Transport Minister Fikile Mbalula has welcomed the transformation journey that has seen the Road Accident Fund (RAF) registering a R3.2bn surplus for the year ended 31 March.

A Business Day report notes the RAF, which collects about R43bn a year through a levy on the fuel price, has operated on a financially unsustainable model for decades, and has been dogged by allegations of corruption, malfeasance and fraud, which had affected its ability to settle claims.

It is the economy’s second-biggest liability after Eskom as it battles a claims liability of about R330bn, edging closer to Treasury projections that they will top R600bn in the next three years.

When the RAF Act came into effect in 1997, the fund’s annual deficit had grown to R886m.

This rose to R1.2bn in 2005.

‘This astronomical increase in the annual deficit continued until the historic R3.2bn surplus reported for the period ended on 31 March,’ said Mbalula yesterday, giving progress made on turning around the RAF.

The Minister said R17bn was spent on administrative costs, with R10.6bn of that amount spent on legal costs and more than R2bn on medical costs.

‘We have turned the corner, we are on the right path, and we will continue to work on a sustainable and equitable RAF scheme,’ he is quoted as saying.

RAF CEO Collins Letsoalo, who is responsible for implementing the new operating model approved by the board, said: ‘The journey to transform the RAF has just begun. We are on the right trajectory, we have gained traction in most areas (but we) still have got a long way to go in the battle against corruption.’

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‘We did not cook the books,’ said Letsoalo in reference to the R305bn reduction in RAF’s contingent liabilities.

According to a report in Die Burger, Letsoalo explained that the RAF consulted accounting experts – including in Belgium – about the most appropriate calculation method for contingent liabilities.

He said the RAF previously used the same method as insurance companies, but the RAF is a social security company rather than an insurance company. The RAF now reflects a contingent liability of only R28bn where it was R332bn in the previous year.

Letsoalo said more changes at the RAF were underway.

He said the RAF regional offices currently close to different divisions of the High Courts will be moved ‘closer to the people’ to make it easier for them to claim without lawyers.

A Netwerk24 report takes a deeper look at how RAF managed to record a surplus for the year.

Administrative costs were reduced by more than R7bn, while investment income grew by 152% to R157m due to a strong performance of the JSE.

Financing costs also decreased by 62% to R90m.

Full report in Die Burger (subscription needed)

Full Netwerk24 report (subscription needed)