• Collins Letsoalo has been acting in the CEO position for the past few months.
• Transport Minister Fikile Mbalula said he was confident the newly appointed CEO and the board would tackle the RAF's challenges.
• As of 31 March, RAF liabilities grew to R324 billion and it had claims valued at R17.2 billion, said Mbalula.

Cabinet has approved the appointment of Collins Letsoalo as the chief executive officer (CEO) of the Road Accident Fund (RAF), Transport Minister Fikile Mbalula announced on Friday.

Letsoalo was the RAF's acting CEO for the past few months and previously served as chief financial officer of the transport department.

The new CEO brings with him various qualifications, including a Bachelor of Commerce in Economics, an Advanced Diploma in Central Banking, a Diploma in Treasury Management and Trade Finance and a Postgraduate Diploma in Trade Finance, Mbalula said in a statement.

"We welcome this decision and we believe this appointment will go a long way in placing the RAF on a stable footing. Mr Letsoalo joins the RAF at a time when it is facing daunting challenges, and requires a steady hand to guide it through the change into the Road Accident Benefit Scheme once the enabling law has been passed by Parliament," Mbalula said.

"I have no doubt that he will rise to the occasion and provide decisive leadership in tackling the challenges."

The minister said as of 31 March the RAF liability grew to R324 billion and had claims valued at R17.2 billion that had been finalised, but could not be paid due to financial cash flow challenges.

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He said the cause of the liability was the increasing number of claims and high administrative costs.

Approximately 102 086 new claims were registered during 2019-20.

Mbalula said the R17.2 billion was owed to claimants who had already waited about five years for their claims to be settled.

"The RAF has operated on a financially unsustainable model for a number of decades. However, this challenge is compounded by the ever-increasing administrative costs of the RAF scheme. Of the revenue collected, more than R17 billion or 40% of this goes to administrative costs, with only R26 billion or 60% received by claimants.

"Of the R17 billion, R10.6 billion is legal costs. In the R26 billion paid, there is a further 'success fee' to the claimant's attorneys as part of the contingency fees agreement entered into between the claimants and their legal representatives," the minister said.

Mbalula said the challenges faced by the entity required strong and visionary leadership. He added that the board, which was appointed in December 2019, had already wasted no time in tackling some of the challenges, starting with appointing a "fit and capable" CEO.

He said the department was under no illusion that the current dispensation of the RAF was unsustainable and they would move speedily to change the fund from a fault-based policy approach to a no-fault policy based approach. 

The minister said the new entity's shareholder compact with the board for 2020-21 had prioritised, among other issues, reducing legal costs and reviewing the operating model, which must deliver a shift from litigation to claims administration.