The impact of COVID-19 on RAF Cash Payments

As of 26 March 2020, South Africa has been faced with what we know as ‘Nation Wide Lockdown’, due to the outbreak of Covid-19 on home grounds. The limitation on movement and conducting of business on a day-to-day basis has left many sectors struggling. The Road Accident fund is one of the entities that currently struggle to function effectively in terms of making payments to deserving beneficiaries.

HOW DID THE NATION WIDE LOCKDOWN AFFECT THE NORMAL OPERATION OF THE RAF OFFICES?

When the government instituted Level 5 Lockdown, only services deemed necessary for survival were considered essential – naturally, as part of this measure, the RAF offices were closed and factually not operational for the duration of this time. They indeed suspended payments from 25 March 2020 to 17 April 2020(https://www.lyonsbriviklaw.com/what-will-happen-to-my-road-accident-claim-during-covid-19/).To the surprise of many, when level 4 Lockdown came around, the Minister of Transport Fikile Mbalula, announced that the RAF will not open for business as it was not deemed an essential service in the transport sector.

Since the RAF obtains its funds from fuel levies, they already took a financial knock when most people opted to stay at home – this will have a long term effect on the effective operation of the RAF, but the RAF not being able to allow their employees back to work means that current important tasks are not getting attention. So, the lockdown has negative effects on the effective operation of the RAF at present, and in the future – the most tangible and current consequence being that they are not able to make timeous cash payments.(https://www.da.org.za/2020/05/da-calls-on-road-accident-fund-to-open-offices-to-assist-crash-victims)

WHAT EFFECT DOES THE LOCKDOWN HAVE ON THE RAF MAKING TIMEOUS PAYMENTS OF CLAIMS?

When a claim has been settled, and the RAF has fully processed this claim, payment to the beneficiary is said to take approximately 180 days. At present, the lack of staff, less funds, and the existing backlog necessarily means that there will be a delay in claims paying out.

With less money coming in from fuel sales, the RAF is unable to follow through all their standing financial commitments for the months of July 2020 until at least March 2021. But to keep the ageing of claims current, payment of claims will occur from the oldest to the newest, as per a recent Plaintiff Letter released by the RAF.

At this point, there is no certainty as to when Settled Claims will pay out. Attorneys acting for clients who have settled during this uncertain time, mention to clients that they should be prepared to wait 12 or more months before their quantum amount pays out. This drastically changes the financial planning of beneficiaries – especially those left without an income due to their accident.

ARE THERE ANY SOLUTIONS IN THE MEANTIME?

As the unpreparedness takes its toll, beneficiaries became more dependent on solutions such as loans or Bridging Finance. Although this is a short term solution, there are still several risk factors to be kept into consideration, most importantly, the probable delay in claims paying out.

Financiers are also at no point aware when the Road Accident Fund will make payment. Therefore, when an option such as Bridging Finance is considered, one must keep in mind that a period of 12 months or more can pass without receiving any payment from the RAF. The fees involved with Bridging Finance is linked to how long one’s claim takes to pay out, so it is very important to plan conservatively according to this knowledge.

Even though the Road Accident Fund Offices have regained some functionality recently, the risk of delayed claim pay-outs remains confrontational and real. During this time, an option such as Bridging Finance is a suitable solution, but should frankly only be considered in case of emergency.