RAF 2014/15 Strategic and Annual Performance Plan (APP)

1. RAF 2014/15 Strategic and Annual Performance Plan (APP) • Dr Eugene Watson • Chief Executive Officer – Road Accident Fund

2. Purpose… • The purpose of this presentation is to present the RAF’s 2014/15 Annual Performance Plan and Strategic plan to the Portfolio Committee of Transport • The presentation covers the following: • Background information… • Where the business is… • Strategy… • Financial projections… • Challenges… • Continued transformation…

3. Background… • Road Accident Fund Act, 1996 (Act No. 56 of 1996) & RAF Amendment Act, 2005 (Act No. 19 of 2005) • “Payment of compensation in accordance with this Act for loss or damage wrongfully caused by the driving of a motor vehicle” • Provide compulsory cover to all users of South African roads against injuries sustained or death arising from accidents involving motor vehicles within the borders of South Africa • National public entity (Schedule 3A of the PFMA) • Constitutional Court Rulings and legal precedents have shaped the mandate • The Fund is called on to: • Provide a social security safety net • Indemnify, rehabilitate and compensate the injured • Promote the safe use of all South African roads • Corporate and Statutory Form

4. Background… • Business Model Revenue Grants & investment revenue Levy on fuel Fuel sold Road Activity Financial Position Administrative costs Number & severity of accidents Volume of claims Third party costs Value of claims Cost

5. Background… • Business Process

6. Background… • Physical • Head office in Centurion • Five regional processing centres • Pretoria, Johannesburg, Durban, East London and Cape Town • New Customer Service Centres • Nelspruit • Mafikeng, Bloemfontein, Polokwane and Kimberley • Virtual • Call centre (0860 23 55 23) • Web (www.raf.co.za) • Twitter (@RAF_SA) • Instagram (@raf_road) • Facebook (www.facebook.com/#!/RoadAccidentFund) • Service Infrastructure

7. Background… Organisational structure

8. Background… • South Africa...Roads…Vehicles...Transport...Crashes...Death & Injuries...Consequences! • 70 year funding regime driven by an “accessible” revenue stream • Moved from protecting a wrongdoer from being sued to supporting victims • Compensation is fault-based and fault must be proven or excluded • Rulings and Orders are not always consistent • Great deal of subjectivity • Micro-economy has been created and is sustained by the RAF • Lawyers, Advocates, Assessors, Experts etc. • Contingency fees charged in excess of 25% • 50% of matters on the Court roll relate to road accidents • Claimants are often not the primary beneficiary of RAF benefits • Unfortunate legacy • The Fund’s Legacy

9. Where the business is… • Revenue increased by 13% to R20,6 billion • Claims processing improved by 47% to a record high of R22.2 billion • Cash expenditure on claims exceeded the net Fuel Levy by R1.9 billion (9%) • Proactively made business operations more accessible and efficient • More than 220,000 calls were responded to by the Call Centre • Over 25,000 people follow RAF’s social media presence • Engaged with road accident victims through our ‘RAF on the Road’ • Interacted with more than 20,000 claimants & settled R376 million in claims • New organisational structure and business processes were fully rolled out • Productivity improved • Quality Assurance Managers tested operational performance and compliance • Complaint experience has reduced • Highlights in 2013/14

10. Where the business is… • Service perception increased to 64% from 52% and customer satisfaction went up to 72.8% from 66% • Staff complement has grown to 2,288 • Vacancy rate has now reduced to below 10% • Policy business unit has been formally established • Combined Assurance Forum established • Maintained an Enterprise-wide Risk Management Framework • Risk maturity level has improved to Level 4 • Audit findings were resolved and many risk mitigation measures implemented. • Clean Audits by the Auditor-General of South Africa for 2012/13 and 2013/14 • Highlights in 2013/14

11. Where the business is… • Implemented the performance management system and succession management plan • The draft Road Accident Benefit Scheme (RABS) Bill was published for a second round of public comments • Significant Court Rulings clarified the scope and limitations of Contingency Fees • Executed the 2013/14 strategic plan and met 83% of APP targets • Overall, a shift was made in respect of the focus on the socio-economic impact of crashes on families, homes and communities, and people were put first –Batho Pele • A seriousness has been introduced in respect of what the Fund is, what it should be and what its employees, as loyal officers, are required to do • Highlights in 2013/14

12. Strategy… • Minister approved the new 2013-2017 Strategic Plan and the 2014/15 Annual Performance Plan (APP) • Mission: To provide the highest standard of care to road accident victims to restore balance in the social system. • Vision: To provide appropriate cover to all road users within the borders of South Africa; to rehabilitate persons injured, compensate for injuries or death and indemnify wrongdoers as a result of motor vehicle accidents in a timely, caring and sustainable manner; and to support the safe use of our roads. • Values: • Ubuntu, Pride in what we do and Solution focused • Excellence • Efficiency • Mission, vision and values

13. Strategy… RAF Objective 3 • A customer-centric, operationally effective and efficient RAF • Effectively manage the Fund’s finances and pursue sustainability. RAF Objective 2 RAF Objective 4 RAF Objective 1 • A legislative dispensation that is aligned to principles of social security. • Strategic Objectives • A transformed and capacitated RAF

14. Strategy… 2014/15 APP

15. Strategy… 2014/15 APP

16. Strategy… 2014/15 APP New Indicators`

17. Strategy… 2014/15 APP

18. Financial Projections… • Revenue • Net fuel sales are estimated to increase at a constant rate of 2% (comprising GDP at 3% – less 1% to allow for improvement in fuel efficiency) • The fuel levy rate increased at 8 cents per annum • 96% of the fuel levy is utilised to pay claims and claims related expenditure • Productivity exceeds available cashand the claims expenditure is limited to available cash • From 2014/15 available cash is a material constraint • Administration • Consumer Price Index (CPI) plus an increase relating to initiatives being put in place to improve productivity in the claims environment of 7,5% • Personnel costs • Estimated rate of 8% relating to cost of living plus 7.5% for improved productivity • Provision for claims incurred • Reduces slightly due to an increase in claims payments thenincreases due to inflation as sufficient claims would not be paid to cover the inflation increase • Assumptions

19. Financial Projections… Income and Expenditure estimates

20. Challenges Key challenges… Challenges Mitigation Backlog Increase in turnaround times • Targeting older claims as part of backlog initiatives • Focused backlog initiatives • Supplemented by outsourced claims administration • Strict performance management with frequent monitoring Direct claims Difficulties in settling direct claims • A dedicated division was established • Business process has been implemented • Appointing mobile RAF officers to assist in gathering information for direct claims Panel of attorneys Difficulties in settling direct claims • Initial panel of attorney tender challenged • Supplementary tender cancelled • Penultimate tender issued • Resistance from outgoing panelists

21. Challenges Most pressing challenge • Revenue from the fuel levy has grown below CPI , despite good levy increases • Statutory Actuary projects unpaid claims to be worth approximately R97bn as at 31 March 2014. • Operational productivity has improved which sees more claim payments made • R15bn in 2012/13 to R22bn in 2013/14 • Problem statement • Increased settlements have seen cash holdings reduce • R6.1bn to R2.5bn for the period ending 31 March 2014 • R2.5bn to R1.3bn for the period ending 30 June 2014 • Solution • Ensure that the Fund has sufficient funds to settle claims • Proactive engagement with Minister, DOT and National Treasury • Continuous monitoring of cash flows • Introduce cash flow management strategies • Manage negativity and subsequent increase in costs • Definitive solution is to implement RABS • Based on Satchwell Commission recommendations and Cabinet-approved policy • Defined social security benefits, no-fault scheme, scheduled payments and rehabilitation

22. Continued transformation… • Markers of change

23. Continued transformation… • Markers of change

24. Contributing to national priorities • Health Care • Improving the quality of public health care – Post-Crash Care • Lowering the costs of private health care – Implementations of medical tariffs • Social Protection • RABS • Long term vision for implementation of a comprehensive social security system • Social security reforms aimed at providing balance and broadening coverage • Longer term priorities include mandatory savings, risk benefits and health insurance • RAF Act • Short term reforms focusing on broadening coverage of existing social security benefits • Corruption • Implement three pronged strategy, enforcement, prevention and education – Improve conviction rate • In addition to the above, but on a smaller scale in terms of impact are: • Employment – Vacancy rate and EE targets • Economy – BEE spend • NDP outcomes….

25. Conclusion • The 2014/15 APP and Strategic plan are a continuation of the current strategy • Reducing the backlog, promoting and paying direct claims, improving operational efficiency and effecting legislative changes (RAF and RABS) • Maintaining capacity (people, processes and infrastructure) • Contributing to national priorities (BBBEE, road safety, employment, gender representivity) • Great effort is and will be placed on: • Fulfilling the APP and Strategic plan deliverables • Addressing the challenges and risks • Preventing the catastrophic socio-economic effects of accidents in our society • It is proposed that PCOT note the presentation and support the RAF’s 2014/15 APP and Strategic Plan • Way Forward….

26. Thank You

27. Current performance status… • Claims volumes (Personal and Supplier)

28. Current performance status… • Claims categories & averages

29. Current performance status… 2014/15 Q1 Performance analysis