The increase in the number of road accidents has put a strain on the Motor Vehicle Accident (MVA) Fund, fresh information has detailed.
As it stands, the MVA Fund is a troubled parastatal as it remains in dire financial challenges. Its latest annual report (2016), details how the Fund experience a challenging financial year its history owing to massive losses that were recorded.
The losses recorded if not reversed, may compromise the Fund’s financial sustainability and its ability to discharge its mandate.
In its financial highlights, the Fund recorded a comprehensive loss of P260.6 million as at 31 December being a significant decline of 195 percent in comparison to the comprehensive income of P275.6 million recorded as at 31st December 2015. The decline is attributable to higher foreign exchange losses owing to the appreciation of the Pula against the United States Dollar and net far value losses on available for sale investments.
In terms of income the Fund recorded a total operating income of P156 million in 2016 being a significant decline when compared to P413 million in 2015. The negative variance was mainly due to depressed primary sources of income and unsatisfactory performance of offshore investments owing to foreign exchange losses.
Corporate Communications Manager at MVA Fund, Thabo Morotsi told Sunday Standard this week that the Fund has also suffered significant foreign exchange losses on offshore investments of P61.5 million in 2016 compared to foreign exchange gains of P202.4 million in 2015 as a result of strengthening of the Botswana Pula against the US Dollar.
He however said fuel levy income and third party cover income which are the primary sources of income for the Fund improved marginally from P49.6 million and P7.6 million in 2015 to P50.2 million and P10 million in 2016 respectively.
“The investment in foreign countries are invested in accordance with the Fund’s Investment Policy Statement. The funds are invested in bonds, equities and money markets. The offshore investment has been placed with Investec Asset Management and Stanlib Investment Management Services and were worth P1.2 billion as at 31st December 2016,” he said.
In an endeavour to mitigate and cushion these losses, Morotsi said MVA Fund Investment Policy Statement is being reviewed on an annual basis to ensure that it takes into consideration the international market dynamics. He said the Asset Managers continue to grow the investment with the hope the market will improve ad see the United States Dollar improving relative to the Botswana Pula.
According to its annual report, the Fund has been heavily reliant on its investment income as the fuel levy income could no longer meet the claims liability. The situation was exacerbated by the cut in the fuel levy from 9.5 thebe per litre to 5.0 thebe per litre by government in November 2014. Morotsi however said that the Fund continues to hold fruitful discussions with government to re-state the fuel levy to its previous rate of 9.5 thebe per litre. He said this is being considered with other equally important government priorities.
On fears that the Fund might collapse due to financial challenges, Morotsi said they do not believe the fund might collapse in the short to medium term as there are still reserves that can absorb the losses.
“However should the Fund continue to experience losses going forward, this will plunge the Fund into a financial crisis and Fund would not be able to discharge its mandate of compensating, rehabilitating and support of people affected by road traffic crashes,” Morotsi added He however explained that government is aware of this scenario and positive engagements will continue to be held to ensure that the Fund fully discharges its mandate The other problem affecting the Fund amongst others is the increase in claims, Morotsi said this caused by the escalating road traffic crashes resulting in increases in fatalities since 2014. He said fatalities increased from 377 in 2014 to 411 in 2015 and finally 450 in 2016. This, he said has resulted in an increased number of those compensated by the fund. There is also among others inadequate rehabilitation facilities and specialists in Botswana resulting in some extensive rehabilitation being referred to South Africa which is expensive. Morotsi however said that the Fund is currently engaged with key stakeholders in the road safety sphere to undertake public education and enforcements in order to inculcate a positive road user behavior.
MVA Fund was created by an Act of Parliament in 1986 and began operating on 1st January 1987. Its operations are governed by the Motor Vehicle Accident Fund Act 15 of 2007. It has seven operations across the country and two mobile offices. Plans are also at an advanced stage to construct a Regional Office in Francistown to improve service delivery.