The Road Accident Fund is losing about R300-million a year due to fraudulent claims and theft by corrupt officials.
Road Accident Fund (RAF) chief executive Humphre Kgomongwe has told Parliament’s public accounts committee that the Fund is losing about R300-million a year due to fraudulent claims and theft by corrupt officials.
The fund is currently facing a financial crisis, and had an actuarial deficit of R13,3-billion at the end of April 2001, reported on Wednesday. The actuarial deficit represents outstanding claims it will have to pay in future.
The situation is deteriorating, the committee heard yesterday, as claims were increasing faster than increases in the fuel levy, which finances the fund. As a result, the fund has had to dip into its investments, Kgomongwe said.
Defrauded by public and staff
Kgomongwe said the fraud was being committed "by both outsiders lodging false claims as well as by the fund’s own staff”.
CARtoday.com reported earlier this week that the crackdown on the alleged defrauding of, and corruption in, the RAF this week led to the arrest of 17 people, police said.
The Gauteng police said their members, working in conjunction with the directorate of public prosecutions, began arresting suspects last week. By Sunday, police had arrested 17 alleged fraudsters acting as frontmen for doctors, lawyers and emergency services, police director Henriette Bester said.
This follows on comments made by Transport Minister Dullah Omar that all indications pointed to the fact that a staggering 25 per cent of annual fund claims were fraudulent. A whole chain of people were allegedly involved in claiming for fictional accidents or adding extra, uninjured people onto real accident claims, Omar added.
The management of the Fund had put out a strong message of zero tolerance of wrongdoing by staff members and had embarked on a campaign of streamlining internal procedures, Kgomongwe said.
Two RAF staff members were recently sentenced to 10 years’ imprisonment for defrauding the Fund and about 10 others had been suspended pending investigations.
Exorbitant salaries paid
The Parliamentary committee members also queried the salaries being paid to the fund’s management.
Kgomongwe earns R75 000 a month while the financial, information technology, human resources and legal services executives are each paid more than R60 000 a month.
They were at pains to point out that the board, assisted by a remuneration committee, determined salaries, that the executive team was highly qualified, and that Kgomongwe’s salary had not been increased for four years.
Questions were also asked about the R7,6 million spent on office furniture in 2000. Kgomongwe said each executive manager received R48 000 for office furniture and equipment.
He said the new RAF management and board had launched a number of initiatives to turn around the fund.
It had appealed to government to increase its allocation and was supporting legislative amendments that would improve its liquidity and cash flow management by an estimated R1,9 billion.
The problem with the fund was that its income was defined, while the rate of accidents and claims increased, Kgomongwe said.