Thursday, October 1, 2020

MVA breaks record as its profits double

Motor Vehicle Accident Fund (MVA)s broke the corporate sector record as its profits shot up 100 percent, thanks to its strategic investments and its tight cost containment measures during the year.

According to the report, surplus for the Fund jumped up to P 135 million from P 67 million in the previous year while operating income surged ahead by 84 percent to P 204 million from P 111 million.
The move drove the value of the fund from P 943 million to P 1.2 billion representing a strong growth of 28 percent.

“The financial performance of the fund points to yet another successful year. The improved performance of the investment markets, the impressive growth on our portfolio and cost containment – all positively impacted on our overall results,” Chief Executive Officer of MVA, Cross Kgosidiile said.

The strong performance registered was largely from offshore markets, which were helped by the devaluation of the pula currency in the past year but were also supported by the local investments.
In May last year, government decided to devalue the pula currency by 12 percent and adopted a crawling peg system, which has since dragged down the local currency against the major currencies.

The fuel levy’s contribution remained flat at P 69 millionÔÇödue to the unchanged structure of 9.5 thebe per litre ÔÇô representing only 33 percent of the total income. The aim of the fund is to try to reduce its contribution to the total revenue to about 20 percent as it explores other engines of growth. The fuel levy was last adjusted in 2000 from eight thebe.

“Assuming that the fuel levy is meant for settlement of claims while the investment income is intended to cover administrative expenses, it can be concluded that the fund is utilizing its resources efficiently. The challenge is to manage the relationship between fuel levy income and claims provisions,” Kgosidiile said.

However, the fund warned of the impending challenges brought about by the change in the law from fault to no fault system, which will also ensure that government fleet is also covered by the fund.
The new move will see victims having to be compensated regardless of whether they were at fault or not.

“Strategic interventions will be required to lower the road accident rate and enhance the increase in road accident claims. This is important in the light of the limited investment opportunities that the fund is permitted to explore,” he added.

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