved from the Central Energy Fund

(CEF) to the South African Revenue Services (SARS).

The changes to the Customs and Excise Act, 1964 (Act No. 91 of 1964) have introduced new provisions that require the fuel

companies to pay 50% of the RAF Fuel Levy at the end of the month following the month of removal of the fuel from the refinery

and the remaining 50% at the end of the following month.

The effect of these provisions is that cash receipts of RAF Fuel Levies do not correspond with the accrual of fuel levy revenue

by the RAF. This particularly impacts the year-end revenue receivable raised from the RAF Fuel Levy. To correctly accrue for the

revenue for the period, RAF Management makes an estimate as to what the expected fuel levy income should be based on

historical evidence. Additional information is disclosed in Note 4 and Note 15.

Diesel Refunds

Diesel refunds are concessions deducted from RAF Fuel Levies received. Diesel concessions are granted to certain sectors of the

economy on the basis of the level of use by the diesel consumer in primary production activities.

In terms of section 5(2) of the RAF Act, after being amended by the Revenue Laws Amendment Act, 2005 (Act No. 31 of 2005),

the RAF receives the RAF Fuel Levy net of diesel refund after it has been collected by SARS.

Diesel refunds affect the amount of revenue to be recognised and cannot be measured accurately at the point of revenue

recognition. Consequently, estimates are made by Management as to what the value of the diesel refunds will be. The estimates

are based on historical evidence, and Management formulates a percentage that is applied to the RAF Fuel Levy. The percentage

range for diesel refunds for the current year is between 11% and 12% of the gross fuel levy for the year. Additional information

is disclosed in Note 13 and Note 15.

Revaluation of Land and Buildings

Land and buildings held for administrative purposes are carried at their revalued amounts, being the fair value at the date of

revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Revaluations are performed by an independent valuer on a yearly basis such that the carrying amounts do not differ materially

from those that would be determined using fair values at the reporting date. The fair value of land and buildings measured

using the valuation model is based on market values. The market value of property is determined by taking into account the

market rentals that are paid in the immediate area. The applicable relevant market rental is used to determine potential income.

Thereafter, the relevant expenditure is deducted to determine the net income and with a relevant capitalisation rate, the market

value if calculated. Additional information is disclosed in Note 8.

1.2 Property, Plant and Equipment

Property, plant and equipment are tangible non-current assets, including infrastructure assets that are held for use in the

production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during

more than one period.

The cost of an item of property, plant and equipment is recognised as an asset when:

• it is probable that future economic benefits or service potential associated with the item will flow to the entity; and

• the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost.

The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the

location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts

and rebates are deducted in arriving at the cost.


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Where an asset is acquired through a non-exchange transaction, its cost is its fair value as at date of acquisition.

Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetary assets, or a

combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the acquired

item’s fair value was not determinable, it’s deemed cost is the carrying amount of the asset(s) given up.

When significant components of an item of property, plant and equipment have different useful lives, they are accounted for

as separate items (major components) of property, plant and equipment.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred

subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of

property, plant and equipment, the carrying amount of the replaced part is derecognised.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included

in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation

arises as a result of acquiring the asset or using it for purposes other than the production of inventories.

Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location

and condition necessary for it to be capable of operating in the manner intended by Management.

Major spare parts and stand by equipment which are expected to be used for more than one period are included in property,

plant and equipment. In addition, spare parts and stand by equipment which can only be used in connection with an item of

property, plant and equipment are accounted for as property, plant and equipment.

Major inspection costs which are a condition of continuing use of an item of property, plant and equipment and which meet the

recognition criteria above are included as a replacement in the cost of the item of property, plant and equipment. Any remaining

inspection costs from the previous inspection are derecognised.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses except for land and

buildings, which is carried at revalued amount being the fair value at the date of revaluation less any subsequent accumulated

depreciation and subsequent accumulated impairment losses.

Revaluations are performed by an independent valuer on an annual basis, such that the carrying amounts do not differ materially

from those that would be determined using fair values at reporting date. The fair value of land and buildings measured using the

valuation model is based on market values. The market value of property is determined by taking into account the market rentals

that are paid in the immediate area. The applicable relevant market rental is used to determine potential income. Thereafter the

relevant expenditure is deducted to determine the net income and with a relevant capitalisation rate, the market value if calculated.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is

restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset

after revaluation equals its revalued amount.

Any increase in an asset’s carrying amount, as a result of a revaluation, is credited directly to a revaluation surplus. The increase

is recognised in surplus or deficit to the extent that it reverses a revaluation decrease of the same asset previously recognised

in surplus or deficit.

Any decrease in an asset’s carrying amount, as a result of a revaluation, is recognised in surplus or deficit in the current period.

The decrease is debited directly to a revaluation surplus to the extent of any credit balance existing in the revaluation surplus

in respect of that asset.

The revaluation surplus in equity related to a specific item of property, plant and equipment is transferred directly to retained

earnings when the asset is derecognised.

Property, plant and equipment are depreciated on the straight-line basis over their expected useful lives to their estimated

residual value.

1. Accounting Policies (continued)


Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful life

Buildings 30 years

Office furniture 15 years

Motor vehicles 5 years

Office equipment 10 years

IT equipment 7 years

Leasehold improvements 3 years

The carrying amount of an item of property, plant and equipment shall be derecognised:

• on disposal (including disposal through a non-exchange transaction); or

• when no future economic benefits or service potential are expected from its use or disposal.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be included in surplus or deficit

when the item is derecognised (unless the Standard of GRAP on leases requires otherwise on a sale and leaseback).

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference

between the net disposal proceeds, if any, and the carrying amount of the item.

1.3 Intangible assets

An asset is identified as an intangible asset when it:

• is capable of being separated or divided from an entity and sold, transferred, licensed, rented or exchanged, either individually

or together with a related contract, assets or liability; or

• arises from contractual rights or other legal rights, regardless whether those rights are transferable or separate from the

entity or from other rights and obligations.

An intangible asset is recognised when:

• it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to

the entity; and

• the cost or fair value of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

If an intangible asset is acquired by means of a non-exchange transaction, the cost shall be its fair value as at the date of acquisition.

Expenditure on research or on the research phase of an internal project, is recognised as an expense when it is incurred. An

intangible asset arising from development, or from the development phase of an internal project, is recognised when:

• it is technically feasible to complete the asset so that it will be available for use or sale.

• there is an intention to complete and use or sell it.

• there is an ability to use or sell it.

• it will generate probable future economic benefits or service potential.

• there are available technical, financial and other resources to complete the development and to use or sell the asset.

• the expenditure attributable to the asset during its development can be measured reliably.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.


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Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset

may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as

intangible assets.

Amortisation is provided to write down the intangible assets, on a straight-line basis, to their residual values as follows:

Item Useful life

Computer software 5 years

Intangible assets are derecognised either:

• on disposal; or

• when no future economic benefits or service potential are expected from its use or disposal.

The gain or loss is the difference between the net disposal proceeds, if any, and the carrying amount. It is recognised in surplus

or deficit when the asset is derecognised.

1.4 Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest

of another entity.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured

at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method

of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use

of an allowance account) for impairment or uncollectibility.

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge

an obligation.

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in

foreign exchange rates.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group

of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The

effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the

financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.

When calculating the effective interest rate, an entity shall estimate cash flows considering all contractual terms of the financial

instrument (for example, prepayment, call and similar options) but shall not consider future credit losses. The calculation includes

all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate (see the

Standard of GRAP on Revenue from Exchange Transactions), transaction costs, and all other premiums or discounts.

There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be estimated

reliably. However, in those rare cases when it is not possible to reliably estimate the cash flows or the expected life of a financial

instrument (or group of financial instruments), the RAF shall use the contractual cash flows over the full contractual term of the

financial instrument or group of financial instruments.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in

an arm’s length transaction.

A financial asset is either cash, a residual interest of another entity, a contractual right to receive cash or another financial asset

from another entity, exchange financial assets or financial liabilities with another entity under conditions that are potentially

favourable to the RAF.



A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a

loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of

a debt instrument.

A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity, or

exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the RAF.

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in

market interest rates.

Liquidity risk is the risk encountered by an entity in the event of difficulty in meeting obligations associated with financial liabilities

that are settled by delivering cash or another financial asset.

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market

prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in

market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors

specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

A financial asset is past due when a counterparty has failed to make a payment when contractually due.

A residual interest is any contract that manifests an interest in the assets of an entity after deducting all of its liabilities. A residual

interest includes contributions from owners, which may be shown as:

• equity instruments or similar forms of unitised capital;

• a formal designation of a transfer of resources (or a class of such transfers) by the parties to the transaction as forming part

of an entity’s net assets, either before the contribution occurs or at the time of the contribution; or

• a formal agreement, in relation to the contribution, establishing or increasing an existing financial interest in the net assets

of an entity.

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or

financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed

of the financial instrument.

Financial instruments at amortised cost are non-derivative financial assets or non-derivative financial liabilities that have fixed

or determinable payments, excluding those instruments that the RAF designates at fair value at initial recognition, or are held

for trading.

Financial instruments at cost are investments in residual interests that do not have a quoted market price in an active market,

and whose fair value cannot be reliably measured.

Financial instruments at fair value comprise financial assets or financial liabilities that are:

• derivatives;

• combined instruments that are designated at fair value;

• instruments held for trading. A financial instrument is held for trading if:

- it is acquired or incurred principally for the purpose of selling or repurchasing it in the near-term; or

- on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which

there is evidence of a recent actual pattern of short-term profit-taking;

- non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at fair

value at initial recognition; and

- financial instruments that do not meet the definition of financial instruments at amortised cost or financial instruments

at cost.


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Classification

The RAF has the following types of financial assets, in terms of classes and category, as reflected on the face of the Statement

of Financial Position or in the notes thereto:

Class Category

Advance payment i.r.o. suppliers’ claims Financial asset measured at amortised cost

Employee debtors Financial asset measured at amortised cost

Sundry debtors Financial asset measured at amortised cost

Claims debtors Financial asset measured at amortised cost

Other deposits Financial asset measured at amortised cost

Cash and cash equivalents Financial asset measured at amortised cost

Rent-a-captive insurance Financial asset measured at amortised cost

The RAF has the following types of financial liabilities (classes and category) as reflected on the face of the Statement of Financial

Position or in the notes thereto:

Class Category

Trade and other creditors Financial liability measured at amortised cost

Claim amounts finalised but not paid at year-end Financial liability measured at amortised cost

Unrecognised portion of straight-lined leases Financial liability measured at amortised cost

Initial Recognition

The RAF recognises a financial asset or a financial liability in its Statement of Financial Position when the entity becomes a party

to the contractual provisions of the instrument.

The RAF recognises financial assets using trade date accounting.

Initial Measurement of Financial Assets and Financial Liabilities

The RAF measures a financial asset and financial liability initially at its fair value plus transaction costs that are directly attributable

to the acquisition or issue of the financial asset or financial liability.

Subsequent Measurement of Financial Assets and Financial Liabilities

The RAF measures all financial assets and financial liabilities after initial recognition using the following categories:

• Financial instruments at fair value.

• Financial instruments at amortised cost.

• Financial instruments at cost.

All financial assets measured at amortised cost, or cost, are subject to an impairment review.

Impairment and Uncollectibility of Financial Assets

The RAF assesses at the end of each reporting period, whether there is any objective evidence that a financial asset or group

of financial assets is impaired.

Financial assets measured at amortised cost:

If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, the

amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future

cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest

rate. The carrying amount of the asset is reduced directly OR through the use of an allowance account. The amount of the loss

is recognised in surplus or deficit.



If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event

occurring after the impairment was recognised, the previously recognised impairment loss is reversed directly OR by adjusting

an allowance account. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised

cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the

reversal is recognised in surplus or deficit.

Derecognition

Financial assets

The RAF derecognises financial assets using trade date accounting. The RAF derecognises a financial asset only when:

• the contractual rights to the cash flows from the financial asset expire, are settled or waived;

• the entity transfers to another party substantially all of the risks and rewards of ownership of the financial asset; or

• the entity, despite having retained some significant risks and rewards of ownership of the financial asset, has transferred

control of the asset to another party and the other party has the practical ability to sell the asset in its entirety to an unrelated

third party, and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the

transfer. In this case, the RAF:

- derecognises the asset; and

- recognises separately any rights and obligations created or retained in the transfer.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration

received is recognised in surplus or deficit.

Financial liabilities

The RAF removes a financial liability, or a part of a financial liability, from its Statement of Financial Position when it is extinguished

– i.e. when the obligation specified in the contract is discharged, cancelled, expires or waived.

An exchange between an existing borrower and lender of debt instruments with substantially different terms is accounted for as

having extinguished the original financial liability and a new financial liability is recognised. Similarly, a substantial modification

of the terms of an existing financial liability or a part of it is accounted for as having extinguished the original financial liability

and having recognised a new financial liability.

1.5 tax

Tax Expenses

The RAF is exempt from taxation in terms of the provision of section 10(1)(cA)(i) of the Income Tax Act, 1962 (Act No. 58 of 1962)

and section 16 of the Road Accident Fund Act, 1996 (Act No. 56 of 1996).

1.6 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified

as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Operating Leases – Lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between

the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability.

1.7 Consumable Stock

Consumable stock is initially measured at cost except where consumable stock is acquired through a non-exchange transaction,

when its cost is its fair value as at the date of acquisition.

Subsequently consumable stock is measured at the lower of cost and net realisable value.


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Consumable stock is measured at the lower of cost and current replacement cost where it is held for distribution at no charge

or for a nominal charge.

Current replacement cost is the cost the RAF incurs to acquire the asset on the reporting date.

The cost of consumable stock comprises all costs of purchase, costs of conversion and other costs incurred in bringing the

consumable stock to its present location and condition.

The cost of consumable stock is assigned using the weighted average cost formula. The same cost formula is used for all

consumable stock having a similar nature and use to the RAF.

When consumable stock is sold, the carrying amounts of the consumable stock are recognised as an expense in the period in which

the related revenue is recognised. If there is no related revenue, the expenses are recognised when the goods are distributed, or

related services are rendered. The amount of any write-down of consumable stock to net realisable value or current replacement

cost and all losses of consumable stock are recognised as an expense in the period the write-down or loss occurs. The amount of

any reversal of any write-down of consumable stock, arising from an increase in net realisable value or current replacement cost, is

recognised as a reduction in the amount of consumable stock and recognised as an expense in the period in which the reversal occurs.

1.8 Impairment of Cash-generating assets

Cash-generating assets are those assets held by the RAF with the primary objective of generating a commercial return. When

an asset is deployed in a manner consistent with that adopted by a profit-orientated entity, it generates a commercial return.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition

of the loss of the asset’s future economic benefits or service potential through depreciation (amortisation).

Carrying amount is the amount at which an asset is recognised in the Statement of Financial Position after deducting any

accumulated depreciation and accumulated impairment losses thereon.

A cash-generating unit is the smallest identifiable group of assets held with the primary objective of generating a commercial return

that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax expense.

Depreciation (amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable,

willing parties, less the costs of disposal.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less cost to sell and its value in use.

Useful life is either:

(a) the period of time over which an asset is expected to be used by the RAF; or

(b) the number of production or similar units expected to be obtained from the asset by the RAF.

Identification

When the carrying amount of a cash-generating asset exceeds its recoverable amount, it is impaired.

The RAF assesses at each reporting date whether there is any indication that a cash-generating asset may be impaired. If any

such indication exists, the RAF estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the RAF also tests a cash-generating intangible asset with an

indefinite useful life or a cash-generating intangible asset not yet available for use for impairment, annually, by comparing its

carrying amount with its recoverable amount. This impairment test is performed at the same time every year. If an intangible

asset was initially recognised during the current reporting period, that intangible asset was tested for impairment before the

end of the current reporting period.



Reversal of Impairment Loss

The RAF assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods

for a cash-generating asset may no longer exist or may have decreased. If any such indication exists, the RAF estimates the

recoverable amount of that asset.

An impairment loss recognised in prior periods for a cash-generating asset is reversed if there has been a change in the estimates

used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of the

asset is increased to its recoverable amount. The increase is a reversal of an impairment loss. The increased carrying amount of

an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined

(net of depreciation or amortisation) had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss for a cash-generating asset is recognised immediately in surplus or deficit. Any reversal of an

impairment loss of a revalued cash-generating asset is treated as a revaluation increase.

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the cash-generating asset is

adjusted in future periods to allocate the cash-generating asset’s revised carrying amount, less its residual value (if any), on a

systematic basis over its remaining useful life.

A reversal of an impairment loss for a cash-generating unit is allocated to the cash-generating assets of the unit pro rata with the carrying

amounts of those assets. These increases in carrying amounts are treated as reversals of impairment losses for individual assets. No part

of the amount of such a reversal is allocated to a non-cash-generating asset contributing service potential to a cash-generating unit.

In allocating a reversal of an impairment loss for a cash-generating unit, the carrying amount of an asset is not increased above

the lower of:

• its recoverable amount (if determinable); and

• the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been

recognised for the asset in prior periods.

The amount of the reversal of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata

to the other assets of the unit.

1.9 Impairment of Non-cash-generating assets

Non-cash-generating assets are assets other than cash-generating assets.

Identification

When the carrying amount of a non-cash-generating asset exceeds its recoverable service amount, it is impaired.

The RAF assesses at each reporting date whether there is any indication that a non-cash-generating asset may be impaired. If

any such indication exists, the RAF estimates the recoverable service amount of the asset.

Irrespective of whether there is any indication of impairment, the RAF also tests a non-cash-generating intangible asset with an

indefinite useful life or a non-cash-generating intangible asset not yet available for use for impairment annually by comparing

its carrying amount with its recoverable service amount. This impairment test is performed at the same time every year. If an

intangible asset was initially recognised during the current reporting period, that intangible asset was tested for impairment

before the end of the current reporting period.

Value in Use

Value in use of non-cash-generating assets is the present value of the non-cash-generating assets’ remaining service potential.

The present value of the remaining service potential of a non-cash-generating asset is determined using the following approach:

Depreciated Replacement Cost Approach

The present value of the remaining service potential of a non-cash-generating asset is determined as the depreciated replacement

cost of the asset. The replacement cost of an asset is the cost to replace the asset’s gross service potential. This cost is depreciated


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to reflect the asset in its used condition. An asset may be replaced either through reproduction (replication) of the existing asset

or through replacement of its gross service potential. The depreciated replacement cost is measured as the reproduction or

replacement cost of the asset, whichever is lower, less accumulated depreciation calculated on the basis of such cost, to reflect

the already consumed or expired service potential of the asset.

The replacement cost and reproduction cost of an asset is determined on an “optimised” basis. The rationale is that the entity would

not replace or reproduce the asset with a like asset if the asset to be replaced or reproduced is an overdesigned or overcapacity asset.

Overdesigned assets contain features which are unnecessary for the goods or services the asset provides. Overcapacity assets are

assets that have a greater capacity than is necessary to meet the demand for goods or services the asset provides. The determination

of the replacement cost or reproduction cost of an asset on an optimised basis thus reflects the service potential required of the asset.

Restoration Cost Approach

Restoration cost is the cost of restoring the service potential of an asset to its pre-impaired level. The present value of the remaining

service potential of the asset is determined by subtracting the estimated restoration cost of the asset from the current cost

of replacing the remaining service potential of the asset before impairment. The latter cost is determined as the depreciated

reproduction or replacement cost of the asset, whichever is lower.

Service Units Approach

The present value of the remaining service potential of the asset is determined by reducing the current cost of the remaining

service potential of the asset before impairment, to conform to the reduced number of service units expected from the asset in

its impaired state. The current cost of replacing the remaining service potential of the asset before impairment is determined as

the depreciated reproduction or replacement cost of the asset before impairment, whichever is lower.

Recognition and Measurement

If the recoverable service amount of a non-cash-generating asset is less than its carrying amount, the carrying amount of the

asset is reduced to its recoverable service amount. This reduction is an impairment loss, which is recognised immediately in the

surplus or deficit. Any impairment loss of revalued non-cash-generating asset is treated as a revaluation decrease.

When the amount estimated for an impairment loss is greater than the carrying amount of the non-cash-generating asset to

which it relates, the RAF recognises a liability only to the extent that is a requirement in the Standards of GRAP.

After the recognition of an impairment loss, the depreciation (amortisation) charge for the non-cash-generating asset is adjusted

in future periods to allocate the non-cash-generating asset’s revised carrying amount, less its residual value, if any, on a systematic

basis over its remaining useful life.

Reversal of an Impairment Loss

The RAF assesses at each reporting date whether there is any indication that an impairment loss, recognised in prior periods for

a non-cash-generating asset, may no longer exist or may have decreased. If any such indication exists, the RAF estimates the

recoverable service amount of that asset.

An impairment loss recognised in prior periods for a non-cash-generating asset is reversed if there has been a change in the

estimates used to determine the asset’s recoverable service amount since the last impairment loss was recognised. The carrying

amount of the asset is increased to its recoverable service amount. The increase is a reversal of an impairment loss. The increased

carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have

been determined (net of depreciation or amortisation) had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss for a non-cash-generating asset is recognised immediately in surplus or deficit. Any reversal of

an impairment loss of a revalued non-cash-generating asset is treated as a revaluation increase.

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the non-cash-generating asset

is adjusted in future periods to allocate the non-cash-generating asset’s revised carrying amount, less its residual value (if any),

on a systematic basis over its remaining useful life.



1.10 Employee Benefits

Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees.

Short-term Employee Benefits

Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within twelve

months after the end of the period in which the employees render the related service.

Short-term employee benefits include items such as:

• wages, salaries and social security contributions;

• short-term compensated absences (such as paid annual leave and paid sick leave) where the compensation for the absences

is due to be settled within twelve months after the end of the reporting period in which the employees render the related

employee service;

• bonus, incentive and performance-related payments payable within twelve months after the end of the reporting period

in which the employees render the related service; and

• non-monetary benefits (for example medical care, and free or subsidised goods or services such as housing, cars and

cellphones) for current employees.

When an employee has rendered service to the RAF during a reporting period, the RAF recognises the undiscounted amount

of short-term employee benefits expected to be paid in exchange for that service:

• as a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted

amount of the benefits, the RAF recognises that excess as an asset (prepaid expense) to the extent that the prepayment

will lead to, for example, a reduction in future payments or a cash refund; and

• as an expense, unless another Standard requires or permits the inclusion of the benefits in the cost of an asset.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their

entitlement or, in the case of non-accumulating absences, when the absence occurs. The RAF measure the expected cost of

accumulating compensated absences as the additional amount that the entity expects to pay as a result of the unused entitlement

that has accumulated at the reporting date.

The RAF recognises the expected cost of bonuses, incentives and performance-related payments when the entity has a present

legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can

be made. A present obligation exists when the RAF has no realistic alternative but to make the payments.

Post-employment Benefits

Post-employment benefits are employee benefits (other than termination benefits) which are payable after the completion of

employment.

Post-employment benefit plans are formal or informal arrangements under which an entity provides post-employment benefits

for one or more employees.

Multi-employer plans are defined contribution plans (other than state plans and composite social security programmes) or

defined benefit plans (other than state plans) that pool the assets contributed by various entities that are not under common

control and use those assets to provide benefits to employees of more than one entity, on the basis that contribution and benefit

levels are determined without regard for the identity of the entity that employs the employees concerned.

Post-employment Benefits: Defined Contribution Plans

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate

legal entity (a pension fund) and will have no legal or constructive obligation to pay further contributions if the fund does not

hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

When an employee has rendered service to the RAF during a reporting period, the RAF recognises the contribution payable to

a defined contribution plan in exchange for that service:


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• as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the

contribution due for service before the reporting date, an entity recognises that excess as an asset (prepaid expense) to

the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and

• as an expense, unless another Standard requires or permits the inclusion of the contribution in the cost of an asset.

Post-employment Benefits: Defined Benefit Plans

Defined benefit plans are post-employment benefit plans other than defined contribution plans.

Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous actuarial assumptions

and what has actually occurred) and the effects of changes in actuarial assumptions. In measuring its defined benefit liability the

RAF recognises actuarial gains and losses in surplus or deficit in the reporting period in which they occur.

Assets held by a long-term employee benefit fund are assets (other than non-transferable financial instruments issued by the

reporting entity) that are held by an entity (a benefit fund) that is legally separate from the reporting entity and exists solely

to pay or fund employee benefits and are available to be used only to pay or fund employee benefits, are not available to the

reporting entity’s own creditors (even in liquidation), and cannot be returned to the reporting entity, unless either the remaining

assets of the fund are sufficient to meet all the related employee benefit obligations of the plan or the reporting entity, or the

assets are returned to the reporting entity to reimburse it for employee benefits already paid.

Current service cost is the increase in the present value of the defined benefit obligation resulting from employee service in

the current period.

Interest cost is the increase during a period in the present value of a defined benefit obligation which arises because the benefits

are one period closer to settlement.

Past service cost is the change in the present value of the defined benefit obligation for employee service in prior periods,

resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee

benefits. Past service cost may be either positive, that is, when benefits are introduced or changed so that the present value of

the defined benefit obligation increases, or negative, that is, when existing benefits are changed so that the present value of

the defined benefit obligation decreases. In measuring its defined benefit liability the RAF recognises past service cost as an

expense in the reporting period in which the plan is amended.

Plan assets comprise assets held by a long-term employee benefit fund and qualifying insurance policies.

The present value of a defined benefit obligation is the present value, without deducting any plan assets, of expected future

payments required to settle the obligation resulting from employee service in the current and prior periods.

The return on plan assets is interest, dividends or similar distributions and other revenue derived from the plan assets, together

with realised and unrealised gains or losses on the plan assets, less any costs of administering the plan (other than those included

in the actuarial assumptions used to measure the defined benefit obligation) and less any tax payable by the plan itself.

The RAF accounts not only for its legal obligation under the formal terms of a defined benefit plan, but also for any constructive

obligation that arises from the RAF’s informal practices. Informal practices give rise to a constructive obligation where the RAF

has no realistic alternative but to pay employee benefits. An example of a constructive obligation is where a change in the RAF’s

informal practices would cause unacceptable damage to its relationship with employees.

The amount recognised as a defined benefit liability is the net total of the following amounts:

• the present value of the defined benefit obligation at the reporting date;

• minus the fair value at the reporting date of plan assets (if any) out of which the obligations are to be settled directly;

• plus any liability that may arise as a result of a minimum funding requirement.



The amount determined as a defined benefit liability may be negative (an asset). The RAF measures the resulting asset at the

lower of the amount determined above or the present value of any economic benefits available in the form of refunds from

the plan or reductions in future contributions to the plan. The present value of these economic benefits is determined using a

discount rate which reflects the time value of money.

Any adjustment arising from the limit above is recognised in surplus or deficit.

The RAF determines the present value of defined benefit obligations and the fair value of any plan assets with sufficient

regularity such that the amounts recognised in the Financial Statements do not differ materially from the amounts that would

be determined at the reporting date.

The RAF recognises the net total of the following amounts in surplus or deficit, except to the extent that another Standard

requires or permits their inclusion in the cost of an asset:

• Current service cost;

• Interest cost;

• The expected return on any plan assets and on any reimbursement rights;

• Actuarial gains and losses;

• Past service cost;

• The effect of any curtailments or settlements; and

• The effect of applying the limit on a defined benefit asset (negative defined benefit liability).

The RAF uses the Projected Unit Credit Method to determine the present value of its defined benefit obligations and the related

current service cost and, where applicable, past service cost. The Projected Unit Credit Method (sometimes known as the accrued

benefit method pro-rated on service or as the benefit/years of service method) sees each period of service as giving rise to an

additional unit of benefit entitlement, and measures each unit separately to build up the final obligation.

In determining the present value of its defined benefit obligations and the related current service cost and, where applicable,

past service cost, an entity shall attribute benefit to periods of service under the plan’s benefit formula. However, if an employee’s

service in later years will lead to a materially higher level of benefit than in earlier years, an entity shall attribute benefit on a

straight-line basis from:

• the date when service by the employee first leads to benefits under the plan (whether or not the benefits are conditional

on further service); until

• the date when further service by the employee will lead to no material amount of further benefits under the plan, other

than from further salary increases.

Actuarial valuations are conducted on an annual basis by independent actuaries separately for each plan. The results of the

valuation are updated for any material transactions and other material changes in circumstances (including changes in market

prices and interest rates) up to the reporting date.

The RAF offsets an asset relating to one plan against a liability relating to another plan when the entity has a legally enforceable

right to use a surplus in one plan to settle obligations under the other plan and intends either to settle the obligations on a net

basis, or to realise the surplus in one plan and settle its obligation under the other plan simultaneously.

Actuarial Assumptions

Actuarial assumptions are unbiased and mutually compatible.

Financial assumptions are based on market expectations, at the reporting date, for the period over which the obligations are

to be settled.

The rate used to discount post-employment benefit obligations (both funded and unfunded) reflects the time value of money.

The currency and term of the financial instrument selected to reflect the time value of money is consistent with the currency

and estimated term of the post-employment benefit obligations.


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Post-employment benefit obligations are measured on a basis that reflects:

• estimated future salary increases

• the benefits set out in the terms of the plan (or resulting from any constructive obligation that goes beyond those terms)

at the reporting date; and

• estimated future changes in the level of any state benefits that affect the benefits payable under a defined benefit plan, if,

and only if, either:

- those changes were enacted before the reporting date; or

- past history, or other reliable evidence, indicates that those state benefits will change in some predictable manner,

for example, in line with future changes in general price levels or general salary levels.

Assumptions about medical costs take account of estimated future changes in the cost of medical services, resulting from both

inflation and specific changes in medical costs.

Termination Benefits

Termination benefits are recognised as an expense when the RAF is demonstrably committed, without realistic possibility of

withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. Termination benefits for

voluntary redundancies are recognised if the RAF has made an offer encouraging voluntary redundancy, it is probable that the

offer will be accepted, and the number of acceptances can be estimated reliably.

1.11 Provisions and Contingencies

Provisions are recognised when:

• the RAF has a present obligation as a result of a past event;

• it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the

obligation; and

• a reliable estimate can be made of the obligation.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at

the reporting date.

Where the effect of time value of money is material, the amount of a provision is the present value of the expenditure expected

to be required to settle the obligation.

The discount rate is the rate before tax that reflects current market assessments of the time value of money and the risks specific

to the liability.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the

reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the RAF settles

the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursement does not exceed

the amount of the provision.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is no longer

probable that an outflow of resources embodying economic benefits or service potential will be required, to settle the obligation.

Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This

increase is recognised as an interest expense.

A provision is used only for expenditures for which the provision was originally recognised. Provisions are not recognised for

future operating deficits.

If an entity has a contract that is onerous, the present obligation (net of recoveries) under the contract is recognised and

measured as a provision.



A constructive obligation to restructure arises only when an entity:

• has a detailed formal plan for the restructuring, identifying at least:

- the activity/operating unit or part of a activity/operating unit concerned;

- the principal locations affected;

- the location, function, and approximate number of employees who will be compensated for services being terminated;

- the expenditures that will be undertaken; and

- when the plan will be implemented; and

• has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or

announcing its main features to those affected by it.

A restructuring provision includes only the direct expenditures arising from the restructuring, which are those that are both:

• necessarily entailed by the restructuring; and

• not associated with the ongoing activities of the RAF.

No obligation arises as a consequence of the sale or transfer of an operation until the RAF is committed to the sale or transfer,

that is, there is a binding arrangement.

After their initial recognition, contingent liabilities recognised in entity combinations that are recognised separately are

subsequently measured at the higher of the amount that would be recognised as a provision, and the amount initially recognised

less cumulative amortisation.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in Note 34.

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a

loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of

a debt instrument.

Loan commitment is a firm commitment to provide credit under pre-specified terms and conditions.

The RAF recognises a provision for financial guarantees and loan commitments when it is probable that an outflow of resources

embodying economic benefits and service potential will be required to settle the obligation and a reliable estimate of the

obligation can be made.

Determining whether an outflow of resources is probable in relation to financial guarantees requires judgement. Indications

that an outflow of resources may be probable are:

• financial difficulty of the debtor;

• defaults or delinquencies in interest and capital repayments by the debtor;

• breaches of the terms of the debt instrument that result in it being payable earlier than the agreed term and the ability of

the debtor to settle its obligation on the amended terms; and

• a decline in prevailing economic circumstances (e.g. high interest rates, inflation and unemployment) that impacts on the

ability of entities to repay their obligations.

Where a fee is received by the RAF for issuing a financial guarantee and/or where a fee is charged on loan commitments, it is

considered in determining the best estimate of the amount required to settle the obligation at reporting date. Where a fee is

charged and the RAF considers that an outflow of economic resources is probable, the RAF recognises the obligation at the

higher of:

• the amount determined using the Standard of GRAP on Provisions, Contingent Liabilities and Contingent Assets; and

• the amount of the fee initially recognised less, where appropriate, cumulative amortisation recognised in accordance with

the Standard of GRAP on Revenue from Exchange Transactions.


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1.12. Payables

Liabilities are present obligations of the entity arising from past events, the settlement of which is expected to result in an outflow

from the entity of resources embodying economic benefits or service potential.

Provisions can be distinguished from other liabilities such as payables and accruals because there is uncertainty about the timing

or amount of the future expenditure required in settlement. By contrast:

• payables are liabilities to pay for goods or services that have been received or supplied and have been invoiced or formally

agreed with the supplier (and include payments in respect of social benefits where formal agreements for specified amounts

exist); and

• accruals are liabilities to pay for goods or services that have been received or supplied but have not been paid, invoiced or

formally agreed with the supplier, including amounts due to employees (for example, amounts relating to accrued leave

pay).

Although it is sometimes necessary to estimate the amount or timing of accruals, the uncertainty is generally much less than

for provisions.

The RAF reports accruals and provisions as part of accounts payable.

Recognition

The RAF recognises payables in accordance with GRAP 19.

A provision shall be recognised when:

• an entity has a present obligation (legal or constructive) as a result of a past event;

• it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the

obligation; and

• a reliable estimate can be made of the amount of the obligation.

If these conditions are not met, no provision shall be recognised.

An accruals recognition criterion is similar to that of the provisions, except that the amount of the obligation is not estimated.

The amount recognised is accurately determined using the relevant report, contract or invoice.

In most instances, the system is used to derive these amounts.

Measurement

The amount recognised as a provision shall be the best estimate of the expenditure required to settle the present obligation

at the reporting date.

It will often be impossible or prohibitively expensive to settle or transfer an obligation at the reporting date. However, the estimate

of the amount that the RAF would rationally pay to settle or transfer the obligation gives the best estimate of the expenditure

required to settle the present obligation at the reporting date.

The estimates of outcome and financial effect are determined by the judgment of the management of the RAF, supplemented

by experience of similar transactions and, in some cases, reports from independent experts. The evidence considered includes

any additional evidence provided by events after the reporting date.

The RAF measures the accruals based on the actual amount as per internal and external reports including contracts and invoices.

The risks and uncertainties that inevitably surround many events and circumstances shall be taken into account in reaching the

best estimate of a provision.

With regard to accruals, there is little to no risk and uncertainty as compared to provisions as actual amounts are used.



1.13 revenue from Exchange transactions

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in

an increase in net assets, other than increases relating to contributions from owners.

An exchange transaction is one in which one entity receives assets or services, or has liabilities extinguished, and directly gives

approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties

in an arm’s length transaction.

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.

Income

Revenue arising from the use by others of entity assets yielding interest, reinsurance income and other income is recognised

when it is probable that the economic benefits or service potential associated with the transaction will flow to the RAF, and the

amount of the revenue can be measured reliably.

Interest is recognised, in surplus or deficit, using the effective interest rate method.

Other income comprises fees that are collected for published tenders, vending machines and parking fees received from employees.

1.14 revenue from Non-exchange transactions

Revenue comprises gross inflows of economic benefits or service potential received and receivable by an entity, which represents

an increase in net assets, other than increases relating to contributions from owners.

Exchange transactions are transactions in which one entity receives assets or services, or has liabilities extinguished, and directly

gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange.

Non-exchange transactions are transactions that are not exchange transactions. In a non-exchange transaction, an entity either

receives value from another entity without directly giving approximately equal value in exchange, or gives value to another

entity without directly receiving approximately equal value in exchange.

Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other than taxes.

Recognition

An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent

that a liability is also recognised in respect of the same inflow.

As the RAF satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange

transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of

revenue equal to that reduction.

Measurement

Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the RAF. The

main income received by the RAF is a levy that is based on fuel sales known as the RAF Fuel Levy. The RAF Fuel Levy income is

a charge levied on fuel throughout the country and the quantum of the RAF Fuel Levy per litre is determined by NT. The RAF

Fuel Levy amendments are communicated through the Budget Speech.

The RAF recognises revenue from fuel levies when the amount of revenue can be reliably measured and it is probable that future

economic benefits will flow to the RAF.

Revenue is measured at the fair value of the consideration received or receivable (net of the Diesel rebate).


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1.15 Investment income

Investment income is recognised on a time-proportion basis using the effective interest method.

1.16 Borrowing Costs

It is inappropriate to capitalise borrowing costs when, and only when, there is clear evidence that it is difficult to link the borrowing

requirements of an entity directly to the nature of the expenditure to be funded i.e. capital or current.

Borrowing costs are recognised as an expense in the period in which they are incurred.

1.17 translation of Foreign Currencies

Foreign Currency Transactions

A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot

exchange rate between the functional currency and the foreign currency at the date of the transaction.

At each reporting date:

• foreign currency monetary items are translated using the closing rate;

• non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange

rate at the date of the transaction; and

• non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the

date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from

those at which they were translated on initial recognition during the period or in previous Financial Statements are recognised

in surplus or deficit in the period in which they arise.

When a gain or loss on a non-monetary item is recognised directly in net assets, any exchange component of that gain or loss is

recognised directly in net assets. When a gain or loss on a non-monetary item is recognised in surplus or deficit, any exchange

component of that gain or loss is recognised in surplus or deficit.

Cash flows arising from transactions in a foreign currency are recorded in Rands by applying to the foreign currency amount the

exchange rate between the Rand and the foreign currency at the date of the cash flow.

1.18 Claims Payments

An insurance contract is defined as a contract under which the insurer accepts significant insurance risk from another party (the

policy holder) by agreeing to compensate the policy holder if a specified uncertain future event (the insured event) adversely

affects the policy holder. The RAF does not have any insurance contracts, but does accept insurance risk as it is mandated by

legislation to compensate victims of road accidents for injuries suffered as a result of motor vehicle accidents.

Claims Incurred

Claims incurred comprise claims and related expenses incurred during the year and changes in the provisions for outstanding

claims, including related external expenses, together with any other adjustments to claims from previous years.

Outstanding Claims Provision

Provision is made at the year-end for the estimated cost of claims incurred, but not yet settled at the reporting date. Claims

outstanding are determined as accurately as possible on the basis of a number of factors, which include previous experience in

claims patterns, claims settlement patterns and trends in claims frequency.

Further, the outstanding claims provision is calculated taking the following elements into account:



• Estimates of additional claims payments that may be required on claims that have already been reported to the RAF and

are still open;

• Estimates of additional claims payments that may be required on claims that have already been reported to the RAF and

are closed, but could be reopened in the future; and

• Estimates of external claims handling expenses, i.e. legal and medical experts, assessors and other experts – excluding the

RAF’s overhead administrative costs.

The estimates of the outstanding claims provision were produced on a “going concern” basis, and the outstanding claims

estimate is reflected in the Financial Statements at a discounted value, based on expected monetary values at the expected time

of payment of those claims. Reserves for internal or indirect claim handling expenses (e.g. administration costs) are specifically

excluded from the estimates.

IBNR Claims Provision

Provision is made at year end for the cost of claims incurred but not yet reported (commonly referred to “Claims IBNR”) to

the RAF.

Reinsurance Contracts Held

The RAF procures reinsurance cover for the purposes of limiting its net loss potential. The reinsurance policies do not release

the RAF from its direct obligations to its claimants, as the duty to compensate the claimants remains with the RAF in spite of the

fact that the reinsurance cover has been procured.

The contracts entered into by the RAF with reinsurers, under which the RAF is compensated for losses on one or more “contracts”

issued by the RAF and that meet the classification requirements for the insurance contracts above, are classified as reinsurance

contracts held. Only the rights under contracts that give rise to a significant transfer of insurance risk are accounted for as

reinsurance assets. Rights under contracts that do not transfer significant insurance risk are accounted for as financial instruments.

Reinsurance premiums for reinsurance cover are recognised as expenses on a basis that is consistent with the recognition basis

for premiums on other similar insurance contracts. Reinsurance premiums are charged to the Statement of Financial Performance

over the period that the reinsurance cover is provided based on the expected pattern of the reinsured risks.

The RAF does not recognise reinsurance assets except for claims which have already been lodged with reinsurers and liability

acknowledged, due to uncertainty regarding the successful realisation of the claims.

1.19 Comparative Figures

Where necessary, comparative figures have been reclassified to conform to changes in presentation in the current year.

1.20 Fruitless and Wasteful Expenditure

Fruitless expenditure as defined in section 1 of the PFMA is expenditure which was made in vain and would have been avoided

had reasonable care been exercised.

All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the Statement of Financial Performance

in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and

where recovered, it is subsequently accounted for as revenue in the Statement of Financial Performance.

1.21 Irregular Expenditure

Irregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in

contravention of, or that is not in accordance with, a requirement of any applicable legislation, including:

(a) this Act; or

(b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or

(c) any provincial legislation providing for procurement procedures in that provincial government.


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NT practice note no. 4 of 2008/09, which was issued in terms of sections 76(1) to 76(4) of the PFMA, requires the following

(effective from 1 April 2008):

Irregular expenditure that was incurred and identified during the current financial and which was condoned before year end

and/or before finalisation of the financial statements must also be recorded appropriately in the irregular expenditure register.

In such an instance, no further action is required with the exception of updating the Note to the Financial Statements.

Irregular expenditure that was incurred and identified during the current financial year and for which condonement is being

awaited at year end must be recorded in the Irregular Expenditure Register. No further action is required with the exception of

updating the Note to the Financial Statements.

Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the

register and the disclosure Note to the Financial Statements must be updated with the amount condoned.

Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the

NT or the relevant authority must be recorded appropriately in the Irregular Expenditure Register. If liability for the irregular

expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps

must thereafter be taken to recover the amount from the person concerned. If recovery is not possible, the accounting officer

or accounting authority may write off the amount as debt impairment and disclose such in the relevant Note to the Financial

Statements. The Irregular Expenditure Register must also be updated accordingly. If the irregular expenditure has not been

condoned and no person is liable in law, the expenditure related thereto must remain against the relevant programme/

expenditure item, be disclosed as such in the Note to the Financial Statements and updated accordingly in the Irregular

Expenditure Register.

1.22 Budget Information

Entities are typically subject to budgetary limits in the form of appropriations or budget authorisations (or equivalent), which

are given effect through authorising legislation, appropriation or similar.

General purpose financial reporting by an entity shall provide information on whether resources were obtained and used in

accordance with the legally adopted budget.

The approved budget is prepared on an accrual basis and presented by economic classification linked to performance outcome

objectives.

The approved budget covers the fiscal period from 1 April 2013 to 31 March 2014.

The Financial Statements and the budget are prepared on the same basis of accounting therefore a comparison with the

budgeted amounts for the reporting period has been included in the Statement of Comparison of Budget and Actual Amounts.

Material movements are explained in the Statement of Comparison of Budget and Actual Amounts and movements of greater

than 10% are assumed material.

1.23 related Parties

The RAF operates in an economic sector currently dominated by entities directly or indirectly owned by the South African

Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only

entities within the national sphere of government are considered to be related parties.

Management are those persons responsible for planning, directing and controlling the activities of the RAF, including those charged

with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions.

Close members of the family of a person are considered to be those family members who may be expected to influence, or be

influenced by, Management in their dealings with the RAF.

Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.



2. New Standards and Interpretations

2.1 Standards and Interpretations Issued, but Not Yet Effective

The RAF has not applied the following standards and interpretations, which have been published and are mandatory for entities

with accounting periods beginning on or after 1 April 2014 or later periods:

GRAP 20: Related Parties

The objective of this standard is to ensure that a reporting entity’s financial statements contain the disclosures necessary to draw

attention to the possibility that its financial position and surplus or deficit may have been affected by the existence of related

parties and by transactions and outstanding balances with such parties.

An entity that prepares and presents financial statements under the accrual basis of accounting (in this standard referred to as

the reporting entity) shall apply this standard in:

• Identifying related party relationships and transactions;

• Identifying outstanding balances, including commitments, between an entity and its related parties;

• Identifying the circumstances in which disclosure of the items above is required; and

• Determining the disclosures to be made about those items.

This standard requires disclosure of related party relationships, transactions and outstanding balances, including commitments,

in the consolidated and separate financial statements of the reporting entity in accordance with the Standard of GRAP on

Consolidated and Separate Financial Statements. This standard also applies to individual financial statements.

Disclosure of related party transactions, outstanding balances, including commitments, and relationships with related parties

may affect users’ assessments of the financial position and performance of the reporting entity and its ability to deliver agreed

services, including assessments of the risks and opportunities facing the entity. This disclosure also ensures that the reporting

entity is transparent about its dealings with related parties.

The effective date of the standard is for years beginning on or after 1 April 2014. The RAF expects to adopt the standard for the

first time in the 2015 financial statements. The adoption of this standard is not expected to impact on the results of the RAF, but

may result in more disclosure than is currently provided in the financial statements.

2014 2013

R‘000 R‘000

3. Cash and Cash Equivalents

Cash and cash equivalents include the following:

Short-term deposits 2,497,771 6,138,000

Current accounts 2,505 1,322

Deposit accounts 4,464 4,464

Cash on hand 35 31

2,504,775 6,143,817

Cash and cash equivalents held by the RAF that are not available for use by the economic entity 4,464 4,464

The effective interest rate on call deposits in 2014 was 5.07% and 5.15% in 2013.


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2014 2013

R‘000 R‘000

4. Receivables from Non-exchange Transactions

Fuel levy receivable 4,768,710 4,153,511

The RAF levies are recovered directly from the oil refineries by the South African Revenue

Service (SARS) and are paid into the National Revenue Fund. SARS pays the funds into the

National Revenue Fund after certain deductions are made in terms of section 47 of the Customs

and Excise Act, 1964 (Act No. 91 of 1964), section 5 of the RAF Act, as well as Schedule No. 6

to the Customs and Excise Act, 1964. NT then pays these levies from the National Revenue

Fund to the RAF.

Approximately 50% of the levies due are payable by the refineries at the end of the month

following the month of removal from the refinery, and the remaining 50% at the end of the

following month.

This amount is reduced by any bad debts that the refineries have sustained that need to be

refunded by the RAF.

5. Receivables from Exchange Transactions

Interest receivable from money market investments 16,116 32,721

6. Other Financial Assets

at amortised CostAdvance payment in respect of supplier claims and other 22,479 14,532

Employee debtors 1,005 2,093

Sundry debtors 2,959 2,731

Rent-a-captive insurance 118,282 113,689

Other deposits 181 181

Claims debtors 7,273 7,409

152,179 140,635

Impairments of claims, advance payment, employee and sundry debtors (19,205) (8,411)

132,974 132,224

Current assetsAt amortised cost 132,974 132,224

Financial assets at amortised Cost

Financial Assets at Amortised Cost Past Due but Not Impaired

Financial assets which are past due but are not considered to be impaired amount to R4,883,000

as at 31 March 2014, and R13,315,000 in 2013.

The breakdown of amounts past due but not impaired is as follows:

Advance payment in respect of supplier claims and other (greater than 90 days) - 12,930

Employee debtors (greater than 90 days) 550 289

Sundry debtors (greater than 90 days) 477 1

Claims debtors (greater than 90 days) 3,856 95


2014 2013

R‘000 R‘000

Financial Assets at Amortised Cost Impaired

Claims, advance payment, employee and sundry debtors that are impaired were R19,205,000

as at 31 March 2014, and R8,411,344 in 2013.

These were impaired and provided for.

The breakdown of amounts is as follows.

Sundry debtors - 2,069

Claims debtors 6,133 6,342

Employee debtors 289 -

Advance payment in respect of supplier claims and other 12,783 -

reconciliation of Provision for Impairment of Financial assets at amortised Cost

Sundry DebtorsOpening balance 2,069 -

Provision for impairment - 2,164

Amounts written off as irrecoverable (2,069) (95)

- 2,069

Claims DebtorsOpening balance 6,342 1,205

Provision for impairment 897 6,301

Amounts written off as irrecoverable (1,106) (1,164)

6,133 6,342

Employee DebtorsOpening balance - -

Provision for impairment 289 -

Amounts written off as irrecoverable - -

289 -

Advance Payment i.r.o. Supplier Claims and OtherProvision for impairment 12,783 -

The creation and release of provision for impairment receivables have been included in

General Expenses Note 24.

The maximum exposure to credit risk at the reporting date is the fair value of each class of

loan mentioned above. The RAF does not hold any collateral as security.

7. Consumable Stock

Consumable stock 3,603 3,012

Included in consumable stock is printing paper, printer cartridges and stationery.


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8. Property, Plant and Equipment

2014 2013

Cost/Valuation

Accumulateddepreciation

andaccumulated

impairmentCarrying

valueCost/

Valuation


andaccumulated

impairmentCarrying

value

R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Land 25,478 - 25,478 24,852 - 24,852

Buildings 126,320 (23) 126,297 126,996 (12) 126,984

Furniture and fixtures 28,599 (12,769) 15,830 26,973 (14,171) 12,802

Motor vehicles 15,740 (10,634) 5,106 12,478 (8,489) 3,989

Office equipment 28,956 (18,002) 10,954 33,181 (20,553) 12,628

IT equipment 179,562 (116,230) 63,332 187,924 (126,623) 61,301

Leasehold improvements 16,367 (16,367) - 16,294 (15,890) 404

Total 421,022 (174,025) 246,997 428,698 (185,738) 242,960

reconciliation of Property, Plant and Equipment – 2014

Openingbalance Additions Disposals Revaluations


of disposedassets Depreciation Total

R‘000 R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Land 24,852 - - 626 - - 25,478

Buildings 126,984 - - 3,546 - (4,233) 126,297

Office furniture 12,802 5,314 (3,695) - 3,008 (1,599) 15,830

Motor vehicles 3,989 3,456 (194) - 194 (2,339) 5,106

Office equipment 12,628 988 (5,207) - 5,101 (2,556) 10,954

IT equipment 61,301 21,570 (29,932) - 29,841 (19,448) 63,332

Leasehold improvements 404 72 - - - (476) -

242,960 31,400 (39,028) 4,172 38,144 (30,651) 246,997

The carrying amount of fully depreciated property, plant and equipment that is still in use is a follows:

2014 2013

R‘000 R‘000

Cost 57,392 91,757

Accumulated depreciation (57,385) (91,744)

Carrying amount 7 13


reconciliation of Property, Plant and Equipment – 2013

OpeningBalance Additions Disposals Revaluations


of disposedassets Depreciation Total

R‘000 R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Land 17,148 - - 7,704 - - 24,852

Buildings 86,064 134 - 43,661 - (2,875) 126,984

Office furniture 13,148 1,075 - - - (1,421) 12,802

Motor vehicles 5,165 625 - - - (1,801) 3,989

Office equipment 14,387 1,084 (44) - 44 (2,843) 12,628

IT equipment 73,866 5,483 (8,362) - 8,281 (17,967) 61,301

Leasehold improvements 4,257 1 - - - (3,854) 404

214,035 8,402 (8,406) 51,365 8,325 (30,761) 242,960

The carrying amount of fully depreciated property, plant and equipment that is still in use is a follows:

2013 2012

R‘000 R‘000

Cost 91,757 79,701

Accumulated depreciation (91,744) (79,701)

13 -

revaluations

The effective date of the revaluations was 31 March 2014. Revaluations were performed by independent valuer, Mr Goosen,

Professional Associated Valuer of Corporate Valuations CC. Corporate Valuations CC is not a related party of the RAF.

Land and buildings are re-valued independently every year, in terms of the RAF Policy.

The valuation was performed using a combination of the Direct Comparable Method and the Income Capitalisation Method

to determine the market value by discounting the future income flow to a present value. A discount rate of 9.75% was used to

discount the income.

9. Intangible Assets

2014 2013

Cost/Valuation

Accumulatedamortisation

andaccumulated

impairmentCarrying

valueCost/

Valuation

Accumulatedamortisation

andaccumulated

impairmentCarrying

value

R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Computer software 84,365 (63,193) 21,172 64,725 (55,712) 9,013

reconciliation of Intangible assets – 2014

OpeningBalance Additions Amortisation Total

R‘000 R‘000 R‘000 R‘000

Computer software 9,013 19,640 (7,481) 21,172


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reconciliation of Intangible assets – 2013

Openingbalance Additions Disposals Amortisation Total

R‘000 R‘000 R‘000 R‘000 R‘000

Computer software 62,656 6,940 (30,206) (30,377) 9,013

2014 2013

R‘000 R‘000

10. Payables from Exchange Transactions

Accrual for overtime 3,283 2,274

Accrual for leave 38,141 36,307

Accrual for 13th cheque 8,298 7,294

Accrual for performance bonuses 89,287 93,866

139,009 139,741

11. Other Financial Liabilities

at amortised CostTrade and other creditors 83,200 51,822

Claim amounts finalised but not paid at year-end 377,379 282,112

Unrecognised portion of straight-lined leases 616 1,207

461,195 335,141

total Other Financial Liabilities 461,195 335,141

Non-current LiabilitiesAt amortised cost 616 1,207

Current LiabilitiesAt amortised cost 460,579 333,934

12. Provision for Outstanding Claims

reconciliation of Provision for Outstanding Claims – 2014

Openingbalance Additions

Utilised during the

year

Provision for outstanding

claims Claims IBNR

Total claims liability

including IBNR

R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Provision for outstanding claims 60,296,000 31,419,094 (22,280,094) 69,435,000 27,565,000 97,000,000

reconciliation of Provision for Outstanding Claims – 2013

Openingbalance Additions

Utilised during the

year

Provision for outstanding

claims Claims IBNR

Total claims liability

including IBNR

R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Provision for outstanding claims 53,918,703 21,579,684 (15,202,387) 60,296,000 22,542,000 82,838,000

9. Intangible Assets (continued)


Provision for outstanding claims is classified as follows:

2014 2013

R‘000 R‘000

Non-current liabilities 72,916,834 62,476,692

Current liabilities 24,083,166 20,361,308

97,000,000 82,838,000

For the 2014 valuation, adjustments were made to the methodology used in the previous valuation. The key adjustments were

(all in respect of personal claims):

• Direct and represented claims were analysed separately.

• Allowance was made for seasonality in reporting and claims capturing patterns.

• When estimating ultimate claim numbers, reliance on the two most recent accident quarters was reduced.

The total claims liability including provision for claims incurred but not reported as at 31 March 2014, net of reinsurance, was

estimated to be R97 billion (2012/13: R82.8 billion). This R97 billion should be interpreted as the expected monetary amount that,

together with notional investment income on this amount, would be sufficient to cover future payments in respect of accidents

that occurred prior to 1 April 2014. The estimate of the total claims liability increased by R14.2 billion from the March 2013 estimate

due to an increase in the average cost of a claim, interest and legislative changes.

Definitions as per GraP 19

• Provision: A liability of uncertain timing or amount.

• Liability: Present obligation of an entity arising from past events, the settlement of which is expected to result in an outflow

from the entity of resources embodying economic benefits or service potential.

• Obligating event: An event that creates a legal or constructive obligation that results in an entity having no realistic

alternative to settling that obligation.

• Contingent liability: A possible obligation depending on whether some uncertain future event occurs, or a present

obligation but payment is not probable or the amount cannot be measured reliably.

From the above definitions, claims registered are likely to represent a liability. However, what is not certain is when it will be paid and

how much will be paid based on the environment within which the RAF operates. Hence, the valuation amount relating to reported

claims is classified as a provision for outstanding claims and is as such recognised in the Statement of Financial Position as at the

reporting period. The provision amount recognised in the Statement of Financial Position as at 31 March 2014 amounted to R69.4 billion.

With regard to the incurred but not reported (IBNR) claims, a claim has not been lodged nor has an assessment been made in

terms of the RAF Act to determine whether the RAF has an obligation or not. The validity of a claim depends on the assessments

being done in terms of the RAF Act.

The total provision for all claims (both outstanding and IBNR) recognised in the Statement of Financial Position as at 31 March 2014

amounted to R97 billion.

It was further estimated that, had the Amendment Act not been introduced, the liability would have been approximately R16.9 billion

higher (i.e. a total liability of approximately R113.9 billion). If the actual future experience is as expected, the outstanding claims

liability is expected to increase at a lower rate than claims inflation during the next five years, as the effect of the Amendment

Act filters through. Thereafter, it is expected to increase with claims inflation, as well as any increase in the number of accidents.


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12. Provision for Outstanding Claims (continued)

Method Used in Determining the Provision for Outstanding Claims

The calculation of the provision for outstanding claims was divided into the following components:

1. Personal claims (Pre- and Post-Amendment Act); and

2. Undertakings.

Method Used to Estimate the Liability for Personal Claims

Non-undertaking, non-supplier claims were subdivided into the following groups:

• Group A: Nil claims: Claims with no compensation payments and no expense payments.

• Group B: Small claims: Claims with no compensation but some expenses.

• Group C: Injury claims, further split into the following:

- Group C1: No general damages.

- Group C2: General damages but no loss-of-earnings.

- Group C3: General damages with some loss-of-earnings.

• Group D: Death claims, further split into the following:

- Group D1: Death claims with loss-of-support.

- Group D2: Death claims with only funeral costs, but no loss-of-support.

The reason for subdividing non-supplier claims into these groups was to obtain homogeneous groups. Claims in the different

groups have very different characteristics. Estimates of future payments based on historical data are better if homogeneous

groups are used.

The liability in respect of Personal claims was estimated as follows:

• Firstly, the number of ultimate and hence the number of outstanding claims for each accident interval was estimated.

• Secondly, it was estimated how many of the outstanding non-supplier claims (both reported and IBNR) are expected to

fall into each group.

• The average amount expected to be paid on outstanding claims in each group was estimated, taking into account that

past experience showed that, on average, larger claims in each group took longer to finalise than smaller claims.

• The outstanding liability was then estimated by multiplying the estimated number of outstanding claims in each group

by the average amounts for the respective groups, for each accident year.

• Amounts already paid in respect of open claims were then deducted and further amounts payable in respect of finalised

claims were then estimated and added. These additional payments were also taken into account in determining the average

amounts.

• The liability of all open limited passenger claims that occurred prior to 1 August 2008 became unlimited (referred to as the

Mvumvu liability) and was also added.

• The liability as a result of the Piaxiao and Van Zyl judgements were also allowed for.

Method Used to Estimate Liability for Undertakings

Considering historical payments, it seems as if undertaking payments in respect of accidents up to 2003 have stabilised. For

these accident years, we estimated the liability for future payments by multiplying the annual amounts paid (taken as the annual

average of the amounts paid during the past 2 financial years, in March 2014 monetary terms) with an annuity factor based on

the average age of claimants receiving these benefits and a net discount rate of 0% per year. The result therefore shows future

payments in current monetary terms.

For accident years 2001 to 2003, current annual payments ranged between R1,765 and R2,084 per estimated ultimate number

of Group C3 claims (average R1,938). For claims in respect of accident years 2004 onwards, it was assumed that ultimate annual

undertaking payments would be a similar factor (R1,938) of ultimate Group C3 claims.


Discounted and Undiscounted Provisions

The method outlined above leads to an estimate of R97 billion (in March 2014 monetary terms) in respect of accidents prior to

1 April 2014. The table below summarises the overall results, based on future claims inflation of 8% per year (2% above assumed

CPI of 6%) and a discount rate of 8% per year (2% above assumed CPI of 6%) – further assuming past payment patterns will

be repeated in future. (Note that the undiscounted liability for undertakings is shown in March 2014 terms without allowing

for future inflation. This is done because the RAF is of the opinion that an undiscounted liability in respect of undertakings is

meaningless, considering the long-term nature of undertakings).

The discounted liability for supplier claims included below is R595 million (2012/13: R591 million).

March 2014 monetary

termsDiscounted

liabilityUndiscounted

liability

R’million R’million R’million

Pre-Amendment Act 16,559 16,559 20,553

Post-Amendment Act 73,186 73,186 104,352

Undertakings 7,255 7,255 7,255

assumptions

The assumptions that have the greatest effect on the measurement of the outstanding claims provision are:

• The proportion of the number of claims falling into each of the defined groups (taking into account that some groups take

on average longer to finalise) will remain similar to past experience.

• The average amount payable per claim in each defined group (taking into account that larger claims take on average longer

to finalise) will remain similar to past experience, allowing for claims inflation of 2% above price inflation.

• The reporting pattern observed for post-Amendment Act claims.

• Payments in respect of undertakings will follow similar patterns as in the recent past.

Movement in Outstanding Claims Liability including IBNR Notes

Personal: old Act

Personal: new Act Undertakings Supplier Total

R’billion R’billion R’billion R’billion R’billion

Opening balance 23.00 53.70 5.60 0.60 82.90Unwinding 1 1.80 4.30 - - 6.10Payments 2 (9.60) (11.70) (0.20) (0.50) (22.00)Accidents since 31 March 2013 3 - 16.70 0.60 0.50 17.80Allowance for the Paixao ruling - 0.10 - - 0.10Allowance for Van Zyl case - 0.30 - - 0.30Unexpected increase 4 1.60 9.30 0.80 0.10 11.80Closing balance 16.80 72.70 6.80 0.70 97.00

Notes

Note 1: This represents interest credited to the liability at the rate of 8% (our assumption for future investment returns). The unwinding of interest is an expense because it is a cost associated with the delay in payment of claims. If a claim is paid in the same year it is incurred, then there will be no cost element attached to that claim, hence no expense. The longer the delay in the payment of the claim, the more the expense incurred due to the unwinding of liability.

Note 2: The RAF expects actual claim payments made during the inter-valuation period, to result in a corresponding release in the liability.

Note 3: This represents the expected new claims for the inter-valuation period.

Note 4: This is the amount required in addition to the items above, to add up to the newly calculated liability (on a similar basis). For personal claims, the increase was largely caused by three factors:

• A lower than expected proportion of claims settling for zero payment, with a higher proportion of claims settling in groups C3 and D1 (the most expensive groups).

• Claims that were settled during the inter-valuation period (IVP) cost more to settle than the liability set up in respect of these claims as at the previous valuation.

• During the IVP, a greater than expected amount was paid on claims that were already settled as at the previous valuation date.


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Sensitivity analysis

Where variables are considered to be immaterial, no impact has been assessed for insignificant changes to these variables.

Particular variables may not be considered material at present. Should the materiality level of an individual variable change,

however, an assessment of reasonable possible changes to that variable in the future may be required.

The RAF believes that the stated discounted liability of R97 billion is reasonable. It was calculated on a best estimate basis. The

actual payments will differ from the estimated liability, as the estimate was based on certain variables and assumptions. The

sensitivity of some of the assumptions is shown below:

Notes

Outstanding reported

claimsR’billion

IBNRR’billion

TotalR’billion

Base scenario 69.4 27.6 97.0Faster runoff 1 69.4 24.1 93.5Slower progression of average claims 2 67.6 27.1 94.7Fewer assumed nil claims 3 74.8 30.1 104.9

Notes

Note 1: The current IBNR calculation methodology assumes that the speed with which claims will be reported in future, will be in line with what has been observed to date. We will therefore over reserve if the actual reporting speed for recent reporting quarters has been quicker than observed in the past. In this sensitivity we show the impact on the provision where if claims reported to date (in respect of accidents on or after 1/4/2009) are 10% higher than what is normally the case.

Note 2: The current methodology assumes (in line with actual experience to date) that claims that take longer to settle, are generally settled for higher amounts. Since very little New Act claims have been paid to date, the assumed increase pattern is based on Old Act claims alone. Should the increase in the average claim per settlement delay be less marked under the New Act, we will be over-reserving. This scenario assumes that the increase in the average claim per settlement delay under the New Act is only 90% of what we observed under the Old Act.

Note 3: It is currently assumed that a material number of open claims will settle as nil claims. If our assumption is too high, we could be materially understating the provision. This scenario assumes that only 90% of the claims currently assumed to settle as nil claims will actually settle as such.

13. Other Provisions

In terms of legislation, the RAF has an obligation to refund a portion of the RAF Fuel Levy, 96c/ι (2012/13: 88c/ι) relating to the

diesel usage in other economic sectors where vehicles are not used. The provision is calculated based on actual claims from

these sectors processed through SARS. The provision is settled on a quarterly basis with the provision at year-end being based

on the last quarter’s results. These results are generally finalised after year-end and after all rebates have been taken into account.

2014 Restated 2013

R‘000 R‘000

Opening balance 860,152 604,499

Increase in provision charged to income 2,675,576 1,981,353

Provision utilised (2,687,167) (1,725,700)

848,561 860,152

12. Provision for Outstanding Claims (continued)


14. Employee Benefit Obligations

Defined Benefit Plan

Post-retirement Pension Benefit Plan

The RAF operates a pension fund which provides benefits on both defined benefit and defined contribution plans for pensioners

and permanent staff respectively. This fund is administered on behalf of the RAF by pension fund administrators and is governed

by the Pension Funds Act, 1956 (Act No. 24 of 1956).

The Pension Funds Act requires a statutory actuarial valuation every three (3) years.

The defined benefit plan fund was actuarially valued, using the projected unit credit method as at 31 March 2014. The valuation

revealed that the assets of the fund represent 208.5% (2012/13: 162.9%) of the liabilities. This is after minimum withdrawal

values have been provided for in terms of the Pension Funds Second Amendment Act, 2001, for existing members from a date

12 months after the surplus apportionment date (31 March 2003).

The assets of the plan mainly consist of investments.

The active members who were entitled to a defined benefit on retirement, converted to a defined contribution funding

arrangement. The RAF therefore no longer has a defined benefit obligation towards them.

2014 2013

R‘000 R‘000

Staff Costs – Defined Benefit Plan ExpenseInterest cost 3,390 3,202

Expected return on plan assets (5,478) (6,274)

Actuarial (gain)/loss recognised in the current year (14,170) 11,269

Movement in unrecognised post-employment benefit asset 16,258 (8,197)

Total expensed in the Statement of Financial Performance - -

The amount included in the Statement of Financial Position arising from the defined

benefit plan is:Present value of the plan liability: End of the year (42,167) (46,863)

Fair value of plan assets: End of the year 87,939 76,375

Unrecognised post-employment benefit asset 45,772 29,512

Actual return on plan assetsExpected return on plan assets 5,478 6,274

Actuarial gain/(loss) on plan assets 9,540 (8,365)

Actual return on plan assets 15,018 (2,091)

The Principal Actuarial Assumptions Used for Accounting PurposesDiscount rate pre-retirement 9.36% 7.51%

Price inflation 6.66% 5.63%

Salary escalation n/a n/a

Pension increases 4.66% 3.94%

Post-retirement interest rate 4.49% 3.43%

Expected return on fund assets 9.36% 7.81%


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Other Assumptions

Post-retirement mortality

PA (90) rated down by two years.

Proportions married

Actual marital status of pensioners were used.

Post-retirement medical aid plan

The RAF operates a post-employment medical benefit scheme that covers employees who were appointed prior to 1 May 1998.

The latest valuation of the RAF’s liability in respect of post-retirement benefits for the financial year-end was performed on

31 March 2014 and it will be valued at annual intervals thereafter.

Thirty pensioners qualify for this benefit and approximately 10% of employees are prospectively entitled to this benefit. The

initial liability and future increases thereof are charged to surplus or deficit.

No plan assets are shown as the medical benefits are unfunded.

The amounts recognised in the Statement of Financial Position are as follows:

2014 2013

R‘000 R‘000

Carrying valuePresent value of the defined benefit obligation – wholly unfunded (43,340) (46,588)

The fair value of plan assets includes:

Changes in the present value of the defined benefit obligation are as follows:Opening balance (46,588) (39,863)Contributions by plan participants 542 542Net expense recognised in the Statement of Financial Performance 2,706 (7,267)

(43,340) (46,588)

Net income/(expense) recognised in the Statement of Financial PerformanceCurrent service cost (2,873) (2,325)

Interest cost (3,476) (3,364)

Actuarial gains/(losses) 9,055 (1,578)

2,706 (7,267)

Key assumptions Used

Assumptions used at the reporting date:

Discount rates 9.36% 7.51%

Healthcare cost inflation 8.16% 7.44%

Real discount rate 1.11% 0.06%

Spouse age gap 3 3

Expected average retirement age 59 59

Normal retirement age 60 60

Proportion married at retirement 80% 80%

Continuation at retirement 100% 100%

14. Employee Benefit Obligations (continued)


Other Assumptions

Mortality: Pre-expected retirement age SA85-90 light

Mortality: Post-expected retirement age PA(90)-1

Expected return on assets

There are currently no assets set aside in respect of the post-employment medical scheme liability. Therefore, no assumption

specific to the assets have been made.

Expected contributions to the plan during the subsequent 2014/15 financial period is R894,000.

Sensitivity analysis

Assumed healthcare cost trend rates have a significant effect on the amounts recognised in surplus or deficit. A half percentage

point change in assumed healthcare cost trend rates would have the following effects:

0.5% Increase

0.5% Decrease

Effect on the aggregate of the service cost and interest cost (3,764) 4,293

Effect on defined benefit obligation 39,576 47,834

Amounts for the current and previous four years:

2014 2013 2012 2011 2010

R‘000 R‘000 R‘000 R‘000 R‘000

Defined benefit obligation 43,340 46,588 39,863 33,802 28,123

2014 2013

R‘000 R‘000

15. Net Fuel Levies

Gross fuel levies 22,953,586 19,865,159

Less: diesel rebate (2,675,575) (1,981,353)

20,278,011 17,883,806

16. Other Income

Other recoveries 1,918 3,578

Foreign exchange gains - 3

1,918 3,581

Recoveries relate to minor recoveries that do not form part of the normal business of the RAF,

such as bad debts recovered, parking income and SETA refunds.

17. Reinsurance Revenue

Revenue received in terms of high-value claims insured by reinsurance companies and

commutation offers received from same 153 1,577

18. Investment Revenue

Interest revenueInterest received from money market investments 231,726 249,811

Interest received from rent-a-captive insurance 4,634 4,991

Interest received – other 1 -

236,361 254,802


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2014 2013

R‘000 R‘000

19. Claims Expenditure

Claims paid 22,184,827 15,089,532

Claims finalised and not paid 377,379 282,112

Reversal of claims finalised and not paid (282,112) (169,256)

Net increase/(decrease) in claims provision 14,162,000 10,230,436

36,442,094 25,432,824

The breakdown of the claims paid is as follows:Claimant compensation (loss of earnings and support, general damages and funeral costs) 16,309,759 10,260,148

Claimant medical costs 1,242,194 1,138,455

Claimant and RAF legal cost 4,632,874 3,690,929

22,184,827 15,089,532

20. Reinsurance Premiums

Paid to reinsurers during the year 22,571 25,222

21. Employee-related Costs

Total staff costs 907,172 762,641

Included in staff costs are:

Contributions to defined contribution plan 68,607 58,780

Contributions to post-retirement healthcare benefit (2,706) 7,267

65,901 66,047

The active members who were entitled to a defined benefit on retirement converted to a

defined contribution funding arrangement. The RAF therefore no longer contributes towards

the defined benefit plan.

As at 31 March 2014, 2,288 staff members were employed by the RAF (2012/13: 1,881).

22. Depreciation and Amortisation

Depreciation: Buildings 4,233 2,875

Depreciation: Leasehold improvements 476 3,854

Depreciation: Motor vehicles 2,339 1,801

Depreciation: Office furniture 1,599 1,421

Depreciation: Office equipment 2,556 2,843

Depreciation: Computer equipment 19,448 17,967

Depreciation: Intangibles 7,481 30,377

38,132 61,138

23. Finance Costs

Interest charged by creditors 23 29

Interest charged on claims 28,923 27,419

28,946 27,448


2014 2013

R‘000 R‘000

24. General Expenses

Advertising 21,714 2,421Auditors remuneration 5,960 3,992Computer expenses 45,267 59,293Consulting and professional fees 66,280 29,306Legal costs 9,817 5,996Forensic costs (NPA) 16,762 9,287Insurance 2,183 4,473Lease rentals on operating lease 47,093 42,887Marketing 37,350 18,904Motor vehicle expenses 4,303 3,178Printing and stationery 9,246 7,024Security 5,291 4,391Telephone and fax 10,879 12,257Travel – local 22,109 15,034Travel – overseas 696 566Loss on sale or derecognition of asset 884 30,287Electricity 10,553 8,733Maintenance 19,902 8,377Operating costs 10,019 9,307Board members expenses 2,604 3,131Board members fees 5,519 5,280Bad debts 11,945 8,465

366,376 292,589

The expenses indicated above are viewed as material and have therefore been separately disclosed. Consulting and professional

fees increased during the financial year due to the outsourcing of certain procurement functions. Legal costs have increased

during the year due to the Panel of Attorney tender that was contested. Forensic costs increased as a result of a Memorandum

of Agreement entered into with the NPA to reduce the levels of crime the RAF is exposed to, both internally and externally.

25. Taxation

The RAF is exempt from taxation in terms of the provision of section 10 (1)(cA)(i) of the Income Tax Act, 1962 (Act No. 58 of 1962)

and section 16 of the Road Accident Fund Act, 1996 (Act No. 56 of 1996).

2014 2013

R‘000 R‘000

26. Fruitless and Wasteful Expenditure

Fruitless and wasteful expenditure 30,441 20,226

Interest and Sheriff Costs

Interest cost is the cost paid for the late payment of the claim compensation as agreed to in a settlement agreement or an order

of the court, and taxed legal bills settled through taxation as these costs are due immediately. The interest is charged under the

Prescribed Rate of Interest Act of 1975 at 15.5% as per Government Gazette No. 15143 issued on 1 October 1993.

Sheriff cost is the cost paid to the Sheriff for its service with regard to serving the warrant of execution (writs) on the RAF.


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As per the definition in the PFMA, fruitless and wasteful expenditure means “expenditure which was made in vain and could

have been avoided had reasonable care been exercised”. The amounts listed above are costs incurred in the settlement process

of claims influenced by external legal processes and time limits legally enforced on the RAF in the settlement of claims.

During the financial year, the number of finalised claims has increased to 240,783 (2012/13: 162,130) which is a 49% increase and

the settlement of the legal costs has been affected by the higher finalisation rates. The legal costs create operational constraints

as there are no legal obligations for plaintiff attorneys to submit the bill within stipulated timeframes and the majority of legal

cost bills are disputed because their content or the items billed are incorrect or invalid. The process of taxation of legal cost bills

through the office of the Taxation Master is the only option to settle these disputes.

The taxation of legal cost bills exposes the RAF to a risk of non-compliance to court processes despite an instruction note from NT

that all payments from legal settlements must be paid within 30 days from the date of settlement. Court rules require that taxed

bills must be paid immediately after taxation and plaintiff attorneys issue warrants of execution immediately after settlement.

As a result payments may comply with the PFMA but not the court rules.

The following information relates to the legal cost bills settled through taxation for 2013/14:

• Number of bills settled through taxation: 26,698 (2012/13: 21,137) and it has increased by 26%.

• Number of bills where a saving is made through taxation: 25,677 (2012/13: 20,653) and it has increased by 24%.

• Amount saved through taxation: R966,168,695 (2012/13: R386,559,115) and it has increased by 150%.

• The success rate in terms of saving legal cost bills is 96% (2012/13: 98%).

RAF officials are required to diligently apply the process of the legal cost bills assessment. Writs Standard Operating Procedures

(SOPs) are in place to ensure that all taxed bills are paid timeously to minimise the impact of the interest cost at a rate of 15.5%.

It must be noted that the sheriff costs from the taxation process cannot be minimised as timeframes are not in place as per

court rules requirements.

The number of writs received in 2013/14 was 5,595. It is 28.67% lower than in 2012/13.

The fruitless and wasteful expenditure is monitored closely by the Executive and Board. There are processes which have

been undertaken to ensure that this risk is mitigated. A process to review the applicable interest rate was undertaken by RAF

Management with the objective of aligning the current rate to the public sector rate. The Department of Justice has called for

public commentary on the proposal.

Disciplinary action has been taken against staff members as a result of negligence resulting in the payment of sheriff and

interest costs, as well as duplicate payments. During the financial year, 19 final written warnings, 27 written warnings and 16

verbal warnings were issued.

2014 2013

R‘000 R‘000

27. Irregular Expenditure

Add: Irregular expenditure – current year 18,457 4,327

Less: Amounts condoned (18,457) (4,327)

- -

Irregular expenditure arose as a result of:

• Non-compliance with supply chain management practices, which resulted in irregular expenditure being incurred;

• Failure to comply with procurement processes when procuring goods or services as stipulated in the Supply Chain

Management Policy, and also committing acts that contravened or failed to comply with a provision of the PFMA and the

RAF Act; and

26. Fruitless and Wasteful Expenditure (continued)


• Non-compliance with the provisions of the RAF Financial Misconduct Policy and PFMA, which constituted financial misconduct

and warranted disciplinary actions.

Any employee who committed an act which undermined the financial management and internal control systems of the RAF,

as required by relevant legislation and policies, is dealt with in terms of the Disciplinary Policy.

Employees who make or permit an irregular expenditure or fruitless and wasteful expenditure, as required by section 57 of the

PFMA, expose themselves to appropriate disciplinary measures.

In 2013/14, the RAF instituted disciplinary steps that included the recovery of wasted revenue and dismissals where employees

were found to have contravened provisions of the Acts and internal policies.

The increase in irregular expenditure was as a result of:

• ICT licences of R13.9 million that had not been renewed in line with the approved procedures and where instances of

under-licensing were detected by management during the year; and

• The use of recruitment agencies by the Human Capital Department which did not comply with approved procedures.

Upon review, the number and type of irregular expenditure had improved from 260 in 2012/13 to 92 at the end of the 2013/14

financial year. This reduction confirms the efficacy of management interventions and a continued reduction is expected.

2014 2013

R‘000 R‘000

28. Cash Generated from Operations

Deficit (17,299,566) (8,465,438)

Adjustments for:Depreciation and amortisation 38,132 61,138

Deficit/(surplus) on sale or derecognition of assets - 30,180

Movements in retirement benefit assets and liabilities (3,248) 6,725

Movements in provision for outstanding claims 14,162,000 10,230,436

Movement in diesel rebate provision (11,592) 255,654

Changes in working capital:Consumable stock (591) (403)

Receivables from exchange transactions 16,605 (14,035)

Other receivables from non-exchange transactions (615,199) (269,162)

Trade and other receivables from exchange transactions (750) 12,707

Payables from exchange transactions 125,323 66,203

(3,588,886) 1,914,005

29. Related Parties

The RAF is an entity created by statute, with the Minister of Transport being the Executive Authority representing the Government

of South Africa. The RAF is a Schedule 3A Public Entity in terms of the PFMA. The related party disclosures are in terms of the

requirements of IPSAS 20. The related parties of the RAF mainly consist of Departments, State-Owned Entities (SOEs), other public

entities in the national sphere of government and Key Management personnel of the RAF, or its Executive Authority and close

family members of related parties. The list of public entities in the national sphere of government is provided by NT on their

website www.treasury.gov.za. NT also provides the names of subsidiaries of public entities.

Although the RAF transacted with other public entities within the national sphere of government, none of the related parties

identified influenced, or was influenced by the RAF during the reporting period and therefore no related party transactions with

other entities in the national sphere of Government are disclosed. All these transactions took place at arm’s length.


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The following transactions were concluded with Key Management of the RAF in terms of employment contracts entered into with

the RAF (please refer to Note 30 – Board and Executive members’ emoluments for detailed information relating to compensation

of members and other key management).

2014 2013

R‘000 R‘000

Compensation to Members and Other Key ManagementKey Management compensation 21,303 17,626

30. Board of Directors and Executive Emoluments

Non-Executive Directors

The Executive Authority approves the remuneration of the Board. Remuneration of Non-executive Directors is benchmarked

against the norms for organisations of a similar size and in line with the guidelines issued by the Executive Authority.

Non-executive Directors receive a fixed monthly remuneration. Remuneration is not determined by meeting frequencies and

escalated by inflationary adjustments only.

Executive remuneration

The Chief Executive Officer makes recommendations to the Board concerning the remuneration of Executives (EXCO) and the

Board approves the remuneration of EXCO members including that of the CEO. Factors influencing the remuneration of the

EXCO members include level of skill, experience and contribution to organisational performance.

The RAF introduced a performance-based remuneration for its Management staff by linking annual salary increases to individual

contributions. Management receives an annual increase based on a combination of Consumer Price Index (CPI) and individual

performance. The organisation conducts an annual salary survey/benchmark to ensure that Management rewards and remuneration

are market-related and kept at levels that will assist us in retaining and attracting key leadership skills. The RAF aims to remunerate

in line with the 50th percentile (median) of the market to recruit and retain the Management team to lead the organisation. Over

and above the basic salary, staff members receive a performance incentive as a percentage of their total cost of employment.

All EXCO members are employed on fixed term contracts of employment.

Executive

Salary Leave payPerformance

bonus Pension

contributionsMedical

contributions Total2014 R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Dr EA Watson 3,758 - 1,202 - 76 5,036

Ms LJ Fosu 1,867 - 591 301 89 2,848Ms L Jabavu (appointed 1 June 2013) 1,598 - - 211 44 1,853Mr A Gernandt (ending 31 March 2013) - 427 481 - - 908Mr R Gounden (appointed 1 May 2013) 1,550 - - 155 - 1,705Mr MI Mvelase (ending 31 March 2014) 2,005 - 455 219 - 2,679

Ms NA Jafta 1,387 - 376 162 45 1,970Ms JR Cornelius (appointed 1 September 2013) 780 - - 150 - 930

Mr RHS Matabane 1,709 - 274 151 - 2,134Ms V Menye (appointed 1 August 2013) 1,087 - - 110 43 1,240

15,741 427 3,379 1,459 297 21,303

29. Related Parties (continued)


Salary Leave payGratuity/

Lump sumPension

contributionsMedical

contributions Total2013 R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Dr EA Watson (appointed 1 July 2012) 2,666 - - - 34 2,700

Mr A Gernandt 2,003 137 - 227 58 2,425

Ms LJ Fosu 1,873 - - 183 63 2,119

Mr SS Ramessur (ending 6 March 2013) 1,281 96 - 165 58 1,600

Mr MI Mvelase (acting CEO until 30 June 2013)* 1,636 - 726 164 - 2,526

Mr DJ Hlabangane (ending 15 August 2013) 440 93 672 49 20 1,274

Ms LM Steele (ending 31 December 2012) 957 201 - 97 - 1,255

Ms NA Jafta 1,215 - - 119 27 1,361

Mr RHS Matabane (appointed 1 September 2012) 865 - - 90 35 990

Ms UM Oliphant (ending 31 March 2013) 1,198 - - 155 23 1,376

14,134 527 1,398 1,249 318 17,626

* Please note that the lump sum payment was for an acting allowance.

Non-Executive Directors

Members’ fees Total2014 R‘000 R‘000

Dr NM Bhengu 764 764

Mr D Coovadia (appointed 1 October 2013) 293 293

Dr KLN Linda (appointed 1 October 2013) 255 255

Adv. DS Qocha 535 535

Mr T Masobe (appointed 1 October 2013) 255 255

Mr A Pandor (appointed 1 October 2013) 255 255

Mr DK Smith 509 509

Ms R Mokoena (appointed 1 October 2013) 255 255

Ms A Steyn 509 509

Mr LED Hlatshwayo 535 535

Mr V Mahlangu (Vice-chairperson) (ending 30 September 2013) 293 293

Mr JN Masekoameng (ending 30 September 2013) 280 280

Mr T Moyo (ending 30 September 2013) 255 255

Ms NZ Qunta (ending 30 September 2013) 280 280

Adv. MJ Ralefatane (ending 30 September 2013) 255 255

5,528 5,528


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Members’ fees Total2013 R‘000 R‘000

Dr NM Bhengu 724 724

Mr V Mahlangu 555 555

Dr JN Masekoameng 550 550

Mr T Moyo 498 498

Adv. DS Qocha 515 515

Ms NZ Qunta 515 515

Adv. MJ Ralefatane 498 498

Mr DK Smith 498 498

Ms A Steyn 482 482

Mr LED Hlatshwayo 531 531

5,366 5,366

31. Risk Management

Overview

The RAF is exposed to a range of financial risks through its financial assets, financial liabilities, reinsurance assets and insurance

liabilities. In particular, the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations

arising from its insurance contracts. The most important components of financial risk are credit risk, liquidity risk and market

risk, which comprises interest rate risk, currency risk and other price risk. The risks that the RAF primarily faces due to the nature

of its assets and liabilities are liquidity risk, interest rate risk and currency risk.

Liquidity risk

Liquidity risk is the risk that the RAF will not be able to meet its financial obligations as they fall due. Ultimate responsibility for

liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework

for the management of the RAF’s short-, medium- and long-term funding and liquidity management requirements. The RAF

manages liquidity risk by maintaining sufficient cash reserves and by matching financial assets and liabilities as far as is practical.

Reinsurance is also used to manage liquidity risk.

The following table analyses the RAF’s financial liabilities into relevant maturity groupings based on the remaining period at the

Statement of Financial Position date to the contractual maturity date. The amounts disclosed in the table are the contractual

undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not

significant.

On demand 1–3 Months 1–5 Years Total R‘000 R‘000 R‘000 R‘000

at 31 March 2014Trade and other creditors (83,200) - - (83,200)

Claims creditors (377,379) - - (377,379)

Cash and cash equivalents 2,504,775 - - 2,504,775

Rent-a-captive insurance 118,282 - - 118,282

at 31 March 2013Trade and other creditors (51,822) - - (51,822)

Claims creditors (282,112) - - (282,112)

Cash and cash equivalents 6,143,817 - - 6,143,817

Rent-a-captive insurance 113,689 - - 113,689

30. Board of Director’s and Executive Emoluments (continued)


Credit risk

The RAF has exposure to credit risk, which is the risk of financial loss to the RAF if a counterparty to a financial instrument fails

to meet its contractual obligations. Key areas where the RAF is exposed to credit risk are:

• Reinsurers’ share of insurance liabilities;

• Amounts due from reinsurers in respect of claims already paid;

• Amounts due with respect to claims debtors;

• Amounts due with respect to study loans and bursaries (this risk is very minimal as the amounts are immaterial);

• Short-term call deposit:;

• The ultimate amount due from the self-funding claims reinsurance policy; and

• Fuel levy debtors.

The nature of the RAF’s exposure to credit risk, as well as the policies and processes for managing the credit risk have not changed

significantly from the prior period.

Potential concentrations of credit risk consist mainly of short-term cash. Money market instrument operations are only entered

into with well-established and reputable financial institutions.

It is the RAF’s policy to grant bursaries and study loans, relevant only to its line of business, to employees. Monthly instalments

are deducted directly from payroll in relation to study loans.

The Rent-a-captive insurance includes an amount set aside as a self-funding Claims Reinsurance Policy. This policy will be utilised

to fund the first R100 million of the retention amount of the Claims Reinsurance Policy in the event of a catastrophic claim being

instituted against the RAF. The deposit amount represents the balance of the special experience account, an account the insurer

maintains for the purposes of recording this policy. The insurer is a well-established and reputable financial institution.

Under the terms of reinsurance agreements, reinsurers agree to reimburse the settled amount in the event that a gross claim is

paid. The RAF, however, remains liable to its claimants regardless of whether the reinsurer meets the obligations it has assumed.

Consequently, the RAF is exposed to credit risk.

The RAF monitors the financial condition of reinsurers on an ongoing basis and reviews its reinsurance arrangements periodically.

The carrying amounts of financial assets and reinsurance assets included in the Statement of Financial Position represent the

RAF’s exposure to credit risk in relation to these assets. As at 31 March 2014, the RAF did not consider there to be a significant

concentration of credit risk which had not been adequately provided for.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates that will affect the RAF’s

income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control

market risk exposures within acceptable parameters, while optimising the return on investment.

The RAF is also exposed to foreign exchange fluctuations where claims from foreigners have been lodged, and damages for

future medical expenses and loss-of-earnings or -support are claimed in a foreign currency. When such claims are settled, the

RAF pays the compensation as soon as possible after settlement date so as to minimise the risk of foreign exchange fluctuations.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in

market interest rates. The RAF is exposed to interest rate risk, as it invests funds in the money market at floating interest rates. As

at 31 March 2014, no derivative financial instruments were used to manage the RAF’s exposure to interest rate risk.

All liquid funds are invested with registered South African banking institutions with maturities of 90 days or less, thereby

minimising interest rate risk.


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Interest rates of interest bearing debts are linked to the prime overdraft rate.

The interest rate applicable to study loans and bursaries is equivalent to the official rate of interest for determining a fringe

benefit, as approved by the Minister of Finance from time to time. The interest rate applicable to the payments of interest on

capital and legal costs is determined by the Prescribed Rate of Interest Act, 1975 (Act No. 55 of 1975).

Interest rate risk Sensitivity analysis

The sensitivity analysis for interest rate risk illustrates how changes in the fair value or future cash flows of a financial instrument

will fluctuate because of changes in market interest rates at the reporting date. For financial instruments and insurance contracts,

the sensitivity is solely associated with the former as the carrying amounts of the latter are not directly affected by changes in

the interest rate.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the RAF’s deficit for the year

ended 31 March 2014 would decrease/(increase) by R13.1 million (2012/13: decrease/(increase) by R31.3 million. This is mainly

attributable to the RAF’s exposure to interest rates on its floating rate investments. The sensitivity analysis has been determined

based on the exposure to interest rates for the RAF’s non-derivative instruments at the financial reporting date. The analysis was

prepared assuming that the investments at year-end were constant throughout the year. A 50 basis point increase or decrease

is used when reporting interest rate risk internally to Key Management personnel and represents Management’s assessment of

the reasonably possible change in interest rates.

Foreign Exchange risk

The financial items that are exposed to currency risk at the reporting date are claims that have not been paid to foreign claimants

yet. The engaging of forward cover is considered on a case-by-case basis if the period between making an offer and final payment

is material. As at 31 March 2014, no derivative financial instruments were used to manage the RAF’s exposure to foreign currency

risk, only fixed-term forward cover contracts were utilised.

The Carrying Amount of RAF’s Outstanding Foreign Currency Denominated

Claims

2014 2013

R‘000 R‘000

LiabilitiesUSD 4,047 4,047

GBP 464 1,757

Euro 11,612 11,612

The following table details RAF’s sensitivity to a 10% increase and decrease in the South African Rand against the relevant foreign

currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to Key Management personnel and

represents Management’s assessment of the reasonably possible change in foreign exchange rates.

The sensitivity analysis includes only outstanding foreign currency denominated claims at reporting date and adjusts their

translation at the period end for a 10% change in foreign currency rates. The figures above indicate an increase in surplus or

deficit where the presentation currency strengthens 10% against the relevant currency. For a 10% weakening of the presentation

currency against the relevant currency, there would be an equal and opposite impact on the surplus or deficit and the balances

above would be negative.

USD impact GBP impact Euro impactAll foreign currencies

R'000 R'000 R'000 R’000

2014 4,277 816 16,888 21,981

2013 3,733 2,462 13,711 19,906

8,010 3,278 30,599 41,887

31. Risk Management (continued)


32. Insurance Risk Management

Overview

The RAF accepts insurance risk as it is mandated by legislation to compensate victims of road accidents for injuries suffered as

a result of motor vehicle accidents. The RAF is exposed to uncertainty surrounding the timing, frequency and severity of claims

under these contracts.

This note presents information about the RAF’s exposure to insurance risk and the RAF’s objectives, policies and processes for

managing this risk.

The RAF has developed, implemented and maintained a sound and prudent Insurance Risk Management Strategy that

encompasses all aspects of the RAF’s operations including the reinsurance risk retention limits. Key aspects of the processes

established to mitigate insurance risk include:

• The maintenance and use of sophisticated management information systems, which provide reliable and up-to-date data

on the risks to which the business is exposed at any point in time;

• Actuarial models, using information derived from the management information systems are used to monitor claims patterns.

Past experience and statistical methods are used as part of the process;

• Catastrophic accidents are modelled and the RAF’s exposures are protected by arranging reinsurance to limit the losses

arising from an individual event. The retention and limits are approved by the RAF’s Board; and

• Only reinsurers with credit ratings equal to ‘AA’ or in excess of, a minimum level determined by Management, are accepted

as participants in the RAF’s reinsurance agreements.

reinsurance Income

The RAF enters into reinsurance treaties with major international reinsurance companies to cover catastrophic accidents. The RAF

recovered R153,000 (2012/13: R1,576,729) from reinsurers during the current financial year in respect of claims settled by the RAF.

Foreign Claims

The number of claims by foreign visitors to South Africa continues to rise as the volume of visitors to the country increases. As

the bulk of these claims are paid in the applicable foreign currency and these claimants also enjoy unlimited benefits, foreigners’

claims form a large proportion of high-value claims. At 31 March 2014, 20% (2012/13: 14%) of the value of the provision for

outstanding claims in excess of R5 million was made up of claims by foreign nationals. It is important to note, however, that the

actual claimed amount can exceed the estimated value of the claim.

Claims reinsurance

In terms of section 4(1)(d) of the Road Accident Fund Act, 1996 (Act No. 56 of 1996) the RAF may procure reinsurance for any risk

undertaken in accordance with this RAF Act. Simultaneously, section 51(1)(a)(i) of the Public Finance Management Act, 1999 (Act

No. 1 of 1999) states as a condition that a public entity must ensure that it has and maintains effective, efficient and transparent

systems of financial and risk management.

The RAF, through its reinsurance brokers procures reinsurance cover and negotiates reinsurance treaties for the RAF. The RAF’s

reinsurance treaties are all excess or loss agreements. Therefore, the reinsurers indemnify the RAF for that part of the ultimate

net loss (total amount paid) which exceeds the retention amount, as per the relevant treaty subject to an indexation clause as

contained in the treaties. The RAF will only accept terms provided by reinsurers with acceptable ratings. The ratings are done by

Standard & Poor’s and AM Best which are international quality rating companies. The RAF currently places its limited reinsurance

cover with a South African company, AIG SA and the unlimited cover is placed with reinsurers based in London. The current

limited cover has a set retention level of R100 million and, in terms of the treaty, the reinsurer’s liability is limited to paying up to

R300 million per any one loss occurrence event, on account of each and every loss occurrence. The unlimited cover placed in

the London reinsurance market provides for cover in excess of R400 million per any loss occurrence event, on account of each

and every loss occurrence.


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The RAF must report to reinsurers all losses (all claims arising from an accident) likely to exceed the notification amounts as

specified in the respective reinsurance treaties.

In terms of the reinsurance treaties, the reinsurers indemnify the RAF for that part of the ultimate net loss (total amount paid)

which exceeds the retention amounts as specified in the treaties, subject to the indexation clause.

The following table illustrates the notification amounts and retention amounts for the respective annual reinsurance treaties:

Notificationamount

Retentionamount

Accident Year R R

1984/85 500,000 1,500,0001985/86 500,000 1,500,0001986/87 3,000,000 5,000,0001987/88 3,000,000 5,000,0001988/89 1,000,000 2,500,0001989/90 1,000,000 3,000,0001990/91 1,000,000 3,000,0001991/92 1,000,000 4,000,0001992/93 1,000,000 4,500,0001993/94 2,000,000 4,500,0001994/95 2,000,000 5,000,0001995/96 2,000,000 5,000,0001996/97 2,000,000 10,000,0001997/98 5,000,000 10,000,0001998/99 5,000,000 10,000,0001999/00 7,500,000 15,000,0002000/01 15,000,000 20,000,0002001/02 15,000,000 20,000,0002002/03 15,000,000 50,000,0002003/04 15,000,000 50,000,0002004/05 15,000,000 50,000,0002005/06 15,000,000 100,000,0002006/07 15,000,000 100,000,0002007/08 75,000,000 100,000,0002008/09 75,000,000 100,000,0002009/10 75,000,000 100,000,0002010/11 75,000,000 100,000,0002011/12 75,000,000 100,000,0002012/13 75,000,000 100,000,0002013/14 75,000,000 100,000,000

The RAF monitors its reinsurance risk on a quarterly basis by reviewing and updating reports to reinsurers which indicate the

current status with regard to matters reported to reinsurers. Furthermore, regular reports are run against the RAF’s database to

identify potential reportable matters, as a pro-active measure.

Directors’ and Officers’ Liability Insurance

The RAF manages the risks that the Directors and Officers of the RAF are exposed to by way of Directors’ and Officers’ liability

insurance.

The RAF’s current Directors’ and Officers’ insurance cover is placed with two underwriters respectively. The total limit of indemnity

per claim is R250 million and to all in the aggregate.

32. Insurance Risk Management (continued)


2014 2013

R‘000 R‘000

33. Commitments

already Contracted for but not Provided forProperty, plant and equipment 17,506 7,674

Intangible assets 8,696 3,232

Operating expenditure 5,040 2,949

31,242 13,855

This committed expenditure will be financed by existing cash resources.

Operating Leases – as Lessee (Expense)

Minimum lease payments due- Within one year 31,466 50,093

- In second to fifth year inclusive 70,880 10,650

102,346 60,743

Operating lease payments represent rentals payable by the RAF for certain of its office properties. The leases have varying terms,

escalation clauses and renewal rights.

34. Contingencies

Other Contingent Liabilities

There are a number of outstanding corporate legal matters. These are as follows:

• Litigation by service providers – 19 matters

• Constitutional Court Matters – 21 matters

• Other – 21 matters

• Other litigation/disputes – 7 matters

The RAF is involved in commercial and labour-related litigious matters. The quantum of this exposure is not disclosed as these

matters are sub judice.

Guarantees

The RAF has ceded to Absa Bank a Special Deposit Account with a balance of R4,464,115 as at 31 March 2014 as security for the

guarantees issued and card facilities granted by Absa Bank on behalf of the RAF.

The guarantee exposure as at 31 March 2014 was R3,969,154:

2014 2013

R‘000 R‘000

SA Mutual Life Assurance Society: Durban office 300 300

Ryckloff Beleggings: Johannesburg office 2,700 2,700

Quantum Leap Investments 94 (Pty) Ltd: Newcastle office - 5

Zig Zag Properties (Pty) Ltd - 18

Faerie Glen Waterpark (Pty) Ltd: Centurion office 969 969

Card facilities (fleet cards) - 472

3,969 4,464


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35. Prior Period Errors

1. The provision for diesel rebate was incorrectly calculated in the prior period. When the adjustments to the provision for the

last 3 months of the financial year for 2012/13 were posted, the provision that had already been raised was not reversed

and therefore the provision for diesel rebate was overstated.

2. The IBNR was incorrectly disclosed as a contingent liability in the past 3 financial years. Refer to Note 12.

The correction of the errors resulted in adjustments as follows:

2014 2013

R‘000 R‘000

Statement of Financial PositionOther provisions - 503,589Opening accumulated surplus or deficit - (503,589)Provision for outstanding claims - 22,542,000Opening accumulated surplus or deficit - (18,688,860)

Statement of Financial PerformanceNet fuel levy - (503,589)Claims expenditure - 3,853,140

36. Going Concern

The RAF draws attention to the fact that at 31 March 2014, the entity had accumulated deficits of R90,925,544,000 and that the

RAF’s total liabilities exceeded its assets by R90,797,758,000.

The going concern basis was used in preparing the Annual Financial Statements. This basis presumes that funds will be available to

finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments

will occur in the ordinary course of business. On an annual basis, following the Minister of Finance’s Budget Speech in Parliament,

the Taxation Amendment Act indicates what the applicable fuel levy will be for the following financial year. The National Budget,

inclusive of the fuel levy amount, is submitted and approved by the South African Parliament via the Taxation Amendment Act,

2009 (Act No. 17 of 2009).

Government also commits to the RAF budget in its Medium-Term Expenditure Framework (MTEF). The RAF will manage the cash

resources to ensure that short-term liabilities are met.

It should further be noted that the RAF can only be dissolved by an Act of Parliament which repeals the current Act and will

result in the common law residual claim being revived. Once triggered common law delictual claims may be instituted against

the wrongdoer, it is also likely that claims would be instituted against the State on the basis that the State is required to ensure

that the RAF is funded to pay claims. There has been no indication of this.

In the course of this financial year increased productivity saw the number of claims settled reach highs never seen before,

however the result was that the cash balance that the RAF closed the year on was significantly reduced from that with which

the financial year started. Though the available funding for the 2014/15 financial year remains at levels similar to that of the past

and the impact of the Diesel Rebate has also had a material impact, the levels of productivity as seen in the 2013/14 financial

year is being maintained. As a result the RAF is in the process of implementing a number of initiatives to ensure its expenditure

and commitments can be managed within the available funding while engagements with NT and DoT are ongoing to secure

additional funding for short-, medium and long-term purposes


levy income as and when it faced liquidity problems. During the 2006 financial year, it received a cash injection of R2.5 billion

and in the 2009 financial year it received R2.6 billion. The Board and Management are committed to implementing plans to



37. Budget Differences

Material Differences between Budget and actual amounts

The material differences can be explained as follows:

Investment Revenue

The income for the 2013/14 financial year is 65% lower than the budget due to a constant increase in claims paid in cash during

the 2013/14 financial year which has resulted in significant depletion of cash holdings.

Claims Expenditure

The claims expenditure paid was projected at R18 billion compared to the actual of R22 billion for the financial year 2013/14. This is

as result of an increase in productivity as well as increased average cost in the settlement of personal claims. For the financial year

2013/14 the provision for outstanding claims was projected to move by R0.25 billion compared to the actual movement of R14.2 billion.

General Expenses

General expenses for the 2013/14 financial year are 15% less than the budget. This is as a result of underspending in general

expenses related to staff vacancies not filled as at 31 March 2014.


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aPPENDIX a: BRANCHES AND SATELLITE OFFICES

Major Regions

Pretoria

Road Accident Fund Building, 38 Ida Street,

Menlo Park, Pretoria, 0081

PO Box 2743, Pretoria, 0001

Tel: +27 12 429 5000

Pretoria (Customer Service Centre)

Middestad Building,

252 Thabo Sehume (previously Andries) Street,

Pretoria, 0002

PO Box 2743, Pretoria, 0001

Tel: +27 12 429 5202

Johannesburg

Marble Towers, 29th floor, 212 Jeppe Street

(Cnr Jeppe and Von Wielligh Street), Johannesburg, 2001

Private Bag X02, Johannesburg, 2000

Tel: +27 11 223 0000

East London

Metropolitan Building, 4th floor,

(Cnr Drury Lane and Caxton Street), East London, 5200

Private Bag X9000, East London, 5200

Tel: +27 43 702 7800

Durban

The Embassy Building, 12th floor,

199 Anton Lembede Street

(previously Smith Street), Durban, 4001

Private Bag X54371, Durban, 4000

Tel: +27 31 365 2800

Cape town

1 Thibault Square, 7th floor, Long Street, Cape Town, 8001

PO Box 2443, Cape Town, 8000

Tel: +27 21 408 3300

Other customer contact centres

Customer Care Share Call Number:

0860 23 55 23

Anonymous Fraud Hotline:

0800 00 59 19

Facebook: www.facebook.com/RoadAccidentFund

Twitter: @RAF_SA

Instagram: @raf_road

ROAD ACCIDENT FUND204

Satellite Offices

Province City/Town Location Physical Address Contact NumberGauteng Pretoria Middestad Building 252 Thabo Sehume (Andries) Street 012 621 1617Mpumalanga Nelspruit Sanlam Centre Office 25, Bell Street 013 754 2380/1/2/3/4Limpopo Tzaneen - 21 Peace Street 015 307 6489Limpopo Polokwane Library Gardens Cnr Grobler and Schoeman Street 015 291 3951Free State Welkom Nedbank Building Suite 105, Ryk Street 057 357 1198Eastern Cape Port Elizabeth Main Post Office Building 259 Govan Mbeki Avenue 041 505 5911Eastern Cape Port Elizabeth Corner House 156 Govan Mbeki Avenue 041 505 5902/5914Western Cape Cape Town Standard Bank Building 1 Thibault Square 021 408 3677/3690

raF HSCs

City/Town Hospital Contact numbers AddressMPUMALANGANelspruit Rob Ferreira 013 741 3551/2 Cnr Madiba Drive and Piet Retief StreetTonga Tonga 013 785 0650 Tonga Village Hospital, Main Road, Nkomazi RuralStanderton Standerton 017 712 5872 Cnr Beyers Naude and Kruger Streets, StandertoneMalahleni eMalahleni 013 653 2082 Cnr President and Coert Steynberg Street, eMalahleniEvander Evander 017 632 4480 Cnr Bologna and Luasanna Street, EvanderKwa-Mhlanga Kwa-Mhlanga 013 947 3659 1128 Section C, Kwa-Mhlanga Village, Kwa-MhlangaMmamethlake Mmamethlake 012 721 2391 Mmamethlake Village, Pakop Road, HammanskraalKWAZULU-NATALPietermaritzburg Edendale 033 395 4033 Main Road, EdendaleDurban Addington 031 332 3006 / 031 332 6565 16 Erskine Terrace, South Beach, DurbanUmlazi Prince Mshiyeni 031 906 0918 / 013 906 0881 2 Mangosuthu Highway, UmlaziChatsworh RK Khan 031 403 2258 336 RK Khan Circle, Croftdene, ChatsworhMadadeni Emadadeni 034 312 4301 Section 5, MadadeniLadysmith Ladysmith 036 631 4586 36 Malcom Road, LadysmithDurban King Edward 031 205 4586 Cnr Sydney and Rick Turner (Francois) Road, UmbiloPietermaritzburg Greys 033 342 9023 / 033 342 7546 Town Bush Road, Chase Valley, PietermaritzburgEmpangeni Ngwelezane 035 794 2669 / 035 794 2693 Thanduyise Road, Ngwelezane Township, EmpangeniStanger Stanger 032 551 4698 Cnr King Shaka and Patterson Street, StangerPort Shepstone Port Shepstone 039 682 7499 Cnr Cornor and Bazley Street, Port ShepstoneIxopo Christ the King 073 970 2888 Peter Hauff, IxopoMkhuze Bethesda 073 298 3210 N2 North, MkhuzeNewcastle Newcastle 034 312 4301 / 078 783 7418 4 Hospital Street, NewcastleNORTHERN CAPEUpington Gordonia 054 331 0006 / 073 633 0715 Scröder Street, UpingtonKimberley Kimberley 053 832 1282 / 0877 144 Du Toitspan Road, KimberleyColesberg Manne Dipico 051 753 2151 / 083 415 9068 Hospital Street, ColesbergLIMPOPOPolokwane Polokwane 015 297 0450 / 083 415 9108 Cnr Hospital and Dorp Street, PolokwaneMankweng Mankweng 015 267 0234 / 076 137 6163 Houtbosdorp Street, MankwengMokopane Voortrekker 015 491 1419 2 Geiser Street, MokopaneMahwelereng Mokopane 015 483 1419 Dudu Madisah Drive, Zone 1, MahwelerengPhalaborwa Maphutha Malatji 015 483 1419 Mpahutha Malatji Street, Namakgale, PhalaborwaBela Bela Bela Bela 014 736 3397 54 Chris Hani Drive, Bela BelaJane Furse Jane Furse 013 265 1555 / 072 424 2952 Jane Furse Village, Nebo Magistrate Circuit, Jane FurseTohoyandou Tshilidzini 015 964 1169 / 079 709 7417 R524 Phundamaria Main Road, ShayandimaElim Elim 015 556 3496 145 Mhangeskraal Street, Makhabo, ElimBurgersfort Dilokong 013 214 9930 / 079 507 6643 Cnr R37 Driekop and Modikwa Mine, BurgersfortGiyane Nkhensani 015 812 0039 / 082 627 4283 Main Road, GiyaniTzaneen Letaba 082 449 9023 Tzaneen Lydenburg Road, LetabaLephalale Ellisras 073 446 7508 Cnr Ngoako Ramotlogi and Chris Hani Drive, LephalaleMusina Musina 015 483 2639 N1 Building, Cnr National and Whyte Road, Musina

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WESTERN CAPECape Town New Somerset 021 402 6422 Cnr Beach and Lower Potswood Road, Green PointCape Town Tygerberg 021 933 8924 Fransie van Zyl Avenue, BellvilleCape Town Groote Schuur 021 447 2666 Groote Schuur Drive, Observatory, Cape TownPaarl Paarl 021 860 2569 Cnr Hospital Street and Bergrivier Boulevard, PaarlManenberg JF Jooste 071 852 4958 Duinefontein Road, ManenbergStellenbosch Stellenbosch 021 883 3074 Cnr Roux Road and Merriman Street, StellenboschWorcester Worcester 023 347 8976 Murray Street, WorcesterRobertson Robertson 023 626 2710 Van Outdshoorn Street, RobertsonVredenburg Vredenburg 022 713 5161 Voortrekker Street, VredenburgGeorge George 044 873 2576 Davidson Road, GeorgeMitchells Plain Mitchells Plain 071 852 4958 8 AZ Berman Drive, Mitchells PlainGAUTENGJohannesburg Charlotte Maxeke 011 642 6709 / 074 385 5843 17 Jubilee Road, Parktown, JohannesburgTembisa Tembisa 011 920 2831 / 2082 Industry Road, Olifantsfontein, JohannesburgGa-Rankuwa Dr George Mukhari 012 560 0420 / 0423 /

083 480 52573111 Setlogelo Street, Ga-Rankuwa

Hammanskraal Jubilee 012 717 3151 / 072 980 6805 92 Jubilee Road, TembaPretoria Kalafong 012 373 4217 / 082 731 5330 Klipspringer Road, Atteridgeville, PretoriaPretoria Steve Biko 083 480 5257 Dr Savage Road , PretoriaBoksburg Tambo Memorial 011 892 1941 / 074 113 0899 Railway Street, BoksburgJohannesburg Helen Joseph 011 482 4639 / 078 180 1219 Perth Road, Auckland Park, JohannesburgSprings Far East Rand 011 813 2785 / 083 445 3854 Hospital Road, New State Areas, SpringsKrugersdorp Leratong 011 410 4621 / 011 411 3704 1 Adcock Street, Chamdor, KrugersdorpKatlehong Natalspruit 011 909 3449 / 071 876 0776 146 Hospital Street, KatlehongPretoria Tshwane District 012 329 5167 / 073 695 1167 Dr Savage Road, PretoriaJohannesburg Chris Hani

Baragwanath011 933 4050 / 082 734 0151 Old Potchefstroom Road, Moreleta Park, Soweto

Vereeniging Sebokeng 016 988 1542 / 083 483 7920 2 Moshoeshoe Street, SebokengEASTERN CAPEEast London Frere 043 722 5056 Amalinda Drive, Amalinda, East LondonPort Elizabeth Livingstone 041 451 0504 Stanford Road, Korsten, Port ElizabethPort Elizabeth Dora Nginza 041 451 0504 / 079 696 1665 Spondo Road, ZwideMthatha Nelson Mandela 047 502 4716 / 047 531 0427 Nelson Mandela Drive, MthathaUitenhage Uitenhage 041 995 1111 / 083 364 9615 Channer Street, UitenhageMdantsane Cecila Makiwane 043 761 3309 Site 1506, Mdantsane TownshipMount Frere Madzikane Ka Zulu 073 195 4418 Hospital Street, Mount FrereQueenstown Frontier 073 195 4418 Cnr Kingsway and Livingstone Road, QueenstownLusikisiki St Elizabeth

Hospital083 578 9738 Main Street, Lusikisiki

NORTH WESTKlerksdorp Tshepong 018 465 2272 / 071 851 1035 45 Benji Oliphant Street, Uraniaville, KlerksdorpMafikeng Mafikeng 018 383 2081 / 083 520 7757 /

082 532 9394Lomanyeng Village, Danville Location, Mafikeng

Rustenburg JS Tabane 014 592 5297 / 082 390 5064 Cnr Bosch and Hestek Streets, RustenburgBrits Brits 012 252 7874 / 074 688 3193 127 Crocodile Street, BritsRustenburg Moses Kotane 072 661 5883 Lekwadi Section, Phatsima Road, RustenburgPotchefstroom Potchefstroom 018 294 7130 / 076 605 5207 Cnr Kruis and Chris Hani Streets, PotchefstoomFREE STATEBloemfontein Pelonomi 051 432 9952 / 073 178 2005 Dr Belcher Road, Heidedal, BloemfonteinSasolburg Sasolburg 072 429 7447 Langenhoven Street, SasolburgWelkom Bongani 057 355 3124 / 3130 Mothusi Road, Thabong, WelkomQwa Qwa Monapo 073 053 9559 / 072 439 8896 Motebang Street, PhuthaditjhabaParys Parys 056 811 5680 / 072 429 7447 8 Hospital Road, Parys


We Care

K-11621 [www.kashan.co.za]

Head Office

2 Eco Glades Office Park, 420 Witch-Hazel Avenue, Centurion

Private Bag X178, Centurion, 0046

Customer Care Share Call Number

0860 235 523

www.raf.co.za

www.facebook.com/RoadAccidentFund

@RAF_SA

RP 255/2014

ISBN 978-0-621-42984-8

We Care

RAF Annual Report 2013/2014

Documents

Transcript of RAF Annual Report 2013/2014