Sunday 21st Oct 2018

Mayibongwe Maqhina - Cape Argus - 

File picture: Thomas Holder / Independent Media. - 

Johannesburg - Auditor-General Kimi Makwetu has warned that the cash-strapped Road Accident Fund (RAF) is facing the risk of financial collapse. Makwetu found that the RAF incurred a net deficit of R26.3 billion as of March and its liabilities exceeded assets by R206bn.

“A material uncertainty exists that may cast significant doubt on the public entity’s ability to continue as a going concern,” he said. Makwetu made his findings in the audit report submitted to Parliament as part of the fund’s annual report.

The board said the mismatch between the RAF’s income and expenditure continued to result in a significant threat to the “going concern” basis for the preparation of the financial statement.

Board chairperson Peter Mathebula confirmed that the fund remained severely under-capitalised with liabilities exceeding assets by R206bn. “The RAF does not have sufficient cash or near-cash assets to cover its short term liabilities. Organisations similar to the RAF elsewhere in the world have, as part of their major assets, investments that cover in excess of 100% of their full outstanding liability,” Mathebula said. He said efforts to secure additional funding were ongoing.

“The RAF’s liquidity challenges are known and discussed at a high level between the RAF and all relevant stakeholders,” he said, in reference to the portfolio committee on transport, the Transport Department, the National Treasury, the Health Department and the Justice Department, as well as the Financial Sector Conduct Authority among others. “Although the financial year has been hard hitting, the board is convinced that the RAF will surmount the challenges faced, but will not solve the decades-old financial predicament the organisation finds itself in.”
The fund had over past three years secured additional funding to  the tune of R14bn. The board said the increase of the fuel levy to 19 cents in April would add R9bn to its coffers in the current financial year.

“The board and management have and will continue motivating for additional funding and seeking support from stakeholders as the RAF operates with insufficient cash as well as bringing an affordable dispensation into being,” Mathebula added.

Acting chief executive Linda Xingwana-Jabavu said liquidity was managed daily in line with available reserves but it remained unsustainable.
 

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