Fix the RAF before seeking new revenue streams from South Africans

The RAF does not need a new revenue stream. It needs competent leadership, credible oversight and urgent reform before South Africans are asked to pay yet more.

Wayne Duvenage is a businessman and entrepreneur turned civil activist. Following former positions as CEO of Avis and President of SA Vehicle Renting and Leasing Association, Duvenage has headed the Organisation Undoing Tax Abuse since its inception in 2012.

The Road Accident Fund’s (RAF’s) crisis is not primarily a failure of revenue collection. It is the result of years of weak leadership, poor administration and inadequate oversight.

Redesigning how the public pays will achieve little unless the government first fixes how the fund operates.

Recent statements from the Department of Transport indicate that the government is reconsidering how the Road Accident Fund (RAF) is financed.

It argues that electric and hybrid vehicles will very gradually erode fuel-levy revenue, prompting the consideration of alternative funding via a previously failed third-party insurance scheme, while not recognising the real issues that need to be addressed.

There is nothing wrong with evaluating new models. However, it is futile to find new ways of pouring money into a scheme where funds are being wasted on a grand scale.

Electric and hybrid vehicles make up less than 1% of the current car park and will remain a small fraction of South Africa’s fleet for the next decade. That long-term policy question must not obscure the immediate crisis.

The RAF is not in trouble because the government has failed to extract enough money from motorists. Enormous revenue increases have been accompanied by maladministration, inefficient systems, weak oversight and poor leadership. Changing the collection mechanism would merely continue to feed a broken system and possibly introduce additional administration costs.

The fuel levy is among the simplest and least expensive ways of funding road-accident compensation. It is collected automatically, without a separate annual account or premium-collection bureaucracy.

It also approximates a user-pays system in that, the more one drives, the more one generally contributes. It is effectively calibrated as a user-pays scheme and much fairer than charging identical annual fees. Someone driving 100km a month should not pay the same as someone driving 10,000km, which would be the case with an annual third-party scheme.

The levy also spreads the burden across small payments whenever motorists fill their tanks. Replacing it with a large annual charge, or a hybrid version thereof, would create affordability problems for households and small businesses.

Electric vehicles will eventually require a supplementary contribution mechanism, and this will need to be explored without discarding a system that remains efficient for the vast majority of road users, for many years to come.

South Africa introduced compulsory third-party motor insurance in 1942. Vehicle owners had to obtain cover from authorised private insurers, but the system produced falsification, evasion, uninsured vehicles, disputes over valid cover and gaps in protection.