South Africa’s fuel levy problem – MyBroadband

The Road Accident Fund (RAF) recorded a R1.5 billion deficit for the 2023/24 financial year. Although substantial, this year’s shortfall was a significant improvement over the R8.4 billion deficit the RAF reported for the previous year.

It partly attributed the deficits to a lack of RAF fuel levy increases over the past three years. The National Treasury has held off on increasing the fuel tax to provide relief to motorists facing high fuel prices.

“The amount of fuel levy we collect is the revenue that we have at the Road Accident Fund. Nothing more. Nothing less,” said RAF CEO Collins Letsoalo.

“The fuel levy keeps on being R2.18, at least since 2021/22. It has not increased over the last three years. You can look at it in inflation-adjusted terms. It has reduced to about R1.93 in real terms.”

Letsoalo explained that the RAF likely would have collapsed in the face of no fuel levy increases if it hadn’t changed its model before 2020.

“Predecessors will tell you that they have never experienced this where the fuel levy hasn’t been increased for this long, but we have managed to keep the RAF floating.”

The RAF’s 2020 to 2025 strategic focus aims at improving the efficiency of the fund’s model through RAF Act amendments and new legislation.

It also aims to reduce legal costs, improve claim turnaround times, and review the RAF’s organisational structure.

Speaking to 702, the RAF’s head of corporate communications, McIntosh Polela, said the strategy is working, but the RAF model as a whole is “unworkable” and “unsustainable”.

“We are still in pretty bad shape, but we’re not going to allow the money to run out,” said Polela.

He explained that the RAF was allocated approximately R55 billion for the year, of which it has paid out R45.1 billion and has a further R8 billion in outstanding payouts due to backlogs.

“We’re sitting at a place where money owed to claimants is now around R8.3 billion. In 2020, we were owing them around R16.2 billion, so we have managed to halve that,” said Polela.

He said the fact that the RAF’s operating model is based on litigation is unsustainable, adding that suing the state for South Africans injured in accidents to access their benefits shouldn’t be allowed.

“We issued in 2023 an RAF bill to Parliament, where we say we need to change the system; otherwise, the whole system is going to collapse,” said Polela.

“We had a situation where, of the 86% of the cases that were going to the court in 2019 to 2020, only 1% went to trial because most of them were being settled at the doorsteps at the court because, in the first place, they should never have been there.”

His comments come after transport minister Barbara Creecy demanded a turnaround plan from the RAF to address the backlog of claims in South Africa’s courts.

Finance minister Enoch Godongwana delivered his 2024 Budget Speech in February, revealing that the government had again decided not to increase the RAF tax for the third year in a row.

“As in the 2022 and 2023 Budgets, the government again proposes no changes to the general fuel levy or the Road Accident Fund levy, resulting in tax relief of around R4 billion,” the National Treasury said in its 2024 Budget Review document.

However, the Organisation Undoing Tax Abuse (Outa) believes the relief can’t continue. It previously said the government held off on an increase in 2024 as it is an election year.

“Outa honestly believes that it will not continue,” it told MyBroadband in February 2024.

“Outa is of the opinion that this is an election year, and as such, the budget was an election budget, but due to the fiscal constraints SA’s budget is facing, it will probably increase in the [medium-term budget].”