Connect with us
Advertisement

MVAF bleeds P100 million as 1152 lose blood on Botswana roads

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.

Continue Reading

Business

Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

This content is locked

Login To Unlock The Content!

Continue Reading

Business

Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

This content is locked

Login To Unlock The Content!

Continue Reading

Business

Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

Continue Reading
Do NOT follow this link or you will be banned from the site!