21 May Dear Road Accident Fund Stakeholder RAF FINANCIAL STATUS UPDATE

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Alyson Potter
8 years ago
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1 21 May 2015 Dear Road Accident Fund Stakeholder RAF FINANCIAL STATUS UPDATE It has been two months since the previous communication. A financial year-end came and went and it is time again to not only bring you up to date with our latest cash management status, but also to share some interesting statistics of the past financial year with you and to draw your attention to a number of practical measures that will assist our engagement with each other. Current Cash Management Status At the time of writing: - Around Service Providers are owed R7bn; - The oldest amounts due according to the financial system were requested for payment in October 2014; - 42% is > 30 days; - 7%/1,909 of claims are >R1m; - 93%/27,422 of claims are <R1m - 1,209 writs to the value of R175m have been recorded and are due. On average: - Around s are received per month by the dedicated addresses, the Treasury Department, the CEO, CFO and COO; - Although we are still getting monitoring systems up and running, indications are that around 60% of these e- mails are responded to within 48 hours; - Between R300m and R400m per month is paid to the Sheriff; payments are made per month; and - Based on the average cost of the claims (at the time of writing this report) that is owed, for every claim prioritised over R1m, 18 claims below R1m would have to wait. We are awaiting the additional funding allocated to the Road Accident Fund (RAF) by the Minister of Finance, and currently the view is that this will be solely dedicated to addressing the oldest outstanding amounts for at least the first four months following receipt in no order other than from the oldest outstanding amount. It is further important to note that the additional funding is not sufficient to address both the backlog and close the gap between productivity and available funding going forward. The situation we find ourselves in is here to stay for the

year with you and to draw your attention to a number of practical measures that will assist our engagement with each other.

2 foreseeable future as indications are that the Accounts Payable book will only reduce to a comfortable level in the next 24+ months. Despite (or partly because of) the situation, we have succeeded in building a number of relationships, whether personally or via electronic media. These have mostly proved to be encouraging and constructive relationships characterised by cooperation, patience and understanding. Apart from a few negative, uncooperative experiences, we are grateful for your willingness to work with the RAF. A host of reporting mechanisms have been implemented albeit still manual but it affords us visibility and the ability to monitor various indicators in support of a flexible and responsive Cash Management Strategy. The initiative to improve process flows in the Treasury Department, in engagements between our regional offices and in the system, is slowly gaining momentum. Tangible results are expected in four to six months. One prevailing challenge remains the continued inability to forecast with certainty, which regularly still results in disruptions to commitments and plans to catch up on the longest overdue amounts. The daily engagement with the Sheriff is the predominant cause of this. This non-value added engagement and constant threat further continues to disrupt operations, including the ability to process and effect claims payments in general. To perhaps reflect on the impact of the writs for a moment it is in fact so significant that, in the 2 nd half of the month, payment plans can be completely disrupted given that we are then restricted to a very limited allocation per day to ensure the funding lasts till the next Fuel Levy income. As a result we are often forced to suspend all plans for a day and ONLY settle Sheriff demands. So not only can we not effect payment as was planned, but we can also not attend to queries and prepare for the next payment runs. Four days before the receipt of the April Levy our funding was depleted as a result.regrettably, a handful of firms appear to regularly pursue this course of action at the expense of thousands of other equally worthy Service Providers and their claimants. With regard to the efforts to consistently achieve the average payment periods previously communicated, we have experienced mixed success. The single largest inhibitor to achieving those days are the issuance of writs and the consequences thereof. 2

These have mostly proved to be encouraging and constructive relationships characterised by cooperation, patience and understanding.

3 Interesting statistics from FY15 The below will soon also be published in our Annual Report. The information is unaudited at this time. Claims Claims registered Outstanding claims as at 31 March Finalised Claims Claims less than 1 year old Average value per claim R114,969 Payments Total number of payments made Total value of payments made Value of >R1m payments Value of <R100k payments R21.5 billion R6.03 billion R5.04 billion Direct claimants (Value & No) R2.00 billion( ) Represented claimants (Value & No) R19.5 billion( ) Financial Results Fuel Levy received Claims expenditure R22.5 billion R27.8 billion Claims expenditure as a % of total expenditure 94.49% Legal fees R5.04 billion Claims requested but not yet paid Total net deficit Provision for outstanding claims Cash on hand (Fuel Levy received 24 March) R6.84 billion R billion R billion R1.048 billion Writs No 10,080 Value R 13.6 million (Sheriff Cost) % change from FY14 Increase of 69% Fruitless and wasteful expenditure as a result of the issuance of writs (Including the cost incurred as a result of the cash flow constraints) R 80.9 million in interest 3

payments made 225 501 Total value of payments made Value of >R1m payments Value of <R100k payments R21.5 billion R6.03 billion R5.04 billion Direct claimants (Value & No) R2.

4 Practical engagement notes Below follows a number of useful notes when engaging with our Finance Department. Though a number of you would no doubt have seen it already, I wish to use the opportunity to remind all. - With respect to any differences between what is outstanding according to your records and reports from the financial system, please note that the Finance Department focuses on what is visible on the financial system and respectfully request that you engage with the relevant Region with regard to invoices lodged/claims settled, but that do not appear on the financial system. - No doubt your ageing is likely to be different to what is reflected on the financial system, but it is necessary that all Service Providers be treated equally and thus the Finance Department work according to the ageing visible on the financial system. - We often experience administrative hurdles when we find that all the necessary paperwork for payments is not at the Treasury Office or there are other problems with a payment. This could result in payment NOT taking place as planned UNTIL the problem has been resolved. - Please make use of the dedicated addresses communicated before, but do allow 48 hours minimum for a response. Please ensure that you include the dedicated address in ALL financial system payment queryrelated correspondence. - Please be reminded to negotiate the longest possible payment terms with your clients preferably days, as that will reduce pressure on you and the RAF. - We would appreciate it if writs and interest can be managed, though we do respect the fact that claimants are entitled to payment. - Please include the name of your firm in the subject line of any correspondence as this assists with the referencing, allocation of responsibilities and records management. In conclusion We are aware of the fact that the current situation causes hardship and frustration, but we remain hopeful that the on-going communication, transparency and information will at least address some uncertainties. We further trust that the correspondence will empower you in engagements with your clients. Also note that the communication is distributed to all stakeholders of the RAF, including Law Societies, the Sheriff, the Departments of Health and Transport, Medical Experts, Advocates, etc. As previously stated, I again wish to reiterate that the RAF can only succeed at improving the management of this situation with your support and cooperation and we remain dedicated to honouring our commitments. 4

- With respect to any differences between what is outstanding according to your records and reports from the financial system, please note that the Finance Department focuses on what is visible on

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