KHAYA SITHOLE | Road Accident Fund faces crisis as levies fall short (original) (raw)

This week marked yet another period of confusion about the direction and the entire point of the war launched by the US and Israel against Iran at the end of February.

US President Donald Trump once again seems to have a different take from one day to the next about the success of the military operation, the economic consequences and the responsibility of everyone else to support his mission.

While many utterances are fluid in nature and serve as a poor proxy for the truth or reality, the more objective variables of the war’s effects offer sobering evidence of just how consequences of the war continue to bind the innocent and the warring.

Since the start of the war the oil price ― the most ubiquitous of all commodities given how dependent we all are on it and everything it fuels ― has escalated with every passing week and fluctuated with every passing rumour of a resolution.

On the eve of the war the global price was quoted at about 72perbarrelandsincethenithasgoneashighas72 per barrel and since then it has gone as high as 72perbarrelandsincethenithasgoneashighas120 despite Trump’s insistence that the economic effects would be marginal, if any.

In the South African case the petrol price has moved from below R20/l of 93 octane unleaded in February to the present level of about R26 (a 33% increase). Inland wholesale diesel prices have moved from R17.91 to R31.17 (up 74%) while paraffin has jumped from just R12.10/l to R28.43 (a 135% increase) in May.

Such steep increases have only been mitigated by the government’s ability to suspend the fuel levies that are generally added to the basic fuel price and retail margins. The relief extended for May was R3/l for petrol and R3.93/l for diesel. In the absence of the relief the increases would now be 48% for petrol and 96% for diesel.

Unfortunately, that is only applicable to petrol and diesel. The runaway increase in paraffin prices has had no tempering instrument. Users of paraffin have therefore been left more acutely exposed and there is no solution in sight.

Such developments feel like the price we pay for our dependencies in a globally connected economic universe and we quite simply have little recourse except patience and faith in the flawed global diplomacy channels. Or Trump simply getting bored by this war and moving on.

These developments should be of interest to the transport ministry as it considers what the funding model for the Road Accident Fund (RAF) should be. The model relies on the fuel levy, but even in normal times the levy receipts are insufficient to fund the RAF and this has resulted in a major contingent liability that will never be honoured.

Difficult conversations about the viability of the RAF have been continuously delayed and in the interim an ambitious compensation model at odds with the reality of insurance solidarity principles has escalated the crisis.

The RAF’s solution of pretending the liabilities simply don’t exist and creating new hurdles for claims has been rejected by the courts, and we now stand at the precipice of a crisis that only a new law can resolve.

Accelerating the finalisation of the Road Accident Benefit Scheme Bill, including a more sensible and practical compensation model, now seems non-negotiable. As we head into election campaign season you cannot imagine that any politicians will abolish the relief while the Middle East conflicts persist and fuel prices remain elevated.

Trump’s reign of madness has ironically forced a reality check, which comes with pain. The question of whether we are willing to fix longstanding lethargic habits in pursuit of long-term viability and sustainability of public institutions is our national litmus test.

• Sithole (@coruscakhaya) is an accountant, academic and activist.