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MVAF bleeds P100 million as 1152 lose blood on Botswana roads

Publishing Date : 08 October, 2018

Author : TSAONE SEGAETSHO

The Motor Vehicle Accident Fund (MVAF) keeps bleeding money out of its coffers to pay out for claims made by people who lost blood on Botswana roads.  In the current financial year, for 2,934 claims, MVAF paid a whopping P100 million to claimants and service providers.


According to 2017 MVAF Annual Report which was released recently, 444 people lost their lives on Botswana roads last year, while those who were seriously injured were 1,152.  The P100 million payments to claimants and service providers make 2,934 of the claims made and 63. 7 percent was paid for medicals. In 2016 the claims were higher than those of 2017 taking a whopping P112 million of the fund’s money.


Since 2013, payments to claims made to MVAF have been increasing together with the number of claimants. In 2016 fatalities were 450 and went down to 444 in 2017. Furthermore, MVAF has set aside close to P130 million for loss of support by those who perished or got injured on Botswana roads. For those who are doing medical undertakings, MVAF will pay around P35 million which was set aside last year. No one has ever been paid for loss of life according to the recently released annual report.


MVAF chairman Abraham Botes said: “As the target year draws near, we believe Botswana will have contributed towards the reduction of road traffic crashes and road traffic fatalities even though the country may not achieve the targeted reduction of 50% by year 2020. The Fund will continue to commit resources within its means, to address the respective pillars of the Decade of Action for Road Safety in order to meet its targets.”


MVAF, the universal compensation provider to people affected by road accidents, hence does not sell any products or services for a fee.  In its latest annual report, MVAF recorded that total assets increased from P3.82 billion in 2016 to P3.83 billion in 2017 on the back of increases in non-current assets from P3.0 billion to P3.1 billion while current assets reduced from P808.7 million to P727.2 million.


Also, according to the Fund financial results, the reserves reduced from P2.7 billion in 2016 to P2.6 billion in 2017 while non-current liabilities increased from P794.6 million in 2016 to P999.9 million in 2017. Current liabilities on the other hand reduced from P313.0 million in 2016 to P247.2 million in 2017 according to the fund’s financials.


The revenue streams of the Fund are the fuel levy, third party cover, investment income and Government subvention. The fuel levy rate is 5 thebe per litre of petroleum product sold. The Fuel levy revenue comprises fuel levy charged to fuel importers into Botswana. This levy income is accounted for on an accrual basis and its rate is 5 thebe per litre. According to the latest financial results, the net fuel levy income increased by 3.6% from P50.1million in 2016 to P52.0 million in 2017.


According to MVAF CEO Micheal Tlhangwane, the Fund perpetually advocates for the increase of the fuel levy rate for years so that MVAF can increase its revenues. Tlhangwane said the Fund has, “engagement with government for the restoration of fuel levy to its previous rate of 9.5 thebe per litre are ongoing as the Fund now heavily relies investment income to meet the costs of claims and operating costs, which poses serious financial risks.”


Tlhagwane said the Fund will also initiate a limited legislative review to ensure that both the MVA Fund Act of 2007 and the MVA Fund Regulations of 2008 are relevant to the current operating environment geared towards improving administration of claims. When giving an economic performance on the 2017 annual report, MVAF chairman Botes said the local economy is yet to recover and this has a direct impact on the operations of the Fund.


He said most mines have closed due to depressed international prices of base metals which affected the local economy. According to Botes, most of the mines use fuel driven machinery for their operations and closure of these mines resulted in lower utilization of fuel, translating into lower fuel levy income.


MVAF also has another revenue source, Third Party Cover, which comprises of premiums charged on foreign registered vehicles which enter the country.  The Third Party Cover decreased by P2 million from P10 million in 2016 to P8 million in 2017.
MVAF’s former money spinner, the Investment Income source of revenue, has registered a huge decline of P78 million. In 2016 it was P94 million and it went down to P16 million in 2017, a drastic fall in a source of revenue.


The investment income comprises of the of the following: (a)Interest income which is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Fund. (b)Dividends are recognised when the right to receive payment is established. These relate to investments in local and offshore investments.


Lastly, the other part of Investment income is (c) rental income revenue includes gross rental income, service charges and management charges from properties and income from property trading. Rental income is accrued on a straight-line basis over the contractual periods as and when the Fund becomes entitled to the income.


MVAF chairman Botes has hinted that the drastic downflow of revenue coming from the Investment income challenges in the property sector.  Botes said the property sector continues to experience challenges owing to oversupply of residential houses on account of difficult economic situation and the restructuring by major parastatals resulting in job losses and releasing of many houses into the rental market.


“The banking sector has also not performed well owing to reduction in the bank rate and difficult trading conditions. The bank rate closed the year at 5.0% following a cut by 50 basis points cut during the third quarter of 2017. Headline inflation was at 3.20% which was within the Bank of Botswana’s objective rate of 3% - 6%. The Fund was affected negatively by unrealized foreign exchange losses on offshore investments as the Botswana Pula continued to strengthen against the United States Dollar,” said Botes.


According to Botes, the Board will, in 2018 review its governance documents and develop tools to enable Board performance evaluations. He said MVAF continues to work closely with Public Enterprises, Evaluation and Privatization Agency (PEEPA) to develop the relevant Corporate Governance Frameworks to remain up to date with best practices.


“The Fund remains optimistic that the economic conditions will improve. We commit to do all possible within our means, to reverse our current financial deficits, and re-build the strength of our financial reserves. We will continue to engage Government for the possible reinstatement of the fuel levy rate to 9.5 thebe per litre, to ensure the sustainability of the Fund,” said Botes.


Botes also said MVAF will also review its investment strategies to align with the prevailing market conditions and target better returns. He also said the provision of compensation, medical and rehabilitative assistance to our claimants will remain our priority.

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