ROAD ACCIDENT FUND ROAD ACCIDENT FUND LEGISLATIVE AMENDMENT BILL, 2004LEGISLATIVE AMENDMENT BILL, 2004

Presentation to the Presentation to the Portfolio Committee on Transport Portfolio Committee on Transport

18 May 200518 May 2005

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AgendaAgenda

Strategic objectivesStrategic objectives Key assumptions Key assumptions Claims statisticsClaims statistics Statistical overview of claimsStatistical overview of claims 2003/4 Auditor General Report2003/4 Auditor General Report Key achievements in 2004/5Key achievements in 2004/5 New initiatives in progressNew initiatives in progress * Strategic Recovery Plan* Strategic Recovery Plan

* Core-Business Re-alignment* Core-Business Re-alignment Comment on the Legislative AmendmentsComment on the Legislative Amendments QuestionsQuestions

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Strategic Objectives of the RAFStrategic Objectives of the RAF

To achieve excellence in RAF business To achieve excellence in RAF business processesprocesses

To promote a road safety culture among To promote a road safety culture among road usersroad users

To effectively manage stakeholder To effectively manage stakeholder relations relations

To eliminate fraud and corruptionTo eliminate fraud and corruption

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Key AssumptionsKey Assumptions

New Claims lodged – 185,000 per annumNew Claims lodged – 185,000 per annum

Current Claim backlog is 445,000 – Discounted actuarial valuation is Current Claim backlog is 445,000 – Discounted actuarial valuation is R18,5 billion as at 31 March 2004R18,5 billion as at 31 March 2004

Average cost of settlement – R22,000 per claimAverage cost of settlement – R22,000 per claim

Rate of Settlement to improve by 15%Rate of Settlement to improve by 15%

Current proposed Legislative amendments will have minimal Current proposed Legislative amendments will have minimal financial effect on 2005/6 budget – will only have a material impact financial effect on 2005/6 budget – will only have a material impact on 2006/7 budgeton 2006/7 budget

Estimated annual fuel consumption is 18,3 billion litresEstimated annual fuel consumption is 18,3 billion litres

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Claims StatisticsClaims Statistics

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Statistical OverviewStatistical Overview

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2003/4 AUDIT REPORT2003/4 AUDIT REPORT

Going Concern Going Concern AFCTAFCT ControlsControls ClaimsClaims

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Key AchievementsKey Achievements

Average settlement costs have reduced in 2004; from Average settlement costs have reduced in 2004; from R27,758 in 2003 to R24,783 in 2004R27,758 in 2003 to R24,783 in 2004

Claims that are finalised have increased incrementally on Claims that are finalised have increased incrementally on a year to year basis when comparing Claims finalised vs a year to year basis when comparing Claims finalised vs Claims lodged; from 66% in 2003 to 96% in 2004Claims lodged; from 66% in 2003 to 96% in 2004

Claims settlement rate has increased dramatically when Claims settlement rate has increased dramatically when comparing total finalised vs total number of claims comparing total finalised vs total number of claims outstanding for 2004 financial year; from 120% in 2003 outstanding for 2004 financial year; from 120% in 2003 to 102% in 2004.to 102% in 2004.

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Key Achievements Key Achievements (continued)(continued)

Claims administration costs per claim has Claims administration costs per claim has decreased dramatically from R3,651 per decreased dramatically from R3,651 per claim in 2003 to R2,818 in 2004.claim in 2003 to R2,818 in 2004.

Financial and budgetary controls have Financial and budgetary controls have been streamlined to ensure effective been streamlined to ensure effective operational cost managementoperational cost management

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New InitiativesNew Initiatives

Claims backlog-special project was Claims backlog-special project was embarked on to settle high volume embarked on to settle high volume supplier claims.supplier claims.

Validation of outstanding claims provision-Validation of outstanding claims provision-project was embarked on to verify project was embarked on to verify outstanding claims independently, as it is outstanding claims independently, as it is thought that a lot of fraudulent claims are thought that a lot of fraudulent claims are included in the unsettled claimsincluded in the unsettled claims

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New Initiatives New Initiatives (Continued)(Continued)

Promotion of Direct claimants – this should Promotion of Direct claimants – this should significantly reduce legal costs which significantly reduce legal costs which constitutes a large portion of the total constitutes a large portion of the total payout payout

Forming strategic alliances with organs of Forming strategic alliances with organs of state like the NPA and SAPS to reduce state like the NPA and SAPS to reduce fraudfraud

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New Initiatives New Initiatives (Continued)(Continued)

Cutting down on Fraud-RAF has joined Cutting down on Fraud-RAF has joined alliances with SAPS & Scorpions – high alliances with SAPS & Scorpions – high success ratesuccess rate

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Strategic Recovery PlanStrategic Recovery Plan

Verification unit was established to validate claims Verification unit was established to validate claims lodged more accurately long before an offer is made to a lodged more accurately long before an offer is made to a claimantclaimant

Evaluation of existing service providers to reduce Evaluation of existing service providers to reduce reliance on them & to enhance internal capacityreliance on them & to enhance internal capacity

Overall business process re-engineering underway to Overall business process re-engineering underway to enable business improvementenable business improvement

Agreement was reached with Legal profession to Agreement was reached with Legal profession to temporarily structure compensation payments in temporarily structure compensation payments in installmentsinstallments

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Strategic Recovery Plan Strategic Recovery Plan (Continued)(Continued)

All service provider contracts reviewed to ensure All service provider contracts reviewed to ensure proper service delivery & BEE complianceproper service delivery & BEE compliance

New Integrated Claims Management System New Integrated Claims Management System (ICMS) has been piloted and is in the process of (ICMS) has been piloted and is in the process of being rolled out to all RAF regional officesbeing rolled out to all RAF regional offices

Proper liquidity management process has been Proper liquidity management process has been implemented that ensures accurate cash flow implemented that ensures accurate cash flow forecasting forecasting

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Core-Business Re-alignment 2004-2005Core-Business Re-alignment 2004-2005

Business AreaBusiness Area Implementation Implementation strategystrategy

Implementation Implementation impactimpact

Top Structure re-alignmentTop Structure re-alignment Strategy-structure alignmentStrategy-structure alignment Efficient Corporate Plan Efficient Corporate Plan delivery and re-alignment of delivery and re-alignment of business focus to RAF business focus to RAF mandatemandate

Direct Claims Direct Claims implementationimplementation Splitting of EL RegionSplitting of EL Region Walk-inn CentersWalk-inn Centers

Request statistics on Request statistics on accidents (hot-spots)accidents (hot-spots)Establish direct claims Establish direct claims sections & draft manualsections & draft manualEstablish a branch office in Establish a branch office in PEPE

Improved accessibilityImproved accessibilityReduced legal costsReduced legal costsImproved public imageImproved public imageEfficient service deliveryEfficient service delivery

Legal CostsLegal Costs Decentralise the function Decentralise the function and integrate it into the and integrate it into the main-stream claims processmain-stream claims process

Reduce operational costs Reduce operational costs and improving and improving accountability & reportingaccountability & reporting

Alternative Dispute Alternative Dispute Resolution (ADR)Resolution (ADR)

Phased roll-out of Mediation Phased roll-out of Mediation & Arbitration& Arbitration

Reduce operational costs Reduce operational costs and improving “actual” client and improving “actual” client service deliveryservice delivery

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Core-Business Re-alignment 2004-2005Core-Business Re-alignment 2004-2005

Business AreaBusiness Area Implementation Implementation StrategyStrategy

Implementation Implementation ImpactImpact

In-house LitigationIn-house Litigation Recruit and train Recruit and train competent staffcompetent staffPilot the project with time Pilot the project with time lineslines

Reduce litigation costsReduce litigation costsDevelop staff Develop staff

Suppliers InvoiceSuppliers Invoice Establish suppliers invoice Establish suppliers invoice section and draft policysection and draft policy

Reduce backlogReduce backlogReduce legal costs Reduce legal costs (summonses)(summonses)

Career-pathing of non-legal Career-pathing of non-legal staffstaff

Train and assess staffTrain and assess staff Retain staffRetain staff

Core-Business SupportCore-Business Support Introduction of the ICMS Introduction of the ICMS SystemsSystems

Standardisation and Standardisation and efficiencyefficiency

Better control on internal Better control on internal collusioncollusion

Direct ClaimsDirect Claims Phased (on BC) roll-out of Phased (on BC) roll-out of “WiC”“WiC”

Redefinition of “Customer”Redefinition of “Customer”

Customer orientationCustomer orientation

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Core-Business Re-alignment 2004-2005Core-Business Re-alignment 2004-2005

Business AreaBusiness Area Implementation Implementation strategystrategy

Implementation Implementation impactimpact

Claims payment functionClaims payment function Section is split from Section is split from previous Accounting previous Accounting function to ensure focus on function to ensure focus on timeous, accurate and valid timeous, accurate and valid paymentspayments

Resources will report to Snr Resources will report to Snr Man: Treasury in stead of Man: Treasury in stead of Snr Man: Fin AccountingSnr Man: Fin Accounting

Undertaking paymentsUndertaking payments Financial core activities to Financial core activities to reside in Finance divisionreside in Finance division

Resources could potentially Resources could potentially be reallocated from be reallocated from Undertakings HO to Finance Undertakings HO to Finance HOHO

ProcurementProcurement The final quality control and The final quality control and releasing of Purchase releasing of Purchase orders will be centralized at orders will be centralized at HO to comply to Supply HO to comply to Supply chain best practices. chain best practices.

No HR resource impact, No HR resource impact, only business process re-only business process re-alignmentalignment

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Core-Business Re-alignment 2004-2005Core-Business Re-alignment 2004-2005

Business AreaBusiness Area Implementation Implementation StrategyStrategy

Implementation Implementation ImpactImpact

Fixed assetsFixed assets Process of control over fixed Process of control over fixed assets register to comply assets register to comply with Supply chain best with Supply chain best practicespractices

Better control over RAF Better control over RAF assets and streamlined SLA assets and streamlined SLA service delivery between service delivery between FM & ProcurementFM & Procurement

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Core-Business Re-alignment 2004-2005Core-Business Re-alignment 2004-2005

Business AreaBusiness Area Implementation Implementation StrategyStrategy

Implementation Implementation ImpactImpact

Performance ManagementPerformance Management Implement RAF customised Implement RAF customised Performance measurement Performance measurement and managementand management

Improved retention of talentImproved retention of talent

Recognition of employeesRecognition of employees

Improved service deliveryImproved service delivery

Policies DevelopmentPolicies Development Review and/or development Review and/or development of RAF-wide policies and of RAF-wide policies and proceduresprocedures

Improved accountability and Improved accountability and compliance to legislationcompliance to legislation

Process AutomationProcess Automation Identification and Identification and automation of other non-automation of other non-core business processescore business processes

Best-practice to enable Best-practice to enable quick services turn-around quick services turn-around timestimes

Organisation DevelopmentOrganisation Development Job Profiling of all Core & Job Profiling of all Core & non-core jobsnon-core jobs

Job evaluation of all jobsJob evaluation of all jobs

Salary Broad-bandingSalary Broad-banding

Improved people Improved people management practices to management practices to ensure parity & fairness ensure parity & fairness thus enabling retention and thus enabling retention and developmentdevelopment

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Core-Business Re-alignment 2004-2005Core-Business Re-alignment 2004-2005

Business AreaBusiness Area Implementation Implementation StrategyStrategy

Implementation Implementation ImpactImpact

Human CapitalHuman Capital

Give effect to Give effect to decentralisationdecentralisation

Decentralising HC services Decentralising HC services and support in alignment and support in alignment with the core business with the core business requirementsrequirements

Empowering of HC in core Empowering of HC in core businessbusiness

Repositioning of central HC Repositioning of central HC as a centre of excellenceas a centre of excellence

Improvement of service – Improvement of service – decisions made at source, decisions made at source, less delays, more less delays, more accountability accountability

Research capability and Research capability and therefore provision of therefore provision of guidelines, policies, guidelines, policies, frameworks that are based frameworks that are based on best practiceon best practice

Implementation effected in Implementation effected in the businessthe business

Corporate Compliance and Corporate Compliance and Legal ServicesLegal Services

Merge Corporate Legal Merge Corporate Legal Services and Corporate Services and Corporate Secretariat into one division Secretariat into one division reporting directly to the CEOreporting directly to the CEO

Best practice alignment and Best practice alignment and improved co-ordinationimproved co-ordination

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AMENDMENT BILL COMMENTAMENDMENT BILL COMMENT

The Fund does not hold any views on the Amendment Bill that are The Fund does not hold any views on the Amendment Bill that are contrary to those put forward by the Honourable Minister and the contrary to those put forward by the Honourable Minister and the Department of Transport, and is duty-bound and committed to Department of Transport, and is duty-bound and committed to effectively and efficiently operationalise and administer the effectively and efficiently operationalise and administer the proposed legislative changes, as soon as they are enacted.proposed legislative changes, as soon as they are enacted.

The Fund does not however intend to rely solely on the enactment The Fund does not however intend to rely solely on the enactment of the proposed legislative changes to stabilize its operations and of the proposed legislative changes to stabilize its operations and management. management.

The Fund is of the view that there is considerable scope for The Fund is of the view that there is considerable scope for improvement in this regard. Much has already been accomplished improvement in this regard. Much has already been accomplished and more could be done. It is nevertheless imperative to note that and more could be done. It is nevertheless imperative to note that the insufficient funding of the Fund over many years remains a the insufficient funding of the Fund over many years remains a cause for serious concern and will continue to bedevil the best cause for serious concern and will continue to bedevil the best intentions and efforts in this regard.intentions and efforts in this regard.

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AMENDMENT BILL COMMENTAMENDMENT BILL COMMENT

The Fund supports the proposal to extend its The Fund supports the proposal to extend its powers to powers to conclude agreementsconclude agreements with service providers and with with service providers and with fellow organs of state. The Fund would however request fellow organs of state. The Fund would however request that the introductory part of the proposed new section that the introductory part of the proposed new section 4(4)(4(4)(aa) should read as follows:) should read as follows:

““(4) ((4) (aa) The Fund may conclude an agreement with any ) The Fund may conclude an agreement with any other organ of State regarding any matter affecting the other organ of State regarding any matter affecting the

Fund in order to improve or ensure–”Fund in order to improve or ensure–”

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AMENDMENT BILL COMMENTAMENDMENT BILL COMMENT The Fund supports the proposed changes regarding the The Fund supports the proposed changes regarding the corporate corporate

governancegovernance of the Fund. of the Fund. It would however request that the possible It would however request that the possible implications for continuity in this regard be considered in conjunction implications for continuity in this regard be considered in conjunction with the commencement date of the changes.with the commencement date of the changes.

For reasons of social equity and administrative convenience the For reasons of social equity and administrative convenience the Fund supports the proposal that no special limitations should apply Fund supports the proposal that no special limitations should apply to the claims of to the claims of passengerspassengers..

The Fund supports the proposals regarding the The Fund supports the proposals regarding the cappingcapping of its of its liability, liability, but considers that the proposed amounts may possibly but considers that the proposed amounts may possibly provide inadequate compensation to claimants.provide inadequate compensation to claimants.

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AMENDMENT BILL COMMENTAMENDMENT BILL COMMENT The Fund believes that the claims of The Fund believes that the claims of foreignersforeigners should be treated as should be treated as

if the claimants were locals, and that the same limitations that apply if the claimants were locals, and that the same limitations that apply to local claims should also apply to foreign claims.to local claims should also apply to foreign claims.

The Fund supports the proposal that it should be liable for The Fund supports the proposal that it should be liable for emergency medical treatmentemergency medical treatment regardless of fault on the part of any regardless of fault on the part of any person. person. The Fund would however request that the momentous The Fund would however request that the momentous financial implications of this proposal be carefully considered.financial implications of this proposal be carefully considered.

The Fund is of the view that its liability in respect of medical The Fund is of the view that its liability in respect of medical expenses needs to be fixed in accordance with a expenses needs to be fixed in accordance with a tarifftariff or tariffs. or tariffs.

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AMENDMENT BILL COMMENTAMENDMENT BILL COMMENT

As regards the manner of effecting compensation, the As regards the manner of effecting compensation, the Fund believes that it should have the choice to make Fund believes that it should have the choice to make payment of large sums in respect of compensation for payment of large sums in respect of compensation for future loss of income or support and of general future loss of income or support and of general damages, damages, by way of a number of by way of a number of installmentsinstallments (not (not annuities) when considerations of balance sheet annuities) when considerations of balance sheet temporarily require that course of action.temporarily require that course of action.

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QuestionsQuestions