Road Accident Fund(RAF) 2008/2009 Annual Report

visionmissioncore valuesVisionTo be a sustainable, world-class provider of cover for personal injury and death arising from the use of motor vehicles inSouth Africa.MissionTo provide appropriate cover to all road users within the borders of South Africa for incidents arising from the use of motorvehicles and, in a timely and caring manner, compensate persons injured or their families in the event of fatal accidents,rehabilitate the injured, indemnify the wrongdoers, and actively promote the safe use of the roads.Core ValuesUbuntu Freedom to succeed Pride in what we do• We care about andsupport others• We involve and listen toothers and recognisetheir contributions• We show concern forpeople’s well-being• We take personal responsibility for deliveringour work and we do what we say we’ll do• We offer solutions, not problems• We empower others to take responsibility fortheir actions and decisions• We continually look for ways to improve whatwe do and how we do it• We are open to change and learn from newideas and ways of working• We find ways to remove or minimise obstacles• We learn from our mistakes• We believe in the role and work of theRAF• We celebrate successes andachievements• We demonstrate integrity,consistency and fairness in ouractions and decisions• We demonstrate energy, passion andconviction in everything we do• We model the highest standards ofpersonal and professional behaviourvision, missionand core valuesAnnual Report 2009Honourable Minister and DeputyMinister of Transport: MessrsSibusiso Ndebele and Jeremy Cronin1

turnaroundstrategyNational TreasuryGovernment of the Republicof South AfricaDepartment of TransportRoad Accident FundRAF to invest in new systems and processesthat will provide superior service deliveryto victims of motor vehicle accidents, theirfamilies and service providers.National TreasuryNational TreasuryAnnual Report 2009National Treasury to ensure that the systemput in place for South Africa is appropriatelyfunded and that correct economic modelsare used to determine the pricing of the RAFGovernment of the RepublicDepartment of Transportof South Africa Fuel Levy on a regular basis.Government of the Republicof South AfricaDepartment of Transport and Parliament tointroduce appropriate legislation to set up aRoad Accident benefit Fund system for South Africa that is equitable,affordable, sustainable, and appropriate for thecountry and eliminates wastages, inefficienciesand leakages inherent in the current system.Department of TransportTurnaroundStrategy2

contentsPageCoverProfileGeographic FootprintRoad Safety - Country ProfileVision, Mission and Core Values 1Turnaround Strategy 2Page6.3 Board Composition 556.4 Powers and Functions of the Board 556.5 Board Committees 566.6 Attendance of Meetings 596.7 Performance Agreement 606.8 The Public Finance Management Act, 1999 616.9 Code of Conduct and Ethical Standards 61Section 1: Five-year Review 6Section 2: Organisational Leadership 142.1 Board of Directors 142.2 Executive Management 16Section 3: Messages from the Chairman and CEO 20Section 4: Review of Operations 324.1 Revenue 324.2 Expenditure 334.3 Profitability 424.4 Cost of Service Delivery 424.5 Productivity 434.6 Financial Health 43Section 5 : Performance against Objectives 48Section 6 : Corporate Governance 546.1 The RAF Board 546.2 Board Structure 54Section 7 : Legal Framework 647.1 Legal Framework 647.2 Funding 747.3 Borrowings 75Section 8 : Sustainability Report 788.1 Sustainability Approach and Philosophy 788.2 Corporate Governance 838.3 Marketing and Communications 838.4 Promoting Road Safety 848.5 Towards the Future 878.6 Human Resources 878.7 Information and Communication Technology 908.8 Conclusion 93Section 9: Annual Financial Statements 96Section 10: Annexures 172Back PageContact DetailsContentsAnnual Report 2009Designed and produced by Puisano Business Development 0861 110 1103

messages five-year from thechairman reviewand ceosection 1

Five-year ReviewSection 1 Annual Report 2009R’millionR’million4 0003 5003 0002 5002 0001 5001 000500010 000-40 000-50 0000-10 000-20 000-30 000Cash holdings1 1453 6922 4041 1921 09105 06 07 08 09Financial year1 708Solvency-21 573-19 8654 360-22 728-18 3684 207-24 448-20 2413 2973 265-31 125-27 828-43 228-39 96305 06 07 08 09Financial yearTotal assetsTotal liabilitiesNet deficitStatement of Financial PositionAssets31 March2009R’million31 March2008R’million31 March2007R’million*31 March2006R’million31 March2005R’millionCurrent assets 3 095 3 155 4 054 4 275 1 645Cash and cashequivalents 1 091 1 192 2 404 3 692 1 145Fuel Levy and interestreceivables 1 922 1 895 1 592 565 441Other receivables 79 66 58 18 59Consumable stock 3 2 - - -Non-current assets 170 142 153 85 63Other receivables 11 13 22 27 -Property, plant andequipment 158 128 129 56 63Intangible assets 1 1 2 2 -LiabilitiesTotal assets 3 265 3 297 4 207 4 360 1 708Current liabilities 9 920 9 806 5 659 7 002 5 515Payables and accruals 428 410 92 564 843Unutilised Governmentgrant59 110 196 199 -Provision for outstandingclaims9 223 9 052 5 180 5 658 4 006Other provisions210 234 191 581 666Non-current liabilities33 308 21 319 18 789 15 726 16 058Payables and accruals 6 9 14 15 -Provision for outstandingclaims33 278 21 288 18 755 15 693 16 044Employee benefits24 22 20 18 14Net deficitTotal liabilities 43 228 31 125 24 448 22 728 21 573Revaluation reserve80 59 59 - -Accumulated deficit (40 043) (27 887) (20 300) (18 368) (19 865)*RestatedTotal net deficit (39 963) (27 828) (20 241) (18 368) (19 865)Total net liabilities 3 265 3 297 4 207 4 360 1 7086

Statement of Financial PerformanceRevenue:Non-exchangetransactions31 March2009R’million31 March2008R’million31 March2007R’million*31 March2006R’million31 March2005R’million- Transfers fromGovernment 2 500 - 2 2 502 -- Net fuel levies 8 845 8 222 7 011 5 552 4 566Exchangetransactions- Investment income andother revenue 574 183 264 88 58Expenses:Total Revenue 11 919 8 405 7 277 8 142 4 624- Claims expenditure(excluding provision foroutstanding claims) 11 131 8 984 6 119 4 850 3 884- Reinsurance premiums 24 27 5 18 43- Staff costs 534 426 397 352 322- Administrativeexpenses 193 122 100 109 112- Finance costs 24 16 - - -- Depreciation andamortisation 9 13 4 15 22Total Expenses 11 915 9 588 6 625 5 344 4 383Surplus/(deficit)before provision foroutstanding claims 4 (1 183) 652 2 798 241Provision for outstandingclaims (12 161) (6 404) (2 511) (1 301) (1 541)(Deficit)/surplus forthe year (12 157) (7 587) (1 859) 1 497 (1 300)*RestatedR’millionR’million14 00012 00010 0008 0006 0004 0002 000029 00023 00017 00011 0005 00004 624Revenue8 1427 2778 40505 06 07 08 09Financial yearTotal expenditure1775 4251426 151109322 352 3978 63017842615 38811 91925053423 29205 06 07 08 09Financial yearAdministrative and other expensesStaff costsClaims expenditureCash Flow Statement31 March2009R’million31 March2008R’million31 March2007R’million*31 March2006R’million31 March2005R’millionNet cash flows used in operating activities (112) (1 274) (1 508) 2 475 813Net cash flows generated by investing activities 35 78 220 72 52Net cash flows used in financing activities (24) (16) - - -Net decrease in cash and cash equivalents (101) (1 212) (1 288) 2 547 865Cash and cash equivalents at beginning of period 1 192 2 404 3 692 1 145 280Cash and cash equivalents at end of period 1 091 1 192 2 404 3 692 1 145*Restated7Section 1Annual Report 2009

NumberClaims outstanding at year-end500 000400 000300 000200 000100 000102 474340 925112 779332 90369 346271 80031 832265 24023 197238 193Ratios and StatisticsClaims finalisationNew claims lodgedNon-suppliersRef. Units1No.31 March200931 March200831 March200731 March200631 March2005294 771 267 133 170 418 190 468 185 773166 146 165 513 112 467 133 414 127 732Suppliers No. 128 625 101 620 57 951 57 054 58 041Increase/(decrease) % 10% 57% (11%) 3% 11%Claims finalisedNon-suppliers2No.330 453 311 207 274 954 188 185 90 116193 193 172 073 173 570 141 436 65 000Suppliers No. 137 260 139 134 101 384 46 749 25 116Increase/(decrease) % 6% 13% 46% 109% (44%)005 06 07 08 09Financial yearSupplier claimsNon-supplier claimsClaims outstandingNon-suppliers3No.261 390 297 072 341 146 445 682 443 399238 193 265 240 271 800 332 903 340 925Suppliers No. 23 197 31 832 69 346 112 779 102 474Increase/(decrease) % (12%) (13%) (23%) 1% 28%Section 1 Annual Report 20098Average R value of all claim paymentsNumber120 000100 00080 00060 00040 00020 000R35 000R30 000R25 000R20 000R15 000R10 000R5 000R0Undertakings56 7512 74169 4432 70780 9122 38388 0012 324103 5832 537005 06 07 08 09Financial yearR 23 492Total undertakingsActive undertakingsTotal payment per claim132 204182 397R 28 198211 798R 31 165331 155R 26 519336 511R 33 17105 06 07 08 09Financial yearAverage Rand value - all claimsNumber of payments400 000350 000300 000250 000200 000150 000100 00050 0000Total individual claim paymentsFinalised / New % 112% 116% 161% 99% 49%UndertakingsTotal Undertakingsregistered 4 No. 103 583 88 001 80 912 69 443 56 751Total Rand value ofUndertakings paid R’000 R 80 926 R 58 740 R 59 125 R 58 724 R 59 184Claims paymentsAll claims 5 R’m R 11 100 R 8 800 R 6 600 R 5 100 R 3 100Rand valueper claim Ave. R 33 171 R 26 519 R 31 165 R 28 198 R 23 492Number of payments No. 336 511 331 155 211 798 182 397 132 204Non-supplier claims 6 R’m R 10 800 R 8 300 R 6 400 R 5 000 R 3 000Rand valueper claim Ave. R 52 876 R 44 851 R 41 883 R 35 747 R 28 829Number of payments No. 204 275 185 544 152 480 140 263 103 423Supplier claims 7 R’m R 300 R 500 R 200 R 100 R 100Rand valueper claim Ave. R 2 730 R 3 209 R 3 603 R 3 059 R 4 309Number of payments No. 132 235 145 594 59 316 42 133 28 780References1. New claims lodgedClaims received and registered by the RAF during the financial year.2. Claims finalised Claims processed in the Supplier and Non-supplier categories where compensationhas been paid in full.3. Claims outstandingClaims registered by the RAF that have not been finalised at year-end, or have beenreopened and not finalised by year-end.4. Total Undertakings registeredAn Undertaking is a medical certificate issued by the RAF to cover future medical costs.5. All claims6. Non-supplier claimsAll claims settled by the RAF.Anon-supplier claim is a claim submitted by any person (the third party) for any loss ordamage which that person has suffered as a result of any bodily injury to himself/herself, orthe death of, or any bodily injury to any other person.7. Supplier claims Asupplier claim is a claim submitted directly to the RAF by a person/institution that providedmedical treatment and accommodation to the victim of the accident.

Ratios and StatisticsClaims payments perheads of damageRef. Units31 March200931 March200831 March200731 March200631 March2005General damages 8 R’m R 4 900 R 3 900 R 2 600 R 2 100 R 1 200Rand valueper claim Ave. R 36 409 R 31 347 R 26 875 R 22 567 R 19 547Number of payments No. 134 160 125 572 97 771 94 058 59 893Loss of earnings 9 R’m R 2 300 R 1 600 R 1 400 R 1 000 R 500Rand valueper claim Ave. R 335 503 R 264 337 R 222 655 R 158 755 R 130 278Number of payments No. 6 782 5 957 6 194 6 444 4 172Loss of support 10 R’m R 600 R 500 R 400 R 300 R 200Rand valueper claim Ave. R 187 236 R 175 457 R 151 253 R 122 558 R 93 617Number of payments No. 2 986 2 758 2 960 2 708 1 934Medicalcompensation 11 R’m R 800 R 700 R 500 R 400 R 300Rand valueper claim Ave. R 5 241 R 4 367 R 5 670 R 4 989 R 5 593Number of payments No. 161 893 174 836 86 101 71 120 50 755Funeral costs 12 R’m - - - - -Rand valueper claim Ave. R 6 650 R 5 847 R 5 783 R 5 003 R 4 674Number of payments No. 3 952 3 450 3 571 3 116 1 793Claimants’ legal costs 13 R’m R 1 600 R 1 300 R 1 000 R 800 R 500Rand valueper claim Ave. R 11 399 R 8 285 R 6 713 R 6 213 R 5 844Number of payments No. 139 276 152 550 147 240 128 589 93 025RAF’s legal costs 14 R’m R 900 R 800 R 700 R 500 R 400Rand valueper claim Ave. R 9 977 R 9 483 R 10 198 R 10 411 R 8 571Number of payments No. 98 311 82 998 66 198 49 939 44 895Average R claim paymentsAverage R value of claim paymentsR40 000R35 000R30 000R25 000R20 000R15 000R10 000R5 000General damages paymentper claimR0R400 000R350 000R300 000R250 000R200 000R150 000R100 000R50 000R059 893R 19 54794 058R 22 56797 771R 26 875125 572R 31 347134 160R 36 409005 06 07 08 09Financial yearAverage Rand value - general damagesNumber of paymentsR 130 278R 158 755R 222 655R 264 337R 335 50305 06 07 08 09Financial year160 000140 000120 000100 00080 00060 00040 00020 000Loss of earnings payment per claim4 1726 4446 1945 9576 7828 0007 0006 0005 0004 0003 0002 0001 000Total individual claim paymentsAverage Rand value - loss of earningsNumber of payments0Total individual claim paymentsReferences8. General damages General damages represent compensation paid by the RAF for loss of amenities of life,pain and suffering, disability and disfigurement.9. Loss of earnings Loss of earnings represents past and future loss incurred by the accident victim inearnings as a result of a motor vehicle accident.10. Loss of support Loss of support represents past and future loss of support incurred by the accidentvictim’s family as a result of a motor vehicle accident.11. Medical compensation Medical compensation represents past and future costs incurred by the accident victimin medical cost as a result of a motor vehicle accident.12. Funeral costs Funeral costs represent cost of internment or cremation of the accident victim arisingfrom a motor vehicle accident.13. Claimants’ legal costs Claimants’ legal costs are expenses paid to accident victims’ attorneys and experts fortheir assistance provided to the accident victim in lodging a claim with the RAF.14. RAF’s legal costs RAF’s legal costs are expenses paid to the RAF’s panel attorneys to represent the RAFin legal cases against it.Average R value of claim paymentsR6 000R5 000R4 000R3 000R2 000R1 000R0Medical compensationpayment per claimR 5 59350 755R 4 98971 120R 5 67086 101174 836R 4 367161 893R 5 241005 06 07 08 09Financial yearAverage Rand value -medical compensationNumber of payments200 000180 000160 000140 000120 000100 00080 00060 00040 00020 000Total individual claim payments9Section 1Annual Report 2009

Section 1 Annual Report 2009R’millionPercentageNumber of claims353025201510506 0004 0002 0000-2 000-4 000-6 000-8 000-10 000-12 0002502141791431077136Cost-to-income ratio1211 1083166221430153113289 987 7 705 06 07 08 09Financial yearClaimants’ legal & expertcosts as % of total incomeRAF’s legal & expert costsas % of total incomeRAF’s admin costs as %of total incomeTotal costs as % of totalincome1 645-5 515-3 870Liquidity4 275-7 002-2 7274 054-5 659-1 6053 155-9 806-6 6513 095-9 920-6 82505 06 07 08 09Financial yearTotal current assetsTotal current liabilitiesNet current liabilitiesClaims finalisedper staff member50103152196205Ratios and StatisticsProfitabilityRef. Units31 March200931 March200831 March200731 March200631 March2005EBIDTA 15 R’m 37 (1 154) 656 2 813 263(Deficit)/surplus torevenue 16 % -102% -90% -26% 18% -28%Operating surplus/(deficit) to revenue 17 % 0% -14% 9% 34% 5%Return on averageequity 18 % -36% -32% -10% 8% -7%Return on average totalassets 19 % -371% -202% -43% 49% -105%Cost-to-income ratio 20 % 28% 31% 30% 22% 31%LiquidityCash-to-claims coverratio 21 Mths 1.18 1.59 4.71 9.13 3.54Current ratio 22 Ratio 0.31 0.32 0.72 0.61 0.30Net working capital 23 R’m (6 825) (6 651) (1 605) (2 727) (3 870)Net working capitalexcluding claimsprovision24 R’m 2 398 2 401 3 575 2 931 136SolvencyTotal assets to totalliabilities25 % 8% 11% 17% 19% 8%References15. EBITDA16. (Deficit)/surplus to revenueSurplus or deficit before finance costs, taxation, depreciation, amortisation andprovision for outstanding claims.Total surplus or deficit as a percentage of revenue.17. Operating surplus/(deficit) to revenue Total surplus or deficit before provision for outstanding claims as a percentage ofrevenue.18. Return on average equityTotal surplus or deficit for the financial year as a percentage of average net deficit atyear-end.19. Return on average total assets Total surplus or deficit for the financial year as a percentage of average total assetsduring the financial year.20. Cost-to-income ratio21. Cash-to-claims cover ratio22. Current ratio23. Net working capital24. Net working capitalexcluding claims provision25. Total assets to total liabilitiesTotal administration and human resources costs including RAF and claimant legal andexpert costs as a percentage of total income during the financial year.Cash and cash equivalents at the end of the financial year divided by average monthlyclaims expenditure for the financial year (compensation and legal costs).Total current assets divided by total current liabilities.Current assets minus current liabilities.Current assets minus current liabilities excluding provision for outstanding claims.Total assets as a percentage of total liabilities.10005 06 07 08 09Financial year

Regional StatisticsUnits CPT Dbn EL Jhb Pta Menlyn TotalFinalisation of claimsNumber of claims outstanding - 31/03/09 No. 30 237 40 221 13 860 50 659 98 918 27 495 261 390Less: Claims finalised 25 948 51 868 11 168 47 519 60 879 133 071 330 453Add: Claims lodged 25 654 35 829 7 090 34 320 59 354 132 524 294 771Number of claims outstanding - 31/03/08 No. 30 531 56 260 17 938 63 858 100 443 28 042 297 072Less: Claims finalised 41 674 57 313 10 756 49 566 83 150 68 748 311 207Add: Claims lodged 25 803 40 100 9 197 35 883 61 137 95 013 267 133Number of claims outstanding - 31/03/07 No. 46 402 73 473 19 497 77 541 122 456 1 777 341 146Less: Claims finalised 46 333 60 840 11 428 59 016 96 696 641 274 954Add: Claims lodged 26 597 35 639 10 096 31 544 66 466 76 170 418Number of claims outstanding - 31/03/06 No. 66 138 98 674 20 829 105 013 152 686 2 342 445 682Claims PaymentsAmounts paid in cashas at : 31 March 09 R’m R 1 422 R 970 R 353 R 1 944 R 2 899 R 3 551 R 11 139Staffing: 31 March 08 R’m R 1 434 R 894 R 292 R 1 615 R 2 390 R 2 123 R 8 748: 31 March 07 R’m R 1 296 R 796 R 266 R 1 686 R 2 054 R 502 R 6 600Number of staff as at : 31 March 09 No. 260 283 129 347 508 426 1 953: 31 March 08 No. 260 287 112 340 440 371 1 810: 31 March 07 No. 229 289 115 328 432 318 1 711Claims lodged by RegionClaims finalised by Region140 000140 000120 000120 000100 000100 000Number80 00060 000Number80 00060 00040 00040 00020 00020 0000CPTDbnELJhb2007 2008 2009NumberPta160 000140 000120 000100 00080 00060 00040 00020 000MenlynClaims outstanding by Region0CPTDbnELJhb2007 2008 2009PtaMenlynSection 1 Annual Report 20090CPTDbnELJhbPtaMenlyn20062007 2008 200911

messages organisational from thechairman leadershipand ceosection 2

2.1 Board of DirectorsMr Todani MoyoChairman of the RiskCommittee(Non-executive Director)Mr Jacob ModiseChief Executive Officer(Executive Director)Mr Veli MahlanguActing Chairman of theBoard(Non-executive Director)Mr Sifiso MsibiChairman of theRemuneration andHuman ResourcesCommittee(Non-executive Director)Ms Grathel MotauChairman of the AuditCommittee(Non-executive Director)Section 2 Annual Report 2009Ms Khibi MananaShareholderRepresentative(Non-executive Director)Ms Kealeboga Moloto-Stofile(Non-executive Director)Dr Aslam Dasoo(Non-executive Director)Professor Caspar GreeffChairman of the ClaimsCommittee(Non-executive Director)14

Directors’ ProfilesMr V Mahlangu (56)Mr JRD Modise (42)Mr SA Msibi (46)Date of Appointment: 9 June 2005Qualifications:Diploma in Public Relations (Damelin),National Certificate in BusinessAdministration(Technikon SA), Small BusinessDevelopment Programme (Unisa),Certificate Public Sector Governance(Unisa), Certificate in ManagementStudies (MANCOSA), MBA - Researchproject pending (MANCOSA)Major Directorships held:Inkoleko Trading 492 (Pty) LtdCurrent Employment:Venue Manager: FIFA 2010 OrganisingCommittee of South Africa, MatchCommissioner: FIFA, MatchCommissioner: Confederation ofAfrican Football (“CAF”)Mr T Moyo (44)Date of Appointment: 9 June 2005Qualifications:BCom (Accounting) (ROMA),Post-graduate Diploma in StrategicManagement (Baruch CollegeCity University of New York), MBA(Finance) (Cardiff Business School,Wales University), Risk Management(SU), Graduate Diploma in CompanyDirection (Graduate Institute ofManagement), Executive DevelopmentProgramme (Harvard BusinessSchool), AIRMSA, MCMA (UK)Major Directorships held:Date of Appointment as Director:1 August 2006Qualifications:BCom (Wits), BAcc (Wits), CA(SA), MBA (Wits Business School),Advanced Management Program(Harvard), Advanced ManagementProgram (Samford)Major Directorships held:Allied Electronics Corporation Ltd,Blue IQ Investment Holdings (Pty) Ltd,Eskom Holdings Ltd, Batsomi Group,Nelson Mandela Children’s Fund(Trustee)Current Employment:Chief Executive Officer: Road AccidentFundMs KR Manana (37)Date of Appointment: 9 June 2005Qualifications:BA (Wits), Post-Graduate Diploma inPublic and Development Management(Wits), BCom Hons in Energy Studies(RAU), Certificate in ManagementDevelopment (Wits Business School),Masters in Transport Studies (UCT)Major Directorships held:GM Architects and Project ManagersCurrent Employment:Chief Director: Public TransportStrategy & Monitoring in theDepartment of Transport (“DoT”)Date of Appointment: 9 June 2005Qualifications:BSc Chemical Engineering (UKZN)Major Directorships held:Pamodzi Investment Holdings (Pty)Ltd, Altech Information Technologies(Pty) LtdCurrent Employment:Executive Director: PamodziInvestment Holdings (Pty) LtdProf. CJB Greeff (74)Date of Appointment: 9 June 2005Qualifications:FFA, FASSA, FIAC, BSC Hons (Unisa)Major Directorships held:Independent Actuarial Consultants,Zonkizizwe Insurance Brokers (Pty) LtdCurrent Employment:Actuarial Consultant: IndependentActuarial ConsultantsMs HG Motau (35)Date of Appointment: 9 June 2005Qualifications:BCom (Accounting) (Unisa), BCom(Accounting) Hons (Unisa), CA (SA)Major Directorships held:Pinnacle Technology HoldingsLtd, York Timber Organisation Ltd,The Innovation Hub ManagementCompany (Pty) LtdOrion SA (Pty) Ltd, YokoyoInvestments (Pty) Ltd, Alpha ToursAfrica (Pty) Ltd, Innovida SA Dubai(Pty) Ltd, Innovida South Africa (Pty)Ltd, Push Umlozi (Pty) LtdCurrent Employment:Ms KE Moloto-Stofile (53)Date of Appointment: 9 June 2005Qualifications:BProc (Unisa), LLB (Wits), MBA(Thames Valley University – UK)Current Employment:Chief Financial Officer: Blue IQInvestment Holdings (Pty) LtdDr AKA Dasoo (47)Chairman & Chief Executive Officer:Yokoyo Investments (Pty) Ltd, InnovidaSouth Africa (Pty) Ltd and Alpha ToursAfrica (Pty) LtdMajor Directorships held:Moloto-Stofile Inc, Rorisang BasadiInvestment Holdings (Pty) Ltd,Gauteng Gambling BoardCurrent Employment:Managing Director: Moloto-Stofile IncDate of Appointment: 9 June 2005Qualifications:MBChB (UKZN)Major Directorships held:Liseko Strategic Investments (Pty) Ltd,Liseko Life Science Investments (Pty)Ltd, Metswale (Pty) Ltd, Meditech SA(Pty) Ltd, Yeikona (Pty) Ltd, EssentialAccess CCCurrent Employment:Chief Executive Officer: Liseko GroupSection 2 Annual Report 200915

2.2 Executive ManagementTop row: Mr Sunjay Ramessur (Chief Information Officer), Mr Bailey Mbalu (Executive: Business Development),Mr Mandla Mvelase (Executive: Marketing and Communications), Ms Lyndsey Steele (Executive: Legal and Compliance)(acting), Mr Joe Hlabangane (Executive: Human Capital)Bottom row: Mr Ayanda Vilakazi (Executive: Marketing and Communications) (resigned),Mr Jacob Modise (Chief Executive Officer), Mr André Gernandt (Chief Financial Officer)Section 2 Annual Report 200916

Executives’ ProfilesMr JRD Modise (42)Position: Chief Executive OfficerQualifications:BCom (Wits), BAcc (Wits)CA (SA), MBA (Wits Business School),AMP (Harvard Business School), AMP(Samford University)Major Directorships held:Allied Electronics Corporation Ltd,Blue IQ Investment Holdings (Pty) Ltd,Eskom Holdings Ltd, Batsomi Group,Nelson Mandela Children’s Fund(Trustee)Mr B Mbalu (43)Position: Executive: BusinessDevelopmentQualifications:BCompt (Unisa), MBA (UCT)Mr M Mvelase (49)Position: Executive: Marketing &CommunicationsQualifications:Bachelor of Law (University ofZululand), Post-graduate Diplomain Marketing (Unisa), Diploma inFinancial Management (Damelin)Mr A Gernandt (43)Position: Chief Financial OfficerQualifications:BCom (Accounting) (UP), BComHons CTA (UP), CA (SA), ExecutiveLeadership Programme Certificate(Unisa)Mr S Ramessur (42)Position: Chief Information OfficerQualifications:BSc Computer Science (Universityof Natal), Certificate in Accounting(Heriott Watt), Certificate in StrategicInformation Systems Planning (HeriottWatt)Major Directorships held:Long Island Residents’ AssociationMr J Hlabangane (51)Position: Executive: HumanCapitalQualifications:B Admin, Employee Relations DiplomaMs L Steele (47)Position: Executive: Legal andCompliance (Acting)Qualifications:BA LLB (Wits)Mr A Vilakazi (32)(Resigned 31 January 2009)Position: Executive: Marketing &CommunicationsQualifications:BCom (Marketing & BusinessAdministration), (UKZN)Honours - Marketing (UKZN), Diplomain Business Administration (UKZN),MBA (UKZN)Major Directorships held:NDODO Transport Solutions, NaomeStaffing, Ledi-Vila Trading,Ayazi Marketing Solutions, SenzosihleConstructionSection 2 Annual Report 200917

messages from thechairmanand ceosection 3

actingchairmanMessage from the Acting ChairmanIt gives me great pleasure to present the financial statements of the Road AccidentFund for the year ending 31 March 2009.Much progress was made during the current financial year in addressing the challengesfacing the organisation and the country with regard to third-party compensation. Althoughthis progress still represents just a ‘scratch on the surface’ and a lot still remains to be done,it is gratifying to see the first shoots of the tentative steps taken on this road to recovery.Annual Report 2009Section 3“plans are beingfinalised to ensurethat the public caninteract with theRAF in their ownlanguage”StrategyOur turnaround strategy remains firmly rooted in the three pillars we require forsuccessful transformation of the RAF for the benefit of the South African public:• Investment in new systems and processes;• Legislative amendments; and• Appropriate funding model.SystemsManagement has made enormous progress in modernising the RAF’s systems toenable the organisation to deliver service of an appropriate quality to the South Africanpublic. Following the successful implementation of a new SAP integrated enterpriseresources planning solution, the design of the new claims administration solution iscomplete and will be rolled out in the new financial year. Infrastructure to improve publicaccess in all provinces of the country is being rolled out and plans are being finalised20

to ensure that the public can interact with the RAF in their own language. The daysof paper-intensive, manual processing are nearing an end. The new year will markthe beginning of a complete departure from the past in claims administration and thecommencement of new ways of conducting business in the RAF.LegislationThe President of South Africa promulgated amendments to the RAF Act that areexpected to provide the initial plugs to the leakages currently in existence in oursystem of third-party compensation in this country. These amendments are very muchwelcomed by the RAF, even though they do not fundamentally change the system inline with the recommendations of the Satchwell Commission. They remove some of thediscriminatory provisions that existed in the old RAF Act and cap the RAF’s liability incertain areas to ensure sustainability. The amendments as they stand, however, will notensure that accident victims obtain the necessary medical attention as speedily andas cost-effectively as possible, nor fully stem the leakages inherent in our third-partycompensation scheme.Our financial results indicate that money that should be going to victims of motor vehicleaccidents, their families and medical services providers, such as ambulances andhospitals, is being wasted on costly, time-consuming and unnecessary legal procedures.South Africa has been slow in implementing reforms necessary to have a sustainablescheme that benefits its citizens. This lethargic approach will cost our future generationsdearly. The price tag is sitting at R42 billion and rising. We remain out of line with the rest ofthe world in this regard. Urgent attention is required to introduce a no-fault scheme with anappropriate benefit structure to benefit our society, particularly the vulnerable and the poor.“South Africahas been slowin implementingreforms necessaryto have asustainablescheme thatbenefits itscitizens”Funding ModelNational Treasury adopted the Revenue Requirement Model developed bythe RAF to determine the fuel levy for the coming financial year.Although the full extent of the pricing required was notapplied, the 17,5 cents a litre increase announcedby the Minister of Finance will go a long waytowards alleviating the cash constraintssuffered by the RAF, and enablethe organisation to clear theSection 321

acklog of outstanding claims. South Africans, who pay for insurance cover through thefuel levy, deserve to have their claims processed as speedily as possible in order to restoretheir lives after motor vehicle accidents. The continuous funding constraints experiencedby the RAF have impeded this in the past. The sector of our society that suffers the mostis the poor who do not have the necessary resources to alleviate the enormous impact ofroad accidents on their lives. We trust that the Revenue Requirement Model will continue tobe used by National Treasury to prevent Government from having to make cash injectionsinto the RAF.Economic Environment“The RAF cannotcease to strive foran environmentwhere accidentvictims will obtaintheir compensationspeedily and costeffectively”South Africa was not able to stay immune from the global economic meltdown causedby the collapse of the financial services sector in the United States of America. Therecession suffered by our economy, that brought with it job losses and a generalslow-down in economic activity, has seen the volume of fuel sales on which the RAF’srevenue is reliant, reducing during the financial year. The motor vehicle sector wasparticularly hard hit, even though the Road Traffic Management Corporation (“RTMC”)reported an increase in registered vehicles to 9.3 million. Notwithstanding, the RAF didnot experience a reduction in the volume of claims reported to the organisation.We were fortunate that no major motor vehicle accidents involving foreign visitorsoccurred during the FIFA Confederations Cup. Having paid one Swiss national halfa billion Rand during the year for the car accident he had in the Western Cape, ournervousness continue, especially with the FIFA World Cup around the corner.Legal SectorThe RAF continues to explore ways in which co-operation with the attorneys representingclients can be improved. All changes that have been suggested by the RAF to improveservice delivery for the benefit of the South African public have been met with resistancefrom the Law Society and personal injury lawyers. The judiciary continues to complainthat their court-rolls are clogged with RAF matters. The Board will continue discussionswith all role players, including the Department of Justice, to find solutions.Section 3 Annual Report 2009The RAF cannot cease to strive for an environment where accident victims will obtaintheir compensation speedily and cost-effectively. Being a government entity not drivenby the profit motive, our interests are only directed at protecting the rights of ordinarySouth Africans and ensuring that they receive medical attention and benefits whichthey pay for through the fuel levy.ProspectsThe focus in the coming 18 months will be on the transition from the old RAF to the newRAF. This will be occasioned by a change to a new customer-centric business model, amigration to a new claims administration solution and retraining of staff.The Board will continue to provide support to the Department of Transport (“DoT”)in implementing the legislative amendments necessary to establish a third-party22

compensation scheme that is appropriate for the country. Work will also continue withNational Treasury to ensure the continued use of the Revenue Requirement Model indetermining fuel levy increases to assure the appropriate capitalisation of the RAF.Finally, the Board will focus on adding to its current successes in clearing the backlogof outstanding claims.Board TermOur term as a Board is coming to an end on 31 July 2009. We hope that we havesown the seeds for a sustainable accident insurance sector in South Africa, whereambulance groups and hospitals will be committed to saving the lives of accidentvictims in the knowledge that the RAF will compensate them timeously and speedily,and where South Africans will get directly, the benefits they pay for in the fuel levy whenthey fill up their cars or pay for bus and taxi fares.Our work is not complete. We leave behind tasks commenced that will require courageto complete. We trust that the new Board will continue to be firm in its resolve totransform the scheme for the benefit of our grandchildren.“Our work is notcomplete. Weleave behind taskscommenced thatwill require courageto complete.”AcknowledgementsOn behalf of the Board of Directors, I would like to express our sincere thanks to theoutgoing Honourable Minister of Transport, Mr Jeff Radebe, for the confidence he hasshown in bestowing upon us the responsibility to lead the stabilisation and turnaroundof the RAF. We hope that we have been able to execute our duties with determinationand aplomb.To the Director-General and her team, the Board wishes to thank you for your support.We also wish to express a warm welcome to our new Honourable Minister and DeputyMinister of Transport, Messrs Sibusiso Ndebele and Jeremy Cronin. They bring withthem enormous experience in the transport sector and the passion and determinationto bring about changes that will benefit all of society, particularly the poor. We wish theMinisters strength and courage in tackling the challenges facing the RAF and promisefull commitment from the Board.Finally, to the Chief Executive Officer, Mr Jacob Modise, the Executive Managementand staff at the RAF, the Board would like to thank you for your application, commitment,dedication and bravery. The country owes you enormous debt of gratitude for tacklingthe stubborn legacies of the past and standing firm against the strong vested interestsin this sector.MR VELI MAHLANGUActing Chairman of the Board29 July 2009Section 3 Annual Report 200923

chiefexecutiveofficerMessage from theChief Executive OfficerSection 3 Annual Report 2009“the country stillhangs on to acompensationsystem thatfails its citizens– particularlythe poor... andenriches the legalfraternity”Road traffic injuries have now come to be regarded as a global ‘epidemic’ affectingthe health of millions of people throughout the world. The World Health Organisation(“WHO”) in their Global Burden of Disease Project in 2004 found that road trafficinjuries were ranked ninth among the leading causes of death worldwide and predictedthat it would rise to be ranked fifth by 2030, ahead of diseases such as HIV/Aids andDiabetes, unless action is taken. In their update report in 2009, the WHO calculatedthat the global losses through traffic injuries amounted to US$ 513 billion and costgovernments between 1% to 3% of their gross national product (WHO: Global StatusReport or Road Safety – Time For Action, 2009). What is more revealing among theWHO observations, is that persons from poor economic settings are disproportionatelyaffected by road traffic injuries, even in high-income countries. Almost half of personswho die in road traffic crashes are pedestrians, cyclists or users of motorised twowheelers(described as the “vulnerable group”) and approximately 62% of road deathsoccur in 10 countries, led by India and China and including South Africa ranked ninth.What these studies highlight for South Africa is the potential social and economicimpact of not acting with a sense of urgency in addressing the ills that afflict thirdpartycompensation in the country. South Africa suffers a double burden in that,coupled with the problems highlighted in the WHO reports, the country still hangs onto a compensation system that fails its citizens – particularly the poor – enriches thefew very vocal interest groups in the legal fraternity, does not support the healthcaresector by providing funds to enable them to save lives, and continues to cost theeconomy more. The provision for outstanding liability at the end of the current financialyear is sitting at R42 billion. What is disheartening is that solutions have already been24

provided by seven commissions of inquiry undertaken by successive governments inthis country, culminating in the Road Accident Fund Commission headed by JudgeKathy Satchwell.ResultsThe RAF’s performance in the current financial year continues to reflect sterling effortsin addressing the legacies of the past within the flawed third-party compensationscheme in the country. The backlog of outstanding claims has now dropped to around260 000 claims from just under 500 000 three years ago, and represents primarilyclaims younger than a year old. Operational efficiencies has allowed the RAF toprocess over 330 000 in the current financial year compared to only 90 000 in 2005,without significant increases in staff complement. The RAF paid R11 billion in claims inthe current financial year, when it could only master R3 billion in 2005.These results, however, highlight clearly the wastages that continue to exist in ourscheme, resulting in inappropriate allocation of economic resources. Out of theR11 billion paid out in compensation:• only R850 million was paid in respect of medical costs;• over R2.5 billion was spent in legal and expert fees;• over R4.9 billion was paid in general damages – primarily to persons not seriouslyinjured;• success fees (contingency fees) paid to attorneys are estimated at R4.3 billionexacerbating the plight of the poor who suffer most hardship from accidents; and• the average time it takes to settle a claim still hovers between 12 to 60 monthsfor non-hospital claims, primarily because of the need to prove fault and thesubjectivity in determining loss of earnings and support benefits.“The backlog ofoutstanding claimshas now droppedto around 260 000claims from justunder 500 000three years ago”Section 4 3 Annual Report 200925

The results, however, also show the promise of successful change among sectors ofsociety that have the capacity to stand up to the legal fraternity. These include:• Private and public hospital groups, ambulance service providers and certaindoctors who prefer to claim directly from the RAF. These suppliers do not engagein unnecessary litigations, and are getting paid much quicker. The backlog ofsupplier claims have declined from 112 000 in 2006 to only 23 000 in 2009.Our balance sheet still remains grossly under-capitalised with the net deficit sitting atR40 billion.Progress on Strategy ImplementationSection 3 Annual Report 200926“The results...show the promiseof successfulchange amongsectors of societythat have thecapacity to standup to the legalfraternity”Systems and processesThree years ago, when a diagnostics exercise was undertaken on the RAF, theoperating model was found to be so flawed that a decision was made to construct anew operating model separate from the existing model, and to gradually shut downthe existing business. This is where the concepts of the “old RAF” and the “new RAF”emanated from. Underlying all this, was the acquisition of tools to support the newRAF. The past three years was spent studying models worldwide, procuring a solutionappropriate for the RAF, and customising it to the unique features of the South Africancompensation scheme.I am pleased to report that the design of the model was completed during the currentfinancial year. In the new year, testing and roll-out will commence.The new operating model has as its pillars:• Centralised processing of claims with specialist processing units in a paperlessenvironment;• Distributed customer services network covering the breadth of the country andproviding pro-active and efficient access to customers;• An investment in a strong IT infrastructure to support the organisation; and• Direct links with third parties – from service providers to enable quick paymentof claims to partners who provide us with information, such as accident reports(see Figure 3.1).This new operating model will link with the SAP system launched in the previousfinancial year, and connect with solutions from third parties to complete the serviceoffering to our clients (Figure 3.2).The hard work will commence on implementation in the new year. It is expected thatit will take at least 18 months for the solution to be bedded down and the old claimsenvironment to be shut down. Availability of funding to clear the backlog, which will stillbe run in the old claims environment, will determine the speed at which the transitionwill occur. The transition will have a significant impact on staff who will require toundergo significant new training, and may be required to possess skills other thanlegal qualifications.

Density:Claims perannumCustomer ServiceNetworkService ClusterProcessingDocumentation MgBusiness Support(Incl Head Office)ITHigh Volume> 1000Regional Service Point(Located at high AccidentDensity Point) 138Case AssessmentMeritsFinanceHRMedium Volume500-999Hospital Service Point126LOE/LOSMarketingRetail Service PointFacilitiesLow Volume< 500Mobile Service Point126140General DamagesLitigation ServicesAuditStrategic SourcingKey: No of servicepointsContact CentreCost ControlForensics 2xxApplications, Tools and ProcessesFigure 3.1 : New Operating Model - Specialised Business Units and Customer Services PointsNEW RAF OPERATING MODELSatelliteOfficesRegionalOfficesCPUCall CentreIntegration withExternal Parties* eNatis* DoHA* EtcInternetRAF Network RAF Network RAF NetworkCITRIXFINEOSPaymentsVendorsPayment toClaimantSAPHard CopyDocumentsClaims documents linked to FINEOSFINEOS retrieves documentsVendorsPaymentsElectronicScanningContent Management SolutionsdocumentsFigure 3.2 : New Operating Model - Integration with Existing and New PlatformsSome of the more fundamental changes will require the simplification of the claimforms, translation into the eleven official languages and a customer services networkthat will assist the public in their own language.R57 million was spent in the current financial year on computer equipment and software.This was in preparation of the roll-out of the new claims administration solution, as wellas software and hardware to support a new customer services network and paperlessenvironment.ExistingClaimsSystemSection 3 Annual Report 200927

LegislationThe promulgation of the Amendment Act occurred too late in the financial year (1 August2008) to have had an impact on the results of the RAF. Very few post Amendment Actclaims were processed during the financial year. The majority that were submitted weresupplier claims that enjoy fast turnaround times in the processing of these claims.The RAF continued to work with the DoT in the development of the no-fault policyduring the year. We await, with anticipation, the commencement of the legislativeprocesses in this regard.Funding“17.5 cents alitre... fuel levyincrease will...alleviate the cashflow constraints ofthe RAF”The RAF, once again, depleted its cash resources during the year, as was predicted inthe models submitted by the RAF to the Minister of Transport, the Portfolio Committeeon Transport and National Treasury in the previous financial year. In June 2008, the RAFslowed down the processing of claims to the utter consternation of the hostile legalfraternity who, instead of working with the RAF to lobby that the RAF be appropriatelycapitalised, went on to vent their anger by flooding the RAF offices with untold numberof writs and attachment orders, and even instituting legal proceedings to force the RAFto pay moneys it did not have. Following the intervention of the Minister of Transport,the South African government approved an additional cash injection into the RAFamounting to R2.5 billion, which was transferred between November and December2008.To avoid situations of this nature occuring again in the future, National Treasury agreedto use the Revenue Requirement Model developed by the RAF to approve the RAF FuelLevy for the 2010 financial year. Although, at 17.5 cents a litre, the increase was shortof what was determined by the model to be the correct fuel levy increase, the rate ofincrease will nevertheless alleviate the cash flow constraints of the RAF in the new year.Direct Payment SystemSection 3 Annual Report 2009The RAF was interdicted, during the year, from introducing a system whereby accidentvictims would get their compensation paid directly to them and the legal fees paiddirectly to their lawyers. On advise of the RAF’s legal representative, the Board agreed towithdraw unilaterally from this costly legal fight and rather approach the matter throughchanges to legislation. A request has been made in this regard to the Department ofTransport to assist in instituting legislation that will create transparency in the schemeand protect the rights of South African citizens.Marketing and CommunicationsThe RAF expects to commence significant education and marketing campaigns toencourage South Africans to claim directly from the RAF. This could not be conductedwhile the internal systems were archaic and could not deliver service of the standardavailable in the private sector.28

messages review of from thechairman operationsand ceosection 4

17 14618 15517 680R’million14 00012 00010 0004 0002 000Graph 4.1: Revenue8 0006 000014 0004 6248 1427 2778 40511 91905 06 07 08 09Financial yearGraph 4.2: Composition of total revenue4.1 RevenueTotal revenue increased by 42% to R11.9 billion for the year (previous year –R8.4 billion) (Graph 4.1). This growth is mainly attributable to an 8% increase in netfuel levy income to R8.85 billion during the year from R8.22 billion in the previous year,as well as the Government grant of R2.5 billion received in the 2009 financial year.Investment income decreased by 44% to R0.10 billion (previous year – R0.18 billion),due to lower average cash holdings during the year. Although year-end cash reservesat R1.2 billion appear steady compared to the previous year’s cash reserves ofR1.1 billion, this belies the fact that the RAF depleted all its cash holdings in June 2008and had to slow down the processing of claims and request additional funding fromNational Treasury. Reinsurance income increased to R0.5 billion in 2009 (previous year– R0.02 billion) as a result of the reinsurance recovery made on the Schoss claimreferred to below (paragraph 4.1.4) (Graph 4.2).4.1.1Fuel Levy12 000470The growth in the gross fuel levy income arose primarily as a result of the 5 centsR’million10 0008 0006 0004 000157625028222623831802500104per litre increase in the RAF Fuel Levy, announced by the Minister of Finance andeffective from the beginning of the financial year. The volume of fuel usage in thecountry declined by 3% to 17.7 mega-litres for the period January to December 2008(previous year – 18.2 mega-litres) according to statistics released by the Road TrafficManagement Corporation (“RTMC”) (Graph 4.3).2 00004 5665 5527 0118 2228 84505 06 07 08 09Financial yearReinsurance and other incomeGovernment grantInvestment incomeNet fuel leviesGraph 4.3: Fuel sold annually20 000The RAF Fuel Levy per litre rose 12% to 46.5 cents (previous year – 41.5 cents). Atthese levels, the RAF Fuel Levy represents 7% of the total fuel price at the pump, whichaveraged more than 870 cents per litre in Gauteng during the 2008/09 financial year(Graph 4.4 and Graph 4.5).Graph 4.4: RAF Fuel Levy and basic fuel levy as a proportion offuel price in Gauteng1 2001 000Section 4 Annual Report 2009Megalitres15 00010 0005 000014 44614 61114 83315 47115 99416 48800 01 02 03 04 05 06 07 08Calendar yearCents per litre80060040020004/047/0410/041/054/057/05Gauteng fuel price10/051/064/067/06Basic fuel levy10/061/07Date4/077/0710/071/084/087/08Road Accident Fuel levy10/081/097%32

4.1.2 Diesel RefundThe refund on fuel provided to certain industrial sectors of the economy increased by13% during the year to R0.88 billion (previous year - R0.78 billion). The refund, at 9% ofgross fuel levy income, represents a major concession on income due to the RAF. Therefund has continued to grow steadily over the years (Graph 4.6).4.1.3 Investment IncomeInvestment income decreased during the year to R0.10 billion (previous year -R0.18 billion) mainly due to the depletion of cash reserves during the year andreduction in interest rates. The year-end cash holdings declined marginally toR1.1 billion (previous year - R1.2 billion). Cash holdings were depleted by increasesin claims processing arising out of improved efficiencies. Due to poor capitalisationthe benefits of increased claim processing capabilities continue to be hampered byavailability of cash. The average cash holdings of R1.0 billion during the year was lowerthan the average cash holdings of R1.9 billion in the previous year (Graph 4.7).4.1.4 Reinsurance IncomeGraph 4.5: Fuel pricebreakdown as at 31 March 200954%1 000900BASIC FUEL LEVYCUSTOMS & EXCISERAF LEVYSLATE LEVY18%1%0%0%1%ZONE DIFFERENTIAL GAUTENGWHOLESALE MARGINDEALERS MARGINSERVICE & DELIVERYPETROLEUM PIPELINESDSMLINLAND TRANSPORT RECOVERY LEVYBASIC FUEL PICE10%1%7%0%2%6%Graph 4.6: Diesel refundThe RAF enters into reinsurance treaties with major international reinsurance companiesto cover catastrophic accidents. The RAF recovered R452.7 million (previous year -R2.3 million) from reinsurers during the current financial year. Most of the recoverieswere made in relation to a claim by a foreign Swiss national, Mr Joachim Schoss, whowas paid €42 million (approximately R525 million). This is by far the largest claim ever paidby the RAF to a single individual.R’million8007006005004003002004215276127768764.2 ExpenditureTotal RAF expenditure increased by 50.6% to R24.08 billion (previous year -100005 06 07 08 09Financial Diesel RefundyearR15.99 billion) mainly as a result of a significant ramp-up in the processing of claims and anincrease in the claims provision (Graph 4.8). Total claims expenditure, including provisionGraph 4.7: Investment income250for outstanding claims grew by a phenomenal 51% to R23.29 billion (previous year -238R15.39 billion). Staff and administration costs remain a small proportion of200total expenses although they increased by 23% to R0.53 billion (previous year -R0.43 billion) and 39% to R0.25 billion (previous year - R0.18 billion) respectivelyto cater for increased processing volumes. In addition, staff were required to workovertime to catch up with lost processing volumes during the months when the RAF’scash resources were depleted.4.2.1 Claims ExpenditureThe increase in the claims expenditure in the current financial year is due to a 27%increase in the total cash payout for claims of R11.1 billion (previous year - R8.7 billion),which included payments accrued for in the previous financial year of (R0.01) billion, aswell as a 91% increase in the provision for outstanding claims of R12.2 billion (previousR’million150100500578218010405 06 07 08 09Financial yearSection 4 Annual Report 2009year - R6.4 billion) (Graph 4.9).33

Graph 4.8: Total expenditure29 0004.2.1.1 Claims VolumesR’million23 00017 00011 000109178426250534The ramp-up in the processing and payment of claims decreased the claims backlogby 12% from 297 072 outstanding claims at the end of the previous financial yearto 261 390 outstanding claims at the end of the current financial year (Graph 4.10).330 453 claims were processed during the financial year. This was achieved despitea 10% increase in claims lodged during this financial year to 294 771 (previous year -267 133 claims lodged) (Graph 4.11).Section 4 Annual Report 200934R’millionNumber5 000025 00020 00015 00010 0005 0000-5 000500 000400 000300 000200 000100 000177322 352 3975 4251426 1518 63015 38823 29205 06 07 08 091 541Financial year7783 105Administrative and other expensesStaff costsClaims expenditureGraph 4.9: Composition ofclaims expenditure01 3015 1362 5116 600-286 -4806 4042368 74812 16111 139-805 06 07 08 09Financial year102 474340 925Net increase in provisionStructured payments and accrualsClaims paid in cashGraph 4.10: Claims outstandingat year-end112 779332 90369 346271 80031 832265 24023 197238 19305 06 07 08 09Financial yearSupplier claimsNon-supplier claimsSome 42% of the claims finalised in the year under review were supplier claims(previous year - 45%). At financial year-end, therefore, the number of outstandingclaims was made up of 238 193 non-supplier claims (previous year - 265 240non-supplier claims) and 23 197 supplier claims (previous year - 31 832 supplierclaims) (Graph 4.10). This reflects a positive benefit from the introduction of payingmedical service providers directly that has accelerated monies paid to them andreduced delays occasioned by the involvement of attorneys as intermediaries (Graph4.10 and 4.12).Claims younger than one year has increased from 47% in 2008 to 51% in 2009 and thepercentage of claims older than three years has decreased from 24% in 2008 to 15%as at the end of 2009 (Graph 4.13). This indicates that an increased proportion of olderclaims have been settled during the current financial year, and that the bulk of claimsoutstanding at year-end arose from new accidents. The focus in the processing ofclaims has been on claims older than two years (Graph 4.14).A large number of claims that are processed continue to be claims settled at a valueless than R1 000 (95 302 claimants in 2009 and to 91 045 in 2008) (Graph 4.15).This is owing to an accelerated approach to supplier claims in accordance with whichhospitals and other service providers are being paid directly by the RAF. As a result ofthe direct payment system to suppliers, the RAF has managed to reduce the backlogof supplier claims faster than the reduction in the backlog of non-supplier claims(Graph 4.10).The RAF continues to receive and settle a high volume of small claims, with more than90% of the volume of claims processed during the financial year being for settlementvalues below R50 000 (Graph 4.16).4.2.1.2 Claims ValueThe composition of the claims payments continues to reflect the inadequacies ofour system of compensation. Of the R11.1 billion (previous year – R8.7 billion) cashpaid out in respect of claims up to 31 March 2009, only R8.6 billion (previous year –R6.7 billion) represented compensation payout. The balance of R2.5 billion paid up to31 March 2009 (previous year – R2.1 billion) was channeled to the legal fraternity aslegal and experts’ fees (Graph 4.17).Almost all claims lodged with the RAF are submitted through attorneys, most of whomcharge contingency fees that are not in line with the Contingency Fee Act, 1997 (Act 66,

of 1997). The Contingency Fee Act allows attorneys to charge fees at client - attorneyrate up to a maximum of 25% of compensation. A contingency agreement betweenthe accident victim and the attorney needs to be made available to the courts on thesettlement of the claims. Because there is hardly ever an agreement of this naturelodged in RAF matters, this represents proof that attorneys would rather use thecommon law contingency act through which as much as 50% of compensation maybe taken by attorneys in contigency fees.For illustrative purposes, assuming contingency fees charged by attorneys amount to50% of compensation, then only R4.30 billion for the 12-month period up to 31 March2009 (previous year - R3.35 billion) of cash paid out by the RAF actually reached thevictims of accidents. This means that as much as 61% of all claims disbursementsmade by the RAF are channeled to attorneys, as opposed to the claimants, and totalan estimated R6.83 billion (previous year - R5.4 billion) (Graph 4.18). This is preciselywhy the RAF believes that the current model is wasteful because the cost of servicedelivery is disproportionately high in relation to compensation paid and RAF Fuel Levyreceived.R’millionGraph 4.11: Claims lodged350 000300 000250 000200 000150 000100 00050 000058 041127 73257 054133 41457 951112 467101 620165 513128 625166 14605 06 07 08 09Financial yearSupplier claimsNon-supplier claimsGraph 4.12: Claims finalisedThe composition of the compensation portion of the claims also continues to reflectmajor weaknesses in the current third-party compensation system in that the bulkof the cash that the RAF pays out is in respect of loss of amenities of life or generaldamages, as opposed to medical costs or loss of income and support.During the current financial year, R4.9 billion (previous year - R3.9 billion) was paid outas general damages. This represents 57% (previous year - 58%) of the compensationpaid (excluding legal fees). Medical payments, at R0.85 billion for the year (previousR’million350 000300 000250 000200 000150 000100 00025 116467 49101 384139 134137 260year - R0.76 billion), represented 10% (previous year - 11%) of compensation paid;loss of income and support payments at R2.83 billion for the year (previous year -R2.01 billion) represented 33% (previous year - 30%) of compensation paid; andfuneral costs, at R0.026 billion for the year (previous year - R0.020 billion) represented50 000065 000141 436173 570172 073193 19305 06 07 08 09Financial year0.3% (previous year - 0.3%) of compensation paid (Graph 4.19).Supplier claimsNon-supplier claimsThe RAF Amendment Act seeks to address, among other, the area of general damagesclaims. The intention is to limit claims for general damages to circumstances where thevictim of the motor vehicle accident is seriously injured. However, the manner in whichthe limitation has been watered down in the Regulations may not result in significantsavings in this regard.4.2.1.3 UndertakingsIncluded in the medical cost payments are certificates issued by the RAF to claimantscovering future medical treatments, called “Undertakings”. The total number ofUndertaking certificates issued at year-end increased 18% to 103 583 (previous year- 88 001). Despite this growth, the number of active Undertakings in respect of whichpayments were made remained low at 2.5% of all Undertakings issued (previous year- 2.6%) (Graph 4.20). This is in line with the nature of the instrument issued in that mostinjuries arising out of motor vehicle accidents heal and do not represent chronic illnesses.An Undertaking is regarded as active if a claim is made against it during the year.Graph 4.13: Claims age analysis as at year-endPercentage of total outstanding claims60453015035 352722 221716263821281347185124 241511 1005 06 07 08 09Financial year% of claims younger than 1 year% of claims between 1 and 2 years% of claims between 2 and 3 years% of claims older than 3 yearsSection 4 Annual Report 200935

Section 4 Annual Report 200936Graph 4.14: Outstanding claims by ageGraph 4.15: Average size of claims paidNumber of claimsNumber of claims outstanding120 00090 00060 00030 0001209060300095 3023 Years2-3 Years1-2 Years1 YearR50 000 - R99 999R100 000 - R249 999R250 000 - R499 999R500 000 - R999 999R1 000 000 - R4 999 999>R5 000 000% of claims paid 2009% of claims paid 2008CAGR‘05-’09-20%-23%-15%-4%Payments in respect of all Undertakings issued were R80.9 million during the currentfinancial year (previous year - R58.7 million) (Graph 4.21).4.2.1.4 Claims Reporting and ProcessingThe number of months it takes for accident victims to report accidents to the RAF hasremained relatively stable over the last few years, at around 12 months. During theyear under review, notification delays were volatile for the most recent few notificationquarters (Graph 4.22). The reasons for this phenomenon may be related to the effect ofthe introduction of the Amendment Act.Delay period (months)Delay period (months)605040302010700Graph 4.22: Average delay in months from accidentdate to notification date: Non-supplier claims25.0020.0015.0010.005.0001 2 3 4 1 2 3 41 2 34 12 341234123412341234123412341234123498 99 00 01 02 03 04 05 06 07 08 09Notification quarterThe average settlement delays has remained stable around 60 months from the dateof the accident (Graph 4.23). This pattern is impacted upon by, among other, theavailability of cash, nature and complexity of the claim and the willingness of attorneysto settle the claims before the court dates. On average, supplier claims are settledmuch quicker because they are less reliant on attorneys to submit their claims (Graph4.10 and 4.12). In terms of the provisions of the RAF Act, victims of road accidentsGraph 4.23: Average settlement delay1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 41 23 412341234123499 00 01 02 03 04 05 06 07 08 09Settlement quarterWeighted settlement pattern from accident dateUnweighted settlement pattern from accident date

have between two years (for hit-and-run accidents) and 20 years (for minors) to lodgea claim against the RAF following an accident.Graph 4.17: Composition of claim payments12 00010 0002 530The RAF is in the process of changing its systems from being reactive (i.e. waitingfor the accident victim to lodge a claim) to being pro-active by getting involved muchearlier in the process of reporting an accident. These processes, once rolled out, willspeed up the processing of claims, reduce fraud and contribute to the reduction of thecosts of administering claims.R’million8 0006 0004 0001 3191 6682 0504.2.1.5 Claims Categories and AveragesClaims settled by the RAF differ materially when the make-up of the claim is considered.The following analysis provides insight into the average number of claims paid over thepast five years, as well as the composition of these claims.2 00009262 1803 8324 9346 6988 60905 06 07 08 09Financial yearRAF and claimant legal costCompensation and medical cost4.2.1.5.1 Total Claim PaymentsThe average Rand value of all claims paid has increased by 25% in 2009 from R26 519to R33 171 (2008: decrease of 15% from R31 165 to R26 519). The increase in averagepayments per claim from 2005 to 2009 has been 8% per annum.Graph 4.18: Composition of claim paymentsincluding estimated contingency fees12 00010 0004 304The reason for the increase in the average payment per claim is that more higher value8 0003 349non-supplier claims were processed during the period under review compared to lowervalue supplier claims.The total number of individual claim payments has increased by 2% in 2009 from 331 155to 336 511 (2008: increase of 56% from 211 798 to 331 155). The average increase in thenumber of claims from 2005 to 2009 has been 19% per annum (Graph 4.24).4.2.1.5.2 Non-supplier versus Supplier ClaimsR’million6 0004 0002 00001 0901 319 1 9161 668 2 4672 0502 5301 090 9261 9162 4673 3494 30505 06 07 08 09Financial yearThe average Rand value of all non-supplier claims paid has increased by 18% in 2009from R44 851 to R52 876 (2008: increase of 7% from R41 883 to R44 851). The increasein average payments of non-supplier claims from 2005 to 2009 has been 17% perannum.The total number of individual non-supplier claim payments increased by 10% in 2009from 185 544 to 204 275 (2008: increase of 22% from 152 480 to 185 544). The averageincrease in number of payments per claim from 2005 to 2009 has been 19% per annum(Graph 4.25).The average Rand value of all supplier claims paid decreased by 15% in 2009 fromR3 209 to R2 730 (2008: decrease of 11% from R3 603 to R3 209). The decrease in averagepayments per claim from 2005 to 2009 has been 9% per annum.The reason for the decrease in average payment per supplier claim is that more lowvaluesupplier claims were paid by the RAF during the 2009 financial year.9 0007 5006 0004 5003 0001 5000716Estimated Contigency feeRAF and claimant legal costComposition and medical costGraph 4.19: Composition of compensationR’million82841 172173562 1261 333214882 6301 795207643 9052 009268474 9092 82705 06 07 08 09Financial yearFuneral costsClaimant medical costsGeneral damagesLoss of earnings and supportSection 4 Annual Report 200937

NumberGraph 4.20: Undertakings120 000100 00080 00060 00040 00020 00056 7512 74169 4432 70780 9122 38388 0012 324103 5832 537005 06 07 08 09Financial yearTotal undertakingsActive undertakingsThe total number of individual supplier claim payments decreased by 9% in 2009 from145 594 to 132 235 (2008: increase of 145% from 59 316 to 145 594). The average increasein the number of claims from 2005 to 2009 has been 56% per annum (Graph 4.26).4.2.1.5.3 General DamagesThe average Rand value of general damages claims paid increased by 16% in 2009from R31 347 to R36 409 (2008: increase of 17% from R26 875 to R31 347). Theincrease in average payments per general damages claim from 2005 to 2009 has been19% per annum.The total number of individual general damages claims payments increased by 7% in2009 from 125 572 to 134 160 (2008: increase of 28% from 97 771 to 125 572). Theaverage increase in number of claims in respect of general damages from 2005 to2009 has been 12% per annum (Graph 4.27).Graph 4.21: Undertakings - amount paid90 000This claims category continues to be abused as most of the claims for general damagesare not for serious injuries. The RAF Amendment Act should address this anomaly.75 00080 9264.2.1.5.4 Loss of EarningsR’00060 00045 00030 00059 18458 72459 12558 740The average Rand value of all loss of earnings claims paid increased by 27% in 2009from R264 337 to R335 503 (2008: increase of 19% from R222 655 to R264 337). Theincrease in average loss of earnings payments per claim from 2005 to 2009 has been22% per annum.15 000005 06 07 08 09Financial yearThe total number of individual loss of earnings claim payments increased by 14% in 2008from 5 957 to 6 782 (2008: decrease of 4% from 6 194 to 5 957). The average increase innumber of claims from 2005 to 2009 has been 5% per annum (Graph 4.28).Section 4 Annual Report 2009Average R value of all claim paymentsGraph 4.24: Total payment per claimR35 000R30 000R25 000R20 000R15 000R10 000R5 000R0132 204R 23 492182 397R 28 198211 798R 31 165331 155R 26 519336 511R 33 17105 06 07 08 09Financial yearAverage Rand value - all claimsNumber of payments400 000350 000300 000250 000200 000150 000100 00050 0000Total individual claim paymentsOnly 6 782 out of a total of 169 123 claimants were paid for loss of earnings. Thisrepresents 4% of the total number of claims paid. Once again, it indicates the level ofabuse of the current dispensation.The average settlement for the past few years has increased far in excess of thegrowth in gross national income and average wage and salary increases throughoutthe country.The introduction of the RAF Amendment Act will, however, not result in a reduction inthe payment of loss of earnings, despite the cap being set at R160 000 per annum.This is because most South Africans earn an annual income of less than the cappedamount and more accident victims will become entitled to claim for loss of income andloss of support as a result of the removal of the R25 000 limit on passenger claims.4.2.1.5.5 Loss of SupportThe average Rand value of loss of support claims paid increased by 7% in 2009from R175 457 to R187 236 (2008: increase of 16% from R151 253 to R175 457). The38

Graph 4.25: Non-supplier payments per claimincrease in average loss of support payments per claim from 2005 to 2009 has been19% per annum.The total number of individual loss of support claim payments increased by 8% in 2009from 2 758 to 2 986 (2008: decrease of 7% from 2 960 to 2 758). The average increasein number of claims from 2005 to 2009 has been 13% per annum (Graph 4.29).4.2.1.5.6 Medical CompensationThe average Rand value of all medical cost claims paid increased by 20% in 2009 fromR4 367 to R5 241 (2008: decrease of 23% from R5 670 to R4 367). The decrease in theaverage medical cost payments per claim from 2005 to 2009 has been 2% per annum.Average R value of claimsR60 000R50 000R40 000R30 000R20 000R10 000R0R 28 829 103 423140 263152 480R 35 747R 41 883185 544204 275R 44 851R 52 87605 06 07 08 09Financial year250 000200 000150 000100 00050 0000Total individual claim paymentsThe total number of individual medical cost claim payments decreased by 7% in 2009from 174 836 to 161 893 (2008: increase of 103% from 86 101 to 174 836). The averageincrease in the medical cost number of claims from 2005 to 2009 has been 27% perannum (Graph 4.30).Average Rand value - non-supplierNumber of paymentsGraph 4.26: Supplier payments per claim4.2.1.5.7 Funeral CostsThe average Rand value of funeral costs claims paid increased by 14% in 2009 fromR5 847 to R6 650 (2008: increase of 1% from R5 783 to R5 847). The increase inaverage funeral cost payments per claim from 2005 to 2009 has been 9% per annum.The total number of individual funeral cost claim payments increased by 15% in 2009 from3 450 to 3 952 (2008: decrease of 3% from 3 571 to 3 450). The average increase innumber of payments per funeral cost claims from 2005 to 2009 has been 25% per annum(Graph 4.31).4.2.1.5.8 Claimants’ Legal CostsAverage R value of claimsR5 000R4 500R4 000R3 500R3 000R2 500R2 000R1 500R1 000R500028 780R 4 30942 133 59 316R 3 059R 3 603R 3 209145 594R 2 730 132 235005 06 07 08 09Financial year160 000140 000120 000100 00080 00060 00040 00020 000Total individual claim paymentsThe average Rand value of all claimants’ legal cost claims paid increased by 38% in2009 from R8 285 to R11 399 (2008: increase of 23% from R6 713 to R8 285). Theaverage increase in average claimants’ legal cost payments per claim from 2005 to2009 has been 19% per annum.The total number of individual claimants’ legal cost claim payments decreased by 9%in 2009 from 152 550 to 139 276 (2008: increase of 4% from 147 240 to 152 550). Theaverage increase in the number of claimants’ legal cost payments per claim from 2005to 2009 has been 12% per annum (Graph 4.32).The current system benefits attorneys who, despite being paid by the RAF their legalcosts in full, continued to charge a contingency fee to the claimants. The current faultbasedsystem of compensation results in vast legal costs being incurred in determiningfault and the quantum of the payment. A properly defined no-fault compensationsystem in the future should see significant savings in this regard.Average R claim paymentsR40 000R35 000R30 000R25 000R20 000R15 000R10 000R5 000R0Average Rand value - supplier claimsNumber of paymentsGraph 4.27: General damagespayment per claim59 893R 19 54794 058R 22 56797 771R 26 875125 572R 31 347134 160R 36 409005 06 07 08 09Financial yearAverage Rand value - general damagesNumber of payments160 000140 000120 000100 00080 00060 00040 00020 000Total individual claim paymentsSection 4 Annual Report 200939

Average R value of claim paymentsGraph 4.28: Loss of earnings paymentper claimR400 000R350 000R300 000R250 000R200 000R150 000R100 000R50 000R04 172R 130 2786 444R 158 7556 194R 222 6555 957R 264 3376 782R 335 50305 06 07 08 09Financial year8 0007 0006 0005 0004 0003 0002 0001 000Average Rand value - loss of earningsNumber of payments0Total individual claim payments4.2.1.5.9 RAF’s Legal CostsThe average Rand value of RAF’s legal cost claims paid increased by 5% in 2009 fromR9 483 to R9 977 (2008: decrease of 7% from R10 198 to R9 483). The increase in theaverage RAF’s legal costs payments per claim from 2005 to 2009 has been 5% per annum.The total number of individual RAF’s legal costs claim payments increased by 18%in 2009 from 82 998 to 98 311 (2008: increase of 25% from 66 198 to 82 998). Theaverage increase in the number of RAF’s legal costs payments per claim from 2005 to2009 has been 19% per annum (Graph 4.33).The establishment of an in-house legal department in the current financial year isexpected to bring about savings in the medium to long term in legal costs incurred bythe RAF.4.2.1.6 High-value ClaimsAverage R value of claimsR200 000R180 000R160 000R140 000R120 000R100 000R80 000R60 000R40 000R20 000Graph 4.29: Loss of supportpayment per claimR01 934R 93 6172 708R 122 5582 960R 151 2532 758R 175 4572 986R 187 23605 06 07 08 09Financial yearAverage Rand value - loss of supportNumber of payments3 5003 0002 5002 0001 5001 0005000Total individual claim paymentsAlthough the number of high-value claims (claims where compensation paid is greaterthan R500 000) as percentage of total finalised increased during the year, these claimsstill represent a relatively small proportion of total claims finalised by the RAF for the2009 financial year - 0.22% out of the total number finalised (2008 - 0.14%) (Graph4.34).In terms of total Rand value paid, these claims constituted 8.6% of the total compensationpayout for 2009 (2008 - 6.1%) (Graph 4.35).4.2.1.7 Foreign ClaimsClaims by foreign visitors to South Africa continue to form a large proportion of highvalueclaims due to an increasing influx of foreign visitors to the country. Since thebulk of payments to foreigners are made in their currency of origin and the fact thatthey have also enjoyed unlimited benefits in the past, foreigners’ claims have began todominate high-value claims.Section 4 Annual Report 200940Average R value of claim paymentsGraph 4.30: Medicalcompensation payment per claimR6 000R5 000R4 000R3 000R2 000R1 000R0R 5 59350 755R 4 98971 120R 5 67086 101174 836R 4 367161 893R 5 24105 06 07 08 09Financial yearAverage Rand value -medical compensationNumber of payments200 000180 000160 000140 000120 000100 00080 00060 00040 00020 0000Total individual claim paymentsWith the promulgation of the RAF Amendment Act, loss of earnings and loss of supportpayments to foreigners have also been capped at R160 000 per annum. The effect ofthis change in legislation will only be visible in future financial periods.At 31 March 2009, 33% (previous year - 77%) of the value of the estimated liability of claimsin excess of R5 million was made up of claims by foreign nationals. The estimated liabilityfor foreigners has reduced since 2008 due to the settlement of a high-value foreign claimfor an amount of €42 million (approximately R525 million), which took up an extensiveportion of the outstanding liability towards foreigners’ claims (Graph 4.36).It is important to note, however, that the actual claimed amounts can often exceed theestimated value of the claim. At 31 March 2009, 13 claims of foreign nationals wereestimated to be in excess of R5 million.

Graph 4.36: Estimated outstanding liability as at 31 March for claims inexcess of R5 million23%2008 200977%33%67%Average R value of claimsGraph 4.31: Funeral costs paymentper claimR7 000R6 000R5 000R4 000R3 000R2 000R1 000R 4 6741 7933 116R 5 0033 571R 5 7833 450R 5 8473 952R 6 6504 5004 0003 5003 0002 5002 0001 5001 000500Total individual claim paymentsTotal RSATotal ForeignersTotal RSATotal ForeignersR0005 06 07 08 09Financial yearAverage Rand value - funeral costsNumber of payments4.2.2 Staff CostsThe increase in staff costs of 23% to R0.53 billion (previous year – R0.43 billion) aroseas a result of a small increase in staff complement, as well as overtime worked bystaff to catch up the backlog of claims processed following receipt of a R2.5 billioncash injection from National Treasury. The staff complement increased by 8% to 1 953(previous year – 1 810) (Graph 4.37).4.2.3 Administration and Other CostsExpansion of the RAF’s presence through satellite offices countrywide, as well as theupgrading of its networks and IT systems resulted in an increase in administration andother costs of 39% to R0.25 billion (previous year - R0.18 billion). These increases werenecessitated in the RAF’s strive to improve its business processes to improve servicedelivery to the public. Despite this, administration and staff costs still represent 1% and2% of total expenditure respectively. (Graph 4.38).Average R value of claimsGraph 4.32: Claimants’ legalcosts payment per claimR12 000R10 000R8 000R6 000R4 000R2 000R093 025R 5 844128 589R 6 213147 240R 6 713152 550R 8 285R 11 399139 276005 06 07 08 09Financial yearAverage Rand value - claimant costsNumber of payments180 000160 000140 000120 000100 00080 00060 00040 00020 000Total individual claim paymentsGraph 4.38: Composition of total expenditure20082009R12 000Graph 4.33: RAF’s legal costspayment per claim1%3%96%Claims ExpenditureStaff CostsAdministrative and other expenses1%2%97%Claims ExpenditureStaff CostsAdministrative and other expensesAverage R value of claim paymentsR10 000R8 000R6 000R4 000R2 000R0R 8 57144 895R 10 41149 939R 10 19866 19882 998R 9 483R 9 977Average Rand value - RAF legal costsNumber of payments98 311005 06 07 08 09Financial year120 000100 00080 00060 00040 00020 000Total individual claim paymentsSection 4 Annual Report 200941

Graph 4.34: High-value claims aspercentage of total claims finalised0.25%4.3 Profitability0.20%0.22The RAF’s drive to reduce its claims backlog has resulted in a deficit for the financialyear of R12.2 billion (previous year deficit - R7.6 billion) (Graph 4.39). The effortsPercentage0.15%0.10%0.14to reduce the backlog resulted in claims expenditure including provision rising toR23.3 billion (previous year - R15.4 billion), which far exceeded revenues accrued fromfuel levies of R8.8 billion (previous year - R8.2 billion) resulting in the deficit.0.05%0.00%10.00%8.00%6.00%4.00%2.00%0.80.80.60.804 05 06 07 08 09Financial yearGraph 4.35: Rand value of highvalueclaims as percentage of totalcompensationPercentage3.824.492.764.486.068.57The activities of the RAF during the current financial year have again reflected the RAF’scapacity to reduce the backlog of outstanding claims over a much shorter period oftime. However, the constraint the RAF will continue to experience will be that the fuellevy income, at current levels, will not allow the RAF to achieve this objective.Adjustments will have to be made to the fuel levy in a manner that reflects the needto address legacies of the past, and transfer payments will need to be made byGovernment to cover the claims backlog in particular.Government, through National Treasury, approved a special government grant ofR2.5 billion to the RAF during the financial year to assist the RAF with cash flowshortages experienced due to the RAF’s continued efforts to reduce the claimsbacklog in the shortest possible time. Cash and cash equivalents have dropped fromR1.2 billion during the previous year to R1.1 billion at the end of the current financialyear.For as long as the RAF chooses to reduce the backlog without specific funding to coverit, the RAF will continue to run down its cash and cash equivalents.Section 4 Annual Report 2009Number of staff0%04 05 06 07 08 09Financial yearGraph 4.37: Staff count2 5002 0001 5001 00050001 7891 8291 7111 8101 95305 06 07 08 09Financial yearThe Minister of Finance announced a 17.5 c/l increase in the RAF Fuel Levy in the budgetspeech during February 2009. This increase, effective from April 2009 is expected toadd another R2.8 billion to the RAF’s income that will assist the RAF in meeting its claimsfinalisation targets during the following financial year.4.4 Cost of Service DeliveryThe RAF focuses on cost-reduction in order to improve efficiencies, but also to makemore cash available for the payment of compensation.Cost-to-income ratio has improved during the financial year to 28% (previous year –31%) as a result of specific interventions made by the RAF. The reduction occurred inadministration costs which stabilised at 7% (previous year - 7%) and RAF’s legal andexpert costs at 8% (previous year - 9%) respectively. Claimants’ legal and expert costsat 13% (previous year - 15%) also contributed to the improved cost-to-income ratio(Graph 4.40).Additional measures, in the process of being introduced within the RAF, include theroll-out of a new claims system and processes, as well as dealing with claimants42

directly rather than through third parties. These interventions are expected to reducethese costs even further.4.5 ProductivityOther efficiency measures that are being introduced include changes in processesto increase productivity. Claims staff members are also being given new tools toincrease efficiency. The results will become more pronounced when the new claimsmanagement system is rolled out (Graph 4.41).4.6 Financial Health4.6.1 Solvency and CapitalisationThe RAF remains grossly under-capitalised with liabilities exceeding assets byR39.9 billion (previous year - R27.8 billion) (Graph 4.42). The only assets of substancethat the RAF owns, other than cash, are land and buildings worth R120 million. Roadaccident funds that are similar to the RAF would have as one of their major assets,investments that cover as much as 110% of the full outstanding liability.Discussions will continue to be held with the DoT and National Treasury to arriveat a more sustainable solution to the proper capitalisation of the RAF. The Boardis considering a strategy to build an investment base that will grow to cover theoutstanding liability over time.The Board approved an economic model for the RAF during the year under reviewthat will provide sustainable funding for the RAF in the future, inclusive of a strategy tobuild up assets to cover the outstanding claims liability. The impact of the economicmodel will only be noticeable in the months following the 2009 financial year-end.The Minister of Finance has announced an increase of 17.5c per litre to 64c perlitre in the RAF Fuel Levy, set to increase the income of the RAF by approximatelyR2.8 billion per annum. As a result of the economic model only being approved in2009, the investment income has been erratic during the reporting period and is madeup primarily of interest income.4.6.2 Liability for Outstanding ClaimsThe liability for outstanding claims is determined on an annual basis by external actuariesappointed by the RAF. The provision is determined by taking into account a number ofeconomic factors, such as the growth in fuel consumption and its effect on anticipatedaccident rates. In estimating the outstanding liability, accidents that have occurred, but notyet reported to the RAF, are taken into account, and are known as “IBNR claims”.At year-end, the provision for outstanding claims liability grew by 40% to R42.5 billion(previous year – R30.3 billion). The actuaries estimate that as many as 181 896 ultimatenon-supplier claims may have occurred, but have not yet been reported (Graph 4.43).R’millionPercentageNumber of claims4 0002 000-2 000-4 000-6 000-8 000-10 000-12 000-14 000Graph 4.39: Profitability0Graph 4.40: Cost-to-income ratio353025201510502502141791431077136024112-1 541-1 30011 1083166221430153113289 987 7 705 06 07 08 09Financial yearClaimants’ legal & expertcosts as % of total incomeRAF’s legal & expert costsas % of total incomeRAF’s admin costs as %of total incomeTotal costs as % of totalincomeGraph 4.41: Claims finalisedper staff member502 798-1 3011031 497652-2 511-1 859152-1 183-6 404-7 58719620505 06 07 08 09Financial year4-12 161-12 15705 06 07 08 09Financial year(Deficit)/surplus before provisionfor outstanding claimsProvision for outstanding claims(Deficit)/surplus for the yearSection 4 Annual Report 200943

Graph 4.42: Solvency104.4 4.2 3.3 3.31.70Graph 4.43: Number of non-supplier reported claims100 00090 00080 000R’million-10-20-30-21.6 -22.7 -24.4-31.1Number70 00060 00050 00040 00030 000-40-50-43.20907080605Financial yearLiabilitiesNet LiabilitiesAssets20 00010 0000h1h2 h1h2 h1h2 h1h2h1h298Claim Numbers Reported to DateIBNR Claimsh1h2h1h2h1h2 h1h2h1h2 h1h2h1h2 h1h299 00 01 02 03 04 05 06 07 08 09Accident half yearThe ultimate claims expenditure for each accident year is therefore higher than the actual amounts paid to date (Graph 4.44).The liability that the RAF needs to provide for on a nominal and discounted basis for each accident year, excluding theprovision for outstanding liability in respect of undertakings issued, continues to increase year on year. The significant spikein the 2008 financial year was caused by the dramatic increase in reported claims during the financial year, which the RAFactuaries took into account in determining the outstanding claims provision (Graph 4.45).Graph 4.44: Estimated ultimate claims payable20 000 00018 000 00016 000 00014 000 00018 000 00016 000 00014 000 000Graph 4.45: Estimated outstandingnon-undertakings claims liabilityR’00012 000 00010 000 0008 000 000R’00012 000 00010 000 0008 000 0006 000 0004 000 0002 000 000098 99 00 01 02 03 04 05 06 07 08 09Accident yearUltimate Claims PayableSmoothed Ultimate Claims Payable6 000 0004 000 0002 000 000098 99 00 01 02 03 04 05 06 07 08 09Accident yearUndiscounted Outstanding LiabilityDiscounted Outstanding LiabilitySection 4 Annual Report 2009The expected pattern of the number of existing Undertakings that will receive a payment over the coming years, as perthe calculations of the actuaries, is depicted in Graph 4.46. The projected discounted annual payout in respect of existingUndertakings, taking into account the projection of the number that will be active, is expected to follow the pattern reflectedin Graph 4.47.44

Graph 4.46: Number of undertakings expected to receive a payment7 0006 000160 000140 000Graph 4.47: Projected discounted annual cashflowsNumber of Undertakings5 0004 0003 0002 000Annual Cashflow (R’000)120 000100 00080 00060 00040 0001 00020 000009 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57Future financial year0 09 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57Future financial yearCurrent IBNR UndetakingsCurrent Inactive UndertakingsCurrent Active UndertakingsCurrent IBNR UndertakingsCurrent Inactive UndertakingsCurrent Active UndertakingsThe total estimated outstanding liability, on an annual basis, including Undertakings, but excluding allowances for reinsuranceis shown in Graph 4.48.Graph 4.48: Estimated outstanding claims total liability18 000 000Graph 4.49: Cash holdings4 00016 000 00014 000 0003 5003 0003 69212 000 0002 500(R’000)10 000 0008 000 0006 000 0004 000 000R’million2 0001 5001 0001 1452 4041 1921 0912 000 000500098 99 00 01 02 03 04 05 06 07 08 09Accident year005 06 07 08 09Financial year4.6.3 LiquidityUndiscounted Outstanding LiabilityDiscounted Outstanding Liability5Graph 4.50: Liquidity1.63.24.34.13.1The RAF is still experiencing cash constraints caused by the disconnect in thedetermination of the fuel levy from the claims experience of the RAF. This has beenexacerbated by the change in the system of collecting the RAF Fuel Levy from asystem involving the Central Energy Fund (“CEF”) to a system administered by SARSat the beginning of the 2006/07 financial year.The new mechanism has added more than two months to the time it takes from thecollection of the levy to receipt by the RAF. For the year under review, as much asR1.7 billion (previous year R1.7 billion) of the R8.2 billion net fuel levy revenues hadnot been received by the RAF for use in processing claims. This change has had anadverse effect on the cash flows of the RAF (Graph 4.49).At 31 March 2009, current liabilities of the RAF exceeded current assets by R6.8 billionR’million0-5-10-5.5-7.0-5.7-9.8-9.905 06 07 08 09Financial yearTotal current liabilitiesNet current liabilitiesTotal current assetsSection 4 Annual Report 2009(previous year – R6.7 billion) (Graph 4.50).45

performanceagainstobjectivessection 5

Performance against Objectives for the 2009 Financial YearThe RAF has concluded a Performance Agreement with the Minister of Transport incorporating the performance objectivesand targets listed in the schedule below. Almost all targets were achieved despite difficult operating conditions. During thefinancial year, the RAF’s actuaries changed the basis of calculating the provision for outstanding claims, resulting in a R12.2billion increase in the provision.No.NationalObjectivesStrategicBusinessObjectivesAnnualPerformanceIndicatorsTargetsActualDifferenceComment1 Managementof transportcosts andinfrastructuredevelopmentto contributeto AsgiSADevelopsustainableeconomicmodel/RestoreRAF to financialhealthRestore RAF tofinancial healthAccumulated deficit at31 March 2009 to beless than or equal tothe targeted amount(solvency)Cash holdings at 31 March2009 to be greater than thetarget amount (liquidity)(R38 609 million) (R40 043 million) (R1 434million) NotAchieved(R43 million) R1 091million R1 134 million AchievedSection 7 5 Annual Report 2009Minimise costsDevelopsustainableeconomicmodelTotal administration,human resources, legaland experts’ costs as apercentage of RAF FuelLevy income not to exceedthe percentage of thetargetDevelop an economicmodel for thedetermination of the RAFFuel LevyDevelop anImplementation Planframework on theAmendment Act and theregulations, includingRisk and Internal ControlManagement PlanBy 31 March200940% 38% 2% AchievedModel has beendevelopedand presentedto NationalTreasury.NationalTreasury iscurrently utilisingthe model indetermining theRAF Fuel Levy.AchievedBy 1 July 2008 Finalised Achieved48

Section 7 5 Annual Report 2009No.NationalObjectivesStrategicBusinessObjectivesAnnualPerformanceIndicatorsTargetsActualDifferenceCommentContinue to assist the DoTwith finalisation of activitiesnecessary to implementthe RAF Amendment Actand the development of aNo-fault PolicyBy 31 March2009No-faultworkshopsattended withDoT in order tofinalise strategydocument.Regulationsand medicaltariffs published.Adjustmentto R160 000loss of incomecalculation done.AchievedMinimise costsDeliver themandate in anoperationallyeffectiveand efficientmannerTotal administration andhuman resources costsas a percentage of RAFFuel Levy income not toexceed the percentage ofthe targetLive transations onSAP ERP system - coremodulesBy 31 March200912% 9% 3% AchievedThe followingcore moduleshave beenimplemented:HR; MaterialsManagement;Controlling;EmployeeSelf Service;ManagementSelf Service;Finance; PlantMaintenanceAchieved49

No.NationalObjectivesStrategicBusinessObjectivesAnnualPerformanceIndicatorsTargetsActualDifferenceCommentComplete the design ofthe new claims systemBy 30 June 2009 Solution designdocuments andblueprints havebeen signed offby RAFAchievedProactiveprevention ofaccidentsDevelop accidentprevention strategies by31 March 2009By 31 March2009Summarisedinitiativesapproved aspart of theCommunicationStrategy bythe Board on22/10/08AchievedDeliver themandate in anoperationallyeffectiveand efficientmannerClaims processed forthe financial year ended31 March 2009 shouldbe greater than the targetamount257 807 330 453 Achieved2 CorporategovernanceandlegislativecompliancePromotinggoodgovernanceLegislation relating togovernance not hampered90% compliance Adhered to AchievedSection 5 Annual Report 20093 BlackEconomicEmpowerment(“BEE”)4 EmploymentEquity (“EE”)Minimisecosts; delivermandateeffectivelyDelivermandateeffectivelyThe amount ofdiscretionary spending onadministration, RAF legaland experts’ costs as apercentage of the totaladministration, RAF legaland experts’ costs, shouldbe equal to or greater thanthe targeted percentage(BEE procurement)The number of African,Coloured and Indianstaff members as apercentage of the totalstaff complement, shouldbe equal to or greater thanthe targeted percentage(EE targets)20% 44% 24% Achieved60% 87% 27% Achieved50

No.NationalObjectivesStrategicBusinessObjectivesAnnualPerformanceIndicatorsTargetsActualDifferenceCommentThe amount spenton training of staffand learnerships as apercentage of the totalstaff costs, should beequal to or greater thanthe targeted percentage(capacity building).1% 2.4% 1.4% AchievedThe number of staffmembers with disabilitiesas a percentage of thetotal staff complement,should be equal to orgreater than the targetedpercentage (disability)0.2% 1.7% 1.5% Achieved5 CorporateSocialInvestment(“CSI”)DelivermandateeffectivelyAmount spent on CSI R 500 000 R 1 177 500 Achieved6 ExpandedPublic WorksProgramme(“EPWP”)Not applicableto RAF7 2010 FIFASoccerWorld CupobjectivesDevelopsustainableeconomicmodelRequest DoT to urgentlyimplement no-fault systemBy 31 March2009No-faultworkshopsattended withDoT in order tofinalise strategydocumentAchievedRequest DoT tourgently implement RAFAmendment ActBy 31 March2009Regulationsand medicaltariffs published.Adjustmentto R160k lossof incomecalculation doneAchievedSection 5 Annual Report 200951

corporategovernancesection 6

6.1 The RAF BoardThe Board of the RAF is responsible for determining the overall direction of the RAF. This is done through a three-year rollingstrategic plan submitted to the Executive Authority, the Minister of Transport, for approval on or before 30 September of everyyear, in compliance with Treasury Regulation 30. The Board is also responsible for formulating and implementing policiesthat are necessary to achieve the RAF’s strategic goals and maintain good governance.The Board is tasked with monitoring the efficiency and effectiveness of Management and renders support to Managementin implementing the strategies and policies of the Board. The onus to provide effective, compliant corporate governance iscollectively assumed by the Board. The Board is governed by the RAF Corporate Charter, which details the roles, structuresand functions of the Board, its various Board Committees, Chairs and Chief Executive Officer. The current Board comprisesa majority of Non-executive Directors with only the CEO as an Executive Director. The Board is appointed on a three-yearterm, which commenced on 1 August 2006 and expires on 31 July 2009.The Directors of the RAF regard corporate governance as fundamental to the success of the business and are fully committedto ensuring that good corporate governance is practised in order for the RAF to remain a sustainable and viable business ofglobal stature. The RAF ensures that its processes and practices are reviewed on an ongoing basis to:• Ensure compliance with legal obligations;• Ensure the maintenance of appropriate internal controls and risk management policies and practices;• Ensure the use of RAF funds in an economic, efficient and effective manner; and• Ensure adherence to good corporate governance practices that are continually benchmarked.The processes and practices are underpinned by the principles of transparency, integrity and accountability and an inclusiveapproach that recognises the importance of all stakeholders with respect to the viability and sustainability of the RAF. TheBoard is responsible for ensuring that this approach is followed and supports the organisation in instilling these principleswithin the RAF context.6.2 Board StructureSection 9 6 Annual Report 2009The RAF has a unitary Board structure currently comprising of eight Non-executive Directors and one Executive Director,who is the CEO. The Board is appointed by the Minister of Transport (“the Minister”), who exercises control over the RAF onbehalf of the Government of the Republic of South Africa. The Road Accident Fund Act, 1996 (Act No. 56 of 1996) (“the RAFAct”) provides that the Minister shall appoint the Chairperson, Vice Chairperson and Non-executive Directors of the RAF. TheMinister also appoints the CEO on such terms and conditions as may be determined by the Board.The standard term of a Non-executive Director is three years. Non-executive Directors are eligible for re-appointment fora further two terms of three years. The Executive Management team is appointed by the CEO, after consultation with theBoard. Executive Management is employed on the basis of either a standard permanent employment contract or a fixedtermcontract. The maximum duration of fixed-term contracts is three years.The Board is required to meet as often as the business of the RAF requires, but at least once a year.Directors have unrestricted access to the advice and services of the Corporate Secretary. In addition, the Directors areentitled to obtain independent, professional advice at the RAF’s expense, where they deem it necessary.54

6.3 Board CompositionMembers of the Board1. Mr V Mahlangu (Acting Chairman of the Board)2. Ms KE Moloto-Stofile3. Mr T Moyo4. Prof. CJB Greeff5. Dr AKA Dasoo6. Ms HG Motau7. Mr SA Msibi8. Ms KR Manana (Director-General Transport – Designee)9. Mr JRD Modise (CEO)Corporate Secretary1. Ms JR Cornelius (Corporate Secretary)– Appointed 1 October 20066.4 Powers and Functions of the BoardAccording to section 11 of the Road Accident Fund Act, 1996 (Act No. 56 of 1996):(1) “The Board shall, subject to the powers of the Minister, exercise overall authority and control over the financial position,operation and management of the Fund, and may inter alia:(a) Make recommendations to the Minister in respect of:(i) The Annual Budget of the Fund;(ii) Any amendment to this Act;(iii) Entering into an agreement with any institution referred to in section 9;(iv)(This sub-paragraph was deleted by section 4 of Act No. 19 of 2005 with effect from 31 July 2006);(v) Any regulation to be made under this Act.(b) Terminate the appointment of any agent and determine conditions on which such appointment is effected or terminated;(c) Approve the appointment, determination of conditions of employment and dismissal by the Chief Executive Officerof staff of the Fund on management level;(d) Approve internal rules and directions in respect of the Management of the Fund;(e) Approve loans made or given by the Fund;(f) Approve donations for research in connection with any matter regarding injuries sustained in motor vehicle accidents;(g) Determine guidelines in relation to the investment of the money of the Fund; and(h) Delegate or assign to the Chief Executive Officer and any member of the staff of the Fund any power or duty of theBoard as it may deem fit, but shall not be divested of any power or duty so delegated or assigned, and may amendor withdraw any decision made by virtue of such delegation or assignment.(2) The Board may report to the Minister of Transport as often as it deems necessary, but shall atleast once during a financial year, or when requested by the Minister to do so, report tothe Minister regarding matters dealt with during that year, or as requested by theMinister.(3) A quorum for any meeting of the Board shall be a majority of itsvoting members.(4) The Board shall meet as often as the business of the Fundmay require.(5) (a) The Members of the Board referred to in section10(1)(a) shall be reimbursed by the Fund for a l lreasonable expenses incurred in attending meetings ofthe Board.Section 9 6 Annual Report 200955

(b) Members of the Board shall be remunerated by the Fund for services rendered as such Members, and reimbursedfor all reasonable expenses incurred in attending meetings of the Board; provided that the Chairperson of the Board mayreceive such higher remuneration than that of the other Members, as may be determined by the Board.(6) (a) Resolutions of the Board shall, whenever practicable, be taken on the basis of consensus.(b) If consensus cannot be reached and except where otherwise expressly provided, all matters before the Board shallbe decided by a majority of the votes cast.”6.5 Board CommitteesThe Corporate Charter of the RAF outlines the functions of the Committees of the Board including the composition, roleand responsibilities, delegated authority and meeting requirements in respect of each of the Committees. The Board hasestablished the following Committees: Audit Committee; Risk Management Committee; Claims Committee; Remunerationand Human Resources Committee; and Chairman’s Committee (ad hoc).The Board retains full and effective control over the operations of the organisation and has delegated some of its powers toCommittees, the CEO and Executive Management through a Delegation of Authority framework. The delegation of authoritydoes not dilute the duties, responsibilities and accountability of the individual Directors and the Board as a whole.6.5.1 Audit CommitteeMemberMs Grathel MotauMr Todani MoyoProf. Caspar GreeffMr Sifiso MsibiRoleChairpersonMemberMemberMemberSection 6 Annual Report 2009The Board of the RAF, as the Accounting Authority, has established an Audit Committee in compliance with the Public FinanceManagement Act, 1999 (Act No. 1 of 1999) (“PFMA”), as well as the Treasury Regulations issued in terms of the PFMA. TheCommittee consists of four Non-executive Directors. The CEO is an ex officio member of the Committee. The Chairpersonis appointed by the Board and is an independent, Non-executive Director of the Board. The Chairperson of the Board is noteligible to chair the Audit Committee. The majority of the persons serving on this Board are financial specialists. The AuditCommittee meets at least four times a year, but may meet more frequently when necessary. The Committee may invite theChairperson of the Board, the Chief Financial Officer, external auditors or the Chief Audit Executive, or any other person toattend meetings. The Committee meets with the Auditor-General, or an external auditor, at least annually to ensure that thereare no unresolved issues of concern.The overall objective of the Audit Committee is to assist the Board of the RAF in ensuring that management has createdand maintained effective risk management, and an effective internal control environment in the organisation, and thatmanagement demonstrates and stimulates the necessary respect of the internal control and governance structures for theachievement of the objectives and goals of the organisation, as well as the management of risks to an acceptable level.The five main areas of responsibility of the Committee are:• To review the risk management and internal control structures including the appropriateness and effectiveness of the riskmanagement strategies, financial control, accounting and reporting systems;• To review the operations and effectiveness of the Internal Audit function;• Liaising with external auditors and the Auditor-General;56

• Monitoring compliance of the RAF with legal requirements; and• Monitoring of compliance with the RAF’s Code of Conduct.An Internal Audit Charter and annual Internal Audit Plan, reviewed and approved by the RAF’s Audit Committee, governsInternal Audit activities within the RAF. Progress in respect of this charter and plan is reported regularly to the Audit Committee.6.5.2 Remuneration and Human Resources CommitteeMemberMr Sifiso MsibiDr Aslam DasooMs Khibi MananaMs Kealeboga Moloto-StofileRoleChairmanMemberMemberMemberThe Board of the RAF has also established a Remuneration and Human Resources Committee (“REMCO”). This Committeeconsists of four Non-executive Directors. The CEO is an ex officio member of the Committee. The Chairperson is appointedby the Board and is an independent, Non-executive Director. The Committee meets twice a year, or as often as necessary.REMCO is responsible for developing and implementing a competitive HR Strategy to ensure that the RAF is able toattract, retain and develop the best possible talent to support superior business performance. The objective is to create anorganisational culture, structure and processes that seek to support the development of people and the optimisation of theirpotential. The HR Strategy forms part of the strategic plan and REMCO is responsible for enforcing, monitoring and auditingdevelopment and progress.The functions of REMCO include, but are not limited to:• Developing appropriate HR policies for the RAF;• Setting up a remuneration structure for Executive Management and the rest of the organisation;• Implementing and monitoring a Performance Management System; and• Monitoring the implementation of the RAF’s HR Strategy, EE Policy and Skills Development Plan.6.5.3 Claims CommitteeMemberProf. Caspar GreeffDr Aslam DasooMs Kealeboga Moloto-StofileMs Grathel MotauMr Todani MoyoRoleChairmanMemberMemberMemberMemberSection 6 Annual Report 200957

The Board of the RAF has also established a Claims Committee. This Committee consists of five Non-executive Directors.The CEO is an ex officio member of the Committee. The Chairperson is appointed by the Board and is an independent,Non-executive Director. The Committee meets four times a year, or as often as necessary. The Chief Operations Officer andother Executives attend meetings of the Claims Committee, as and when required. The functions of this Committee include,but are not limited to the following:• The setting up of appropriate policies and procedures relating to all aspects of claims administration;• Approving strategies relating to the streamlining of activities in the claims operations and improvement of service delivery;• Monitoring the performance of the claims operations of the RAF;• Monitoring settlement of claims in excess of R5 million; and• Overseeing legislative amendments pertaining to the RAF Act.6.5.4 Risk Management CommitteeMemberMr Todani MoyoDr Aslam DasooMr Sifiso MsibiMs Grathel MotauProf. Caspar GreeffRoleChairmanMemberMemberMemberMemberThe Board of the RAF has established a Risk Management Committee in compliance with the PFMA, as well as the TreasuryRegulations issued in terms of the PFMA. The Committee consists of five Non-executive Directors appointed by the Board.The Chairman is an independent, Non-executive Director of the Board. The CEO is an ex officio member of the Committee.The Committee Chairman is knowledgeable of the status of the position, and has the requisite business, financial andleadership skills. This Committee meets at least four times a year, but may meet more frequently when necessary. TheCommittee may invite the Chairman of the Board, the Chief Financial Officer, or any other person to attend meetings.The roles and responsibilities of the Risk Management Committee include:Section 6 Annual Report 2009• Monitoring the quality, integrity and reliability of the organisation’s risk management;• Assisting the Board in the discharge of its duties relating to corporate risk accountability;• Reviewing and assessing the integrity of risk control systems and ensuring that risk policies and strategies are in placeand are effectively managed;• Monitoring of external development relating to the practice of corporate risk accountability and the reporting of specificallyassociated risks, including emerging external risk trends and impacts on the RAF;• Reviewing the RAF’s reports detailing the adequacy and overall effectiveness of the risk management process; and• Reviewing the reinsurance protection for the RAF, including type of cover, limits and deductibles, and ensuring that theBoard is alerted to uninsured and uninsurable risks.A Risk Management Policy and Risk Management Framework have been approved that are supported by strong riskmanagement methodologies overseen by the Risk Management Committee. A Senior Risk Manager oversees the operationalaspects of risk management within the RAF.On an annual basis, the Board undertakes a risk assessment whereby the top ten risks of the organisation are identified. Afull Risk Strategy is then developed to address the identified risks. The current list of the top ten risks identified by the Boardis as follows:58

• Solvency risk;• Regulatory environment;• Economic business model;• Fraud by external and internal parties;• Systems and processes to support the business;• Rate of increase in the number of accidents – increases in claims lodged;• Stakeholder management, marketing and communications;• Human resource capital;• Governance and leadership; and• Business continuity.6.5.5 Chairman’s CommitteeThe Chairman’s Committee is an ad hoc Committee that meets as and when required by the Board to deal with, amongother, matters on an emergency basis that cannot be dealt with through special Board meetings. The Committee did nothave a need to meet during the year under review.Chairman’s Committee1. Mr V Mahlangu (Chairman)2. Mr T Moyo (Chairman – Risk Committee)3. Ms HG Motau (Chairperson – Audit Committee)4. Prof. CJB Greeff (Chairman – Claims Committee)5. Mr SA Msibi (Chairman – Remuneration and HumanResources Committee)6.6 Attendance of MeetingsBoard AttendanceAudit Committee AttendanceBoardMembers30 April 200826 June 200830 July 200822 September 200822 October 200825 March 2009TotalV Mahlangu √ √ √ √ X √ 5AKA Dasoo √ X X √ X √ 3CJB Greeff √ √ √ √ √ √ 6KR Manana √ √ √ √ X X 4KE Moloto- √ X √ √ √ √ 5StofileHG Motau √ √ X √ √ √ 5T Moyo √ √ √ √ √ √ 6SA Msibi √ X √ √ √ X 4JRD Modise √ √ √ √ √ √ 6ACMembers2 April 200824 April 200828 July 200822 October 200827 November 200826 January 200923 March 2009HG Motau √ √ √ √ √ √ √ 7CJB Greeff √ √ √ √ √ √ √ 7T Moyo √ √ √ √ √ √ √ 7SA Msibi X √ X X √ √ X 3JRD Modise(Ex Officio)√ √ √ √ X √ √ 6TotalSection 6 Annual Report 200959

Claims Committee AttendanceRisk Management Committee AttendanceClaimsCommitteeMembers7 July 200827 November 200818 February 200924 March 2009TotalRMC Members28 July 200829 October 200817 February 200923 March 2009TotalCJB Greeff √ √ √ √ 4AKA Dasoo √ √ √ √ 4KE Moloto-Stofile √ √ √ X 3HG Motau X X √ √ 2T Moyo √ X √ √ 3JRD Modise(Ex Officio)√ √ √ √ 4T Moyo √ √ √ √ 4AKA Dasoo √ √ √ X 3CJB Greeff √ √ √ √ 4HG Motau X √ √ √ 3SA Msibi X √ √ X 2JRD Modise(Ex Officio)√ √ √ √ 4Remuneration and Human Resources Committee AttendanceREMCOMembers29 July 200825 September 200813 October 200817 February 200924 March 2009TotalSA Msibi √ √ √ √ √ 5AKA Dasoo X X √ √ √ 3KR Manana √ √ X √ X 3KE Moloto-Stofile √ √ √ X √ 4JRD Modise(Ex Officio)√ √ √ √ √ 5Section 6 Annual Report 20096.7 Performance AgreementThe RAF concludes, on an annual basis, a Performance Agreement (“the Agreement”) with its Executive Authority, theMinister of Transport. The Agreement documents the key performance indicators (“KPI’s”) to be attained by the RAF, asagreed between the Board and the Minister. The Agreement serves to promote and encourage good governance practiceswithin the RAF, by clarifying the respective roles and responsibilities of the Board and the Minister. The Agreement providesthe Minister with the mechanism to direct the activities of the RAF in line with the national strategic objectives of Government.The performance objectives agreed with the Minister for the current financial year are contained on pages 48 to 51.The RAF’s performance against these objectives has been audited by the Auditor-General and his report is contained onpages 97 to 101 of this Annual Report.60

6.8 The Public Finance Management Act, 1999The Public Finance Management Act, 1999 (Act No. 1 of 1999) (“PFMA”) provides strong guidance to public entities ongood corporate governance. The Board has developed a dedicated capacity to ensure compliance with the PFMA. Theresponsibilities of the Board, as defined in section 51 of the PFMA, include taking appropriate action to ensure:• Economic, efficient, effective and transparent systems of financial, risk management and internal controls;• A system is maintained for properly evaluating all major capital projects prior to a final decision on each project;• The implementation of appropriate and effective measures to prevent unauthorised, irregular or fruitless and wastefulexpenditure, expenditure not complying with legislation, or losses from criminal conduct;• All revenues due to the RAF are collected;• The economic and efficient management of available working capital; and• The definition of objectives and the allocation of resources in an economic, efficient, effective and transparent manner.6.9 Code of Conduct and Ethical StandardsAn approved Code of Conduct, which should be read in conjunction with the Conflict of Interest Policy, defines the RAF’sorganisational values and requires adherence by Directors, employees and contractors to the RAF in accordance with theethics prescribed in these documents. The purpose of the Code of Conduct and the Conflict of Interest Policy is to set ethicalstandards and values applicable to all Directors, employees and contractors of the RAF. These documents are intended toassist in fostering adherence to the highest ethical standards within the RAF and to clarify issues, policies and protocolsrelating to fraud, corruption and unacceptable conduct.Section 6 Annual Report 200961

messages legal from thechairman frameworkand ceosection 7

7.1 Legal FrameworkTreatment ProcessClaims ProcessAccidentClaimantExpertsTransportationto hospitalLegal fraternityEmployersHospitaltreatmentRoad AccidentFundCourtsHomePost-recoverytreatmentMedical, loss of income, loss of support, general damagesand funeral costs claim by claimantClaimant can claim directly from the RAFClaimant can claim through an attorneyThe parties can use the courts to determine the claimLegal and expert costs claimed by attorneysFigure 7.1: Process StructureAnnual Report 20097.1.1 Legal MandateDuring the reporting period, the Road Accident Fund Act, 1996 (Act No. 56 of 1996) (the “RAF Act”) was amended by theRoad Accident Fund Amendment Act, 2005 (Act No. 19 of 2005) (hereinafter referred to as the “RAF Amendment Act”).Section 7The provisions of the RAF Act govern all claims arising from motor vehicle accidents that occurred before 1 August 2008.Motor vehicle accidents that occur after midnight on 31 July 2008 are governed by the provisions of the RAF AmendmentAct. The implications of some of the changes affected to the system of compulsory motor vehicle insurance by the RAFAmendment Act are explained in paragraph 7.1.2.8 below.In terms of both the RAF Act and the RAF Amendment Act, the RAF provides cover to all users of South African roads for lossor damage caused by the negligent driving of motor vehicles within the borders of the Republic. The client base of the RAF64

therefore comprises not only the South African public, but all foreigners within the borders of the country. The RAF providestwo types of cover, namely personal insurance cover to accident victims or their families, and indemnity cover to wrongdoers.7.1.2 Liability of the RAF7.1.2.1 Fault-based systemThe system of compensation managed by the RAF in terms of the RAF Act and the RAF Amendment Act is based on therequirement of fault. The RAF is only obliged to pay compensation if an injury or death is due to the negligent or other wrongfulact of the driver or owner of a motor vehicle, or his or her employee in the performance of the employee’s duties as an employee.In establishing fault, the common law rules of delict, as developed and interpreted by the courts, are applied.The effect of the system being fault-based is that in order for a claimant to succeed with a claim against the RAF, it mustbe established that the damage or loss suffered did not result from that claimant’s own negligence or other wrongful act oromission.Therefore, if the claimant was not negligent in causing the collision, then the RAF will be liable to pay the full agreed or provendamages. In the same manner, if a claimant was solely to blame for the collision, no claim will lie against the RAF.7.1.2.2 Compensation only for bodily injuryThe RAF is liable only to pay compensation for loss or damage suffered as a result of bodily injury or death. The effect ofthis is that the RAF does not pay for any loss or damage to property (such as damage to motor vehicles, goods conveyedin a vehicle, etc.).7.1.2.3 Accidents within South African bordersThe RAF is liable for loss or damage caused by the negligent or unlawful drivingof a motor vehicle at any place within the Republic of South Africa. It isnot liable for losses or damage arising outside the borders ofSouth Africa.Section 5 7Annual Report 200965

e) A third party does not institute a third party claim against the RAF personally or through an admitted and practisingattorney or other authorised official;f) A third party enters into an agreement with any person other than an admitted and practising attorney or other authorisedofficial in terms of which such a person receives a portion of the compensation recovered, or any amount for servicesrendered in respect of a third party claim;g) A third party unreasonably refuses or fails to submit to a medical examination by a medical practitioner appointed by the RAFon request of the RAF and at its cost; andh) A third party refuses or fails to:(i) Submit to the RAF (at the latter’s cost) copies of all relevant medical reports in their possession;(ii) Allow inspection of their medical records held by a medical practitioner or a hospital;(iii) Submit an affidavit setting out full particulars of the accident together with a claim form;(iv) Supply within a reasonable time from obtaining possession thereof, copies of all relevant statements and documentsin respect of the collision.7.1.2.6.1.2 Exclusion of liability in terms of the RAF Amendment ActSection 19 of the RAF Amendment Act continues to provide that liability is excluded in the instances referred to in subparagraphs(a), (e), (f), (g) and (h) above. However, the RAF Amendment Act does not provide for the liability of the RAF tobe excluded in circumstances referred to in sub-paragraphs (b), (c) and (d) above. The effect of this is that the RAF will beliable on the same principles applicable to other claimants if a person is injured or killed on or after 1 August 2008 and at thetime of the accident such person was:a) A paying motorcycle passenger is injured or killed by the exclusive negligence of the driver of the motorcycle;b) A member of the same household as the driver of the motor vehicle in which such person was conveyed and the collisionresulted solely from the negligence or unlawful act of such driver;c) A passenger in a motor vehicle who is responsible for the maintenance of the driver of such motor vehicle and thecollision resulted solely from the negligence or unlawful act of such driver.The exclusions listed in sub-paragraphs (a) and (e) to (h) above, are still provided for in the RAFAmendment Act, and consequently in such circumstances, the RAF will not be liablefor any losses or damages, regardless as to whether the collision inquestion occurred prior or subsequent to 1 August 2008.The RAF Amendment Act brought into beingone further instance where its liability isexcluded, namely where the loss ordamage results from secondaryemotional shock. The effectAnnual Report 2009Section 767

of this is that where an accident occurs after 31 July 2008 and a person suffers shock as result of witnessing or hearing ofsuch accident, and the person suffers losses consequent to the shock, the RAF will not be liable for these losses. However,a person who suffers loss as a result of secondary emotional shock will have the right to claim such loss from the wrongdoerin terms of the common law.7.1.2.7 Limitation of liability7.1.2.7.1 Limitation of liability in terms of the RAF ActIn terms of section 18 of the RAF Act, the liability of the RAF is limited in certain instances.Passenger limitationsIn respect of certain specified categories of passengers or the dependants of those passengers in the case of the death ofthe passenger, the liability of the RAF is limited in respect of both the amount recoverable and the damages sought to beindemnified, depending on the category into which the particular passenger falls.The limitation only becomes operative where the injury or death is caused by the sole negligence of the driver of the vehiclein which the passenger was conveyed.In respect of passengers conveyed in vehicles under the following prescribed circumstances:• Passengers for reward;• Passengers conveyed in the course of the lawful business of the owner of that motor vehicle;• Passengers conveyed in the course of their employment where they are not covered by the Compensation forOccupational Injuries and Diseases Act, 1993 (Act No. 130 of 1993) (“COIDA”); and• Lift club passengers,the liability of the RAF is limited to an amount of R25 000 in respect of both general and special damages.The liability of the RAF in respect of claims of all other passengers (social passengers, such as friends) is limited to R25 000in respect of special damages only. These passengers are not entitled to general damages.Funeral expensesAnnual Report 2009Section 18 of the RAF Act also limits the liability of the RAF for funeral expenses, with the RAF only being liable to pay thenecessary actual costs related to cremation or internment.Reduction of liabilityIn terms of section 18 of the RAF Act, the RAF may deduct from its liability amounts that claimants are entitled to undercertain other specified legislation. In this regard, the RAF is entitled to reduce its liability in the following circumstances:Section 7• Passengers who are employees injured or killed in the course of their employment and who are covered by COIDA. Interms of the RAF Act, the monetary amount for which the RAF is liable is limited to the amount which the claimant couldhave claimed but for section 18 of the Act or R25 000, whichever is the lesser, minus any compensation to which theclaimant is entitled under COIDA.• Members of the South African National Defence Force (“SANDF”) who have claims against the Minister of Defence in68

terms of the Defence Act, 2002 (Act No.42 of 2002) (“the Defence Act”). This refers to members of the SANDF who are,at the time of the accident, rendering a military service or undergoing military training in terms of the Defence Act orany other Act governing the SANDF. The claimant’s common law damages suffered as a result of the accident fall to bereduced by the RAF in the sum that such a claimant is entitled to under the Defence Act.7.1.2.7.2 Limitation of Liability in terms of the RAF Amendment ActLimitation on passenger claims removedThe inequitable and discriminatory provisions in the RAF Act that provided for the RAF’s liability to be limited to R25 000where a person is injured or killed while a passenger in the vehicle that was solely to blame for the accident, has beenremoved in terms of the RAF Amendment Act. The effect of this is that the RAF will be liable on the same principles applicableto all other claimants if a person is injured or killed on or after 1 August 2008, and at the time of the accident such personwas a passenger in the vehicle that was solely to blame for the accident.Funeral expensesThe limitation of the RAF’s liability to pay only the necessary actual costs of cremation or internment remains in the RAFAmendment Act.Reduction of liabilityThe RAF Amendment Act has retained the provision that the RAF may deduct payments received by third parties in termsof COIDA and the Defence Act.Section 7Annual Report 200969

Additional limitations in the RAF Amendment ActThe removal of the limitation on passenger claims served to increase the liability of the RAF. So as to ensure the sustainabilityof the system, it was necessary for new limitations on the RAF’s liability to be introduced in the RAF Amendment Act. Inrespect of accidents occurring on or after 1 August 2008, the liability of the RAF is limited as follows:1. Hospital, medical and related expenses are now paid on the basis of two tariffs. The first relates to emergency medicaltreatment and the applicable tariff is based on the National Health Reference Price List. The second relates to nonemergencymedical treatment and the tariff applicable for such treatment is the Uniform Patient Fee Structure for feespayable by full-paying patients prescribed by the National Health Act, 2003 (Act No. 61 of 2003), as revised from time totime.2. Loss of income and support is now capped at a maximum of R160 000 per annum, irrespective of the actual loss. Thiscap is adjusted quarterly to counter the effect of inflation.3. Payment of general damages is now limited only to instances where a serious injury has been sustained. In terms ofthe Regulations to the RAF Amendment Act, an injury will be assessed as “serious” if the injury results in 30% or moreimpairment of the Whole Person as provided for in the American Medical Association Guides (“AMA Guides”). TheRegulations further provide that if an injury does not result in 30% or more Impairment of the Whole Person, such an injurymay only be assessed as serious if that injury:(i) Resulted in a serious long term impairment or the loss of a body function;(ii) Constitutes permanent serious disfigurement;(iii) Resulted in severe long-term mental or severe long-term behavioural disturbance or disorder; or(iv) Resulted in the loss of a foetus.Apart from being required to ensure the sustainability of the system, the introduction of new generally applicable limitationson the RAF’s liability has gone some way in addressing the systemic problems in the RAF Act, in that:1. The inequity of the poor subsidising the rich has been partially addressed through the cap on loss of income andsupport and the medical tariffs;2. The payment of general damages in instances only where a serious injury has been sustained will limit wastages in thesystem and curtail abuse; and3. By limiting liability for loss income and support, the system is more reasonable and sustainable, as the risk of enormousclaims by foreigners has been removed.Section 7Annual Report 200970

7.1.2.8 Comparison of Liability of RAF in terms of RAF Act and RAF Amendment ActPassengers whose injury or deathis caused by the sole negligence ofthe driver of the vehicle in which thepassenger was conveyedA paying motorcycle passengerwhere the injury or death resultsfrom the exclusive negligence of thedriver of the motorcycleRAF Act – Applicable to accident thatoccurred before 1 August 2008RAF Amendment Act – Applicableto accidents that occur on or after 1August 2008.a) Liability limited to R25 000 forspecial damages and generaldamages in instances where:(i) Passengers conveyed forreward;(ii) Passengers conveyed in thecourse of the lawful businessof the owner of that motorvehicle;(iii) Passengers conveyed in thecourse of their employmentwhere they are not coveredby the Compensation forOccupational Injuries andDiseases Act, 1993 (Act No.130 of 1993) (“COIDA”); and(iv) Passengers conveyed as partof a lift clubR25 000 limitation removed and theRAF is liable on the same principlesapplicable to all other claimants.b) Liability limited to R25 000 forspecial damages only in respectof claims of all other passengers(social passengers, such asfriends)Liability excludedA member of the same householdas the driver of the motor vehicle inwhich such person was conveyedand the collision resulted solely fromthe negligence or unlawful act ofsuch driverA passenger in a motor vehicle whois responsible for the maintenance ofthe driver of such motor vehicle andthe collision resulted solely from thenegligence or unlawful act of suchdriverThe person who suffered the lossor damage (called the “third party”)cannot hold the wrongdoer (usuallythe driver) liable for the damages atcommon lawExclusion removed and the RAFis liable on the same principlesapplicable to all other claimants.Liability excludedLiability excludedExclusion removed and the RAFis liable on the same principlesapplicable to all other claimants.Exclusion removed and the RAFis liable on the same principlesapplicable to all other claimants.Annual Report 2009Section 771

Annual Report 2009Section 772A third party refuses or fails to:(i) Submit to the RAF at the RAF’scost, copies of all relevant medicalreports in their possession;(ii) Allow inspection of their medicalrecords held by a medicalpractitioner or a hospital;(iii) Submit an affidavit setting out fullparticulars of the accident togetherwith a claim form;(iv) Supply within a reasonable timefrom obtaining possession thereof,copies of all relevant statementsand documents in respect of thecollisionA third party does not institute athird party claim against the RAFpersonally or through an admittedand practisingattorney or other authorised officialA third party enters into anagreement with any person otherthan an admitted and practisingattorney or other authorisedofficial in terms of which such aperson receives a portion of thecompensation recovered, or anyamount for services rendered inrespect of a third party claimA third party unreasonably refusesor fails to submit to a medicalexamination by a medical practitionerappointed by the RAF on request ofthe RAF and at its costClaims arising from secondaryemotional shock. (Secondaryemotional shock refers to instanceswhere the claimant was not involvedin the accident, but either witnessedor heard of the accident)Funeral expensesHospital, medical and relatedexpensesLiability excludedLiability excludedLiability excludedLiability excludedRAF liable for full agreed amount ofproven lossRAF liable to pay the necessaryactual costs related to cremation orinternmentRAF liable to pay the reasonable andnecessary costs resulting from theinjuries sustainedLiability excluded.Liability excluded.Liability excluded.Liability excluded.Liability excluded.RAF liable to pay the necessaryactual costs related to cremation orinternment.Liability of the RAF is determined onthe basis of two tariffs:(i) Emergency medical treatment ispaid according to a tariff basedon the National Health ReferencePrice List(ii) Non-emergency medical treatmentis paid in accordance with theUniform Patient Fee Structure forfees payable by full-paying patientsprescribed by the National HealthAct, 2003 (Act No. 61 of 2003), asrevised from time to time.

Loss of incomeLoss of supportGeneral damages (pain andsuffering, loss of amenities of life,disfigurement and disability)RAF is liable for the unlimited actualloss, except in instances where thepassenger limitation of R25 000appliesRAF is liable for the unlimited actualloss, except in instances where thepassenger limitation of R25 000appliesRAF is liable for unlimited damagesin all instances where an injury issustained, except where the passengerlimitation is applicableLiability capped at a maximum ofR160 000 per annum, irrespective ofthe actual loss. This cap is adjustedquarterly to counter the effect ofinflation.Liability capped at a maximum ofR160 000 per annum, per breadwinner,irrespective of the actual loss. This capis adjusted quarterly to counter theeffect of inflation.RAF is only liable if a “serious injury”has been sustained. An injury will beassessed as “serious” if the injuryresults in 30% or more impairment ofthe whole person as provided for in theAMA Guides.Certain injuries will be regarded as“serious” even if the injury does notresult in 30% or more impairment ofthe whole person. These are injuriesthat:(i) Result in a serious long-termimpairment, or the loss of a bodyfunction;(ii) Constitute permanent seriousdisfigurement;(iii) Result in severe long-term mental,or severe long-term behaviouraldisturbance or disorder; or(iv) Result in the loss of a foetus.Automatic liability to pay costs notretained. Normal rules applicable tocosts of litigation apply.Legal costsRight to claim against the wrongdoerin terms of the common lawUpon acceptance of an amountoffered, the RAF is liable to pay theagreed or taxed party and party costsin respect of the claimRetained where the RAF is unable topay the compensationRetained only where:(i) The RAF is unable to pay anycompensation, and(ii) In instances of secondaryemotional shock.Annual Report 2009Section 773

7.2 Funding7.2.1 RAF Fuel LevyThe RAF is funded by way of a fuel levy on all petrol and diesel sold within the Republic of South Africa.The collection of the RAF Fuel Levy is administered by the South African Revenue Services (“SARS”) through the operationof section 47 of the Customs and Excise Act, 1964 (Act No. 91 of 1964) and section 5 of the RAF Act.The RAF plays no part whatsoever in the collection of its fuel levy income. The RAF Fuel Levy collection process is depictedin figure 7.2.Oil refineries/companiesNational TreasurySouth AfricanRevenue ServicesFuel retailersDepartment ofTransportIndustry consumersMotoring publicRoad Accident FundAnnual Report 2009Section 7Figure 7.2: Fuel Levy Collection ProcessPetrol and diesel consumptionRAF Fuel Levy collected by SARS (one to two months afterthe fuel leaves the refinery)RAF Fuel Levy deposited with National TreasuryRAF Fuel Levy paid to the RAF via the Department of Transport(50% paid one month after receipt by National Treasury, theremaining 50% two months after receipt by National Treasury)Diesel rebate refunded to SARS (set-off)Diesel rebate refunded to industrial customers74

7.2.2 Diesel RefundThe fuel levy income received by the RAF is reduced by the fuel levy refunded by the Commissioner for SARS in respect ofdiesel concessions provided to certain sectors of the economy.Diesel concessions are granted to certain sectors of the economy on the basis of the level of the off-road use by the dieselconsumer in that sector. By way of illustration, the fishing, coastal shipping, offshore mining, rail freight sectors/industriesand Eskom make no use of the road network during their consumption of diesel. They therefore derive no benefits from thesystem of compulsory motor vehicle insurance administered by the RAF in terms of the RAF Act. As a result, these sectorsare entitled to a 100% concession in respect of their diesel fuel consumption. The agriculture and forestry sector and theonshore mining sectors utilise approximately 20% of their diesel consumption while making use of the road network and arethus entitled to an 80% refund of the RAF Fuel Levy. The payment of the 20% portion of the diesel levy affords these userscover by the RAF in respect of their on-road vehicle use.The concessions have been granted as follows:• Agriculture and Forestry 80%• Onshore Mining 80%• Fishing and Coastal Shipping 100%• Offshore Mining 100%• Rail Freight 100%• Eskom 100%7.3 BorrowingsThe RAF Act also allows funding to be procured by way of the raising of loans.Section 7Annual Report 200975

sustainabilityreportsection 8

8.1 Sustainability Approach and PhilosophyThe improvement of the RAF’s sustainability report – in terms of content, quality and boundary - is an ongoing activity. Thisprocess of continuous improvement will enable the RAF to meet the primary goal of sustainable development, which is to“meet the needs of the present without compromising the ability of future generations to meet their own needs”.New and innovative choices and ways of thinking will continue to be explored by the RAF in the areas of its operations,products, services, and other activities. The goal is to achieve even higher levels of transparency regarding the economic,environmental and social impact of the RAF’s activities. The RAF recognises that in practical, everyday terms, this meansencouraging stakeholders to think in a sustainable manner and creating a RAF culture that will be the foundation for asustainable future.The RAF’s sustainability is reported against the backdrop of key internationally accepted and local standards, including theGlobal Reporting Initiative’s (“GRI”) Sustainability Reporting Guidelines and the King II Report on Corporate Governance,2002. The Financial Sector Charter’s (“FSC”) performance indicators and the Department of Trade and Industry Codes ofGood Practice (“Dti CoGP”) have also been applied in this regard.The RAF’s philosophy on sustainability is driven by the nature of our business, our customers, our service offering, theneeds of our customers, the needs of the service delivery partners in the value chain, the role and impact that the RAF hason the South African economy, the social and economic objectives of government, and global warming.The next step is to develop a clear definition of what sustainability means within a short-term insurance business context and, morespecifically, within the context of the RAF being a government entity. This is to be followed by the development of a SustainabilityFramework that will guide everyday management decisions - beyond mere compliance and the meeting of our statutory mandate- in as far as the entity’s actions impact on the triple bottomline (economic, social and environmental performance).8.1.1 Governance of SustainabilitySustainability governance and management is fundamentally about understanding and managing the non-financial impactof our activities on all major stakeholder groups, both internal and external. This includes clients, shareholders, employees,suppliers, communities, government partners, regulators, etc. The RAF’s Risk Management and Control Framework plays akey role in this regard. Senior Management takes an active role in the risk management process and is responsible for themaintenance of, and ultimately compliance with, the Risk Management Framework. In addition, the responsibilities of theAudit and Risk Committee also include various aspects of risk management and compliance.Section 8 Annual Report 2009Risk elements are defined in consultation with department heads, who in turn are responsible for the implementation andmonitoring of the identified issues. The Board is kept informed by means of interaction with the Executive team, as well asmore structured feedback at Board meetings.The RAF’s approach to risk management is ultimately aimed at:• Creating the right awareness and understanding of risk at all levels of the organisation;• Instilling a culture of risk management and risk ownership;• Proactively engaging risks and managing risks within the risk framework of the business;• Embedding risk management in the way the business is managed;• Complying with appropriate risk management practices in terms of corporate governance guidelines; and• Complying with the requirements of the King Report on Corporate Governance for South Africa, 2002 (“King II”).78

Best practice suggests the establishment of a Sustainability Committee, whose primary responsibility is to attend to issuesof sustainability on behalf of the Board. Once established, this Committee will work in collaboration with already existingentities, such as the Audit and Risk Committee, the Human Resources Committee, etc.A full Risk Management Report is included in this report.8.1.2 Societal NeedsThe cover provided by the RAF could be likened to a form of social security insurance. Its benefits are enjoyed by the entirepopulation, including foreigners and illegal immigrants, even though the contribution towards cover is made primarily by theeconomically active members of society.The RAF aims to deliver on customer expectations by being alert to their needs, resolving issues timeously, and providingcover in a fair, efficient and financially responsible manner. This approach also forms the backbone of the Amendment Act.8.1.3 Understanding our Customers’ NeedsMost of our customers seem to be unaware of the existence of the cover provided by the RAF, their contribution towards thecover, directly or indirectly, the benefits they are entitled to and processes they need to follow to claim.In the coming year, the RAF will spend considerable effort towards a much more informed understanding of our customers’needs. Research will play a key role in developing this understanding. It is envisaged that this will lead to a stronger senseof empathy in the way the RAF engages, interacts and communicates with its customer base.8.1.4 Customer SatisfactionIn the midst of all the activities that the RAF has embarked on in order to improve on service delivery, the need remainsto measure the effectiveness and extent to which these initiatives are meeting customer expectations and needs. This willrequire that the RAF takes a customer-centric view with regard to measuring customer satisfaction levels. Qualitative andquantitative research will provide more insight into what our customers define as “value” in terms of their expectations.It is envisaged that there are three key criteria to which clients will ascribe value and in accordance with which the RAF willseek to measure customer satisfaction:• Speedy resolution of issues;• Adequate dissemination of information to customers; and• Extent to which customers feel treated as individuals in their own right.In the period approaching, year-on-year comparisons will be done to reflect a solid progression in terms of these issues.8.1.4.1 Real Results for ClientsOver the years, the RAF has paid billions of Rand to victims of road accidents to ensure, among other, that they receive adequatemedical care, are buried in a dignified manner and that dependants are not adversely affected by the death of a breadwinner.In many cases, the victims, who are often left physically, emotionally and psychologically scarred by the accidents, are unableto live a normal and fruitful life after an accident. It has been the RAF’s goal to assist road accident victims to live normal andproductive lives. This is done through various rehabilitation interventions, such as purchasing wheelchairs, artificial limbs, hiringSection 8 Annual Report 200979

caregivers and purchasing equipment worth millions (such as hoists, commode chairs, motorised wheelchairs and other items).Some of these can be used to help accident victims adapt to demands posed by ill-equipped bathrooms and ablution facilities,thus forming part of our Patient Outreach Programme (“POP”) which provides aftercare for claimants.Below follows some examples of persons assisted by the RAF as part of its POP:Mr Selwyn Paul Els“The RAF is an angel sent from above. I don’t know what I would have done without them”, is how 50-year-old Selwyn PaulEls describes the organisation after the RAF ensured that he was able to live a normal life despite a life-altering accident.Fourteen years ago, the former Warrant Officer (Correctional Services) from Sunnyridge in East London suffered a seriousspinal cord injury, which caused him to be permanently disabled, wheelchair-bound and about 75% dependent on relativesand friends. The married father of a high school teenage girl was his family’s breadwinner before the accident and the familysoon struggled to afford his monthly paraplegic supplies and chronic medication. The situation was worsened when hismedical aid funds were depleted.The financial burden left the once outgoing man and sports enthusiast depressed, which in turn led to tension in his marriage.This was until the RAF intervened with a compensation payout of R970 243 and further assistance through the POP.The compensation enabled Els to settle his bond and pay for alterations to his home, adding a second garage that nowallows him to move about freely. The manual gate and garage doors were motorised and he was able to convert his houseinto a wheelchair-friendly environment. Through POP, Els has been given a motorised wheelchair for use in the house, amini-rider which he uses for short distances to shops and surrounding areas, and a Quickie Breezy manual chair to use asa back-up. A hoist to lift him in and out of the swimming pool, which he uses for hydrotherapy and relaxation, has also beenfitted and he also has his own “Golden Fleece”, a medicated sheep skin.Last year his wife landed a full-time job and Els now has a full-time attendant who deals with his basic needs, thanks to theintervention of the RAF. Els’ normal and productive life would not have been possible without active case management andthe intervention of the RAF’s undertakings department.Ms Nthabiseng MolongwanaSection 8 Annual Report 2009Nthabiseng Molongwana, 34, from Langenhoven Park in Bloemfontein was left a quadriplegic after a horrific car accident in1994. As if that was not enough, her parents got divorced after she was discharged from hospital and she had to live withher mother in a two bed-roomed house in Phelindaba. The house had no ceiling, was freezing cold at night and very warmduring the day. Needless to say, the fluctuating temperatures worsened her condition.The house had no wheelchair ramp, and she had to be carried into the house. Having lost control of her bodily functions, shewas often left destitute when her mother went looking for transport to take her to hospital on occasions when the catheterslipped out. She depended on the state hospital for medication and incontinence supplies and this meant waking up earlyin the morning and spending hours in long queues.Her daily struggles came to end when the RAF paid her over R2 million as compensation. She used the money to buy ahouse in an upmarket suburb in Bloemfontein, and a special kombi which could accommodate her wheelchair.“For the past eight years, the RAF has assisted with medication, wheelchairs and other items that I needed. The sense of securityand comfort knowing that everything will be taken care of has been unbelievable. For instance, I used to have problems withpressure sores, but this problem is something of the past thanks to the RAF”, she says.80

Molongwana is now Deputy Director: Public Relations at the Association of People with Disabilities, where she once stayed.In an effort to make her life as normal as possible, the RAF is paying the salaries of her two helpers.“The RAF has made my life easier. I have people who look after me and the RAF pays them, which makes a huge differenceto my budget. I really don’t know how I would have managed without the extra assistance”, Molongwana says.Molongwane , a BSc graduate from the University of the Free State, is grateful that the RAF helped restore her dignity.Following the death of her mother five years ago, she would not have had any assistance were it not for the RAF.Mr Philip RaphelaPhilip Raphela, 43, confesses to being an “unbearable man” after suffering from Organic Brain Syndrome following severehead injuries from a car accident in 2003. He was impulsive, irritable, aggressive and paranoid and both his mother and sisterwere so afraid of him, they moved out of the house they shared with him. In addition to suffering from a major personalitychange, Raphela’s cognitive abilities were affected, he struggled to process information and had a poor attention span.An investigation revealed that his claim had been settled by the RAF, but when he enquired with his lawyer what hadhappened to his money, he was offered a cheque of R100 000, which he refused. The RAF assisted him in drafting a letterto the Law Society and he eventually received his full payment of R710 000.Last year, while working for the Department of Education as an ABET teacher, he suffered a relapse and was admitted to theNkhensani Hospital. The RAF again intervened and a Case Manager took him to a psychiatrist which put him on medication.Since then, he has stopped smoking and drinking and is now a respected member of the Zion Christian Church.8.1.5 Improving RAF SystemsExtensive work has been done and is still underway to develop, implement and improve IT systems as part of the RAF’sturnaround and renewal programme. Ultimately, the systems will encapsulate sophisticatedworkflow and claims management tools that will enable RAF employees to customiseinformation and render support to customers instantly.Section 8 Annual Report 200981

8.1.6 Improving Claims Management ProcessesRefinements to the RAF claims operating model will continue in the next financial year. Processes of service delivery willcontinue to be refined with the aim of meeting the needs of our customers, including suppliers, and other service providers,such as the health and legal fraternities.Some of these interventions will be aimed at:• Encouraging more claimants to approach the RAF directly; and• Assigning dedicated teams to deal with specific customer and supplier segments.8.1.7 Resolving Disputes and ClaimsOur decisions relating to customer claims are often not understood or accepted. A well-designed Communications Strategywill enable the RAF to identify areas in which the necessary improvements can be made.8.1.8 Funding LevelThough the fuel levy income has increased over the years, there is recognition that capital maintained by the RAF is animportant part of managing the uncertainties that would impact on the RAF’s ability to service claims. Going forward, asolid and effective strategy aimed at increasing investment income is critical in building up assets to cover the outstandingclaims liability.Organisations similar to the RAF have set themselves a funding level of some 110%. It is this target that the RAF needs toaspire to. This can only be achieved once the organisation has sufficient funds. A strategy will be put in place to make thetransition from the current funding levels to the target level over a specified period of time.8.1.9 Reducing FraudIn keeping with the RAF’s goal of providing suitable and fair compensation in a socially and economically responsiblemanner, the RAF procurement policies and fraud and risk management procedures are in place. The controls imposed bythese procedures will be strengthened to effectively curb fraudulent activities from both internal and external sources.8.1.10 Environmental InitiativesSection 8 Annual Report 2009There is plenty of room for the RAF to take an active role in limiting the effects of its activities on the environment. Ecologicallysustainable principles will be considered and applied across all RAF offices. These include:• ‘Low-flow’ water devices;• Use of energy efficient light bulbs;• Control of the level of printing paper used;• Reducing printing levels;• Installing solar shading devices;• Solar-boosted hot water;• Under-floor air conditioning systems; and• Initiatives to limit carbon emissions of our fleet of vehicles (by adopting a carbon neutral fleet programme policy).82

By developing a Sustainable Workplace Action Plan and an Environmental Sustainability Reporting System, the RAF willcome to understand the organisation’s environmental footprint. The aforementioned will ultimately inform the developmentand implementation of a comprehensive and effective Environmental Policy.8.1.11 ReinsuranceIn order to protect the RAF against the impact of catastrophic events, the organisation has an appropriate level of reinsurancecover in place. This forms a key component of the RAF’s financial risk management strategies.8.1.12 Risk Management FrameworkThe RAF has a comprehensive Risk Management Framework that delineates defined management and operationalpractices across the entire spectrum of the business. This ensures that exposure to significant risk is identified, measuredand quantified, and the relevant risk management intervention strategies are employed.So important is this activity that the RAF Board owns this process together with the active involvement of Management.Continuous improvements to the process will enable the organisation to become even more proficient in controlling risk to amanageable level. The risk profile is therefore reviewed at regular intervals.8.1.13 Transformation and EmpowermentThrough its commitment to Government’s national broad-based black economic empowerment (“BBBEE””) andtransformation, the RAF is playing an important role in supporting Government’s initiatives towards a sustainable economyand people who actively participate in it.8.1.14 Community EngagementThe RAF’s primary platform in community engagement in the past has been through road safety campaigns. It is envisagedthat in the new financial year a broader community engagement programme will be developed with a view to diversify andincrease our involvement within the communities we serve.8.2 Corporate GovernanceThe RAF subscribes to the highest standards of corporate governance as espoused in King II and the Protocol on CorporateGovernance. The details of our activities and governance structures are included in Section 6 of this Annual Report.8.3 Marketing and CommunicationsThe RAF has developed a comprehensive Communication Strategy, which saw the implementation of various campaignspertaining to the Amendment Act and Road Safety Awareness. Print and electronic media played an important role inconveying the core messages in most of the official languages, thus ensuring that all South Africans are abreast of theeffects of changes to the legislation and the importance of road safety.These campaigns will play a vital role in the future to ensure that the South African public supports the RAF’s drive to engage withaccident victims directly. The fact that the RAF was invited to participate in TV programmes such as “Morning Live” and “CarteBlanche” is an indication that the media is ready to reflect on the reasons why change is needed in order to turn the RAF around.Section 8 Annual Report 200983

8.4 Promoting Road Safety8.4.1 IntroductionRoad traffic injuries are a global problem affecting all sectors of society. To date, road safety has received insufficientattention at international and national levels. According to the World Health Organisation, road traffic injuries are a growingpublic health issue, disproportionately affecting vulnerable groups of road users, including the poor. More than half thepeople killed in traffic crashes are young adults aged between 15 and 44 years – often the breadwinners in a family.Furthermore, road injuries cost low-income and middle-income countries between 1% and 2% of their gross nationalproduct – more than the total development aid received by these countries.South Africa’s road accident rate is unacceptably high, mainly due to factors such as alcohol and speed, usage patternsof public transport (busses and / or minibuses) and seasonal holiday rushes between inland and coastal areas. Generallyspeaking, accident statistics are attributable to a prevailing attitude of irresponsibility, intolerance and lack of courtesy onthe part of road users.In South Africa, approximately 15 000 people die on our roads every year (RTMC, 2008). In comparison to other countriessuch as in Australia, only 1 700 people die in road crashes per annum. Over 40% of all road deaths in the country arepedestrians. According to the RTMC (2006), the cost of road crashes to the South African economy has been increasingover the last decade from approximately R38 billion in 2002/3 to R48 billion in 2006/7.The challenge, therefore, is to inculcate the right attitude in our road-using public. Needless to say, this will require a majormind shift in South African road users. It is of the utmost importance that the RAF contributes to this paradigm shift in orderfor South African road users to view it as socially and morally unacceptable to behave inappropriately on our roads. Realprogress will be made when a social and moral stigma is attached to drivers who misbehave.In view that road accidents are a key cost driver for the RAF and of strategic importance to the RAF’s business a decisionwas taken at RAF Board level to promote road safety by becoming proactively involved in campaigns aimed at addressingroad safety behaviour, with the ultimate aim of reducing road crashes in South Africa. The strategic focus is to ensure that theparadigm shift is maintained. The only way in which the RAF will achieve this paradigm shift, is by inculcating these positivevalues in the youth, through schools and other educational structures at an early stage of development. The RAF targetedthe youth at school level as a key stakeholder in our road safety prevention strategy. During the reporting period, the RAFparticipated in road safety initiatives locally and internationally.Section 8 Annual Report 2009Appropriate road behaviour has to become second nature and an essential component of good citizenship, whereas badroad behaviour should be considered as criminal. If these principles can be instilled, the RAF is certain to experience adramatic reduction in road accident rates, and resultant claims.During the year under review, the organisation embarked on a process of developing and implementing its own road safetyprogrammes, as well as supporting established programmes initiated by other members of the transport fraternity. The RAFis set to involve itself fully in all road safety initiatives, treating the cause of the problem rather than the symptoms. Duringthe year under review, the RAF fully supported the efforts of Arrive Alive, the Global Road Safety Partnership (“GRSP”), theSouth African National Roads Agency Limited (“SANRAL”), the RTMC, as well as provincial and local law enforcement.84

8.4.2 Road Safety Strategic ObjectivesThe RAF has developed a Road Safety Strategy, particularly aimed at the youth, the generation which will eventually beentrusted with the responsibility of doing something of strategic value to reduce South Africa’s current high rate of roadaccidents in line with the National Road Safety Strategy. The RAF also targets pedestrian safety as a primary focus of itsroad safety initiatives.The road safety strategy is aligned with the RAF mission; “… to actively promote safe use of our roads.”The key strategic thrust of the road safety strategy is to position the RAF as the nation’s spearhead for safe road usepromoting a national drive to educate, communicate and increase national road safety awareness. It is to reduce the currenthigh rate of road accidents in line with world-class standards by:• Promoting road safety principles; and• Creating a platform for all transport industry stakeholders to assist the victims of road accidents and their family members.8.4.3 Activities to support Strategic ObjectivesIn rolling out its Road Safety Strategy, the RAF participated in the following activities during the year under review:8.4.3.1 National Road Safety Debate Competition: 10 and 11 September 2008In 2007, the RTMC initiated a debating competition as one of its flagship road safety projects. This competition is aimedat educating learners and communities on road safety through the participatory education approach; instilling a culture ofsafe traffic participation; involving learners in the enhancement of road safety education in schools; and enhancing learners’communication and presentation skills. The RAF exhibited at the event hosted at Sun City during September 2008.8.4.3.2 Transport Indaba, Vhembe District Municipality: 22 - 24 October 2008The Transport Indaba at the Vhembe District Municipalitywas aimed at creating a platform for all transportindustry stakeholders to deliberate on the roleof transportation in the Vhembe District(urban rural transport) in order t oSection 8 Annual Report 200985

develop practical and implementable solutions acceptable to all stakeholders with the view to improve people’s lives andlivelihoods.Recommendations flowing from this Indaba were to commit funding, participate in road safety projects and partner with sisterorganisations, such as the RTMC, SANRAL and the Automobile Association (“AA”), as well as to roll out a communicationcampaign targeting motorists ahead of the 2008 festive season.8.4.3.3 Transport Month – October 2008The RAF celebrated Transport Month in October 2008 by embarking on outside broadcasts in order to promote the RAF’sservices to the general public. SABC broadcasts went out from Marble Hall and Siyabuswa on 20 and 27 October throughlocal radio stations, Thobela FM and Ikwekwezi FM respectively.8.4.3.4 Piet Retief Hospital - 26 November 2008Piet Retief Hospital (Mpumalanga Province) hosted an Open Day on 26 November 2008. The main objectives were torepresent the interests of all commuters in the Mpumalanga Province, clarify RAF claims processes, and promote roadsafety in general. The RAF participated as a critical stakeholder by presenting an overview of its services, processes andprocedures. Similar platforms will be used in future to educate the public about the RAF business.8.4.3.5 World Remembrance Day - 7 December 2008On 7 December 2008, the RAF joined hands with the DoT on World Remembrance Day – an annual event during whichmembers of different church denominations and government institutions, accident victims, bereaved families, etc. gather topay their respects to all victims of road accidents, and in particular, hold in remembrance those who are no longer with us.On this occasion, the RAF had a fully operational mobile office where members of the public could make enquiries on theirexisting claims or submit new claims, as well as obtain information on all other RAF-related queries.8.4.3.6 Engen 1 Stop – Khanysile N3 – Road Safety: 12 - 13 December 2008The RAF, at the invitation of SAPS, participated in a campaign held at the Engen 1 Stop – Khanyisile N3 in the MpumalangaProvince on 12 - 13 December 2008. SAPS members and vehicles were deployed at the Engen 1 Stop to perform highvisibilitycrime prevention and crime combating foot patrols at the filling station, as well as patrols on the N3. The RAF hosteda road safety exhibition during these two days.Section 8 Annual Report 20098.4.3.7 Mpumalanga Provincial Road Safety Prayer Day: 17 January 2009The Mpumalanga Provincial Government’s Road Safety Prayer Day was aimed at creating a platform for all transport industrystakeholders to participate in a prayer day for all victims and families affected by road crashes. The RAF participated byeducating the Standerton community on the basic principles of road safety.8.4.3.8 Limpopo Provincial Government: 3 - 9 February 2009The Limpopo Provincial Government Roads and Transport hosted an Outreach for Road Safety on 3 February 2009 at Ka-Dzumeri Sports Grounds (Mopani) and at the Xikundamalema Village (Vhembe) on 5 February 2009. The main objective ofthese events was to represent the interests of all commuters in the Limpopo Province on transport and road safety. The RAFwas, once again, identified as a critical stakeholder and participated by hosting an exhibition at both events.86

8.5 Towards the Future8.5.1 Pedestrian Safety CampaignThe RAF’s Pedestrian Safety Campaign was officially launched during April 2009. Media partners like the SABC supportedthis campaign with coverage. The campaign is aimed at improving pedestrian safety through a comprehensive road safetyeducational programme. The campaign is also assisting in increasing awareness of the RAF brand and benefits, whilstcreating platforms to educate, share information and increase awareness of pedestrian safety principles.A total of 126 schools in all 9 provinces were targeted and a mascot, aptly called “RAFI”, was introduced for the first time.Print and electronic media will be utilised to support and sustain this initiative.8.6 Human ResourcesThe RAF regards its employees as its most important asset. In order to become an employer of choice, the establishmentand implementation of best practice human resource systems, practices, policies and procedures are imperative. This visionwill be supported by creating a learning environment aimed at attracting and retaining competent employees through theapplication of integrated processes and systems.8.6.1 Change ManagementThe Change Management function has a critical role to play in the facilitation of organisational effectiveness, given thecurrent process of transformation within the RAF. Since employees are at the coalface of change, Change Managementinterventions were introduced to ensure employee commitment to transformation initiatives. A Change Agent Network wasestablished to engage those staff members most impacted by the changes taking place within the RAF and to create aplatform for the exchange of information.8.6.2 Performance ManagementThe RAF implemented a Performance Management System during the 2008/09 financial year to ensure that the strategicgoals of the organisation are achieved. The Performance Management System is aimed at creating an environment in whichemployees are encouraged to perform to the best of their abilities and where managers provide meaningful guidance in asupportive and productive atmosphere.A Readiness Assessment was conducted with the RAF Management in July 2008 and employee support was garneredthrough SATAWU.8.6.3 Climate SurveyA Climate Survey amongst staff was conducted to measure general perceptions regarding the transition of the RAF. Therecommendations of the Climate Survey will be implemented in the new financial year.8.6.4 Employee RelationsEmployee Relations seeks to advocate consistent and fair labour practices and promote a harmonious relationship betweenManagement, employees and the recognised trade union. The RAF has managed to create healthy communication channelsSection 8 Annual Report 200987

with the trade union and other stakeholders, resulting in the South African Transport and Allied Workers Union (“SATAWU”)playing an increasingly positive role within the context of transformation. Whilst it is acknowledged that disagreements areinherent to the labour relations sphere, our engagements with our stakeholders are characterised by ongoing efforts to builda mutually beneficial relationship.8.6.5 Transformation CommitteeA Transformation Committee has been established to create a platform for Management and the Union to meet on a regularbasis to deal with transformational issues that may impact on employees’ conditions of employment.8.6.6 Employee WellnessThe Human Resource Department, through its Employee Wellness Programme (“EWP”), provides a comprehensive,integrated and holistic approach to employee wellness. In order to pro-actively and effectively address the health and wellbeingof employees, the RAF has implemented the following:8.6.6.1 Employee Assistance ProgrammeIn partnership with Independent Councelling and Advisory Services (“ICAS”), a renowned and accredited health serviceprovider, the Employee Assistance Programme (“EAP”) offers an off-site 24-hour hotline available to all employees and theirimmediate family members. This programme was launched nationally during August. In addition, In-House Wellness Centreswere established in all regions.8.6.6.2 HIV/AIDS Management ProgrammeHIV and AIDS remain high-risk factors. The number of employees diagnosed with HIV/AIDS increased to 254 during the yearunder review. This is mainly attributable to the average age of the RAF’s workforce. Voluntary Counselling and Testing (“VCT”)were conducted during February 2009 and 841 employees participated. The results indicated that 60 employees tested positive.8.6.6.3 World AIDS DayThe RAF participated in World AIDS Day activities on 1 December 2008 in all its branches. Prominent speakers were invitedto address employees on the topic.8.6.6.4 Programme for People Living with DisabilitiesSection 8 Annual Report 2009The RAF embarked on a project to employ people living with disabilities. Initially, this initiative formed part of the RAF’s CorporateSocial Responsibility, as the RAF recruited from its claimant database. A comprehensive rehabilitation and integration programmewas developed and implemented to reintegrate the employees in the workplace. A two-day workshop was organised, of which thefirst day was intended for managers and employees living with a disability, and the second day for the entire Head Office staff tosensitise and create awareness around disability. These employees attended two more workshops to build their self-esteem andthey also received computer skills training.8.6.6.5 Sports and RecreationSports and recreation have been taken to another level in the RAF. Sport has been identified as a mechanism that unites andbridges cultural gaps in a diversified society. The RAF now encourages its staff the opportunity to participate in differentsporting and recreation codes offered by the organisation, for example soccer, choral music, netball, volleyball, etc. The88

RAF further participates in sports tournaments with other Funds within the SouthernAfrican region (such as Namibia, Botswana and Swaziland), which encourages cooperationand networking with other Funds.Graph 8.1: Internal vs externaldemographics90%80%798.6.7 Employment Equity70%60%72In terms of the Employment Equity Act, the RAF is a “designated employer”, and assuch, is obliged to provide annual Employment Equity (“EE”) reports on 1 October ofeach year. EE targets, as set out in the provincial and national guidelines, were wellachieved during the reporting period.Percentage50%40%30%20%As a designated employer, the RAF prepared an Employment Equity Plan in orderto achieve progress towards EE in the workplace. This programme has since beenimplemented.10%0%9963131025AfricanColouredIndianWhiteEmployees livingwith disibiltyGraph 8.1 illustrates the internal versus external demographics.8.6.8 Staff CompositionThe RAF’s gender and age analysis as at March 2009 are illustrated in Graph 8.2 andGraph 8.3.RAF CompositionExternal CompositionGraph 8.2: Gender analysis44%Graph 8.4 and Graph 8.5 indicate the RAF’s staff establishment grouped by BusinessUnit, and per Region as at 31 March 2009.The RAF had 1 953 permanent employees at the end of the 2008/09 financial year. Ofthese, 82% fell within the core business unit, i.e. Claims Operations (Graph 8.6).8.6.9 Training and Skills Development56%8.6.9.1 Skills DevelopmentMaleFemaleThe RAF regards the development of its staff as a cornerstone to the successfulimplementation of its turnaround strategy. The RAF Board identified training as a keycomponent to empower and enhance the capability of staff. In this regard, the Boardallocated 1% of the total salary bill as a training budget.Building of skills capacity in critical areas within the organisation remained a key focusduring the year under review. The RAF implemented SAP as part of its turnaroundstrategy. Staff received training in the areas of financial management, managementaccounting, human capital management, materials management and documentmanagement. The aim of the training was to equip prospective users with the requisiteknowledge and skills to operate the SAP system. Phase two of the SAP implementationtraining has also commenced.In addition, a training needs analysis was conducted to identify individual trainingrequirements in accordance with employees’ areas of responsibility.NumberGraph 8.3: Age Distributionby Gender4003202401608007042268189313FemaleMale27134227688600>2526>3031>3536>4546>551815156>6667+Section 8 Annual Report 200989

Graph 8.4: Percentage split of staffcomplement per business unit0.2%2.6% 1.1%2.8%5.6%0.3%0.1% 1.1%86.2%The Human Resources Development Strategy is being developed in order to align itto current transformation and forecasted organisational needs. To this end, varioustraining and development programmes have been rolled out.8.6.9.2 Internships and LearnershipsThe organisation enrolled 35 interns for learnerships with INSETA in order to equip themwith the competencies required to enter the job market. The majority of the learners inthe IT department and Call Centre were appointed on a permanent basis after they hadsuccessfully completed the programme.Graph 8.5: Staff complementper Region600CEOFinance DepartmentHuman CapitalICTInternal AuditLegal ServicesOperationsBusiness DevelopmentCommunications and Marketing8.6.9.3 Study Bursaries97 bursaries were awarded to employees to enrol for various courses and programmesthat have been identified as critical to the success of the organisation.Further, in our endeavour to expand the skills capacity of our staff, 22 study loans wereissued to allow staff to further their studies at academic institutions.8.6.9.4 Staff MovementsNumber of staff480360240260283426347508Positions were mainly filled in our core area of business, namely the Claims Department.Further demands were made in the IT Division as part of the IT Renewal Strategy. Itremains a challenge to recruit qualified IT personnel due to the scarcity of resources inthis field. Our staff complement remained relatively stable.Section 8 Annual Report 200990Number of staff1 8001 6001 4001 2001 000800600400200012005129Cape TownDurbanEast London110545022East LondonHead OfficeJohannesburgPretoriaGraph 8.6: Staff complement perbusiness unit41684222CEOFinance DepartmentHuman CapitalICTInternal AuditLegal ServicesOperationsBusiness DevelopmentCommunications and Marketing8.6.9.5 Staff TurnoverThe current percentage turnover for the organisation is 10.8%. As a counter-measure,the RAF Management made a decision to offer contract employees permanentpositions. This decision brought about stability in the retention of critical skills.8.7 Information and CommunicationTechnology8.7.1 IntroductionThe RAF Information and Cummunication Technology (“ICT”) Department embarkedon a three-year, three-phased approach in support of achieving a full turnaround of andalignment to the RAF business. Subsequently, a myriad of very specific and focusedICT initiatives spanning the stabilisation, optimisation and innovation phases of theBoard-approved ICT Strategy have been launched. Execution of these phases arenot necessarily sequential in nature and the majority of years one and two have beendedicated to transforming the ICT infrastructure through a technological refresh, as wellas new process enablement. The remainder of year two and three’s focus have beenand will continue to be on the optimisation and innovation thrusts, by developing andbuilding people and process efficiency.

8.7.2 Stabilisation8.7.2.1 Refreshing the Supporting ICT InfrastructureConsistent with our objective of becoming a world-class organisation with a world-class ICT environment, the RAF wascompelled to replace its ailing and inadequate ICT infrastructure. During the year under review, the organisation embarked ona complete refresh of the supporting ICT environment by redefining and redesigning the process of accessing core businessapplications and refreshing the applications hosting hardware platforms, while also adopting high-availability technology.The security and protection of all claimant information was enhanced through the establishment of an off-site Data HostingCentre to derive a physically secure site with centrally stored and managed business-critical information. This informationcan be accessed from anywhere and at any time. Most of the core-enabling infrastructure has been built during the yearunder review. Full implementation and user cutover will continue into the coming year.Virtualised computing infrastructure was also implemented for enhanced agility while reducing complexity and associatedsupport costs. This infrastructure will also reduce downtime for all critical systems. Virtualisation and centralisation of thehosting infrastructure will also improve the RAF’s energy efficiency.In accordance with our strategic intent of expanding the existing footprint by establishing a presence at the accident sceneand hospitals, the RAF has upgraded the wide area network (“WAN”) by partnering with an appropriate service provider withcomplementary points of presence for flexible and speedy connectivity to core systems and information stores. The RAF hasalso established an Application Delivery Framework to support the access to information from anywhere and at any time,while simultaneously reducing the amount of sensitive information traversing the networks.The ICT department is currently enhancing customer relations management by upgrading the call centre for improvedavailability and accessibility to claimants and by making real time ‘claim status information available when queried. AnEnterprise-wide Content Management System is also being established for the electronic ingestion and archival ofall claimant documents with the anticipated benefit of reduced loss and improved security ofclaimant information.Section 8 Annual Report 200991

8.7.2.2 SAP Enterprise Resource Planning SystemThe SAP Resource Planning System is a world-class financial system used by most of the Fortune 500 companies on a globalbasis. The implementation of this system was done in record time and with minimal issues. The SAP system has provided theRAF with state-of-the-art systems and processes to transform all areas of the business, in particular Internal Finance and HR.The ability to better control budgets, staffing, payments, payroll and human resources are catered for in the new SAP system.The core system has been in operation for a year and additional modules have been added to this system, i.e. Employee SelfService (“ESS”), Manager Self Service (“MSS”) and Business Warehouse. Performance Management and other systems arescheduled to be implemented in the coming financial year.The implementation of SAP represents the start of process improvements and will be enhanced and improved on acontinuous basis. The RAF is committed to investing heavily in the development and training of key ICT personnel forsupport and maintenance of the SAP environment.8.7.2.3 Phetogo Claims Administration SystemWhile the SAP implementation provides the technologies and processes to enhance and improve the back-office functions, workhas continued on defining new systems to improve and enhance front-office processes for improved service delivery to claimants.Research was undertaken on claims administration systems worldwide and the models used by The Accident CompensationCorporation (“ACC”) in New Zealand and The Transport Accident Commission (“TAC”) in Victoria, Australia, were selected asbest practice models. This resulted in the procurement of a new Corporate Relations Management and Claims AdministrationSystem called “Fineos”, supported by a full organisation-wide transformation programme, branded as the Phetogo project.The mobilisation and design phase of this project commenced during the reporting period. This new system will automateand streamline the entire claims administration process by eliminating cumbersome manual processes.In addition, it will result in specialist skills being developed and used in each of the areas in the claims administration process.Electronically scanned and processed files will enable speedier sharing of information. Documents will be centrally storedand tracked for current and future claims queries and/or processing. This project will continue through the stabilisation andoptimisation phases of the ICT Strategy. By actively integrating this system with a Call Centre, the RAF workforce will be ableto produce accurate and timely feedback to all stakeholders.8.7.3 OptimisationSection 8 Annual Report 2009While the stabilisation phase involved revitalising and refreshing the RAF’s ICT environment, the optimisation phase is aimedat building a sustainable and supportive ICT environment. The aim here is to develop a build, operate and transfer (“BOT”)model where these sophisticated and advanced technologies will be deployed with sufficiently skilled resources to supportthis environment.During the optimisation phase, leading practices and standards of work will be deployed in the RAF ICT environment.During this exercise, the relevant ICT governance controls will be reviewed and enforced using the Control Objectives for IT(“CobIT”) framework as a guide.Service levels and other key performance metrics for performance measurement are currently being defined. In addition tomonitoring user satisfaction levels during this phase, emphasis will be placed on building high-performance teams with astrong team culture.92

8.7.4 InnovationThis phase will be aimed at ensuring that the investments in the ICT infrastructure and people are realised. Furthermore,possible integration with key government systems, such as those of the South African Police Service (“SAPS”), Home Affairs,the DoT, the RTMC, etc. will be investigated and developed. This phase will see the deployment of mobile technologies tocapture accident information at the scene of accidents. The use of appropriate technologies to reach claimants, partners,suppliers, employees and other stakeholders will be implemented to make the RAF an easily accessible organisation.EffortTimeStabilise Optimise Innovate8.8 ConclusionDuring the year under review, there has been significant progress in the realisation of the RAF business and ICT strategies.The Phetogo Change Management and Transformation Programme was effectively established. The required Phetogo ICTfoundation infrastructure was developed and built with the primary focus on stabilisation of the entire ICT landscape. Duringthe coming year, the emphasis will shift with the predominant focus being on optimisation rather than stabilisation.Section 8 Annual Report 200993

annualfinancialstatementsfor the financial year ended 31 March 2009section 9

Section 9: Annual Financial Statements for the Financial Year ended31 March 2009ContentsPageReport of the Auditor-General to Parliament on the Financial Statements and PerformanceInformation of the Road Accident Fund for the Year ended 31 March 2009 97Report of the Audit Committee 102Report of the Board for the Financial Year ended 31 March 2009 104Statement of Responsibility by the Board of Directors 107Certificate by the Corporate Secretary 108Statement of Financial Position as at 31 March 2009 109Statement of Financial Performance for the Financial Year ended 31 March 2009 110Statement of Changes in Net Assets for the Financial Year ended 31 March 2009 111Cash Flow Statement for the Financial Year ended 31 March 2009 112Notes to the Financial Statements for the Financial Year ended 31 March 2009 113Section 9Annual Report 200996

Report of the Auditor-General to Parliament on the Financial Statements and PerformanceInformation of the Road Accident Fund for the Year ended 31 March 2009Report on the Financial StatementsIntroduction1. I have audited the accompanying financial statements of the Road Accident Fund (“RAF”) which comprise thestatement of financial position as at 31 March 2009, and the statement of financial performance, the statementof changes in net assets and the cash flow statement for the year then ended, and a summary of significantaccounting policies and other explanatory notes, as set out on pages 109 to 169.The Accounting Authority’s Responsibility for the Financial Statements2. The accounting authority is responsible for the preparation and fair presentation of these financial statements inaccordance with the basis of accounting determined by National Treasury, as set out in note 2.1 to the financialstatements and in the manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (“PFMA”)and the Road Accident Fund Act, 1996 (Act No. 56 of 1996) and for such internal control as the accountingauthority determines is necessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.The Auditor-General’s Responsibility3. As required by section 188 of the Constitution of the Republic of South Africa, 1996 read with section 4 of thePublic Audit Act, 2004 (Act No. 25 of 2004) (“PAA”), my responsibility is to express an opinion on these financialstatements based on my audit.4. I conducted my audit in accordance with the International Standards on Auditing read with General Notice 616of 2008, issued in Government Gazette No. 31057 of 15 May 2008. Those standards require that I comply withethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free from material misstatement.5. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor’s judgement, including the assessment ofthe risks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accounting estimatesmade by management, as well as evaluating the overall presentation of the financial statements.6. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my auditopinion.Section 9 Annual Report 200997

Opinion7. In my opinion these financial statements present fairly, in all material respects, the financial position of the RoadAccident Fund as at 31 March 2009 and its financial performance and its cash flows for the year then ended, inaccordance with the basis of accounting determined by National Treasury, as set out in note 2.1 to the financialstatements and in the manner required by the PFMA.Emphasis of MattersWithout qualifying my opinion, I draw attention to the following matters:Basis of Accounting8. The public entity’s policy is to prepare financial statements on the basis of accounting determined by NationalTreasury, as set out in note 2.1 to the financial statements.Going Concern9. With reference to the paragraph on page 105 of the report by the board, the annual financial statements indicatethat the RAF has not been solvent for a number of years.The financial statements furthermore show that the RAF’s total liabilities exceeded total assets by R 39 963 million(2008: R 27 828 million) at 31 March 2009.This was mainly attributable to the long-term provision for outstanding claims amounting to R33 277 million (2008:R21 287 million) while the short-term provision included in net current liabilities amounted to R 9 222 million (2008:R 9 052 million). Contributing further to the financial position was the fact that the amount of claims processedby RAF during the financial year exceeded the fuel levy received. The RAF also recorded a net deficit of R 12 156million for 2009 (2008: R 7 587 million).The above conditions indicate the existence of a material uncertainty which may cast significant doubt on theRAF’s ability to continue as a going concern.Annual Report 2009Fruitless and Wasteful Expenditure10. As disclosed in note 22.5 to the financial statements, fruitless and wasteful expenditure to the amount of R 14 997million was incurred on sheriff and interest costs as a result of the delay in the payment of claims expenditure.Other MattersWithout qualifying my opinion, I draw attention to the following matters that relate to my responsibility in the audit ofthe financial statements:Section 9Governance Framework11. The governance principles that impact the auditor’s opinion on the financial statements are related to the98

esponsibilities and practices exercised by the accounting authority and executive management and are reflectedin the key governance responsibilities addressed below:Key Governance Responsibilities12. The PFMA tasks the accounting authority with a number of responsibilities concerning financial and risk managementand internal control. Fundamental to achieving this is the implementation of key governance responsibilities, whichI have assessed as follows:No. Matter Y NClear trail of supporting documentation that is easily available and provided in atimely manner1. No significant difficulties were experienced during the audit concerning delaysor the availability of requested information.Quality of financial statements and related management information2. The financial statements were not subject to any material amendmentsresulting from the audit.3. The annual report was submitted for consideration prior to the tabling of theauditor’s report.Timeliness of financial statements and management information4. The annual financial statements were submitted for auditing as per thelegislated deadlines section 55 of the PFMA.Availability of key officials during audit5. Key officials were available throughout the audit process. XDevelopment and compliance with risk management, effective internal control andgovernance practices6. Audit Committee• The public entity had an Audit Committee in operation throughout thefinancial year.• The Audit Committee operates in accordance with approved, written termsof reference.• The Audit Committee substantially fulfilled its responsibilities for the year,as set out in section 77 of the PFMA and Treasury Regulation 27.1.8.7. Internal audit• The public entity had an internal audit function in operation throughout thefinancial year.XXXXXXXXSection 9 Annual Report 200999

Annual Report 2009No. Matter Y N• The internal audit function operates in terms of an approved internal auditplan.• The internal audit function substantially fulfilled its responsibilities for theyear, as set out in Treasury Regulation 27.2.8. There are no significant deficiencies in the design and implementation ofinternal control in respect of financial and risk management.9. There are no significant deficiencies in the design and implementation ofinternal control in respect of compliance with applicable laws and regulations.10. The information systems were appropriate to facilitate the preparation of thefinancial statements.11. A risk assessment was conducted on a regular basis and a risk managementstrategy, which includes a fraud prevention plan, is documented and used asset out in Treasury Regulation 27.2.12. Powers and duties are assigned, as set out in section 56 of the PFMA. XFollow-up of audit findings13. The prior year audit findings have been substantially addressed. X14. SCOPA/Oversight resolutions have been substantially implemented. N/AIssues relating to the reporting of performance information15. The information systems were appropriate to facilitate the preparation of aperformance report that is accurate and complete.16. Adequate control processes and procedures are designed and implementedto ensure the accuracy and completeness of reported performanceinformation.17. A strategic plan was prepared and approved for the financial year under reviewfor purposes of monitoring the performance in relation to the budget anddelivery by the RAF against its mandate, predetermined objectives, outputs,indicators and targets as set out in Treasury Regulation 30.1.18. There is a functioning performance management system and performancebonuses are only paid after proper assessment and approval by thosecharged with governance.13. The financial statements were subject to material amendments. This was due to a lack of effective and efficientsystems to record and report on these items. Management has indicated that they will implement controls toensure proper monitoring and supervision over the recording and reporting of these items in future.XXXXXXXXXXSection 9100

Report on Other Legal and Regulatory RequirementsReport on performance information14. I have reviewed the performance information as set out on pages 48 to 51.The accounting authority’s responsibility for the performance information15. The accounting authority has additional responsibilities as required by section 55(2)(a) of the PFMA to ensurethat the annual report and audited financial statements fairly present the performance against predeterminedobjectives of the public entity.The Auditor-General’s responsibility16. I conducted my engagement in accordance with section 13 of the PAA read with General Notice 616 of 2008,issued in Government Gazette No. 31057 of 15 May 2008.17. In terms of the foregoing, my engagement included performing procedures of an audit nature to obtain sufficientappropriate evidence about the performance information and related systems, processes and procedures. Theprocedures selected depend on the auditor’s judgement.18. I believe that the evidence I have obtained is sufficient and appropriate to report that no significant findings havebeen identified as a result of my review.Appreciation19. The assistance rendered by the staff of the Road Accident Fund during the audit is sincerely appreciated.Pretoria31 July 2009Section 9 Annual Report 2009101

Report of the Audit CommitteeIn compliance with the PFMA and related Treasury Regulations, the Board of the RAF has established an AuditCommittee as its sub-committee in order to enhance its oversight responsibilities and good governance of the RAF.The Audit Committee consists of four members who are all members of the Board, are financially literate and possessdiverse skills. The Chairperson is knowledgeable of the status of the position and has the requisite business, financialand leadership skills to serve in this position.During the year under review, the Audit Committee was governed by a Charter and written Terms of Reference, whichwere approved by the Board of the RAF. The Terms of Reference and the Charter are in line with the PFMA, TreasuryRegulations, the Standards of the Institute of Internal Auditors, as well as the recommendations contained in the King IIReport on Good Corporate Governance. These documents are reviewed annually to ensure their relevance.The Committee was therefore responsible for performing its duties as set out in the Terms of Reference, and theseincluded reviewing the following:Annual Report 2009• The effectiveness of the RAF’s internal control systems;• The risk areas of the RAF’s operations to be covered in the scope of the internal and external audits;• The accounting and auditing concerns identified as a result of the internal or external audits;• The RAF’s compliance with legal and regulatory provisions, in particular the Road Accident Fund Act, 1996 (ActNo. 56 of 1996); the Public Finance Management Act, 1999 (Act No. 1 of 1999) (as amended by Act 29 of 1999),(“PFMA”), as well as the National Treasury Regulations;• The activities of the Internal Audit Department, including its work programmes, coordination with theexternal auditors, the reports of significant investigations and the responses of management to specificrecommendations;• The independence and objectivity of the external auditors;• The review of the financial statements with specific attention to:• Underlying accounting policies or changes thereto;• Major estimates and managerial judgements;• Significant adjustments flowing from the year-end audit;• Compliance with South African Statements of Generally Accepted Accounting Practices (“GAAP”), effectiveStandards of Generally Recognised Accounting Practices (“GRAP”), the PFMA and other statutory precepts;and• The appropriateness of the going concern assumption.The Audit Committee also undertook the following activities during the year under review:• Reviewing and approving of the Internal Audit Department’s Charter and Internal Audit Plan;• Conducting investigations within its Terms of Reference;• Encouraging communication between Members of the Board, Senior and Executive Management, Internal AuditDepartment; and• Monitoring enterprise-wide risk management processes.Section 9The Audit Committee’s assessment of the internal controls in the claims environment is that the systems, althoughenhanced, could still be improved. The roll-out of the new paperless claims management solution will provide thismuch needed improvement. Despite this, and based on the information and explanations given by Management and the102

Internal Audit department and discussions held with the Auditor-General on the result of their audits, the Audit Committeeis of the opinion that the internal accounting controls are adequate to ensure that the financial records may be relied uponfor preparing the financial statements, and accountability for the assets and liabilities is maintained.The Audit Committee has evaluated the financial statements of the RAF for the year ended 31 March 2009 and concludedthat they comply, in all material respects, with the requirements of the PFMA, and were prepared in accordance withthe South African Statements of Generally Accepted Accounting Practices (“GAAP”), including any interpretationsof such Statements issued by the Accounting Practices Board (“the APB”), with the effective Standards of GenerallyRecognised Accounting Practices (“GRAP”) issued by the Accounting Standards Board (“the ASB”).The Audit Committee agrees that the adoption of the going concern premise is appropriate in preparing the financialstatements. The Audit Committee has therefore recommended the adoption of the financial statements by the Board,based on the assumption that the RAF continues to receive the financial support it requires from Government in orderto meet its legislative mandate.MS HG MOTAUChairperson of the Audit Committee29 July 2009Section 9 Annual Report 2009103

Report of the Board for the Financial Yearended 31 March 2009IntroductionThe Board presents its report which forms part of the Annual Financial Statements of the Road Accident Fund (“RAF”)for the year ended 31 March 2009 to the Minister of Transport, the Executive Authority in terms of section 55(1)(d) ofthe Public Finance Management Act, 1999 (Act No. 1 of 1999), as amended by Act 29 of 1999 (“PFMA”).The RAF, as established by the Road Accident Fund Act, 1996 (Act No. 56 of 1996), (“RAF Act”), is listed as a NationalPublic Entity in accordance with schedule 3A of the PFMA. The Board acts as the accounting authority in terms of thePFMA.Board and Secretary of the Road Accident FundThe Minister re-appointed the current Board for a term of three years, which commenced on 1 August 2006 and willend on 31 July 2009.The Board and Corporate Secretary at the date of this report are as follows:Current BoardNon-executive Board MembersMr V Mahlangu (Acting Chairman)Mr T MoyoProf. CJB GreeffDr AKA DasooMs HG MotauMs KR Manana (Director-General Designee)Mr SA MsibiMs KE Moloto-StofileAnnual Report 2009The Director-General of the Department of Transport or any other senior officer in the Department of Transport,designated by him or her for a particular purpose, serves as an ex officio member of the Board.Executive Board MemberMr JRD Modise (Chief Executive Officer)Chief Financial OfficerMr A GernandtCorporate SecretaryMs JR CorneliusSection 9104

Principal ActivitiesThe RAF is principally engaged in providing insurance cover to persons who use South African roads. The cover is inthe form of indemnity to the wrongdoer and compensation to victims who suffer loss or damage wrongfully caused bythe driving of motor vehicles in South Africa, or their families in the event of fatal injuries.ResultsThe detailed review of the results of the RAF for the year ended 31 March 2009 is included under the Five-Year Reviewand the Review of Operations in this Annual Report.Solvency and Going ConcernThe going concern basis was used in preparing the Annual Financial Statements. The Board and Management arecommitted to implementing plans to contain the growing deficit caused by the rising provision for outstanding claims.As part of these plans, the RAF has engaged National Treasury and the Department of Transport in discussions toresolve the short-, medium- and long-term funding position of the RAF.The table below depicts the total assets and the total liabilities of the RAF over the past five years:RAF: Financial Position Analysis2009 2008 2007 2006 2005R’000 R’000 R’000 R’000 R’000Total Assets 3,265,224 3,296,916 4,207,589 4,359,675 1,707,643Total Liabilities (43,228,756) (31,124,667) (24,448,415) (22,727,617) (21,572,755)Total net deficit (39,963,532) (27,827,751) (20,240,826) (18,367,942) (19,865,112)- From the table above it is clear that the RAF has not been solvent for a number of years.- The net deficit has increased in the 2009 financial year.Events subsequent to Reporting DateNo undisclosed material events have taken place between the Statement of Financial Position date and the authorisationof the Annual Financial Statements.Section 9 Annual Report 2009105

ADDRESSESThe Road Accident Fund’s office, postal and registered addresses are as follows:Registered office/domicile: Postal address: Website address:38 Ida Street Private Bag X2003www.raf.co.zaMenlo ParkMENLYNPRETORIA 00630081MR V MAHLANGUMR JRD MODISEActing Chairman of the BoardChief Executive Officer29 July 2009 29 July 2009Section 9Annual Report 2009106

Statement of Responsibility by the Board of DirectorsThe Public Finance Management Act (“PFMA”) requires the Directors to ensure that the Road Accident Fund (“RAF”)keeps full and proper records of its financial affairs. The financial statements should fairly present the state of affairs ofthe RAF, its financial results, its performance against predetermined objectives and its financial position at the end of theyear in terms of the South African Statements of Generally Accepted Accounting Practices (“GAAP”) and the effectiveStandards of Generally Recognised Accounting Practices (“GRAP”).The financial statements are the responsibility of the Directors. The external auditors are responsible for independentlyauditing and reporting on the financial statements.The financial statements of the RAF have been prepared in terms of GAAP and GRAP. These financial statements arebased on appropriate accounting policies, supported by reasonable and prudent judgements and estimates and areprepared on the going concern basis.The Directors have reviewed the RAF’s cash flow forecast for the year ending 31 March 2010 and considered the risksand challenges for the future. In light of this review and the current financial position, they are satisfied that the RAF hasadequate resources or has access to adequate resources to continue in operational existence for the short-term future.To enable the directors to meet the above-mentioned responsibilities, the RAF Board of Directors sets standards andimplements systems of internal control. The controls are designed to provide cost-effective assurance that assets aresafeguarded, and that liabilities and working capital are efficiently managed.Policies, procedures, structures and approval frameworks provide direction, accountability and division of responsibilities,and contain self-monitoring mechanisms. The controls throughout the RAF focus on those critical risk areas identifiedby operational risk management and confirmed by Executive Management. Both Management and the Internal Auditdepartment closely monitor the controls and actions taken to correct deficiencies as they are identified.Based on the information and explanations given by Management and the Internal Audit department and discussionsheld with the Auditor-General on the result of their audits, the Directors are of the opinion that the internal accountingcontrols are adequate to ensure that the financial records may be relied upon for preparing the financial statements, andaccountability for the assets and liabilities is maintained.Nothing significant has come to the attention of the Directors to indicate that any material breakdown has occurred in thefunctioning of these controls, procedures and systems during the year under review.In the opinion of the Directors, based on the information available to date, the financial statements fairly present thefinancial position of the RAF at 31 March 2009 and the results of its operations and cash flow information for the year.The financial statements of the RAF for the year ended 31 March 2009 have been approved by the Board of Directorsand signed on its behalf by:MR V MAHLANGUActing Chairman of the Board29 July 2009Section 9 Annual Report 2009107

Certificate by the Corporate SecretaryI hereby certify that the RAF has lodged all returns as required by the Public Finance Management Act, 1999 (ActNo. 1 of 1999), as amended by Act No. 29 of 1999.MS. JR CORNELIUSCorporate Secretary29 July 2009Section 9Annual Report 2009108

Statement of Financial Position as at 31 March 20092009 2008NOTES R’000 R’000ASSETSCurrent assets 3 095 119 3 155 007Cash and cash equivalents 4 1 090 698 1 192 406Transfers receivable from fuel levies 5 1 912 498 1 884 204Interest receivable 6 9 770 10 229Other receivables 7 79 212 66 091Consumable stock 8 2 941 2 077Non-current assets 170 105 141 909Other receivables 7 11 463 12 419Property, plant and equipment 9 157 620 128 013Intangible assets 10 1 022 1 477Total assets 3 265 224 3 296 916LIABILITIESCurrent liabilities 9 920 046 9 806 185Payables and accruals 11 428 170 410 468Unutilised government grant 12 59 781 110 133Provision for outstanding claims 13 9 222 560 9 052 033Other provisions 14 209 535 233 551Non-current liabilities 33 308 710 21 318 482Payables and accruals 11 6 073 9 036Provision for outstanding claims 13 33 277 795 21 287 461Employee benefits 15 24 842 21 985Total liabilities 43 228 756 31 124 667NET DEFICIT (39 963 532) (27 827 751)Revaluation reserve 79 850 58 916Accumulated deficit (40 043 382) (27 886 667)Total net liabilities 3 265 224 3 296 916Section 9 Annual Report 2009109

Statement of Financial Performance for the Financial Year ended 31 March 20092009 2008REVENUENOTES R’000 R’000Revenue from non-exchange transactionsTransfer revenue 11 345 378 8 222 048Transfers from Government 12 2 500 000 -Net fuel levies 16 8 845 378 8 222 048Revenue from exchange transactions 573 678 182 693Investment income 17 103 548 179 734Other revenue 18 17 395 625Reinsurance revenue 19 452 735 2 334Total revenue 11 919 056 8 404 741LESS EXPENSESClaims expenditure 20 23 292 031 15 388 325Reinsurance premiums 21 23 789 27 237Staff costs 22 534 090 426 095Administrative expenses 22 193 369 121 609Finance costs 22 23 955 15 830Depreciation - property, plant and equipment 22 8 082 12 116Amortisation - intangible assets 22 455 454Total expenses 24 075 771 15 991 666Annual Report 2009DEFICIT FOR THE PERIOD (12 156 715) (7 586 925)Section 9110

Statement of Changes in Net Assets for the Financial Year ended 31 March 2009RevaluationReserveAccumulateddeficitTotalR’000 R’000 R’000Balance at 31 March 2007 58 916 (20 299 742) (20 240 826)Revaluation reserve - - -Operating deficit for the year - (7 586 925) (7 586 925)Balance at 31 March 2008 58 916 (27 886 667) (27 827 751)Operating deficit for the year - (12 156 715) (12 156 715)Revaluation of Land 2 288 - 2 288Revaluation of Building 18 646 - 18 646Balance at 31 March 2009 79 850 (40 043 382) (39 963 532)Section 9 Annual Report 2009111

Cash Flow Statement for the Financial Year ended 31 March 2009CASH FLOWS FROM OPERATING ACTIVITIES2009 2008NOTES R’000 R’000Cash receipts : Fuel levies 8 793 068 8 678 382: Grants received, etc. 2 500 000 -: Other receipts 6 836 24 378: Reinsurance claims received 452 735 2 334Cash payments : Claims expenditure (11 138 897) (8 748 428): Reinsurance premiums (23 789) (27 237): Staff expenditure, etc. (534 090) (426 095): Other expenditure (168 843) (776 943)Net cash flows used in operating activities 23 (112 980) (1 273 609)CASH FLOWS FROM INVESTING ACTIVITIESInterest income 102 269 174 565Acquisition of property, plant and equipment 9 (45 943) (32 323)Acquisition of intangible assets 10 (21 231) (65 192)Proceeds on disposal of property, plant and equipment 23 132 432Net cash flows generated by investing activities 35 227 77 482CASH FLOWS FROM FINANCING ACTIVITIESFinance costs 22 (23 955) (15 830)Net cash flows used in financing activities (23 955) (15 830)Net decrease in cash and cash equivalents (101 708) (1 211 957)Cash and cash equivalents at beginning of period 1 192 406 2 404 363Cash and cash equivalents at end of period 4 1 090 698 1 192 406Section 9Annual Report 2009112

Notes to the Financial Statements for the Financial Year ended 31 March 20091. Reporting EntityThe Road Accident Fund (“RAF”) is an entity domiciled in South Africa. The address of the RAF’s registered office is38 Ida Street, Menlo Park, Pretoria. The RAF’s primary business is to provide cover to all users of South African roads,local or foreign, against injuries or death they may sustain as a result of the wrongful driving of motor vehicles withinthe borders of the country. The cover provided is in the form of a social security insurance in that the benefits areenjoyed by the whole population, including foreigners and illegal immigrants, even though the contribution towards thecover may be made primarily by the economically active members of society. The full responsibilities of the RAF arecontained in the Road Accident Fund Act, 1996 (Act No. 56 of 1996), as amended.The financial statements were approved by the Board of Directors on 29 July 2009.2. Basis of Presentation2.1 Statement of ComplianceThe financial statements have been prepared in accordance with the South African Statements of Generally AcceptedAccounting Practices (“GAAP”) including any interpretations of such Statements issued by the Accounting PracticesBoard (“the APB”), with the effective Standards of Generally Recognised Accounting Practices (“GRAP”) issued by theAccounting Standards Board (“the ASB”) replacing the equivalent GAAP Statement as follows:Standard of GRAPGRAP 1: Presentation of financial statementsGRAP 2: Cash flow statementsGRAP 3: Accounting policies, changes in accountingestimates and errorsReplaced Statement of GAAPIAS 1 (AC 101): Presentation of financial statementsIAS 7 (AC 118): Cash flow statementsIAS 8 (AC 103): Accounting policies, changes inaccounting estimates and errorsCurrently the recognition and measurement principles in the above GRAP and GAAP Statements do not differ or resultin material differences in items presented and disclosed in the financial statements. The implementation of GRAP 1, 2and 3 has resulted in the following changes in the presentation of the financial statements:Section 9 Annual Report 2009113

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Terminology DifferencesStandard of GRAPStatement of financial performanceStatement of financial positionStatement of changes in net assetsNet assetsSurplus/deficitAccumulated surplus/(deficit)Contributions from ownersDistributions to ownersReplaced Statement of GAAPIncome statementBalance sheetStatement of changes in net equityEquityProfit/lossRetained earnings/(loss)Share capitalDividendsCash Flow StatementThe cash flow statement can only be prepared in accordance with the direct method.Specific InformationSpecific information has been presented separately on the statement of financial position such as:(a) Receivables from non-exchange transactions, including taxes and transfers;(b) Taxes and transfers payable;(c) Trade and other payables from non-exchange transactions.Restrictions on Cash BalancesThe amount and nature of any restrictions on cash balances is required.Annual Report 2009Budget InformationParagraph 11 – 15 of GRAP 1 has not been implemented due to the fact that the local and international budgetreporting standard is not effective for this financial year. Although the inclusion of budget information would enhancethe usefulness of the financial statements, non-disclosure will not affect the objective of the financial statements.2.2 Basis of MeasurementThe financial statements have been prepared on the historical cost basis except for land and buildings which arecarried at their revalued amounts, and outstanding claims liabilities and fuel levy debtors which are presented at theirpresent values.The methods used to measure fair values are discussed further in note 3.19.Section 92.3 Functional and Presentation CurrencyThese financial statements are presented in South African Rand (“ZAR”), which is the RAF’s functional currency. Allfinancial information presented in ZAR has been rounded to the nearest thousand.114

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2.4 Use of Estimates and JudgementsThe preparation of financial statements in conformity with SA GAAP and GRAPs 1, 2 and 3 requires management tomake judgements, estimates and assumptions that affect the application of accounting policies and the reportedamounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognised in the period in which the estimate is revised and in any future periods affected.In particular, information about significant areas of estimation, uncertainty and critical judgements in applyingaccounting policies that have the most significant effect on the amounts recognised in the financial statements isincluded in note 3.17.3. Significant Accounting PoliciesThe significant accounting policies set out below have been applied consistently to all periods presented in thesefinancial statements, except as set out below in the relevant notes.Certain comparative amounts have been reclassified to conform to the current year’s presentation (see notes 5, 6, 7,11, 14, 20 and 22.3).3.1 Foreign Currency TransactionsTransactions in foreign currencies are translated to the functional currency of the RAF at the prevailing exchange ratesat the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reportingdate are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or losson monetary items is the difference between amortised cost in the functional currency at the beginning of the period,adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated atthe exchange rate at the end of the period.Foreign exchange gains and losses that relate to items that meet the definition of a financial instrument are presentedin the statement of financial performance within ‘finance income or cost’. All other foreign exchange gains and lossesare presented in the statement of financial performance within ‘net foreign exchange gains/(losses)’.3.2 Insurance ContractsContracts under which the RAF accepts significant insurance risk from another party (the claimant) by agreeing tocompensate the claimant if a specified uncertain future event (the insured event) adversely affects the claimant areclassified as insurance contracts. The RAF accepts insurance risk as it is mandated by legislation to compensatevictims of road accidents for injuries suffered as a result of motor vehicle accidents.Insurance risk is significant if, and only if, an insured event could cause the RAF to pay significant additional benefits.Once a contract is classified as an insurance contract it remains classified as an insurance contract until all rights andobligations are extinguished or expire.Section 9 Annual Report 2009115

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Claims IncurredClaims incurred comprise claims and related expenses incurred during the year and changes in the provisions foroutstanding claims, including provisions for claims incurred but not reported and related external expenses, togetherwith any other adjustments to claims from previous years.Outstanding Claims ProvisionProvision is made at the year-end for the estimated cost of claims incurred but not settled at the reporting date,including the cost of claims incurred but not yet reported (commonly referred to as “Claims IBNR”) to the RAF and thecost of claims reported but not yet settled as at the reporting date. Claims outstanding are determined as accurately aspossible on the basis of a number of factors, which include previous experience in claims patterns, claims settlementpatterns and trends in claims frequency.Further, the outstanding claims provision is calculated taking the following elements into account:• Estimates of additional claims payments that may be required on claims that have already been reported to theRAF and are still open;• Estimates of additional claims payments that may be required on claims that have already been reported to theRAF and are closed, but could be reopened in the future; and• Estimates of external claims handling expenses, i.e. legal and medical experts, assessors and other experts –excluding the RAF’s overhead administrative costs.The estimates of the outstanding claims provision were produced on a “going concern” basis, and the outstandingclaims estimate is reflected in the financial statements at a discounted value, based on expected monetary valuesat the expected time of payment of those claims. Reserves for internal or indirect claim handling expenses (e.g.administration costs) are specifically excluded from the estimates.The outstanding claims provision is calculated gross of any reinsurance recoveries. A separate estimate is madeof the amounts that will be recoverable from reinsurers based upon the gross provisions and having due regard tocollectability.Annual Report 2009Reinsurance Contracts HeldThe RAF procures reinsurance cover for the purposes of limiting its net loss potential. The reinsurance policies do notrelease the RAF from its direct obligations to its claimants, as the duty to compensate the claimants remains with theRAF in spite of the fact that the reinsurance cover has been procured.Section 9The contracts entered into by the RAF with reinsurers under which the RAF is compensated for losses on one ormore “contracts” issued by the RAF and that meet the classification requirements for insurance contracts above areclassified as reinsurance contracts held. Only rights under contracts that give rise to a significant transfer of insurancerisk are accounted for as reinsurance assets. Rights under contracts that do not transfer significant insurance risk areaccounted for as financial instruments.Reinsurance premiums for reinsurance cover are recognised as expenses on a basis that is consistent with therecognition basis for premiums on other similar insurance contracts. Reinsurance premiums are charged to the116

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)statement of financial performance over the period that the reinsurance cover is provided based on the expectedpattern of the reinsured risks.The net amounts paid to a reinsurer at the inception of a contract may be less than the reinsurance assets recognisedby the RAF in respect of its rights under such contracts. Any difference between the premium due to the reinsurer andthe reinsurance asset recognised is included in surplus or deficit in the period in which the reinsurance premium is due.The RAF does not recognise reinsurance assets except for claims which have already been lodged with reinsurers andliability acknowledged, due to uncertainty regarding the successful realisation of the claims.3.3 Non-derivative Financial InstrumentsNon-derivative financial instruments comprise receivables, cash and cash equivalents, other receivables and payablesand accruals. A financial instrument is recognised if the RAF becomes a party to the contractual provisions of theinstrument.Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value throughsurplus or deficit, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financialinstruments are measured as described below.Cash and cash equivalents include cash in hand, deposits held at call and other short-term highly liquid investmentswith original maturities of three months or less.The RAF’s non-derivative financial assets have been classified as ‘loans and receivables’ and its non - derivativefinancial liabilities have been classified as ‘financial liabilities measured at amortised cost’.Non-derivative financial instruments classified in the ‘loans and receivables’ and ‘financial liabilities measured atamortised cost’ categories are measured, subsequent to initial recognition, at amortised cost using the effectiveinterest method, less any impairment losses for financial assets. Where the effect of discounting is immaterial the nonderivativefinancial instruments are measured at cost.Non-derivative financial assets are derecognised if the RAF’s contractual rights to the cash flows from the financialassets expire or if the RAF transfers the financial asset to another party without retaining control or substantially allrisks and rewards associated with ownership of the asset. Purchases and sales of financial assets are accounted for attrade date, i.e., the date that the RAF commits itself to purchase or sell the asset. Non-derivative financial liabilities arederecognised if the RAF’s obligations specified in the contract expire or are discharged or cancelled.3.4 Property, Plant and EquipmentProperty, plant and equipment comprise mainly land and buildings, office equipment, furniture and motor vehicles, aswell as computer equipment.Section 9 Annual Report 2009117

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Recognition and MeasurementItems of property, plant and equipment are measured at cost less accumulated depreciation and accumulatedimpairment losses, with the exception of land and buildings.Cost includes expenditure that is directly attributable to the acquisition of the asset and other direct costs to bring theasset into the condition and location intended for use by management.Land and buildings held for administrative purposes are carried at their revalued amounts, being the fair value atthe date of revaluation, less any subsequent accumulated depreciation for buildings and subsequent accumulatedimpairment losses.Revaluations are performed by an independent valuer with sufficient regularity (as a minimum every three years) suchthat the carrying amounts do not differ materially from those that would be determined using fair values at reportingdate.Any revaluation increase arising on the revaluation of such land and buildings is credited in net assets to the propertiesrevaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognisedin surplus or deficit, in which case the increase is credited to surplus or deficit to the extent of the decrease previouslycharged. A decrease in the carrying amount arising on the revaluation of such land and buildings is charged to surplusor deficit to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previousrevaluation of that asset.When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separateitems (major components) of property, plant and equipment.The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of theitem if it is probable that the future economic benefits embodied within the part will flow to the RAF and its cost can bemeasured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing ofproperty, plant and equipment are recognised in surplus or deficit as incurred.Annual Report 2009Gains and losses on disposals of items of property, plant and equipment are determined by comparing the proceedsfrom the disposal with the carrying amount. On the subsequent sale or retirement of a revalued asset, the attributablerevaluation surplus remaining is transferred directly to accumulated surplus/ (deficit).DepreciationSection 9Depreciation is recognised in surplus or deficit on a straight-line basis over the estimated useful lives of each part of anitem of property, plant and equipment. Depreciation methods, current useful lives and residual values are reassessedat the reporting date, with the effect of any changes in estimates that will influence the depreciation and book valuesbeing accounted for on a prospective basis (book values are only recalculated in the current financial year and into thefuture). Land is not depreciated.118

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)The estimated useful lives for the current and comparative period are as follows:2009 2008Buildings 30 years Buildings 30 yearsMotor vehicles 5 years Motor vehicles 5 yearsOffice equipment 10 years Office equipment 6.67 yearsOffice furniture 15 years Office furniture 12 yearsComputer equipment 7 years Computer equipment 5 years3.5 Intangible AssetsIntangible assets acquired by the RAF, which have finite useful lives, are measured at cost less accumulatedamortisation and accumulated impairment losses.Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specificasset to which it relates. All other expenditure is recognised in surplus or deficit as incurred.Amortisation is recognised in surplus or deficit on a straight-line basis over the estimated useful lives of intangibleassets from the date that they are available for use.The estimated useful life for the current and comparative period is as follows:2009 2008Computer software 5 years Computer software 5 yearsThe estimated useful life and amortisation method are reassessed at each reporting date, with the effect of anychanges in estimate being accounted for on a prospective basis.3.6 Consumable StockInventories comprise consumable stores which are measured at the lower of cost and net realisable value. The cost ofthe consumable stores is measured on the weighted average principle, and includes expenditure incurred in acquiringthe consumable stores and other direct costs incurred in bringing them to their existing location and condition.3.7 ImpairmentFinancial AssetsA financial asset is assessed at each reporting date to determine whether there is any objective evidence that it isimpaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events havehad a negative effect on the estimated future cash flows of that asset.Section 9 Annual Report 2009119

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between itscarrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assetsare assessed collectively in groups that share similar credit risk characteristics.All impairment losses are recognised in surplus or deficit.An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairmentloss was recognised. For financial assets measured at amortised cost, the reversal is recognised in surplus or deficit.Non-financial AssetsThe carrying amounts of the RAF’s non-financial assets, other than consumable stock, are reviewed at each reportingdate to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverableamount is estimated.The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessingvalue in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money and the risks specific to the asset.An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount.Impairment losses are recognised in surplus or deficit.Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the losshas decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used todetermine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amountdoes not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if noimpairment loss had been recognised.Annual Report 20093.8 Government GrantsGovernment grants are not recognised until there is reasonable assurance that the RAF will comply with the conditionsattaching to them and that the grants will be received.Government Grants related to ProjectsGrants that compensate entities for projects undertaken and for which there is no return on investment are recognisedas expenses when incurred.Section 9Government Grants related to AssetsGrants that compensate the RAF specifically for the cost of an asset are deducted in arriving at the carrying amountof the asset.120

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Government Grants related to IncomeOther government grants are recognised as revenue over the periods necessary to match them with the costs for whichthey are intended to compensate, on a systematic basis. Government grants that are receivable as compensation forexpenses or losses already incurred or for the purpose of giving immediate financial support to the RAF with no futurerelated costs are recognised in surplus or deficit in the period in which they become receivable.3.9 Employee BenefitsThe RAF operates both defined contribution and defined benefit plans, the assets of which are held in a trusteeadministeredfund.3.9.1 Defined Contribution PlansA defined contribution plan is a post-employment benefit plan under which the RAF pays fixed contributions into aseparate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions todefined contribution pension plans are recognised as an expense in surplus or deficit when they are due.3.9.2 Defined Benefit PlansDefined Benefit Pension PlanThe RAF’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimatingthe amount of future benefit that employees have earned in return for their service in the current and prior periods.That benefit is discounted to determine its present value and any unrecognised past service costs and the fair value ofany plan assets are deducted. The discount rate is the yield at the reporting date on AA credit-rated or similar bondsthat have maturity dates approximating the terms of the RAF’s obligations. The calculation is performed by a qualifiedactuary using the projected unit credit method. When the calculation results in a benefit to the RAF, the recognisedasset is limited to the net total of any unrecognised past service costs and the present value of any future refunds fromthe plan or reductions in future contributions to the plan.When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees isrecognised in surplus or deficit on a straight-line basis over the average period until the benefits vest. To the extent thatthe benefits vest immediately, the expense is recognised immediately in surplus or deficit.Post-retirement Medical ObligationsThe RAF provides post-retirement health care benefits to its retirees based on the following subsidy policy:• An employee who joined the RAF before 1 May 1998 will pay 50% of the total healthcare contribution and the RAFthe balance. The entitlement to post-retirement health care benefits is based on the employee remaining in serviceup to retirement age.• An employee who joined the RAF from 1 May 1998 will after retirement pay 100% of the total healthcare contribution.Therefore the RAF will have no further obligation with regards to these employees’ health care benefits uponretirement.Section 9 Annual Report 2009121

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)The expected costs of these benefits are accrued over the period of employment, using the projected unit credit method.Valuations of these obligations are carried out by independent actuaries.Recognition of Actuarial Gains and Losses on Defined Benefit ObligationsA portion of actuarial gains and losses is recognised as surplus or deficit in the period if the net cumulative unrecognisedactuarial gains and losses at the end of the previous reporting period exceed the greater of:• 10% of the present value of the defined benefit obligation at the date before deducting plan assets, or• 10% of the fair value of any plan assets at that date.The portion of actuarial gains and losses to be recognised is the excess referred to above, divided by the expectedremaining working lives of the employees participating in the plan.This policy is applied for both the defined benefit pension plan and the post-retirement medical obligations.3.9.3 Termination BenefitsTermination benefits are recognised as an expense when the RAF is demonstrably committed, without realisticpossibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date.Termination benefits for voluntary redundancies are recognised if the RAF has made an offer encouraging voluntaryredundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.3.9.4 Short-term BenefitsShort-term employee benefit obligations are measured on an undiscounted basis and are expensed as the relatedservice is provided.Annual Report 2009A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans ifthe RAF has a present legal or constructive obligation to pay this amount as a result of past service provided by theemployee and the obligation can be estimated reliably.3.10 ProvisionsA provision is recognised if, as a result of a past event, the RAF has a present legal or constructive obligation that canbe estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.Where the effect of discounting is material, provisions are determined by discounting the expected future cash flows ata pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.Section 93.11 RevenueRevenue comprises mainly fuel levies, Government grants/ transfer payments, investment income and reinsuranceincome.122

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Fuel LeviesThe main income received by the RAF is a levy that is based on fuel sales known as the Road Accident Fund Levy.The Road Accident Fund Levy income is a charge levied on fuel throughout the country and the quantum of the RoadAccident Fund Levy per litre is determined by National Treasury. The Road Accident Fund Levy amendments arecommunicated through the Budget Speech.The RAF recognises revenue from fuel levies when the amount of revenue can be reliably measured and it is probablethat future economic benefits will flow to the RAF.Revenue is measured at the fair value of the consideration received or receivable.Government Grants/Transfer PaymentsThe RAF recognises revenue from transfer payments when the amount of revenue can be reliably measured, it isprobable that future economic benefits will flow to the RAF and the conditions relating to the transfer payment havebeen complied with.Revenue is measured at the fair value of the consideration received or receivable.Investment IncomeInvestment income comprises interest income on funds invested. Interest income for financial assets not classified atfair value through surplus or deficit is recognised on a time-proportion basis using the effective interest method.Reinsurance IncomeReinsurance income comprises settlements by reinsurance companies in respect of insured events that are coveredby the reinsurance policy.Other IncomeOther income comprises fees that are collected for published tenders, vending machines and parking received fromemployees.3.12 Lease PaymentsPayments made under operating leases are recognised in surplus or deficit on a straight-line basis over the term ofthe lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of thelease.Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of thelease when the lease adjustment is confirmed.Section 9 Annual Report 2009123

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)3.13 Finance CostsFinance costs comprise interest charged on outstanding creditors, interest charged in the claims handling process,unwinding of the discount on provisions and impairment losses recognised on financial assets. Interest charged isrecognised in surplus or deficit using the effective interest method.3.14 Income Tax ExpenseThe RAF is exempt from taxation in terms of the provision of section 10(1)(cA)(i) of the Income Tax Act, 1962 (Act No.58 of 1962) and section 16 of the Road Accident Fund Act, 1996 (Act No. 56 of 1996).3.15 Related PartiesThe RAF operates in an economic environment currently dominated by entities directly or indirectly owned by the SouthAfrican Government. As a result of the constitutional independence of all three spheres of Government in South Africa,only parties within the national sphere of Government that influenced the RAF or vice versa will be considered to berelated parties.Key management is defined as being individuals with the authority and responsibility for planning, directing andcontrolling the activities of the entity. We regard all individuals from the level of Executive Management up to the Boardof Directors as key management per the definition.Close family members of key management personnel are considered to be those family members who may beexpected to influence, or be influenced by key management individuals in their dealings with the entity.The objective of the financial statements is to provide relevant and reliable information and therefore materiality isconsidered in the disclosure of these transactions.3.16 Irregular, Fruitless and Wasteful ExpenditureAnnual Report 2009Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, a requirement of anyapplicable legislation, including:• The PFMA, or• Any national legislation providing for procurement in that National Government.Fruitless and wasteful expenditure means expenditure that was made in vain and could have been avoided hadreasonable care been exercised.Any irregular, fruitless and wasteful expenditure is charged against surplus or deficit in the period in which it is incurred.Section 93.17 Critical Accounting Estimates and Assumptions in Applying Accounting PoliciesThe preparation of financial statements requires management to make judgements, estimates and assumptions that124

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.Actual results may differ from these estimates.Estimates and assumptions are reviewed on an ongoing basis and are based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under the circumstances.Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any futureperiods affected.In particular, significant areas of estimation, uncertainty and critical judgements in applying accounting policies thathave the most significant effect on the financial statements are:Revenue Recognition on the Road Accident Fund LevyEffective as from 1 April 2006, the responsibility for the collection of the fuel levy was devolved from the Central EnergyFund (“CEF”) to the South African Revenue Services (“SARS”).The changes to the Customs and Excise Act have introduced new provisions that require the fuel companies to pay50% of the Road Accident Fund Levy at the end of the month following the month of removal of the fuel from the refineryand the remaining 50% at the end of the following month.The effect of these provisions is that cash receipts of Road Accident Fund Levies do not correspond with the accrual ofthe levy revenue by the RAF. This particularly impacts the year end revenue receivable raised from the Road AccidentFund Levy. In order to correctly accrue for the revenue for the period, management makes an estimate as to what theirexpected levy income should be based on historical evidence.Diesel RefundsDiesel refunds are concessions deducted from the fuel levies received. Diesel concessions are granted to certainsectors of the economy on the basis of the level of certain use by the diesel consumer in primary production activities.In terms of section 5(2) of the RAF Act, after being amended by the Revenue Laws Amendment Act, 2005 (Act No.31 of 2005), the RAF receives the Road Accident Fund Levy net of diesel refund after it has been collected by SARS.Diesel refunds affect the amount of revenue to be recognised and cannot be measured accurately at the point ofrevenue recognition. Consequently estimates are made by management as to what the value of the diesel refunds willbe. The estimates are based on historical evidence, and management formulates a percentage that is applied to theRoad Accident Fund Levy. The percentage range for diesel refunds for the current year is 9% to 10% of the gross fuellevy for the year.Outstanding Claims ProvisionThe estimation of the ultimate liability arising from claims incurred but not settled at the reporting date is the RAF’s mostcritical accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of theSection 9 Annual Report 2009125

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)liability that the RAF will ultimately pay for such claims. The provision for outstanding claims is actuarially determinedon an annual basis. The measurement of the obligations in respect of this liability requires actuarial estimates andvaluations. An actuary is engaged to perform these calculations. More detail on the actuarial assumptions can befound in notes 3.2 and 13.Post-retirement Employee BenefitsThe RAF provides a defined benefit pension plan and a post-retirement medical plan to some of its employees. Themeasurement of the obligations (and assets) in respect of this liability requires actuarial estimates and valuations. Anactuary is engaged to perform these calculations. More detail on the actuarial assumptions can be found in notes 3.9and 15.3.18 New Standards and Interpretations Not Yet AdoptedA number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31March 2009 and, other than indicated below, have not been applied in preparing these financial statements:• GRAP 4 The Effects of Changes in Foreign Exchange Rates:Prescribes how to include foreign currency transactions and foreign operations in the financial statements ofan entity and how to translate financial statements into a presentation currency. The principal issues are whichexchange rate(s) to use and how to report the effects of changes in exchange rates in the financial statements.The Standard also prescribes how to include foreign currency transactions and foreign operations in the financialstatements of an entity and how to translate financial statements into a presentation currency.• GRAP 5 Borrowing Costs:Annual Report 2009Prescribes the accounting treatment for borrowing costs. This Standard generally requires an entity to capitaliseborrowing costs that are directly attributable to the acquisition, construction or production of a qualifying assetas part of the cost of that asset. However, the Standard permits the expensing of borrowing costs where it isinappropriate to capitalise borrowing costs that are directly attributable to the acquisition, construction or productionof a qualifying asset. Other borrowing costs are recognised as an expense.• GRAP 6 Consolidated and Separate Financial Statements:Prescribes the circumstances in which consolidated and separate financial statements are to be prepared and theinformation to be included in those financial statements so that the consolidated financial statements reflect thefinancial performance, financial position and cash flows of an economic entity as a single entity.• GRAP 7 Investments in Associates:Section 9Prescribes the accounting treatment for investments in associates where the investment in the associate leads tothe holding of an ownership interest in the form of a shareholding or other formal net asset structure. The purposeof this Standard is to prescribe the circumstances in which the investors should use the equity method, how theequity method is to be applied and requires certain disclosures in respect of investments in associates.126

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)• GRAP 8 Interests in Joint Ventures:Prescribes the accounting treatment of jointly controlled operations, jointly controlled assets and jointly controlledentities and to provide alternatives for the recognition of interests in jointly controlled entities.• GRAP 9 Revenue from Exchange Transactions:Prescribes the accounting treatment of revenue arising from exchange transactions and events.Certain specific items to be recognised as revenues are addressed in other Standards and are excluded from thescope of this Standard. For example, gains arising on the sale of property, plant and equipment are specificallyaddressed in the Standard of GRAP on Property, Plant and Equipment and are not covered in this Standard. Theobjective of this Standard is to prescribe the accounting treatment of revenue arising from exchange transactionsand events. The primary issue in accounting for revenue is determining when to recognise revenue. Revenue isrecognised when it is probable that future economic benefits or service potential will flow to the entity and thesebenefits can be measured reliably. This Standard identifies the circumstances in which these criteria will be metand, therefore, revenue will be recognised. It also provides practical guidance on the application of these criteria.• GRAP 10 Financial Reporting in Hyperinflationary Economies:Prescribes the appropriate accounting treatment where the entity prepares and presents financial statementsunder the accrual basis of accounting and the entity’s functional currency is the currency of a hyperinflationaryeconomy.• GRAP 11 Construction Contracts:Prescribes the accounting treatment of costs and revenue associated with construction contracts. The Standard:• identifies the arrangements that are to be classified as construction contracts;• provides guidance on the types of construction contracts that can arise in the public sector; and• specifies the basis for recognition and disclosure of contract expenses and, if relevant, contract revenues.• GRAP 12 Inventories:Prescribes the accounting treatment for inventories. A primary issue in accounting for inventories is the amount ofcost to be recognised as an asset and carried forward until the related revenues are recognised. This Standardprovides guidance on the determination of cost and its subsequent recognition as an expense, including anywrite-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs toinventories.• GRAP 13 Leases:Prescribes for lessees and lessors, the appropriate accounting policies and disclosures to apply in relation tofinance and operating leases.Section 9 Annual Report 2009127

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)• GRAP 14 Events after the Reporting Date:Prescribes when an entity should adjust its financial statements for events after the reporting date; and thedisclosures that an entity should give about the date when the financial statements were authorised for issue andabout events after the reporting date. The Standard also requires that an entity should not prepare its financialstatements on a going concern basis if events after the reporting date indicate that the going concern assumptionis not appropriate.• GRAP 16 Investment Property:Prescribes the accounting treatment for investment property and related disclosure requirements.• GRAP 17 Property, Plant and Equipment:Prescribes the accounting treatment for property, plant and equipment so that the users of financial statements candiscern information about an entity’s investment in property, plant and equipment and changes in such investment.• GRAP 19 Provisions, Contingent Liabilities and Contingent Assets:Defines provisions, contingent liabilities and contingent assets and identifies the circumstances in which provisionsshould be recognised, how they should be measured and the disclosures that should be made about them. TheStandard also requires that certain information be disclosed about contingent liabilities and contingent assets inthe notes to the financial statements to enable users to understand their nature, timing and amount.• GRAP 100 Non-current Assets held for Sale and Discontinued Operations:Annual Report 2009Sets out the accounting for assets held for sale, and the presentation and disclosure of discontinued operations.In particular, the Standard requires assets that meet the criteria to be classified as held for sale to be:• Measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets tocease; and• Presented separately on the face of the statement of financial position and the results of discontinuedoperations to be presented separately in the statement of financial performance.• GRAP 101 Agriculture:Prescribes the accounting treatment, financial statement presentation, and disclosures related to agriculturalactivity.• GRAP 102 Intangible Assets:Section 9Prescribes the accounting treatment for intangible assets that are not dealt with specifically in another Standardof GRAP. This Standard requires an entity to recognise an intangible asset if, and only if, specified criteria aremet. The Standard also specifies how to measure the carrying amount of intangible assets and requires specifieddisclosures about intangible assets.128

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)• IFRIC 13 (AC 446) Customer Loyalty Programmes:Addresses the accounting by entities that operate, or otherwise participate in, customer loyalty programmes fortheir customers. It relates to customer loyalty programmes under which the customer can redeem credits forawards such as free or discounted goods or services. IFRIC 13, which becomes mandatory for the RAF’s 2010financial statements, is not expected to have any impact on the financial statements.• IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009):The amendment requires an entity to capitalise borrowing costs directly attributable to the acquisition, constructionor production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as partof the cost of that asset. The option of immediately expensing those borrowing costs will be removed. The RAF willapply IAS 23 (Amendment) retrospectively from 1 April 2009 but is currently not applicable to the RAF as there areno qualifying assets.3.19 Determination of Fair ValuesA number of the RAF’s accounting policies and disclosures require the determination of fair value, for both financialand non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosurepurposes based on the methods described below. Where applicable, further information about the assumptions madein determining fair values is disclosed in the notes specific to that asset or liability.Property, Plant and EquipmentThe fair value of property, plant and equipment measured using the valuation model is based on market values. Themarket value of property is determined by taking into account the market rentals that are paid in the immediate area.The applicable relevant market rental is used to determine potential income. Thereafter the relevant expenditure isdeducted to determine the net income and with a relevant capitalization rate, the market value if calculated. The marketvalue of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items.Non-derivative Financial LiabilitiesFair value, which is determined for disclosure purposes, is calculated based on the present value of future principaland interest cash flows, discounted at the market rate of interest at the reporting date.Section 9 Annual Report 2009129

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2009 2008NOTES R’000 R’0004. Cash and Cash EquivalentsCash and cash equivalents include thefollowing:Short term call deposits at banking institutions 1 060 906 1 181 687Balance of RAF current accounts 8 129 3 014RAF deposit account not available for use 21 633 7 697Total guarantees 30 22 003 7 779Less: Guarantees in process of being cancelled (370) (82)Petty cash 30 8Total 1 090 698 1 192 406The effective interest rate on call deposits in 2009 was 11.06% (2008: 9.21%).The RAF’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed innote 27.5. Transfers Receivable from Fuel LeviesFuel levy receivable 1 912 122 1 883 828Interest receivable from fuel companies 376 376Total 1 912 498 1 884 204Annual Report 2009The Road Accident Fund Levies are recovered directly from the oil refineries by the South African Revenue Service(“SARS”) and are paid into the National Revenue Fund. Before SARS pays the funds into the National RevenueFund, certain deductions are made by SARS in terms of section 47 of the Customs and Excise Act, 1964 (Act No.91 of 1964), section 5 of the RAF Act, as well as Schedule No. 6 to the Customs and Excise Act No. 91 of 1964. TheNational Treasury then pays these levies from the National Revenue Fund to the Department of Transport, which inturn pays these funds to the RAF.Approximately 50% of the levies due are payable by the refineries at the end of the month following the month ofremoval from the refinery and the remaining 50% at the end of following month.This amount is impaired by any bad debts that the refineries have sustained that need to be refunded by the RAF.Section 9130

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2009 2008NOTES R’000 R’0006. Interest ReceivableInterest receivable from money marketinvestments 9 770 10 229Total 9 770 10 2297. Other ReceivablesLoans and receivablesAdvance payment i.r.o. suppliers claims andother 17 896 15 782Employee debtors / Loans and bursaries 373 79Sundry debtors 2 161 1 831Indemnity policy - ref note 28.5 58 894 53 531Other deposits / Cash collateral provided 353 363Total loans and receivables 79 677 71 586Miscellaneous receivablesClaims debtors 10 998 6 924Total miscellaneous receivables 10 998 6 924Total other receivables 90 675 78 510Current portion of other receivables 79 212 66 091Non-current portion of other receivables 11 463 12 41990 675 78 510The Board considers the carrying amount of other receivables to approximate fair value.8. Consumable StockConsumable stock 2 941 2 077Total 2 941 2 077Section 9 Annual Report 2009131

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)9. Property, Plant And EquipmentLandat CostBuildingsat RevaluedAmountLeaseholdImprovementsat CostNOTES R’000 R’000 R’000Cost/revaluationBalance at 1 April 2008 16 000 89 000 -Additions - - -Utilisation of transfer payment for acquisitions 12 - - -Revaluation of land and buildings 2 288 12 712 -Disposals - - -Balance at 31 March 2009 18 288 101 712 -Depreciation and impairment lossesBalance at 1 April 2008 - 2 967 -Net depreciation for the year - 2 967 -Depreciation - 2 967 -Utilisation of transfer payment - - -Disposals - - -Accumulated depreciation at 31 March 2009 - 5 934 -Accumulated depreciation eliminated on revaluation - (5 934) -Balance at 31 March 2009 - - -Net carrying amount at 31 March 2009 18 288 101 712 -Annual Report 2009Cost/revaluationBalance at 1 April 2007 16 000 89 000 29 962Additions - - -Utilisation of transfer payment for acquisitions 12 - - -Revaluation of land and buildings - - -Disposals / reclassification - - (29 962)Balance at 31 March 2008 16 000 89 000 -Section 9Depreciation and impairment lossesBalance at 1 April 2007 - - 29 962Net depreciation for the year - 2 967 -Depreciation - 2 967 -Utilisation of transfer payment - - -Disposals / reclassification - - (29 962)Balance at 31 March 2008 - 2 967 -132Net carrying amount at 31 March 2008 16 000 86 033 -

MotorVehiclesat CostOfficeEquipmentat CostOfficeFurnitureat CostComputerEquipmentat CostComputerEquipmentGrantAllocationCapitalWork-in-ProgressR’000 R’000 R’000 R’000 R’000 R’000 R’000Total8 077 16 522 17 892 80 969 - - 228 460282 6 160 3 057 7 323 29 121 - 45 943- - - - (29 121) - (29 121)- - - - - 15 000(147) - - (61) - - (208)8 212 22 682 20 949 88 231 - - 260 0745 174 8 475 10 837 72 994 - - 100 447914 2 148 1 111 942 - - 8 082914 2 148 1 111 942 5 487 - 13 569- - - - (5 487) - (5 487)(87) - - (54) - - (141)6 001 10 623 11 948 73 882 - - 108 388- - - - - - (5 934)6 001 10 623 11 948 73 882 - - 102 4542 211 12 059 9 001 14 349 - - 157 6207 125 11 242 17 498 79 042 - - 249 8691 907 5 369 583 3 309 21 155 - 32 323- - - - (21 155) - (21 155)- - - - - - -(955) (89) (189) (1 382) - - (32 577)8 077 16 522 17 892 80 969 - - 228 4604 967 6 719 9 706 69 492 - - 120 8461 161 1 828 1 299 4 861 - - 12 1161 161 1 828 1 299 4 861 1 613 - 13 729- - - - (1 613) - (1 613)(954) (72) (168) (1 359) - - (32 515)5 174 8 475 10 837 72 994 - - 100 4472 903 8 047 7 055 7 975 - - 128 013Section 9 Annual Report 2009133

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)10. Intangible AssetsAcquiredSoftwareat CostAcquiredSoftwareGovernmentGrant AllocationTotalNOTES R’000 R’000 R’000CostBalance at 1 April 2008 2 272 - 2 272Additions - 21 231 21 231Utilisation of transfer payment for acquisitions 12 - (21 231) (21 231)Balance at 31 March 2009 2 272 - 2 272Amortisation and impairment lossesBalance at 1 April 2008 795 - 795Amortisation for the year 455 - 455Amortisation 455 14 095 14 550Utilisation of transfer payment - (14 095) (14 095)Balance at 31 March 2009 1 250 - 1 250Net carrying amount at 31 March 2009 1 022 - 1 022Annual Report 2009CostBalance at 1 April 2007 2 272 - 2 272Additions - 65 192 65 192Utilisation of transfer payment for acquisitions 12 - (65 192) (65 192)Balance at 31 March 2008 2 272 - 2 272Amortisation and impairment lossesBalance at 1 April 2007 341 - 341Amortisation for the year 454 - 454Amortisation 454 2 906 3 360Utilisation of transfer payment - (2 906) (2 906)Section 9Balance at 31 March 2008 795 - 795Net carrying amount at 31 March 2008 1 477 - 1 477134

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2009 2008NOTES R’000 R’00011. Payables and AccrualsFinancial liabilities measured at amortisedcostTrade and other creditors 50 755 39 320Claim amounts requested but not paid at yearend 276 409 284 136Unrecognised portion of straightlined leases 6 073 9 036Total financial liabilities measured atamortised cost333 237 332 492Other payables and accrualsFuel levy refund accruals 22 509 21 404Accrual for 13th cheque 8 094 6 625Accrual for leave 29 122 23 012Accrual for overtime 6 100 3 211Accrual for performance bonuses 35 181 32 760Total other payables and accruals 101 006 87 012Total Payables and accruals 434 243 419 504Current portion of payables and accruals 428 170 410 468Non current portion of payables and accruals 6 073 9 036434 243 419 504The liquidity risk disclosure for other liabilities is addressed in Note 27.12. Unutilised Government GrantUnutilised portion at the beginning of theyear110 133 196 480Grant received in 2009 for claims expense 2 500 000 -Capitalised to acquisition of computer equipment 9 (29 121) (21 155)Capitalised to acquisition of intangible assets 10 (21 231) (65 192)Recognised in statement of financial performance (2 500 000) -Amount transferred to the following year 59 781 110 133Section 9 Annual Report 2009135

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2009 2008NOTES R’000 R’00013. Provision for Outstanding ClaimsAnalysis for reporting purposesCurrent portion 9 222 560 9 052 033Non-current portion 33 277 795 21 287 461Total 42 500 355 30 339 494Movements for the yearOpening balance 30 339 494 23 935 366Utilisation during the year (11 131 170) (8 984 197)Provisions made during the year 23 292 031 15 388 325Closing balance 42 500 355 30 339 494The methodology that was used for 2009 did not distinguish large claims greater than R1 million separately, but wasincluded in the respective Heads of Damage.The amount of R42.5 billion reflects the discounted actuarial estimate of the amounts expected to become due andpayable in future in respect of claims that had arisen at year-end. The undiscounted liability for both non-undertakingsand undertakings claims as at 31 March 2009 is R63.8 billion (31 March 2008: R44 billion).13.1 Methodology Used in Determining the Provision for Outstanding ClaimsThe following methodology was used to estimate the outstanding claims provision.Annual Report 2009Section 9• The claims between non-undertakings and undertakings classes of business were split as the claim paymentpatterns for these two classes of business differ significantly.• The non-undertakings claims payment data was grouped into the following categories:1. General damages2. Loss of earnings3. Compensation commissioner award4. Loss of support5. Past medical non-supplier6. Future medical7. Funeral costs etc.8. RAF legal costs9. Claimant legal costs10. Supplier claims11. Pre-1998 liability136

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)• Ultimate reported non-undertakings claims numbers were projected using the Chain Ladder and BHF methods.Current open claims, reopened claims and finalised claims are included in the projections.• Previously claims in excess of R1 million were analysed as a separate class, regardless of the original claim type(or heads of damage). For this review, all claims of the same claim type were assessed together, regardless oftheir size.• Previously multiple payments in respect of claims in excess of R1 million were aggregated and allocated to theweighted average time to payment where the weights used are the payments at each period in time. For thisreview, each individual payment was recognised as falling in the relevant period in which it was paid. This removedsome distortion for the purpose of data reconciliation.Ultimate reported non-undertakings claimsAccident yearOutstandingliabilityundiscounted(R’000)Outstandingliabilitydiscounted(R’000)Amount of claimspaid to date(R’000)Ultimate amountof claimspayable(R’000)(1) (2) (3) (4) =(1) + (3)1998 33 775 32 925 2 930 842 2 964 6171999 147 792 140 238 3 474 898 3 622 6902000 369 975 341 703 4 002 103 4 372 0782001 770 615 692 812 4 435 965 5 206 5802002 1 448 553 1 270 982 4 982 371 6 430 9242003 1 355 541 1 157 486 5 484 990 6 840 5312004 2 197 327 1 835 585 5 093 807 7 291 1342005 3 081 109 2 534 555 4 362 814 7 443 9232006 4 977 807 4 035 114 3 743 604 8 721 4112007 7 887 356 6 247 683 2 778 225 10 665 5812008 13 629 469 10 380 613 2 004 097 15 633 5662009 16 660 172 11 992 506 324 816 16 984 988TOTAL 52 559 491 40 662 202 43 618 532 96 178 023The table above presents the development of claim payments and the estimated ultimate cost of claims for the accidentyears 1998 – 2009. This information is disclosed to illustrate the general insurance risk inherent in the RAF. Column (3)of the table shows the cumulative amounts paid during successive years related to each accident year. For example,with respect to the accident year 2002, by the end of 2009, R4.98 billion had actually been paid in settlement of claims.Section 9 Annual Report 2009137

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)The graph below illustrates the 2009 ultimate liabilities by accident year versus the 2008 ultimate liabilities by accidentyear.2009 vs 2008 Ultimate Claims Payable(Non Undertakings: Supplier and Non-Supplier)20Ultimate Claims Payable (R’billion)181614121086422009 Non-Supplier and Supplier2008 Non-Supplier and Supplier098 99 00 01 02 03 04 05 06 07 08Accident YearThe graph below shows the 2009 ultimate liabilities by accident year versus the 2008 ultimate liabilities by accidentyear, including the breakdown between claims paid to date and future payments.2009 vs 2008 Ultimate Claims Payable Breakdown - Past &Future Payments(Non Undertakings: Supplier and Non-Supplier)Annual Report 2009Section 900 01 02 03 04 05 06 07 08Ultimate Claims Payable (R’billion)2018161412108642009 08 09 08 09 08 09 08 09 08 09 08 09 08 09 08090809080908Future payments (Non-Supplierand Supplier)Paid to date (Non-Supplier andSupplierAccident Year138

99 00 01 02 03 04 05 06 07 082018Notes to the Financial Statements 16 for the Financial Year ended 31 March 2009 (cont.)14• The liability calculated under the12non-undertaking class was calculated using a modified average cost per claimreserving method and using actuarial 10 judgement to determine the ultimate claims experience for each accidentyear.8• Allowance was made for further claims run-off for non-undertaking claims.6• For the undertakings class the method used was to determine the probability of a future payment together with an4annual cost per undertaking payment. The undertaking class is potentially very long term and allowance was made2for 45 years of future payments.• Future projected claim payments0were discounted at an appropriate discount rate. The discount rates used vary09 08 09 08 09 08 09 08 09 08 09 08 09 08 09 08090809080908between 7.0% per annum and 8.7% per annum depending on the future term of the expected claim payment(2008: between 9% and 10.6% per annum).Discount Rate at Each Future Duration9.00%8.50%8.00%7.50%Discount rate7.00%iabilityeneral DamagesLoss of EarningsLoss of SupportPast MedicalFuture MedicalRAF Legal and OtherClaimant Legal and OtherOther expensesSupplierUndertakings13.2 Assumptions6.50%6.00%1 3 5 7 9 11 13 15 17 19 21 23 25Future Term in YearsThe assumptions that have the greatest effect on the measurement of the outstanding claims provision are:• That the development of future number of claims reported will follow past established development patterns asapplied to the independent estimate of the ultimate projected number of claims.• That the claims payment patterns were not distorted by large claims or claims aggregations caused by majoraccidents with a large number of deaths or serious injuries.• That trends in the ratio of claims paid as a proportion of that reported remains relatively stable.• That no further significant claims arise from accidents occurring prior to the 1980 financial year.• Recoveries on fraudulent claims are implicitly allowed for in the future projections. Data on fraud recoveries wasnot available and as such, no allowance was made in the claims projections.• The liabilities in respect of undertakings are determined with reference to the probability of payment and theexpected amount of payment in future periods.Section 9 Annual Report 2009139

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)13.3 The Effect of Changes in AssumptionsThe following material changes influenced the provision for the year under review:The previous review made assumptions about the number of claims that would arise from each claim reported. Forthe three classes “RAF Legal”, “Claimant Legal” and “Large Claims” the analysis was performed using only finalisedclaims.The actuaries have used payment data:• which incorporated all claims, whether finalised or not;• where multiple payments are not combined and given weighted average dates; and• where no large claims class is created.Using this approach, the actuaries estimate the future discounted liability to be R42.5 billion as at 31 March 2009.The movement in the claims liability is recorded as follows:2009R bn2008R bnOpening balance of liability (30.3) (23.9)New claims in respect of the current year (12.0) (8.7)Amount paid during the year 11.2 8.8Unwinding of interest rate (2.9) (1.6)Change of basis (8.5) (4.9)Closing balance of liability (42.5) (30.3)Annual Report 2009Explanation of the main reasons for the increase in the provision for outstanding claims:The liability increased by R12bn in respect of accidents which occurred during the most recent 12 months. During thesame period, the RAF paid R11.2bn of claims, which resulted in a commensurate decrease in the liability. The effectof restating the discounted liability in 2009 money terms is referred to as “unwinding the discount rate” and results toan increase of R2.9bn. An increase in the liability of R8.5bn is attributed to a change of basis. This refers mainly to therevision of assumptions to reflect the emerging experience of the RAF.Section 9The assumptions about the likely future experience are based on historic trends observed. Changes in trends areonly allowed for to the extent that they are substantiated by actual observable experience. During previous valuations,increased claims numbers and average claims sizes were observed only in the most recent few months. As suchassumptions were adjusted partially to allow for this possible increase in the liability. However, the most recentexperience observed during the current valuation has confirmed that these adverse trends in claims experiencewere, in fact, real and persistent. As such, there is now a larger body of actual observed experience to substantiatethe assumption changes. The assumptions have been adjusted to reflect this, and the liability increases accordingly.140

13.4 Liability Breakdown of Recent Valuations20181614121086442Notes to the Financial Statements for the Financial Year098 99 00 01 02 03 04 05 06 07ended 08 31 March 2009 (cont.) 2009 08 09 08 09 08 09 08 09 08 09 08 09 08 09 080908The chart below shows the relative proportions of the total liability split between the various classes at the last twovaluations. The same methodology was used in both cases to ensure a consistent comparison, and also excludes anyadjustments due to the Amendment Act.20181614121086Liability Breakdown45%40%35%30%25%20%15%9.00%8.50%March 08 8.00%March 097.50%7.00%10%5%0%Pre 1998 LiabilityGeneral DamagesLoss of EarningsLoss of SupportPast MedicalFuture MedicalRAF Legal and OtherClaimant Legal and OtherOther expensesSupplierUndertakingsThere have been changes to the breakdown of the total liability between the last two valuation dates:6.50%6.00%1 3 5 7 9 11 13 15 17 19• General Damages is still the largest class, though it has dropped to 25% of the total, from 39%• Loss of Earnings has reduced from 21% to 17%• Loss of Support has reduced from 8% to 6%• Past and future medical has remained the same• RAF legal and other has increased from 7% to 18%• Claimants Legal & Other has grown from 13% to 20%• Supplier has grown from 1% to 2%13.5 Sensitivity AnalysisWhere variables are considered to be immaterial, no impact has been assessed for insignificant changes to thesevariables. Particular variables may not be considered material at present. Should the materiality level of an individualvariable change, however, an assessment of reasonable possible changes to that variable in the future may be required.The RAF believes that the liability for claims reported in the statement of financial position is reasonable. It wascalculated on a best estimate basis. The possibility exists that it might be either under or overstated as the process ofestimation is based on certain variables and assumptions which could differ when claims arise.Section 9 Annual Report 2009141

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)13.5.1 InflationFor the valuation, the actuaries assumed that base inflation would be 2% below the yield curve.However, a number of sensitivity tests were done using different inflation curves, the results of which are shown below.ImpactDescription of Inflation Sensitivity Discounted UndiscountedBond yield less 2% R0.0bn R0.0bnBond yield less 3% -R1.0bn -R1.6bnMarket derived inflation R2.2bn R3.3bnBond yield plus 2% R4.5bn R6.9bnBond yield plus 2% for two years, plus 0% for two years then less 2%thereafterR1.3bnR1.5bn13.5.2 Increase in Claim Numbers ReportedIn the previous financial year, the RAF experienced a marked increase in the number of claims reported. Duringthe same period, however, statistics reported by organisations such as the Road Traffic Management Corporation(“RTMC”) showed a reduction in accident rates. The volume of fuel sales increased 7%. The actuaries raised concernthat this increase in the number of claims reported could be due to causes to date undetermined. Therefore, in theplace of fuel sales, the actuaries chose to use the number of registered vehicles as an independent estimate to projectthe ultimate number of claims reported for a specific year.Annual Report 2009ImpactDescription of Claim Numbers Sensitivity Discounted UndiscountedBest Estimate of Claim Numbers R0.0bn R0.0bnBest Estimate of Claim Numbers less 5% from 2007h1 onwards -R1.8bn -R2.3bnBest Estimate of Claim Numbers plus 5% from 2007h1 onwards R1.8bn R2.3bnBest Estimate of Claim Numbers plus 10% from 2007h1 onwards R3.5bn R4.6bnSection 9As the majority of the outstanding liability is in the most recent accident half years, the sensitivity of the final liability tothe claim numbers for 2007h1 onwards was investigated. If the claim numbers in each accident half year 2007h1 –2009h2 were to increase by 10%, the discounted liability would increase by R3.5bn to R46.0bn.142

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)13.5.3 UndertakingsIn the last year, a number of new Undertakings were created with relatively few payments being made. This has causeda decrease in the undertakings discounted liability from R3.4 billion to R3.2 billion.As a sensitivity, an alternative approach was taken which analysed the statistical distribution of the frequency andseverity of the projected future cash flows. This suggested a potential saving on the discounted liability of R1.0 billion,to R2.4 billion.13.6 Material ClaimsA Swiss national lodged a claim with the RAF in 2003 for injuries sustained in a motor vehicle accident which occurredon 23 November 2002 amounting to R4.4 billion.This is by far the largest claim ever lodged against the RAF.The RAF was determined to be 100% liable for the claimant’s proven damages following a merit investigation in 2004.The claim was settled during the 2009 financial year for an amount of €42 million (approximately R525 million) of whichthe RAF has paid the full amount but has recovered a reinsurance claim of approximately R463 million.14. Other Provisions2009 2008NOTES R’000 R’000Fuel/Diesel RefundIn terms of legislation, the RAF has an obligationto refund 46,5 c/l (2008/09) 41,5 c/l (2007/08) inthe RAF Fuel Levy to different economic sectors.The provision is calculated based on actualclaims from these sectors processed throughSARS.Opening balance 233 551 150 431Increase in the provision charged to income 876 102 775 959Provision utilised (900 118) (692 839)Total 209 535 233 551Section 9 Annual Report 2009143

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)15. Post-Retirement Employee Benefits15.1 Post-employment Pension BenefitThe RAF operates a pension fund which provides benefits on both defined benefit and defined contribution plans forpermanent staff. This fund is administered on behalf of the RAF by pension fund administrators and is governed by thePension Funds Act, 1956 (Act No. 24 of 1956).The Pension Funds Act requires a statutory actuarial valuation every three years.The defined benefit plan fund was actuarially valued using the projected unit credit method as at 31 March 2009. Thevaluation revealed that the assets of the fund represent 163.5% (31 March 2008 – 196.3%) of the future benefits. This isafter minimum withdrawal values have been provided for in terms of the Pension Funds Second Amendment Act, 2001for existing members from a date 12 months after the surplus apportionment date (31 March 2003).The RAF has carried out a surplus apportionment exercise. As the surplus apportionment has not yet been approvedby the Financial Services Board, the RAF has not recognised an asset in respect of the surplus.The assets of the plan mainly comprise of investments. The investments are broadly in: equities (36.10%),cash (40.3%), bonds (9.4%) and international (14.2%).The average remaining working lives of employees on the plan is 10.4 years and actuarial gains and losses exceedingthe 10% corridor have been recognised over this period.2009 2008NOTES R’000 R’000Section 9Annual Report 2009Staff costsDefined benefit plan expense- Current service costs 90 83- Interest costs 2 486 2 203- Expected return on plan assets (4 822) (4 986)- Actuarial loss recognised in the current year 439 2 630- Movement in unrecognised post-employment benefit asset 7 622 140Total expensed in the statement of financial performance 22.1 5 815 70144

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)The amount included in the statement of financial positionarising from the defined benefit plan is as follows:2009 2008NOTES R’000 R’000Present value of plan liability: End of year (32 361) (27 819)Fair value of plan assets: End of year 61 013 54 59328 652 26 774Unrecognised actuarial loss: End of year 3 113 3 113Unrecognised post employment benefit asset (31 765) (29 887)Movements in the net asset / (liability) recognised in thestatement of financial position- -Amount charged to the statement of financial performance (5 815) (70)Contributions received by the fund 5 815 70Closing balance - -Actual return on plan assetsExpected return on plan assets 4 822 4 986Actuarial gain/ (loss) on plan assets 3 633 (2 505)Actual return on plan assets 8 455 2 481Section 9 Annual Report 2009145

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)The principal actuarial assumptions used for accounting purposes were as follows:NOTES2009 2008Discount rate pre-retirement 9.00% 9.25%Price inflation 6.40% 6.25%Salary escalation 8.00% 8.25%Pension increases 4.30% 4.38%Post retirement rate 4.30% 4.67%Expected return on fund assets 9.00% 10.41%Pre-retirement mortality Nil NilPost-retirement mortalityProportions marriedPA(90) rated down by 1 year100% of all future pensionersmarried at retirement, husband 3years older than the wife.Expected return on assetsA blended average of the projectedlong term real returns for the variousasset classes with allowance beingmade for price inflation, fees and taxare used to detemine the expectedreturn on assets.Present value of the obligation Period R'0002009 32 3612008 27 819Annual Report 2009Fair value of plan assets Period R'0002009 61 0132008 54 593Surplus /(Deficit) Period R'0002009 28 6522008 26 774Section 9Expected contributions to the plan during the subsequent financialperiod:PeriodR'0002010 64146The next actuarial valuation for the defined benefit plan is due on 31 March 2010.

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)15.2 Post-employment Medical ObligationsThe RAF operates a post-employment medical benefit scheme that covers employees who were appointed prior to1 May 1998.The latest valuation of the RAF’s liability in respect of post-retirement benefits for the financial year-end was performedon 31 March 2009 and it will be valued at annual intervals thereafter.Twenty-four current pensioners qualify for this benefit and approximately 10% of employees are prospectively entitledto this benefit. The initial liability and future increases thereof are charged to surplus or deficit.No plan assets are shown as the medical benefits are unfunded.2009 2008NOTES R’000 R’000Staff costsPost employment medical benefit expense- Current service costs 1 312 1 050- Interest costs 1 883 1 191- Actuarial (gain) recognised in the current year - (212)Total expensed in the statement of financial performance 22.1 3 195 2 029The amount included in the statement of financial positionarising from the defined benefit plan is as follows:Present value of plan liability: End of year (24 701) (21 091)Unrecognised actuarial (gain): End of year (141) (894)Closing net (liability) (24 842) (21 985)Movements in the net asset / (liability) recognised in thestatement of financial positionNet past service (liability): Beginning of the year (21 985) (20 219)Amount charged to the statement of financial performance (3 195) (2 029)Contributions received by the fund 338 263Closing net (liability) (24 842) (21 985)Section 9 Annual Report 2009147

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)The principal actuarial assumptions used for accounting purposes were as follows:NOTES2009 2008Discount rate 9.00% 9.00%Health care cost inflation 8.00% 8.00%Real discount rate 0.93% 0.93%Normal retirement age 60.0 60.0Expected average retirement age 59.1 59.1Spouse age gap 3 years 3 yearsContinuation at retirement 100% 100%Proportion married at retirement 80% 80%Mortality: Pre-expected retirement ageMortality: Post-expected retirement ageExpected return on assetsSA1985-90 lightPA(90)-1There are currently no plan assetsset aside in respect of the postemploymenthealth care liability.Therefore no assumption specificto the assets have been made.Annual Report 2009Present value of the obligationExpected contributions to the plan during the subsequent financialperiod:The value of the accruedcontractual liability as at 31 Marchfor each of the years are asfollows:PeriodR'0002009 24 7012008 21 091PeriodR'0002010 385Section 9148

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Sensitivity AnalysisAssumptionVariation% Change inpast-servicecontractualliability% Change inservice cost plusinterest costHealth care cost inflation +1% +20.6% +22.3%-1% -16.2% -17.3%AssumptionVariation% Change inpast-servicecontractualliability% Change inservice cost plusinterest costMortality +1% -17.1% -18.4%-1% +22.3% +24.0%AssumptionVariation% Change inpast-servicecontractualliability% Change inservice cost plusinterest costResignation rate +1% -7.2% -8.3%-1% +8.3% +9.7%Section 9 Annual Report 2009149

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)16. Net Fuel Levies2009 2008NOTES R’000 R’000Gross fuel levies 9 721 480 8 998 007Less: diesel rebate (876 102) (775 959)Total 8 845 378 8 222 04817. Investment IncomeInterest received from money market investments 99 230 180 751Interest from rent-a-captive 7 5 465 4 084Other interest 132 68Effect of discounting of long term debtors 7 (1 279) (5 169)Total 103 548 179 73418. Other RevenueRecoveries 689 255Foreign exchange gains 16 574 -Profit on sale of property, plant and equipment 132 370Total 17 395 62519. Reinsurance RevenueAnnual Report 2009Section 9Revenue received in terms of high-value claims insured byreinsurance companies and commutation offers received from same 452 735 2 334Total 452 735 2 334150

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2009 200820. Claims ExpenditureNOTES R’000 R’000Claims paid * 11 138 897 8 748 428Accruals for claims received not paid yet 276 409 284 136Reversal of accruals for claims received not paid yet (284 136) (48 367)Net increase in claims provision 12 160 861 6 404 128Total 23 292 031 15 388 325*During previous financial years, interest cost on claims was reflected in claims expenditure. It is now allocated toFinance costs in note 22.3. The comparative amount for 2008 was updated accordingly.21. Reinsurance PremiumsPaid to re-insurers during the year 23 789 27 237Total 23 789 27 23722. Operating ExpenditureThe operating deficit has been arrived at after taking into accountthe following:22.1. Staff CostsTotal staff costs 534 090 426 095Included in staff costs are:Contributions to defined benefit plan 15 5 815 70Contributions to defined contribution plan 33 192 33 121Contributions to post retirement healthcare benefit: 15 3 195 2 029As at 31 March 2009, 1 953 staff members were employed by the RAF (2008: 1 810).Section 9 Annual Report 2009151

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2009 200822.2. Administrative ExpensesNOTES R’000 R’000Administrative expenses include, among other, the following:External audit fees 3 456 3 062Directors' fees 25 2 951 2 831Directors' expenses 745 1 557Operating lease rental - buildings* 26 978 21 796Operating lease rental - equipment 565 997Loss on sale of property, plant and equipment 67 -Other expenses 158 607 91 366Total 193 369 121 609Included in other expenses are:Professional services 46 346 26 376Computer services 23 864 4 612Telephone, stationery and postage 19 955 13 387Operating costs - offices 19 328 16 688Subsistence and transport 12 445 8 080Maintenance 8 842 5 551Marketing 7 220 743Forensic and fraud combat services 6 758 5 005Legal fees on corporate matters 4 077 2 852Annual Report 2009* The RAF occupies a number of office premises which are under long-term operating leases. These lease agreementsrange over periods varying between one to five years and are subject to escalation of 8% to 10% per annum.22.3. Finance CostsSection 9Interest expense on financial liabilities measuredat amortised cost 23 955 15 830Interest charged by creditors 79 83Interest charged on claims # 23 876 15 747Total 23 955 15 830152#During the previous financial year the RAF only included interest charged by trade creditors under this heading.From 2009 the RAF included Interest paid in the claims handling process under finance costs. This was previouslyincluded in note 20 - Claims expenditure. The comparative amount for 2008 was updated accordingly.

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2009 200822.4. Depreciation and AmortisationNOTES R’000 R’000Buildings 2 967 2 967Motor vehicles 914 1 161Office equipment 2 148 1 828Office furniture 1 111 1 299Computer equipment 942 4 861Total Depreciation 9 8 082 12 116Intangible assets 455 454Total Amortisation 10 455 454The RAF has reassessed the useful life of its fixed assets in the current financial year. The resultant adjustment isreflected in the current financial year and therefore no adjustment was done for prior years. Had the lifespan of theassets not been reassessed in 2009, the depreciation for the year would have been R6.2 million more than the currentR8 million reflected.22.5. Fruitless ExpenditureThe following items of potential fruitless expenditure are beingdisclosed:Interest and sheriff cost 14 997 19 024Total 14 997 19 024Interest and Sheriff Costs – As per the definition of the PFMA, fruitless and wasteful expenditure means “expenditurewhich was made in vain and could have been avoided had reasonable care been exercised”. The amounts listed arecosts incurred in the settlement process of claims influenced by the external legal processes and time limits legallyenforced on the RAF in the settlement of claims. A portion of the mentioned costs could be regarded as potentially“fruitless and wasteful” as in certain instances, it is physically impossible to comply with the time limits that are inplace, i.e. where a writ can be issued against the RAF immediately after a claimant legal cost bill has been taxed.It must be highlighted that the RAF operates in a highly litigious environment where legal processes place hugedemands on its operations.Section 9 Annual Report 2009153

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2009 200822.6. Financial Misconduct ExpenditureNOTES R’000 R’000The following items relating from financial misconduct are beingdisclosed:Fraud - Claims related 30 556Total 30 556Fraud - Claims related: These are costs borne by the RAF as a result of fraudulent transactions processed through theRAF claims payment system. Immediate steps were taken, on discovery of the fraud, to prevent further losses and,where possible, diciplinary action has been taken and funds are in the process of being recovered.Fraud reported in 2009 to the value of R30 000 - This case is set down for trial on 14 August 2009.Fraud reported in 2008 to the value R555 989 - This case is set down for trial on 26 August 2009.During the year under review, 346 cases of fraud to the value of R21.3 million (claimed amount) were investigatedby the joint project between the RAF, South African Police Service and the National Prosecuting Authority.Currently, there are 324 cases on the Court roll valued at R95.1 million (claimed amount).23. Cash Used by Operating ActivitiesReconciliation of Net Deficit to Cash Used in OperationsAnnual Report 2009Section 9Operating deficit for the period (12 156 715) (7 586 925)Adjusted for non-cash items:Depreciation of property, plant and equipment 22 8 082 12 116Amortisation of intangible assets 22 455 454(Profit)/ loss on sale of property, plant and equipment (65) (370)Carrying value of assets disposed (67) (62)Proceeds on disposal 132 432Adjusted for items classified as investing and financing activities:Investment income 17 (103 548) (179 734)Effect of discounting of long term debtors 17 1 279 5 169Finance costs 22 23 955 15 830Adjusted for changes in provisionsIncrease in provision for outstanding claims 12 160 861 6 404 128Increase in provision for employee benefits 2 857 1 766(Decrease)/ Increase in provisions (24 016) 78 057(86 855) (1 249 509)154

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)2009 2008NOTES R’000 R’000Changes in working capital (26 125) (24 100)Increase in receivables (12 165) 1 762Increase in income receivable (27 835) (302 433)Increase in inventories (864) (2 077)Increase in payables and accruals 14 739 278 648Net cash flows cash used in operating activities (112 980) (1 273 609)24. Related PartiesThe RAF is 100% owned by its shareholder, the Government of the Republic of South Africa represented by theDepartment of Transport. The RAF is a Schedule 3A Public Entity in terms of the PFMA. The related party disclosuresare in terms of the requirements of IAS 24 (AC 126) Related Party Disclosures and the specific guidance given by theSouth African Institute of Chartered Accountants in conjunction with ED 223. The related parties of the RAF mainlyconsist of departments, state-owned entities (“SOE”), other public entities in the national sphere of Governmentand key management personnel of the RAF, or its shareholder and close family members of related parties.The list of public entities in the national sphere of Government is provided by National Treasury on their websitewww.treasury.gov.za. National Treasury also provides the names of subsidiaries of public entities.The following transactions were carried out with related parties:Government grant not utilised at the beginning of the year 110 133 196 480Plus: Government grant received for claims expense 2 500 000 -Less - Amounts recognised in the financial year 2 550 352 86 347Acquisition of new IT systems 50 352 86 347Claims expenses paid 2 500 000 -Amounts transferred to the following year 59 781 110 133Although the RAF transacted with other public entities within the national sphere of Government, none of the relatedparties identified influenced or was influenced by the RAF during the reporting period and therefore no related partytransactions with other entities in the national sphere of Government are disclosed.The following transactions were concluded with key management of the RAF in terms of employment contractsentered into with the RAF.Key Management compensation 25 15 240 10 579Section 9 Annual Report 2009155

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)25. Board and Executive Members’ EmolumentsThe following members held office as the Board of the RAF during the year ended 31 March 2009.25.1 Non-executive Board MembersMembers Office held Term Annual FeeR’ 000V Mahlangu (Acting Chairperson) Board member 1 Apr 08 to 31 Mar 09 560T Moyo Board member 1 Apr 08 to 31 Mar 09 411C J B Greeff Board member 1 Apr 08 to 31 Mar 09 411A K A Dasoo Board member 1 Apr 08 to 31 Mar 09 374H G Motau Board member 1 Apr 08 to 31 Mar 09 411S A Msibi Board member 1 Apr 08 to 31 Mar 09 411K E Moloto-Stofile Board member 1 Apr 08 to 31 Mar 09 373Sub-total 2 95125.2 Executive Board MembersSection 9MemberOffice heldTermSalaryPerformanceBonusPensionContributionsAnnual Report 2009MedicalContributionsTotal EmploymentCost 2009J R D ModiseChief ExecutiveOfficer1 Apr 08 to31 Mar 09R’ 000 R’ 000 R’ 000 R’ 000 R’ 0003 572 2 160 349 46 6 127Sub-total 3 572 2 160 349 46 6 127156

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)25.3 Executive ManagementMembersOffice heldTermSalarySettlementsPerformanceBonusPensionContributionsMedicalContributionsTotalEmploymentCost 2009R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000A GernandtB MbaluY R TenzaA M VilakaziM MvelaseD J HlabanganeS S RamessurL M SteeleChiefFinancialOfficerExecutiveBusinessDevelopmentChiefOperationsOfficerExecutiveCommunicationand MarketingExecutiveCommunicationand MarketingHumanResourcesExecutiveChiefInformationOfficerExecutiveCorporateLegal Service1 Apr 08 to31 Mar 091 Apr 08 to31 Mar 091 Apr 08 to31 Jul 081 Apr 08 to31 Jan 091 Jan 09 to31 Mar 091 Apr 08 to31 Mar 091 Apr 08 to31 Mar 091 Apr 08 to31 Mar 091 364 - 308 139 40 1 8511 051 - 243 103 10 1 407491 827 - 54 6 1 378897 - - 84 33 1 014250 - - 25 - 275853 - - 83 34 9701 006 - - 104 40 1 150947 - 121 - - 1 068Sub-total 6 859 827 672 592 163 9 113Section 9 Annual Report 2009157

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)25.4 SummaryTotal EmploymentCost 2009Total EmploymentCost 2008Notes R’ 000 R’ 000Non-executive Board members 25.1 2 951 2 831Key management 15 240 10 579Executive Board members 25.2 6 127 5 367Executive management 25.3 9 113 5 21226. TaxationThe RAF is exempt from taxation in terms of the provision of section 10(1)(cA)(i) of the Income Tax Act, 1962 (Act No.58 of 1962) and section 16 of the Road Accident Fund Act, 1996 (Act No. 56 of 1996).27. Financial Risk Management27.1 OverviewThe RAF is exposed to a range of financial risks through its financial assets, financial liabilities, reinsurance assets andinsurance liabilities. In particular, the key financial risk is that the proceeds from its financial assets are not sufficient tofund the obligations arising from its insurance contracts. The most important components of this financial risk are creditrisk, liquidity risk and market risk (which comprises interest rate risk, currency risk and other price risk). The risks thatthe RAF primarily faces due to the nature of its assets and liabilities are liquidity risk, interest rate risk and currency risk.27.2 Credit RiskAnnual Report 2009The RAF has exposure to credit risk, which is the risk of financial loss to the RAF if a counterparty to a financialinstrument fails to meet its contractual obligations. Key areas where the RAF is exposed to credit risk are:• Reinsurers’ share of insurance liabilities;• Amounts due from reinsurers in respect of claims already paid;• Amounts due with respect to study loans and bursaries (this risk is very minimal as the amounts are immaterial); and• The ultimate amount due from the self funding claims re-insurance policy (note 7).The nature of the RAF’s exposure to credit risk, as well as the policies and processes for managing the credit risk havenot changed significantly from the prior period.Section 9Potential concentrations of credit risk consist mainly of short-term cash. Money market instrument operations are onlyentered into with well established and reputable financial institutions.It is RAF’s policy to grant bursaries and study loans to employees in the fields of study that are relevant only to theRAF’s line of business. Monthly installments are deducted directly from payroll in relation to study loans.158

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Deposits include an amount set aside as a self-funding claims reinsurance policy. This policy was, in the past, usedas a director and officer indemnity policy until 31 May 2008. It was converted into a self-funding claims reinsurancepolicy with effect from 1 June 2008. This policy will be utilised to fund the first R100 million of the retention amountof the claims reinsurance policy in the event of a catastrophic claims being instituted against the RAF. The depositamount represents the balance of the special experience account, an account the insurer maintains for the purposesof recording this policy. The insurer is a well established and reputable financial institution.Under the terms of reinsurance agreements, reinsurers agree to reimburse the ceded amount in the event that agross claim is paid. The RAF, however, remains liable to its claimants regardless of whether the reinsurer meets theobligations it has assumed. Consequently the RAF is exposed to credit risk.The RAF monitors the financial condition of reinsurers on an ongoing basis and reviews its reinsurance arrangementsperiodically.The carrying amounts of financial assets and reinsurance assets included in the statement of financial positionrepresent the RAF’s exposure to credit risk in relation to these assets. At 31 March 2009, the RAF did not considerthere to be a significant concentration of credit risk which had not been adequately provided for.Credit Risk Analysis 2009 R’000Counterparty Categories Recoverable Doubtful ImpairedFuel levy debtors 1 911 229 893 -Sundry debtors 1 525 636 -Claims debtors 10 998 - -Other receivables 18 622 - -Cash and cash equivalents 1 090 698 - -Indemnity policy 58 894 - -Credit Risk Analysis 2008 R’000Counterparty Categories Recoverable Doubtful ImpairedFuel levy debtors 1 882 935 893 -Sundry debtors 1 210 621 -Claims debtors 6 924 - -Other receivables 16 224 - -Cash and cash equivalents 1 192 406 - -Indemnity policy 53 531 - -Section 9 Annual Report 2009159

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)27.3 Liquidity RiskLiquidity risk is the risk that the RAF will not be able to meet its financial obligations as they fall due. Ultimateresponsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidityrisk management framework for the management of the RAF’s short, medium and long-term funding and liquiditymanagement requirements.The RAF manages liquidity risk by maintaining sufficient cash reserves and by matching financial assets and liabilitiesas far as is practical.Reinsurance is also used to manage liquidity risk.Liquidity Risk Analysis 2009Financial liabilitiesWeightedaverageeffectiveinterest rateOn demand 1-3 months 1-5 years TotalR’000 R’000 R’000 R’000Trade and other creditors 50 755 - - 50 755Claims creditors 276 409 - - 276 409Total 327 164 - - 327 164Annual Report 2009Financial assetsWeightedaverageeffectiveinterest rateOn demand 1-3 months 1-5 years TotalR’000 R’000 R’000 R’000Cash and cash equivalents 11.06% 1 090 698 - - 1 090 698Fuel levy debtors 318 687 1 593 435 - 1 912 122Sundry debtors 114 2 047 - 2 161Claims debtors - 10 998 - 10 998Indemnity policy 9.74% 58 894 - - 58 894Total 1 468 393 1 606 480 - 3 074 873Net financial assets 1 141 229 1 606 480 - 2 747 709Section 9160

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Liquidity Risk Analysis 2008Financial liabilitiesWeightedaverageeffectiveinterest rateOn demand 1-3 months 1-5 years TotalR’000 R’000 R’000 R’000Trade and other creditors 39 320 - - 39 320Claims creditors 284 136 - - 284 136Total 323 456 - - 323 456Financial assetsWeightedaverageeffectiveinterest rateOn demand 1-3 months 1-5 years TotalR’000 R’000 R’000 R’000Cash and cash equivalents 9.21% 1 192 406 - - 1 192 406Fuel levy debtors 313 971 1 569 857 - 1 883 828Sundry debtors 891 940 - 1 831Claims debtors 6 924 - - 6 924Indemnity policy 8.95% 53 531 - 53 531Total 1 567 723 1 570 797 - 3 138 520Net financial assets 1 244 267 1 570 797 - 2 815 06427.4 Market RiskMarket risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affectthe RAF’s income or the value of its holdings of financial instruments. The objective of market risk management is tomanage and control market risk exposures within acceptable parameters, while optimising the return on investment.The RAF’s activities expose it primarily to the financial risks of changes in foreign exchange rates for formal contractsthat it has entered into. The RAF has entered into a contract with a foreign company to deliver a claims managementinformation technology system. This service and some of the related hardware are subject to foreign exchangefluctuations that are covered by forward currency contracts.The RAF is also exposed to foreign exchange fluctuations where claims from foreigners have been lodged, anddamages for future medical expenses and loss of earnings or support are claimed in a foreign currency. When suchclaims are settled, the RAF pays the compensation as soon as possible after settlement date so as to minimise therisk of foreign exchange fluctuations.Section 9 Annual Report 2009161

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)27.4.1 Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in market interest rates. The RAF is exposed to interest rate risk as it invests funds in the money marketat floating interest rates. As at 31 March 2009 no derivative financial instruments were used to manage the RAF’sexposure to interest rate risk.All liquid funds are invested with registered South African banking institutions with maturities of 90 days or less, therebyminimising interest rate risk.Interest rates of interest bearing debts are linked to the prime overdraft rate.The interest rate applicable on study loans and bursaries is equivalent to the official rate of interest for determining afringe benefit as approved by the Minister of Finance from time to time. The interest rate applicable to the payments ofinterest on capital and legal costs is determined by the Prescribed Rate of Interest Act No. 55 of 1975.Interest Rate Risk Sensitivity AnalysisThe sensitivity analysis for interest rate risk illustrates how changes in the fair value or future cash flows of a financialinstrument will fluctuate because of changes in market interest rates at the reporting date. For financial instrumentsand insurance contracts, the sensitivity is solely associated with the former as the carrying amounts of the latter are notdirectly affected by changes in the interest rate.If interest rates had been 50 basis points higher/lower and all other variables were held constant, the RAF’s deficit forthe year ended 31 March 2009 would decrease/ (increase) by R5.5 million (2008: decrease/ (increase) by R 9.7 million).This is mainly attributable to the RAF’s exposure to interest rates on its floating rate investments. The sensitivity analysishas been determined based on the exposure to interest rates for the RAF’s non-derivative instruments at the financialreporting date. The analysis was prepared assuming that the investments at year-end were constant throughout theyear. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key managementpersonnel and represents management’s assessment of the reasonably possible change in interest rates.Annual Report 200927.4.2 Currency RiskThe financial items that are exposed to currency risk at the reporting date are claims that have not been paid to foreignclaimants yet, as well as the exposure on the acquisition of intangible assets in foreign currencies. The engagingof forward cover is considered on a case-by-case basis if the period between making an offer and final payment ismaterial. As at 31 March 2009 no derivative financial instruments were used to manage the RAF’s exposure to foreigncurrency risk, only fixed term forward cover contracts were utilised. The carrying amounts of RAF’s outstanding foreigncurrency denominated claims are as follows:Section 9162

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Currency 2009 2008(’000) (’000)USD 93 5,498GBP 19 059 17 720EUR 1 289 2 752The carrying amount of the RAF’s outstanding foreign currency related contract with the foreign company is as follows:Currency 2009 2008(’000) (’000)EUR 5 659 6 346The following table details RAF’s sensitivity to a 10% increase and decrease in the South African Rand against therelevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to keymanagement personnel and represents management’s assessment of the reasonably possible change in foreignexchange rates.Foreign Currency Sensitivity AnalysisUSD impact GBP impact Euro impact All foreign currenciesR’000 R’000 R’000 R’0002009 91 26 333 9 794 36 2182008 4 505 28 969 3 452 37 016The sensitivity analysis includes only outstanding foreign currency denominated claims at reporting date and adjuststheir translation at the period end for a 10% change in foreign currency rates. The figures above indicate an increase insurplus or deficit where the presentation currency strengthens 10% against the relevant currency. For a 10% weakeningof the presentation currency against the relevant currency, there would be an equal and opposite impact on the surplusor deficit and the balances above would be negative.Section 9 Annual Report 2009163

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)28. INSURANCE RISK MANAGEMENT28.1 OverviewThe RAF accepts insurance risk as it is mandated by legislation to compensate victims of road accidents for injuriessuffered as a result of motor vehicle accidents. The RAF is exposed to uncertainty surrounding the timing, frequencyand severity of claims under these contracts.This note presents information about the RAF’s exposure to insurance risk and the RAF’s objectives, policies andprocesses for managing this risk.The RAF has developed, implemented and maintained a sound and prudent insurance risk management strategy thatencompasses all aspects of the RAF’s operations including the reinsurance risk retention limits. Key aspects of theprocesses established to mitigate insurance risk include:• The maintenance and use of sophisticated management information systems, which provide reliable and up todate data on the risks to which the business is exposed at any point in time;• Actuarial models, using information derived from the management information systems are used to monitorclaims patterns. Past experience and statistical methods are used as part of the process;• Catastrophic accidents are modeled and the RAF’s exposures are protected by arranging reinsurance to limit thelosses arising from an individual event. The retention and limits are approved by the RAF’s Board; and• Only reinsurers with credit ratings equal to “AA”, or in excess of, a minimum level determined by managementare accepted as participants in the RAF’s reinsurance agreements.28.2 Reinsurance IncomeThe RAF enters into reinsurance treaties with major international reinsurance companies to cover catastrophicaccidents. The RAF recovered R452 734 581 (2008: R2 333 799) from reinsurers during the current financial year inrespect of claims settled by the RAF.Annual Report 200928.3 Foreign ClaimsClaims by foreign visitors to South Africa continue to rise as the volume of visitors to the country increases. As thebulk of these claims are paid in the applicable foreign currency and these claimants also enjoy unlimited benefits,foreigners’ claims form a large proportion of high-value claims. At 31 March 2009, 33% (2008: 77%) of the value of theprovision for outstanding claims in excess of R5 million was made up of claims by foreign nationals. The reason forthe huge difference in foreign claims between 2008 and 2009 is that a large claim lodged by a Swiss national (that wasoutstanding in 2008) was settled during the 2009 financial year.It is important to note, however, that the actual claimed amount often exceeds the estimated value of the claim.Section 928.4 Claims ReinsuranceIn terms of section 4(1)(d) of the Road Accident Fund Act, 1996 (Act No. 56 of 1996) the RAF may procure reinsurancefor any risk undertaken in accordance with this Act.164

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)Simultaneously section 51(1)(a)(i) of the Public Finance Management Act, 1999 (Act No. 1 of 1999) states a conditionthat a public entity must ensure that it has and maintains effective, efficient and transparent systems of financial andrisk management.The RAF each year through its reinsurance brokers procures reinsurance cover and negotiates reinsurance treaties forthe RAF. The RAF’s reinsurance treaties are all excess of loss agreements. Therefore the reinsurers indemnify the RAFfor that part of the ultimate net loss (total amount paid) which exceeds the retention amount, as per the relevant treatysubject to an indexation clause as contained in the treaties.The RAF will only accept terms provided by reinsurers with acceptable ratings. The ratings are done by Standard &Poor and AM & Best which are international quality rating companies. The RAF currently places its limited reinsurancecover with a South African company, AIG SA and the unlimited cover is placed with reinsurers based in London. Thecurrent limited cover has a set retention level of R100 million and in terms of the treaty the reinsurer’s liability is limitedto pay up to R300 million per any one loss occurrence event, on account of each and every loss occurrence. Theunlimited cover placed in the London reinsurance market provides for cover in excess of R400 million per any lossoccurrence event, on account of each and every loss occurrence.The RAF must report to reinsurers all losses (all claims arising from an accident) likely to exceed the notificationamounts as specified in the respective reinsurance treaties.In terms of the reinsurance treaties, the reinsurers indemnify the RAF for that part of the ultimate net loss (total amountpaid) which exceeds the retention amounts as specified in the treaties, subject to the indexation clause.Section 9 Annual Report 2009165

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)The following table illustrates the notification amounts and retention amounts for the respective annual reinsurancetreaties:Annual Report 2009Accident Year Notification Amount Retention Amount1984/85 R 500 000 R 1 500 0001985/86 R 500 000 R 1 500 0001986/87 R 3 000 000 R 5 000 0001987/88 R 3 000 000 R 5 000 0001988/89 R 1 000 000 R 2 500 0001989/90 R 1 000 000 R 3 000 0001990/91 R 1 000 000 R 3 000 0001991/92 R 1 000 000 R 4 000 0001992/93 R 1 000 000 R 4 500 0001993/94 R 2 000 000 R 4 500 0001994/95 R 2 000 000 R 5 000 0001995/96 R 2 000 000 R 5 000 0001996/97 R 2 000 000 R 10 000 0001997/98 R 5 000 000 R 10 000 0001998/99 R 5 000 000 R 10 000 0001999/00 R 7 500 000 R 15 000 0002000/01 R 15 000 000 R 20 000 0002001/02 R 15 000 000 R 20 000 0002002/03 R 15 000 000 R 50 000 0002003/04 R 15 000 000 R 50 000 0002004/05 R 15 000 000 R 50 000 0002005/06 R 15 000 000 R 100 000 0002006/07 R 15 000 000 R 100 000 0002007/08 R 15 000 000 R 100 000 0002008/09 R 15 000 000 R 100 000 000The RAF monitors its reinsurance risk on a quarterly basis by reviewing and updating reports to reinsurers whichindicates the current status with regards to matters reported to reinsurers. Furthermore, regular reports are run againstthe RAF’s data base to identify potential reportable matters, as a pro-active measure.Section 928.5 Directors’ and Officers’ Liability InsuranceThe RAF manages the risks that the directors and officers of the RAF are exposed to, by way of directors’ and officers’liability insurance cover, which is placed within a rent-a-captive policy, issued by a reputable insurance company. This166

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)policy was in force until 31 May 2008. From 1 June 2008, the policy was converted in order to fund the RAF’s portionof the first R100 million before the reinsurance market’s liability materialises.The policy has been set up as a self-insurance instrument whereby any premiums paid remain an asset of the RAF.Claims against the policy will reduce the value of this asset. The RAF has paid a once-off premium of R49 million intothe rent-a-captive policy during March 2007. The money earns interest for the duration of the policy period.In terms of the policy the first amount (excess) payable in relation to each claim is R25 000 or 5% of the claim,whichever is the greater.The policy contains a limit of indemnity per defined events per occurrence which is set at R30 million.The annual aggregate limit of indemnity for any one period of insurance (annum) is set at R80 million.The policy also stipulates that an additional premium shall be payable by the RAF should claims paid and outstandingin terms of the policy exceed R45 million, subject to a maximum additional premium payable of R19,5 million.Claims are paid from the funds placed in the captive. Upon expiry/cancellation of the policy the amount left in the policyafter payment of claims, plus the investment income, is paid back to the RAF.Directors’ and officers’ liability insurance is now undertaken through a normal insurance policy as opposed to a renta-captive.29. Lease CommitmentsThe RAF leases various outlets and offices under non-cancelable operating lease agreements. The leases have varyingterms, escalation clauses and renewal rights.The future aggregate minimum lease payments under non-cancelable operating leases are as follows:2009 2008Notes R’ 000 R’ 000Up to one year 25 151 21 132Two to five years 31 565 26 980Total minimum lease payments 56 716 48 112Section 9 Annual Report 2009167

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)30. ContingenciesThe RAF has contingent liabilities in respect of the following:30.1 GuaranteesThe RAF has signed the following sureties prior to 31 March 2009:ABSA Bank – Employees’ personal loansThe total of the guarantee is R1.5 million. The personal loan scheme with ABSA Bank was terminated during May 2004.The balance of loans outstanding as at 31 March 2009 is R Nil. The guarantee was cancelled by the Bank subsequentto year end.ABSA Bank – Employees’ housing loansThe RAF has signed as Guarantor for housing loans granted by ABSA Bank Limited to employees of the RAF. Theliability of the RAF was limited to 10% of each mortgage bond. The scheme has been terminated.The total of the guarantee is R500 000. The amount pledged is R Nil. The guarantee was cancelled by the Banksubsequent to year end. The following local guarantees also existed at 31 March 2009:2009 2008Annual Report 2009Section 9Description Purpose R’000 R’000SA Mutual Life Assurance Society Office accomodation Durban 300 300Ryckloff Beleggings Office accomodation Johannesburg 5 249 5 249Sound Props Investments Archives Cape Town - 9Gensec Property Services Office accomodation Pretoria 19 19Apexhi Properties Limited Office accomodation Centurion 82 82South African Post Office Limited Office accomodation Port Elizabeth 28 -Paramount Property Fund Ltd Office accomodation Forensics Cape Town 78 -Changing Tides (Pty) Ltd Office accomodation Polokwane 15 -Chessboard Trade and Invest 79 (Pty) Ltd Office accomodation East London 283 -Lichcrete CC Office Accommodation Lichtenburg 3 -Total local guarantees 6 057 5 659Card facilities (fleet cards) 120 120Guarantee for employee personal loans 1 500 1 500Guarantee for employee housing loans 500 500Guarantee for Fineos FEC 3 566 -Guarantee for Fineos FEC 10 260 -Total 22 003 7 779168

Notes to the Financial Statements for the Financial Year ended 31 March 2009 (cont.)The RAF has ceded to ABSA Bank Limited a Special Deposit Account with a balance of R21 633 239 as at 31 March2009 as security for the guarantees issued, facilities and loans granted by ABSA Bank Limited on behalf of the RAF.30.2 Security Furnished Pending Finalisation of Legal ProceedingsAccording to current legal processes and Court rules the RAF has furnished security to the amount of R156 478 inrespect of legal proceedings pending.The amount has been invested in terms of section 78(2A) of the Attorneys Act, 1979 in interest-bearing term depositinvestment instruments at registered banking institutions for the benefit of the RAF.30.3 Other Contingent LiabilitiesThe provision for outstanding claims is calculated by the actuaries after taking into consideration relevant externallitigation and other costs in order to settle the claims.Because the system of compensation administered by the RAF is based on the law of delict requiring claimants toprove both fault and their damages, the RAF is continuously engaged in litigation. Whilst the provision calculated bythe actuaries attempts to cover all these litigated claims, the inherent uncertainty of the outcome means that there maybe additional contingent liabilities.In addition, the RAF is involved in other commercial and labour-related litigious matters. The quantum of this exposureis not disclosed as these matters are sub judice.Section 9 Annual Report 2009169

annexuressection 10

Annexure IGlobal Reporting Initiative (GRI) IndexAn index to the Road Accident Fund Annual Report 2009 based on the Global Reporting Initiative (GRI) sustainabilityreporting guideline criteria, as provided in the table below.Section 10 Annual Report 2009GRI reference Description Reference in the Annual Report PageStrategy andanalysisOrganisationalprofileReportparametersGovernance,commitmentsandengagementsManagementapproach andkey performanceindicatorsEnvironmentalframeworkSocialperformanceindicators,labour practicesand decent workStatement of seniordecision-makers, descriptionof impacts, risks andopportunitiesOrganisational profile, detailsand scale of organisation,ownership, significant changesintroducedReport profile, scope andboundariesGovernance, commitmentsto external initiatives andstakeholder engagementEconomic performance,service offering, role andimpact on SA economy,human resourcesMessages from the Chairman and CEO 20ProfileRAF Locations - Contact informationKey Data and Ownership StructureMessages from the Chairman and CEOReview of OperationsLegal FrameworkProfileTurnaround StrategyFive-year ReviewOrganisational LeadershipMessages from the Chairman and CEOReview of OperationsPerformance against ObjectivesCorporate GovernanceLegal FrameworkSustainability ReportAnnual Financial StatementsVision, Mission and Core ValuesTurnaround StrategyFive-year ReviewOrganisational LeadershipReview of OperationsCorporate GovernanceSustainability ReportFive-year ReviewReview of OperationsPerformance against ObjectivesSustainability ReportAnnual Financial StatementsGlobal warming Sustainability Report 78Employment, labour /management relations,occupational health andsafety, training and skillsSustainability Report 78CoverAnnexure III/CoverCover203264Cover26142032485464789612614325478632487896172

Annexure IIList of Abbreviations/AcronymsAAAutomobile AssociationABETAdult Basic Education TrainingACCAccident Compensation CorporationAMA Guides American Medical Association’s Guides to the Evaluation of Permanent ImpairmentAmendment Act RAF Amendment Act, 2005 (Act No. 10 of 2005)APBAccounting Practices BoardASBAccounting Standards BoardAsgiSAAccelerated and Shared Growth Initiative for South AfricaBEEBlack Economic EmpowermentBOTBuild, Operate and TransferCAChartered AccountantCAFConfederation of African FootballCEFCentral Energy FundCEOChief Executive OfficerCobITControl Objectives for ITCoGPCodes of Good PracticeCOIDACompensation for Occupational Injuries and Diseases ActCompactShareholder Compact and Performance AgreementCSICorporate Social ReponsibilityDefence Act The Defence Act, 2002 (Act No. 42 0f 2002)DoTDepartment of TransportDPSDirect Payment SystemEBITDAEarnings Before Interest, Tax, Depreciation and AmortisationEAPEmployee Assistance ProgrammeEEEmployment EquityEPWPExpanded Public Works ProgrammeERPEnterprise Resource PlanningESSEmployee Self ServiceFineosClaims Management SolutionFSCFinancial Sector CharterGAAPGenerally Accepted Accounting PracticesGRAPGenerally Recognised Accounting PracticesGRIGlobal Reporting InitiativeGRSPGlobal Road Safety PartnershipHPCSAHealth Professions Council of South AfricaHRHuman ResourcesIBNRThe number of claims incurred, but not yet reportedICASIndependent Councelling and Advisory ServicesICFInternational Classification of Functioning, Disability and HealthICTInformation Communication TechnologyIRBAIndependent Regulatory Board of AuditorsITInformation TechnologyKPIKey Performance IndicatorLSSLaw Society of South AfricaMANCOSA Management College of Southern AfricaMBAMasters Business AdministrationMFRMinimum Funding RequirementsMinisterMinister of TransportMSSManagement Self ServiceMTEFMedium-term Expenditure FrameworkSection 10 Annual Report 2009173

NHRPLNational Health Reference Price ListPAA Public Audit Act, 2004POPPatient Outreach ProgrammePFMAPublic Finance Management ActRAFRoad Accident FundRAURand Afrikaans UniversityREMCORemuneration and Human Resources CommitteeRRMRevenue Requirement ModelRTMCRoad Traffic Management CorporationSAAPILSouth African Association of Personal Injury LawyersSABCSouth African Broadcasting CorporationSANDFSouth African National Defence ForceSANRALSouth African National Roads Agency LimitedSAPSSouth African Police ServiceSARSSouth African Revenue ServicesSATAWUSouth African Transport and Allied Workers UnionSCOPASpecial Committee on Public AccountsSOEState Owned EntitiesSUStellenbosch UniversityTACTransport Accident CommissionTPDTransvaal Provincial Division of the High Court of South AfricaUCTUniversity of Cape TownUKUnited KindgdomUKZNUniversity of KwaZulu-NatalUNUniversity of NatalUNISAUniversity of South AfricaUPUniversity of PretoriaUPFSUniform Patient Fee ScheduleVCTVoluntary Counselling and TestingWANWide Area NetworkWHOWorld Health OrganisationWITSUniversity of WitwatersrandWSPWorkplace Skills PlanSection 10 Annual Report 2009174

Annexure IIIList of ContactsSatellite OfficesLocation Physical Address City/Town Province ContactNumberSanlam Centre Bell Street, Office 25 Ground floor Nelspruit Mpumalanga 013 752 3075083 637 0685TM Centre 78 Harding Street, Shop 1B Newcastle KwaZulu-Natal 034 312 7946084 515 546521 Peace Street 21 Peace Street Tzaneen Limpopo 015 307 6489082 764 8899Library Gardens Cnr Grobler and Schoeman Street Polokwane Limpopo 015 291 3951083 641 9761Nedbank Building Ryk Street Suite 105 Welkom Free State 057 357 1198083 637 0682Main Post Office Building 259 Govan Mbeki Avenue Port Elizabeth Eastern Cape 041 582 4244Golden Acre Adderley Street Cape Town Western Cape 083 326 1235Shop No 2 109 Scholtz Street Lichtenburg North West 083 627 5318Corner House 156 Govan Mbeki Avenue Port Elizabeth Eastern Cape 084 403 8601Spooral Park 1002 Lenchen Street Centurion Gauteng 083 627 5318Hospital-Based OfficesHospital Name Physical Address City/Town Province ContactNumberRob Ferreira Cnr Madiba Drive & Piet Retief Street Nelspruit Mpumalanga 013 741 3551/2Temba Kabokweni Main Road Temba Mpumalanga 013 741 3551Tonga Tonga View, Kwalugedlana Tonga Mpumalanga 013 780 0222Shongwe Jeppes Reef Street Shongwe Mpumalanga 013 741 3552Barberton 1 Hospital Street Barberton Mpumalanga 013 741 3551Standerton Cnr Beyers Naude & Kruger Street Standerton Mpumalanga 017 712 5872Witbank President Mandela Street Witbank Mpumalanga 013 690 3652Evander Cnr Bolobna Lausalle Street Evander Mpumalanga 017 632 2212Edendale Old Edendale Road, Plessislaer Pietermaritzburg KwaZulu-Natal 033 395 4033Addington 16 Erskine Terrace, South Beach Durban KwaZulu-Natal 031 332 3006Prince MshiyeniPrince Mangosuthu Highway,V SectionUmlazi KwaZulu-Natal 031 906 0881/0918RK Khan RK Khan Circle, Croftdene Chatsworth KwaZulu-Natal 031 403 2258/9Newcastle 4 Hospital Street Newcastle KwaZulu-Natal 034 312 4301Madadeni Section 5 Newcastle KwaZulu-Natal 034 312 4301Gordonia Schroder Street, Upington, 8800 Upington Northern Cape 054 331 0006Kimberley 144 Du Toitspan Road Kimberley Northern Cape 053 802 2159Central Karoo Visser Street De Aar Northern Cape 051 753 9319Manne Dipico Station Street Colesberg Northern Cape 051 753 9319Polokwane Cnr Hospital & Dorp Street Polokwane Limpopo 015 297 0450Mankweng Houtbosdorp Street Mankweng Limpopo 015 267 0234/5Section 10 Annual Report 2009175

Hospital Name Physical Address City/Town Province ContactNumberSomerset Somerset Beach Road Cape Town Western Cape 021 402 0495GF Jooste Duinefontein Road Cape Town Western Cape 021 691 1634Tygerberg Francie Van Zyl Road Cape Town Western Cape 021 933 5657Grootte Schuur Main Road Cape Town Western Cape 021 447 2666/3044Paarl Hospital Street Paarl Western Cape 021 872 1711Ext 2269Stellenbosch Maryman Street Stellenbosch Western Cape 021 883 3074Worcester Murray Street Worcester Western Cape 023 347 8976Robertson San Outdshoorn Street Robertson Western Cape 023 626 2710Charlotte Maxeke JHB 17Jubilee Road, Parktown Johannesburg Gauteng 011 642 6709AcademicTembisa Industrial Road Tembisa Gauteng 011 923 2082SAPEASA 385 Trim Street Brooklyn Gauteng 012 460 8366Dr George Mukhari Admin Building, Medunsa Road Ga-Rankuwa Gauteng 012 560 0420/23Frere Hospital Main Amalinda Street East London Eastern Cape 043 722 5056/8Cecilia Makiwane NU 9 East London Eastern Cape 043 722 5056/8Livingstone Standford Road, Korsten Port Elizabeth Eastern Cape 041 401 9126Provincial Burkingham Road, Central Port Elizabeth Eastern Cape 041 401 9126Dora Nginza Spondo Street, Zwide Port Elizabeth Eastern Cape 041 401 9126Tshepong Benji Olifant Road, Uraniaville Klerksdorp North West 018 406 3156Mafikeng Cnr Danville and Lichtenburg Road Mafikeng North West 018 383 2081JS Tabane Cnr Heystek and Bosch Street Rustenburg North West 014 590 5155Brits 1 Lyster Avenue Brits North West 012 252 1029Pelonomi Dr Belcher Road, Hedendal Bloemfontein Free State 051 405 1059Universitas Paul Kruger Street Bloemfontein Free State 051 405 1059Section 10 Annual Report 2009176