MVA Fund Losses Pile Up To P243 million
Assets valued at P4 billion
For three consecutive years, Motor Vehicle Accident (MVA) Fund losses have been piling up; reaching P243 million for the year ended 31st December 2018, Chief Executive Officer (CEO) Michael Tlhangwane has said.
Commenting in the company’s just released (2018) annual report, Tlhangwane said the Fund, for the third successive year recorded a high comprehensive loss owing to depressed revenue as a result of subdued local economy resulting in low investment income and unrealized foreign exchange losses on offshore investments. Further, he said, claims costs continued to increase owing to increases in road traffic fatalities.
The Fund recorded a comprehensive loss of P243 million for the year ended 31st December 2018 being a significant decline in performance compared to the comprehensive loss of P127 million for the year ended 31st December 2017.
“The comprehensive loss was largely attributable to fair value losses of available for sale investments,” he said, adding that the Fund recorded total operating income of P397 million being a significant increase in comparison to total operating income of P77 million recorded in 2017.
Tlhangwane said the increase in income was due to a higher investment income owing to higher profit on disposal of local listed equities as well foreign exchange gains on offshore investment.
Investment income for the year was P204.5 million being an increase of 65 percent from P123.8 million recorded in 2017. The increase in investment income was due to profit on disposal of First National Bank Botswana and Sechaba Brewery Holdings Limited shares.
Foreign exchange gains of P127.3 million recorded in 2018 were significantly higher than the foreign exchange loss of P107.5 million recorded in December 2017 as the Pula depreciated against the US Dollar.
Fuel Levy Income of P66.4 million increased by 27.5 percent from P52million recorded in 2017 owing to reinstatement of fuel levy rate from 5 thebe per litre to 9.5 thebe per litre effective 15th October 2018.
Costs Total expenses increased by 16.1 percent from P331 million recorded in 2017 to P384 million in 2018 primarily due to increase in net claims provision, interest expense and administrative expenses.
The MVA Fund boss further said claims provision increased by 24 percent from P143 million in 2017 to P177 million in 2018 owing to increase in high value claims as well as medical inflation.
The Fund also intensified follow up of funeral and loss of support claims to encourage those affected by road traffic accidents to lodge claims with the Fund for compensation. The increase in interest expenses from P89.2 million in 2017 to P106.3 million in 2018 is attributable to the increase in claims expenses as the Fund holds the money for claimants in interest earning account.
Administrative expenses increased from P74.7 million to P78.1 million as result of increases in staff costs, information technology expenses and inflationary pressures.
Financial Position Despite the comprehensive losses reported above, the Fund’s total assets marginally declined from P3.83 billion as at December 31st 2017 to P3.76 billion as at December 31st 2018.
Claims lodged declined by 3 percent from 2 934 claims received in 2017 to 2 850 received in 2018. The decrease in claims received is attributable to the decline in total crashes during the year. As at December 31st 2018, the Fund settled 2 191 and repudiated 271 claims. The Fund said offers that were awaiting acceptance by claimants were 165 while 223 claims were outstanding for various reasons. The Fund attained a claims completion ratio of 91 percent and will continue to follow-up those who have not yet submitted information that will enable the Fund to progress outstanding claims.
To underscore our commitment to the discharge of this mandate, the Fund has taken a bold decision in the Kgogamasigo Strategic Plan 2018 – 2022 to compensate all eligible people, according to Chairperson Dr. Mompati O. Mmalane
The year 2018 was first year of the implementation of the Kgogamasigo Strategic Plan 2018-2022. The Strategy just like its precursor focuses on service excellence, innovation and cost management. The Strategic Plan is premised on the Balanced Score Card Methodology which is a tested methodology for strategy development and execution.
The Fund took a bold decision in the current Strategic Plan to, amongst others, compensate 100 percent of those eligible for the Fund’s compensation. This move is intended to ensure that the Fund achieves its mandate of compensation and support
According to Botswana Police Service Annual Accident Report 2018, the traffic safety performance is improving in relative terms despite an increase in fatalities. Road traffic crashes declined by 2.5 percent from 17 786 in 2017 to 17 341 in 2018. Fatalities however increased by 4.1 percent from 444 deaths in 2017 to 462 deaths in 2018. Dr. Mmalane said one of the major contributing factors to increased fatalities is multiple causalities resulting from a single crash and 6 fatal accidents were recorded which cumulatively claimed 38 lives. Statistics further reveals reductions in both serious and minor injuries. Serious injuries declined by 4.6 percent from 1 152 in 2017 to 1 099 in 2018, whereas minor injuries declined by 1.2 percent from 4 739 in 2017 to 4 682 in 2018.