News24 | RAF board says it’s not in favour of a higher fuel levy

The Road Accident Fund says increases in the fuel levy would not be a ‘sustainable solution’.

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• The Road Accident Fund says it does not want the fuel levy to go up, despite its annual report listing an increase to as much as R3 a litre as a possible funding option.
• Its board says higher levies are not a sustainable answer and wants to improve how the fund is run and change its funding model.
• The RAF remains under severe financial pressure, with reported claims liabilities of R449 billion.
• For more financial news, visit News24 Business.
  

The Road Accident Fund (RAF) says it is not in favour of the fuel levy going up, saying it knows that higher fuel costs would put more pressure on households, businesses and the wider economy.

“The RAF does not regard further levy increases as a sustainable solution to the fund’s underlying challenges,” its board said in a statement.

The statement came after the fund’s recent annual report listed an increase in the levy from R2.25 to “up to R3 per litre” as an option to address its financial problems.

The report said the RAF could ask National Treasury, through the government’s three-year budget process, for a higher fuel levy, along with financial support.

The RAF leadership presented an overview of the fund’s annual report to the Portfolio Committee on Transport this week. A possible increase in the levy was not mentioned at the hearing.

The RAF board said in a new statement that raising the levy was not its “preferred approach”.

“The annual report identifies an increase from R2.25 to R3 per litre as one of the funding options, including possible engagement with National Treasury,” it said.

“This reference must be distinguished from the RAF’s current preferred approach, which prioritises improved efficiency, stronger financial management and reform of the funding and benefit model.”

READ | RAF eyes R3/litre levy as woes mount, with 23 suspended staff costing taxpayers R26m a year

The RAF levy has been R2.25 a litre since April and is built into the price of petrol and diesel. Before that, it had been held at R2.18 a litre for five years.

South African motorists have faced a sharp rise in fuel prices due to higher oil prices. This week, the inland price of 95 unleaded petrol breached R30 a litre for the first time.

How to fund the RAF?

The board said talks with Treasury should be seen as part of a “wider effort” to change how the RAF is funded.

The fund has been in a precarious financial position for years, with its claims liabilities far outstripping its assets.

A change in accounting treatment, following a long fight over how the fund should account for its claims, sharply increased its reported claims liability. The annual report found the change increased this figure from R40 billion to R449 billion. 

The full R449 billion is not immediately payable and includes a large share of claims that the fund only expects to pay in the future.

The board said it wanted to improve how the fund is run, speed up the handling of claims, and do more to stop fraud and abuse.

“[…] the RAF’s aspiration is that improved efficiency, stronger financial management and reform of the funding and benefit model will, over time, create scope for a reduction in the RAF levy, while ensuring that the fund can meet its obligations to road accident victims.”