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Policy: Motor insurance proposed to replace RAF

SA’s Fuel Retailers Association has proposed scrapping the Road Accident Fund (RAF) in favour of a mandatory insurance scheme. A Business Tech report says the proposal was one of several made to Parliament this week as the government considers its options to reduce record-high petrol prices. The association argues that government should totally scrap the existing fund in its current revenue structure and replace it with a mandatory motor insurance flat fee – not linked to the petrol pump price. RAF funds are primarily raised from a levy attached to the Basic Fuel Price. The RAF levy is currently set at R2.18/litre after the National Treasury opted not to increase it in the 2022 financial year. Data from Outa shows that the RAF levy made up 5% of the price of petrol in 2009 and generated around R9bn per annum for vehicle-related injury compensation. As of 2022, it now makes up more than 10% of the fuel price and contributes close to R45bn to the RAF. This specific ‘tax’ has undergone several substantive increases – from R0.45c per litre in 2009 to R2.18 in April 2021. The Association said scrapping the RAF could also have other benefits for the country’s fiscus, with the scheme previously flagged as one of SA’s biggest budgetary concerns next to Eskom.

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