In its application to the Gauteng High Court (Pretoria) for the winding up of the Road Accident Fund (RAF), Maponya Attorneys says that given the financial peril the RAF is in, a court-ordered winding-up is the fairest outcome for all stakeholders.

As things stand the fund is insolvent as its total liabilities exceeded its assets by R262.11bn according to its 2018/19 annual report. And things have become worse since then, as its accumulated deficit is expected to increase from R329.7bn in 2019/20 to R593.1bn in 2022/23 according to a presentation to Parliament in June.

The RAF’s funding issues have led to creditors making 560 attachments to its bank accounts in the 2018/19 financial year. A Moneyweb report notes Maponya says several creditors, who are owed R97m, have already attached movable assets seized at the fund’s office in Centurion in an attempt to sell them off.

Maponya is owed R20.6m and it fears that in the rush of civil claims against the RAF, it and other creditors could lose out to those who have already attached assets.

To prevent this from happening, it has asked the court to unwind it under the provisions of the Insolvency Act. In doing so, Maponya says it will substitute individual debt collecting remedies to one that is fairer to all creditors.

Doing it this way will also formalise the involvement of relevant trade unions, employees and the tax authorities.

Moneyweb notes the RAF has not responded to questions on whether it will oppose the application. It did point out in its 2019/20 annual performance plan that the financial issues around the RAF are nothing new as it has been insolvent since 1981.

The fund has until 28 September to deliver answering papers.

Full Moneyweb report

Notice of motion for RAF winding up

Some law firms, however, believe the move is not in the best interest of claimants and are contemplating an application to intervene in the matter, says Rapport.

Douw van der Merwe, a Pretoria attorney who instigated an attachment of the furniture of the RAF office in Centurion last week, says his firm is considering an application to intervene.

‘We think the fund should rather be placed in business rescue.’

This is because the RAF continues to receive a steady stream of income. In the meantime, it has emerged that the government itself pays a 42% commission for RAF claims submitted on government’s behalf.

Gauteng Health MEC Jacob Mamabolo said in answer to a question by DA MPL Jack Bloom that the government appointed a company called Batsumi Claims Management Solutions to submit its claims to the RAF.

The company had collected R524m from RAF and was paid R220m for this service.

Mamabolo said the tender constituted value for money as the Gauteng Health Department was able to recover some costs from the RAF and his own department does not have the capacity to file claims with the fund.

Full report in Rapport (subscription needed)