The National Department of Transport and the Road Accident Fund Management have presented the Road Accident Fund Amendment Bill (henceforth the Bill) before the Portfolio Committee on Transport as a product or outcome of a wide consultation process.

As the Congress of South African Trade Union (COSATU), we take exception to this claim. Already, amongst the employees of the RAF, many of whom have been joining the South African Transport and Workers' Union (SATAWU) at a rapid rate recently, there is a pervasive sense of insecurity and concern about the RAF's restructuring. This is despite the fact that this Bill involves no substantial institutional changes with a bearing on the employees' fate.

The department and the RAF Management have failed to table this Bill at the National Economic Development and Labour Council (NEDLAC). This takes place against a background of a series of such omissions, including the failure on the part of the department to table for discussion in Parliament and at NEDLAC the RAF Commission's Report as well as the recommendations of the Intergovernmental Committee made to Cabinet, which led to a proposal for this legislative reform.

Based on the issues raised above concerning the consultative process, this submission approaches this Bill informed by two principal concerns;

• Even though this Bill constitute an interim measure, (purportedly to address some-cash flow problems experienced by the Fund) to what extent does it relate to the RAF Commission's findings regarding RAF's operational deficiencies and the need to shift towards an integrated social protection system.

• Are the proposed amendments adequate in relation to the stated objects of the Bill and the overall factors accounting for the current virtual insolvent position of the RAF.

The RAF Commission has been preceded by a number of other commissions whose recommendations have largely not been of any consequence particularly for the working people and the poor in general. Similarly, there has been a lot of ad hoc and piecemeal legislative reforms since 1946, which like the current Bill, amounted to little more than tinkering with an otherwise iniquitous road accident compensation system. Thus, in all these previous endeavours there have not been any recommendations remotely comparable to the findings of the Satchwell Report's proposed Road Accident Benefit Scheme. COSATU is therefore concerned about the apparent delay in the serious consideration and engagement with social partners concerning the Satchwell Report's recommendations for purposes of policy formulation and implementation since Cabinet has accepted the commission's recommendations.

In the overall, the thrust of our submission support some proposed amendments whilst at the same time opposes others, even though one of the main objectives of our submission is to call for more transparent and robust consideration of the RAF Commission's Report, the Intergovernmental Committee recommendations before we could be in a position to support the consideration of this Bill by Parliament.

COSATU's interest regarding the current untenable financial state and operation of the RAF and our demand for the establishment of an integrated and comprehensive social protection system in which the Road Accident Benefits Scheme would be an integral part, is informed by the following realities (which are also captured in the RAF Commissions Report);

• In the current system of road accident compensation disparities are perpetuated between urban and rural areas, the rich and poor, the rural and urban poor, the employed and the unemployed. The fact that the RAF does not keep any systematic or meaningful data showing its proportion of coverage or performance in terms of access especially regarding the poor is a major point of concern, exacerbating this disparity.

• Similarly, loss of income, hardship and inconvenience suffered by disablement and loss of functioning, funeral expenses and health care costs are more easily proven by claimants in formal employment, enjoying access to early and better healthcare and rehabilitation recording or reporting.

• As long as the basic operational premise and principles guiding the object of the damages of the current system remains, in which awards for personal injury sustained are meant to put the claimant in the same position financially as if he or she had not been injured, the system will remain unsustainable. This system put the Fund in an untenable position of unlimited liability depending on the outcome of the judicial processes, hence the continuing downward spiral regarding the Fund's solvency because of the disparity between levy receipts and awards issued.

• Road accident victims who are socio-economically privileged, in good employment and professional vocations will always be in a position to prove greater financial loss than the unemployed, the poor and the less advantaged.

It is iniquitous that passengers commuting in minibus taxis and buses (the so-called survival commuters according to the Satchwell Report) who are least able to afford safe transport and are the ones who are most vulnerable to accidents, are able to claim the least by way of compensation from the Fund.

Notwithstanding their contribution, their benefits for compensation are the least because their loss of income is less, and as stated in the commission's report, 'their loss of amenities do not include luxury pastimes and their past medical treatment was not provided at the cost to themselves or the RAF'. In fact, the awards made to victims travelling in public road transport (including taxis) are limited, whilst such limits are not applicable to those travelling in private motor vehicles. This is unacceptable and obviously unjust, yet the Bill fails to deal with it as part of amendments that could be made in the short-term.

Again, as noted by the commission's report, 'it is a striking feature of our delictual system of damages that the response to catastrophe is to furnish benefits or compensation that compensate the damage or loss suffered but not need or requirements' (our emphasis).

COSATU believes that a more sustainable and effective attempt to stop the current financial haemorrhage of the RAF as a result of lump-sum disbursements of compensation, lies in the all-round overhaul of the current road accident benefit system towards a "no fault-based" road accident system, which must become an integral part of a comprehensive social protection system as proposed by both the Report of the Committee of Inquiry into a Comprehensive System of Social Security for South Africa (the Taylor Report) and Satchwell Report.

Unlike the current fault-based road accident compensation system, the 'no-fault' Road Accident Benefit Scheme will constitute a complete departure from the current vested interest dominated and litigious system towards a social security system.

This system will be based on the victims' needs rather than on proof of fault and therefore it will be directed and centred on those who have sustained life-changing injuries and disablement or those who have suffered bereavement and loss of support in the death of the breadwinner.

Thus, the main object of the scheme would not be to compensate the victim in a manner that is intended to put them in a position as if they have suffered no misfortune (as intended in the current system), but to provide social protection and support based on their circumstances in the aftermath of their misfortune in order to empower them to move forward.

The benefits of the scheme would thus be made available to those who need and are entitled to them, facilitating necessary health care and rehabilitation and means of alleviation of hardship, in an articulated relationship with other social security packages.

As it will be reflected below, COSATU is not persuaded by the rationale given by the RAF Management as to the basic objective of this Bill, namely, 'improving the efficiency of the Fund'. There is absolutely nothing in the Bill, in terms of the suggested amendments which pertains to 'consideration of sound corporate governance' as its claimed in the memorandum.

Through the introduction of mediation and arbitration, the RAF will unavoidably have to incur more administrative costs as it expands its infrastructure and personnel complement. This is undertaken at the time when the commission's report shows that a lot of revenue from the levy is expended in administrative costs.

It would have been of benefit to us as COSATU if the RAF's proposed amendment to the Act in relation to the mandatory mediation and arbitration was motivated on the basis of some sound costs-benefits analysis regarding the likely net effect of these measures. It is estimated by the commission's report that up to 50 percent of the Fund's expenses are diverted to the payment of the legal, health and other allied professional fees, to the disadvantage of the victims of road accidents.

In motivating for this Bill, the RAF claims that 'the Bill is expected to have a positive impact on the RAF's cash-flow position'. As COSATU we would propose that any legislative reforms in the interim should also reflect measures dealing with the issues raised in the findings of the forensic auditors, Nkonki Sizwe Ntsaluba Incorporated.

COSATU broadly shares the concerns of the RAF Commission regarding some of the proposed amendments contained in this Bill as introduced at the end of 2001. In its reference to these amendments, the commission asserted that;

The RAF Commission goes further to make the following compelling observation;

This provision proposes to make it mandatory for future medical expenses to be disbursed on instalment basis only, rather than in terms of the current practice where the Fund may exercise its discretion as to whether disbursements occur on the basis of lump sum or undertakings.

This provision proposes mandatory disbursement of compensation for future loss of earnings and loss of support on instalment basis in arrears negotiated with the claimant, applicable retrospectively on the currently unfinalised claims.

This amendment pertains to General Damages. Like section 17(4)(b) and 17(4)(c) it proposes a departure from lump sum disbursement, towards instalments. However, in this regard the RAF proposes that there should be some threshold payment in lump sum of a particular percentage of the overall compensation award in which the remainder or balance will be paid on the basis of instalments. As with the section 17 (4)(b), it seeks to make this provision apply retrospectively.

The basic objective of clause 1 of this Bill is to propose that the furnishing of Undertakings be rendered obligatory so that compensation for future expenses and losses in respect of medical expenses, loss of earnings and support (in an instance of the bereaved dependents) in order to discontinue disbursements in lump sums.

With some merit, it is argued by the RAF Management that this measure will help in amelioration of 'the risk of mismanagement, abuse and over-hasty spending of compensation' and 'under-compensation'.

In principle COSATU is opposed to road accident benefits being granted on the basis of lump-sum awards, particularly within the structure of the current "fault-based' system. To that extent, we are supportive of compensation disbursements being issued on instalment basis as an interim measure, although we have some reservations to the implementation of such an approach in the current fault-based system.

In addition, our support for this proposal is conditional on the RAF being able to improve its performance regarding the current appalling situation where 'in excess of 80% of Undertakings issued are never utilised by the recipients', as established in the commission's report.

Thus, our support for an instalment based compensation approach is largely in the extent that it moves away from these lump-sum disbursements and potentially it could begin to compatibly point towards a direction of a 'no fault' system, as integrated with other social protection programmes.

However, as COSATU we are concerned that these amendments are proposed on the basis of a narrowly defined motivation for 'immediate positive impact on RAF's cash flow'. Whilst abandoning lump sum payments may achieve such a goal, the RAF seems to be complacently weighing its projections on the basis of taking for granted an absolutely unacceptable performance of its Undertaking Department where; more than 80% of Undertakings issued are never utilised by the recipients, majority of whom being the poor.

Based on the above, and the fact that this Bill still proposes the continuation or maintenance of a delictual system of road accident compensation, COSATU is not persuaded by the claim of the RAF in its motivation that one of the benefits of these provisions is that they represent 'responsible management of social security benefits', simply because the claimants henceforth would be able to access these benefits over time. In any case, RAF compensation awards are anything but social security benefits, since they are based and depend on prove of culpability and the fact that the manner in which the victims are compensated is largely reflective of the socio-economic disparities in our polarised society.

In this provision, the Bill seeks to deduct from the compensation paid by the Fund all benefits from other sources accruing to a claimant as a result of the same injury or death. These would be collateral benefits awarded from sources such as insurance, pension and gratuity accounts. This provision is made on the basis or motivation that 'many claimants receive double or even triple compensation' from other sources in addition to the compensation of the Fund.

In our point of view as COSATU, this is but a manifestation of inequalities primarily determined by income or social position, which the Fund fails to deal with or take into account in other and more objectionable respects of the current road accident compensation system, notably on the compensation for future loss of income. It is a phenomenon encouraged by the absence of any guaranteed right to compensation from road accident misfortune. Thus, many working people have taken insurance policies covering members of their households, prompted by this state of insecurity. In fact, such life insurance policies tend to constitute their primary economic assets which are leveraged for purposes of their other socio-economic needs, for which this amendment could easily become a disincentive.

Therefore, as COSATU we are opposed to this amendment, as proposed in Clause 2 re; section 17 (b).

In this provision, the Bill provides for mandatory mediation and arbitration in which litigation would become the last resort. COSATU would naturally take a sympathetic view to this proposal, to the extent that it attempts encourage and focus more on constructive resolution of disputes. It is also claimed that the time-saving potential of this mechanism or process could be of benefit to the poor.

However, we would not support this provision in the manner proposed in this Bill. Firstly, there is no basis to determine whether there would be any cost-saving dividends for the Fund accruing from such an exercise, noting the fact that there would naturally be extensive costs implications for the RAF in undertaking such nation-wide infrastructural, personnel and service agreement requirements.

Secondly, the Bill does not establish any institutional framework for purpose of such exercises. If the Fund is to establish some independent institutions in pursuit of its mandate, it is necessary that the founding legislation also outline the institutional framework, in term of which the accountability, relationships and operational powers of these bodies are outlined.

Whilst the attempt to introduce mediation and arbitration may have some benefit in creating a constructive mechanism for dispute resolution, it must be acknowledged that so far this mechanism has been only piloted in Western Cape, even so on a voluntary basis, rather than on mandatory basis as proposed in the Bill.

The Bill must reflect the fiscal implications attendant to this apparatus of mediation and arbitration as proposed.

It must be noted, that these reforms are proposed at the time when the primary challenge before the RAF and the department should have been the definition of the wayforward in terms of the integration of the road accident compensation system into the social protection system as proposed by the RAF Commission, and the Taylor Commission.

These piecemeal measures undertaken in a policy vacuum seem to be tangential from the Department of Social Development's institutional transformation, in which the latter has already began to set up the Social Security Agency, which is expected to eventually undertake the operation of the RAF in terms of the road accident benefits, albeit in a 'no-fault' social security context. This agency is itself intended to have its own independent institutions, which if they are properly aligned to the requirement of the road accident benefits, could yield economies of scale and scope.

Equally important is the recognition that notwithstanding these mechanisms of mediation and arbitration, this Bill does not fundamentally change the basic fault-centred system on which the Fund's liability to compensate is based. Thus, in this process of mediation and arbitration, dispute resolution will still be based on the requirements of prove to all the elements of fault as contained in the principal Act;

This provision is intended to introduce prescribed medical tariffs which the RAF would be liable to pay, both in terms of medical care undertaken in the public and private sectors.

The provision limits claims by non-residents by introducing prescriptions, a departure from the current situation where non-resident enjoy the same unlimited cover as residents, which means that they can lodge their claims denominated in foreign currencies and in the context of different socio-economic and cultural realities for purposes of other related claims, i.e. general damages.

This provision pertains to existing claims by secondary victims who may suffer emotional shock on hearing of injury or death of another, or on being a witness to a lurid accident.

In principle COSATU generally supports these amendments in the extent that they seek to;

• End open-ended exposure of public funds to unreasonable claims, especially regarding the private patient rates.
• End unlimited cover for non-residents which have seen vast outflow of scares public resources from South Africa, at the time when the RAF is virtually insolvent.
• End the risk of fraud and malingering and unlimited exposure for the Fund to those claiming as secondary victims.

Essentially, this provision introduces the application of retrospectivity regarding the proposed amendments on the payments in instalments and on the introduction of mediation and arbitration proceedings. This means that in respect of the unfinalised but lodged claims, these amendments will apply.

COSATU is opposed to this amendment. This is a clause which may very well be open to constitutional challenge anyway, and therefore in effect it may defeat the objects of this steamrolled retrospective introduction of these amendments and the Bill in general.

COSATU can not support this Bill, even though it is merely intended as an interim intervention, unless the department and the RAF Management first engage NEDLAC social partners on the RAF Commission Report, the Intergovernmental Committee's Report submitted to Cabinet on which basis this Bill has been proposed.

COSATU is not convinced as to the need for delay in the move towards comprehensive social protection of which the road accident benefit scheme ought to be part, as recommended by both the Satchwell and Taylor Reports.

Whilst some of the proposed amendments are generally worthwhile and long overdue, COSATU believes equally important is the primary challenge before the RAF in terms of its corporate governance as emerged from the auditor's report and the need to move towards a no-fault based compensation system.

In making the issuing of Undertakings mandatory, the RAF should also take drastic measures to improve its Undertaking Department's performance, firstly in relation to its current estimated up to 80 % short-fall, before it could be ready for legislatively compulsory issuing of Undertakings to all awarded victims.

We believe a genuine engagement with social partners could help in dealing with both the short-term and long term challenges facing the RAF.