EASING THE STRESS OF DISTRESSED
Major changes in legislation have opened up the Motor Vehicle Accident (MVA) Fund’s compensatory and restorative services to all victims of road accidents in the country. The MVA Fund of Namibia is the last resort for compensation in the event of an accident. It is the statutory body established to design, promote and implement accident and injury prevention measures.
Over the years, the Fund’s caring services to all who need help after suffering the loss, pain and trauma of road accidents has had profound beneficial impact nationwide. By the same measurement, the MVA Fund has had a lot of questions about the organisation’s ability to deliver into the future.
To give an outline of the company’s operations and its position in the industry and in society, is the Chief Executive Officer Jerry Muadinohamba.
PF: How do you describe the service at MVA Fund?
JM: At MVA Fund, we believe in service above self. We are driven by a Customer Service Charter which allows our customers to expect, as an entitlement, superior service at all times. We deal with customers who unfortunately do not have the luxury of taking their business elsewhere. In most cases, they are in emotional situations, because either they are dealing with the loss of loved ones or have experienced the trauma of a road crash themselves.
When complete information is provided, we pride ourselves in our ability to turn around funeral grant claims in less than 30 minutes and all other claims in less than 30 days.
To realize the vision of providing peace of mind to all road users, through our business partners, we grant a 24 hour Guarantee of Payment for any person involved in a motor vehicle accident, which allows them access to stabilising emergency medical treatment at the nearest medical facility. In the event that such facility is not equipped with appropriate medical equipment, the attending doctor may recommend that the injured person be transferred to another facility which is equipped for further management.
PF: What measures have been put in place to turn around the MVA Fund which for years has been reported to be in the red?
JM: When I was appointed as the first substantive CEO of the then newly created parastatal in February 2004, my pre-occupation was to build a credible and reputable organisation out of nothing.
To mention but a few of the challenges that I found on the ground:
There were no documented business processes and/or systems in place.
The Fund at the time had neither appropriately trained personnel nor leadership capacity to deliver on its mandate.
The system was unknown and extremely legalistic and thus inaccessible to the ordinary man on the street, without the assistance of an attorney.
The Fund had an actuarial liability of over N$540 million, coupled with cash flow problems that rendered the speedy settlement of claims challenging.
In concurrence with the Board we developed a three-year transformation strategy aimed at addressing these challenges.
Through this strategy, the Fund acquired a claims management system and implemented well documented business processes shortening the claims turnaround times from an average of two and a half years to an average of six months, and today the turn around times have drastically improved to thirty days.
In consequence of the same strategy, we appointed appropriately trained personnel and a competent management cadre who are able to deliver on the Fund’s mandate and who, in an efficient way, also contributed to the shortened turnaround times.
We were instrumental in passing the MVA Fund Amendment Act of 2007 which repealed the legalistic 2001 Act. Through this Act, the span of cover of the MVA Fund benefits was extended to members of our society who had previously been excluded.
In addition, the Fund embarked upon extensive public educational campaigns that rendered the Fund a household name in matters related to accident and injury prevention and the provision of assistance to people affected by road crashes.
The main reason we are viewed as being “in the red” is due to our historic actuarial deficit. Allow me to explain what is meant by ‘actuarial deficit’. It is an assumption made about the ability of an institution to pay its current and future liabilities at any point in time should it cease operations, for whatever reason. In essence, the total liabilities should not exceed the assets. In our industry, such liabilities comprise of future undertakings to pay future medical and other support costs for existing claims.
Also included are claims which have been reported but are not yet finalised, such as matters under litigation. In addition, our actuaries estimate the cost of claims in respect of accidents that occured but have been claimed for. Lumped together, all these future costs are weighed up against the current assets and income of a particular year without taking the certain future income which the Fund is going to receive into consideration. Therefore, in calculating the differences between liabilities and assets, all the future liabilities are included but not the corresponding future assets.
In 2004, management at the time worked towards settling about 11 000 claims. This exercise for the first time assisted the institution to realise the full extent of its liability, which resulted in the N$519 million actuarial deficit. Together with this actuarial deficit, actuaries prescribed an amortisation plan of projecting the right fuel levy funding levels over various periods of time. In line with the amortisation plan, we managed to secure an increase in the fuel levy from 3.7 cents to 19.7 cents by the end of the transformation strategy phase.
The clearing of the back log reduced the actuarial deficit extensively from N$519 million to N$212 million. The fuel levy increase ensured that the Fund exited 2008 with a positive cashflow and short term investment balance of N$53 million. The rest is history.
PF: So how does the element of MVA Fund being ‘technically bankrupt’ come in?
JM: In order to explain the meaning of technical bankruptcy/insolvency, it is important to contextualise it from my perspective as the CEO of the MVA Fund.
The term “technical bankruptcy” or insolvency in this industry is equated to the actuarial deficit recorded in any given year. Actuarial deficit is a position in which an institution is not able to meet its long-term liabilities with its current assets, like in the ordinary case of bankruptcy.
The difference lies in the way actuaries compute the liability of an institution vis-a-vis the method used to compute the value of assets. As I said, in the MVA Fund industry, such liabilities comprise future commitments without taking into consideration the certain future income to meet these commitments.
It should be made clear that this technical insolvency does not affect the Fund’s day to day cash balance necessary to deliver on its mandate or the Institution’s ability to meet its obligations for the next five years.
For as long as the actuarial liabilities exceed the Fund’s assets, the Institution will remain in deficit as demonstrated in the table below.
2009 2008 2007 2006 2005 2004
N$m N$m N$m N$m N$m N$m
The Fund\'s deficit (458) (141) (212) (163) (207) (519)
PF: Is there any explanation as to why the deficit went down between 2004 and 2008 before increasing extensively to N$458million in 2009? You also seem to have a substantial drop in your balance sheet in terms of equity and liabilities.
JM: The balance sheet of the fund has actually been improving since 2004 as indicated in that table.
The deficit improved from N$519 million to N$141 million in 2008. The year 2009 was not a good one as the Fund experienced increased claims inflow due to the new Act which is now covering more people than the previous Acts. In addition, a huge claim for the Belgians that has been under litigation for a long period was finalised in November 2009 and will cost the Fund about N$250 million over the next 25 years. The actuaries are working towards producing the latest actuarial report and the Office of the Auditor General is reviewing our financial accounts to pave the way for publishing the latest financial report. The accounts for the year ended 31 March 2010 will be published when this audit has been completed.
PF: Is the compensation system financially viable?
JM: Yes, the system is viable. This compensation system has been successfully used in South Africa, Botswana, Swaziland, some States of Australia and New Zealand. The founding legislation of the fuel compensatory model rendered the system not viable, but legislative amendments in Botswana, and recently Namibia, have proven that this model is sustainable. The Botswana Fund, which was the first to adopt the new legislation, today boasts a two billion Pula asset base. They have introduced benefit limitations ahead of us and they are financially sound. South Africa is now also following suit and started with the reform process.
There are certain challenges that could pose a threat to the sustainability of the system. In this regard, the Injury Grant or general damages, was identified as one of the major cost drivers. This is money paid out to injured persons in respect of the pain and suffering endured as a result of a crash. Through our involvement with claimants, we have realized that some claimants present contradictory injury profiles to those diagnosed by medical practitioners in an effort to gain financially.
Such behaviour frustrates all rehabilitation efforts because it appears there is a societal belief that the longer you take to rehabilitate, the more severely you appear to have been injured and therefore the more money you should be paid.
This behaviour, which is fuelled by the injury grant, does not add any value to the long-term well being of our people. For this reason, the Fund is considering, with the approval of Parliament, removing the injury grant from its list of benefits to concentrate fully on medical rehabilitation of the injured.
PF: But is it true that you have relied heavily on loans to stay afloat over the years?
JM: This is not entirely true. Let me take you back to the outcome of the transformation strategy which resulted in a positive cash balance at the end of the 2007/2008 financial year. The Fund’s main revenue stream has always been the fuel levy. Even during the transformation phase, the Fund operated within the limited funds available and had never sought any loans or overdraft facilities.
The MVA Fund sought its first loan of N$70 million in 2009 from the Energy Fund administered by the Ministry of Mines and Energy when the N$250 million Belgian tourists’ claims were due for settlement.
The implementation of the new MVA Fund Act 10 of 2007, with its extended reach to people who were previously excluded, saw an increase in the number of claims and amounts of money paid as benefits, especially medical related claims. In order to supplement the revenue which was exceeded by the expenditure, the Fund obtained an overdraft facility of N$20 million from Bank Windhoek for the period June to September 2009, after which the overdraft facility was paid off.
PF: In reference to the Harry Simon and the Belgian tourists claim that chewed a substantial chunk from the Fund, how do you describe and explain the rate in the percentage of accidents that were claimed for, yet they took place at a time when the MVA Fund Act of 2001 placed no limits on the amount being claimed?
JM: In number they are insignificant but their financial impact on our coffers is high because they hail from an era where liabilities were unlimited. True, a good example is the Belgian tourists’ case that was settled at N$250 million.
PF: You have managed to convince government to pass a new legislation that caps liability of the Fund from an unlimited to a limited liability. How has that paid off?
JM: The legislative amendments brought more benefits than limitations, not only in terms of the amounts but also in terms of the reach. The medical benefit under the old Act was limited to N$380 000, and in terms of the new Act it is now standing at N$1,5 million. Whereas the old system only benefited claimants that could prove fault, in the new system, this benefit is extended to everyone.
The reason for this legislative amendment was to bring greater benefits to a great number of our citizens and in that we have succeeded.
PF: Do Namibians really understand what is due to them after an accident, in terms of the benefits they accrue?
JM: The Fund’s benefits are spelt out in Sections 24 and 25 of Act 10 of 2007, and therefore are public knowledge. Through complimenting that knowledge, and through our extensive public educational campaigns, Namibians now know where to go to after an accident and what they can expect as support.
PF: Under the MVA Fund Act of 2007, the Fund’s liability to tourists and other visitors is notably limited while Namibians are well covered for. Yet all are using the same roads. Why is this so?
JM: If you and I travel abroad, in many countries, we will be forced to take out insurance to cover for the medical expenses, inclusive of road crashes. It is this same principle that applies in respect of tourists.
PF: What are the current costs of managing accidents in the country?
JM: For the past two years, from the Fund’s perspective, the total costs of managing accidents amounts to N$225 million for an average financial year.
Road safety and/or accident and injury prevention is a multi-sectoral approach issue comprising of various role players. Namibia is yet to receive an extensive research report analysing the cost of managing accidents by all role players. We can, however provide what it costs the Fund but it is a drop in the bucket to the total cost in the country.
PF: In that case, how much do you spend on compensation in a year?
JM: The MVA Fund spends a total of 65% of its annual revenue on compensation/benefits.
PF: Is it not being too wishful therefore, that the MVA seems to be too dependent on the reduction of accidents in order to manage the funds you receive so as to meet the claims?
JM: Being wishful is being a dreamer. If you don’t dream it you can’t achieve it. The crash rates in Namibia are too high and apart from the costs to the Fund, the misery and social impacts must be reduced through improved driving on our roads.
PF: How do you plan to meet your long-term financial commitments?
JM: As I explained earlier, if one matches future expenditure against future income, the position is much more positive. It’s only that it is not an accepted accounting practise to record future income although all future expenditure should be recorded once it is known to the Fund. The Fund will continue to pursue additional funding and ensure that the amendments to the MVA Fund Act are passed by Parliament and will continue to actively manage our costs. We believe these measures will ensure that the Fund will continue to meet all its future obligations.
PF: South Africa, a country with a similar model to ours, recently increased the fuel levy for its accident fund, something which has faced stiff resistance from that country’s legal fraternity. Here, the MVA Fund, we understand, receives around 30 cents per fuel litre sold. By not increasing the levy, does that mean that the money you receive is sufficient in meeting demands for funds needed for such a high accident prone country?
JM: I would rather not comment about the developments in South Africa. In Namibia, the actuaries determine the appropriate funding level for the Fund annually, which guides our engagement with the Ministry of Mines and Energy for adjustments to the fuel levy. As a point of correction, the fuel levy currently stands at 32.7 cents per litre.
PF: How much did you receive in fuel levies last year compared to the year before?
JM: The Fund received a total of N$225 million for the financial year commencing April 01, 2009 compared to the N$161 million received in the previous financial year.
PF: What is your view about the role of the legal fraternity in the Fund?
JM: Four years ago I went public on my stance with the legal fraternity. The MVA Fund Act provides for legal representation and the Fund does not object to that. The problem that we experienced in the past was that some lawyers were charging contingency fees, in some instances resulting in up to 30% reduction in the claimant’s compensation amounts, which in my stance is morally and ethically wrong. However, we have sorted out these differences and we have a good working relationship with the legal fraternity.
In the new Act, claimants still have a choice of approaching the Fund directly, or approaching any legal firm for assistance. However, they should be prepared to carry the legal costs owed to the lawyer as the Fund only pays a contributory amount. At the moment, about 5 % of our claims are through lawyers.
PF: Is the MVA Fund not hijacking other key players in the industry such as the Roads Safety Council (NRSC)? Are your roles not clashing? Word has it that you are attempting to annex the Council and If so, what model are you using?
JM: We have a good working relationship with the NRSC. The MVA Fund Act gives the Fund the mandate to carry out some of the same activities bestowed upon the NRSC. However, to mitigate the notion in some quarters that MVA Fund attempts to annex NRSC, the Fund resolved to “contribute” to injury and accident prevention and that is what the Fund is doing. The MVA Fund is the only institution that is financially affected after a car crash has occurred therefore it has a strong functional interest in accident prevention.
The Fund has no intention to create an empire. However over the years the Fund visited leaders in compensation models and it makes business sense to do prevention and compensation hand in hand, whether this is achieved through business partners or as an individual business. Before the launch of Xupifa Eemwenyo in 2005, the role of the NRSC in accident prevention was not visible. It is only after the Fund came out strongly, that the council retaliated – although to the benefit of the country. They can take a leading role, but as a Fund, our stance is that we will continue making contributions whether it is through research or resource enhancement. But we will not sit back and wait for accidents to happen or for claimants to walk into our doors. We need to know about accidents as and when they happen, as injured are picked up so that we can take the claim to them. That is the only way such a system can be viable.
PF: Of course, the number of claims is dependent on the number of daily accidents, but have programs like Xupifa Eemwenyo really achieved their intended purpose?
JM: Absolutely yes. When you look at Xupifa Eemwenyo, people tend to look only at the number of accidents and the number of people who died. We look at how many lives were saved, how many people were attended to in 15 minutes, 20 minutes, 30 minutes of an accident, how many drunk drivers were removed from public roads, how many road hogs were asked to pull over or how many people were cut out of wrecks and as a result are alive today.
That is what Xupifa Eemwenyo has achieved over the years. You are right that the overall objective is to have fewer accidents, and fewer people dying, but this cannot be achieved by Xupifa Eemwenyo alone, it will only be achieved through you and me. We need behaviour change in Namibia – this Government dependency syndrome has become our own enemy. Yes, there were years when we managed to achieve reductions, with a massive injection of financial and human resources from our sponsors and partners. In order to sustain this, we need a permanent setup of a similar nature with the necessary Government policy, funding and drive, but none of this will succeed if the public does not cooperate.
PF: How many people work at MVA Fund and does the number justify the Fund’s existence?
JM: At the moment we have 103 plus a further 11 student Interns who are with us to gain work experience. Based on the standard staffing, the Fund is turning an average of 6.48 claims per month per staff member if we assumed that everyone was solely dealing with processing claims which is of course not entirely the case.
PF: You are often referred to as “Mr Mutual Agreement” in the corridors of your office. How does the Fund maintain the moral and performance of staff at the workplace?
JM: At the Fund we nurture and reward top performing employees, while we put struggling employees through skills development programmes, but if underperformance persists after several interventions, it is not in the best interest of either the individual or the Fund. In such cases, we mutually agree to part because the relationship is not mutually beneficial.
Conditions of the agreement include confidentiality of the reasons for separation; however, these may be made available to any competent authority if either party breaches the agreement.
In 2008, in particular, it affected the morale of the staff as some employees were dishonest with others on the reasons for the separation. Now employees understand better and through constant feedback and conversations morale and teamwork at the Fund has never been better. Our employee engagement rates at 3.64 out of 5 while the industry average is at 2.8.
PF: We understand the performance management system has been a problem ever since you tried to implement it. What can you say about this?
JM: Like any nouvelle intervention, it had its challenges in the beginning. Although PMS has been imbedded in the Fund culture for a few years now, we only decided to acquire a system in 2008. This presented some challenges, technology-wise and process-wise, but in April 2010 we had our first semester assessment and this process proved seamless.
PF: The MVA Fund is known to be a performance based organization. Whenever bonuses are linked to performance, there is always a problem of balancing between individual performance and team performance. How are you managing this conflict?
JM: At the Fund we do not have such problems. The performance equation compels individuals to strive for achievement but in tandem with the team. The CEO’s performance is based on 50% individual and 50% institutional. For Senior Management it is 60% individual and 40% unit, management 70% individual and 30% sub-unit Staff 80% individual and 20% sub-unit. Therefore individuals know that team performance will affect their performance and bonus.
PF: How are you handling the expansion of the organization with such limited funding?
JM: If the Fund were to expand, it will be initiated by management having considered all aspects that go hand in hand with such an expansion.
PF: Last year, the Fund made headlines with executives allegedly using corporate funds to finance leisure trips outside the country as well as paying incentives for things such as ‘maid allowances’. You never clarified the issue in detail or did you?
JM: In respect of the perceived leisure trips outside the country, it is important to establish the context for the trips referred to in your question. I wish to clarify the misunderstandings in respect of the trip undertaken by the Fund’s employees to South Africa. In my recollection, the Fund only recorded negative publicity in the print media about perceived lavish spending by executives.
In fact, this was erroneously reported as the trip in question was in fact undertaken by our employees who qualified to attend the annual Inter-Fund Games in which the Fund partakes every year. This is an annual event where the regional sister funds namely, MVA Fund Namibia, MVA Fund Botswana, Sincephetelo MVA Fund in Swaziland and the Road Accident Fund in South Africa come together to strengthen ties by participating in different sports codes.
The MVA Fund Namibia and the three other regional funds share a multilateral agreement to inter alia, develop and strengthen strategic ties and work towards harmonisation of a regional road accident compensation system, cooperate in human resource and capacity building and to facilitate the free flow of business information to improve service delivery and corporate governance.
It should be duly noted that the MVA Fund adheres to strict corporate governance requirements and all operations are guided by our corporate values which place a great emphasis on transparency, accountability and integrity in all our dealings.
In 2008, the Fund proposed a policy to cater for women or single fathers with toddlers, to allow them to attend training and workshops by providing for travel allowance for the baby caretaker. The policy was not approved by the board.
PF: Finally, how competent is your senior management and what is your succession plan, if for some reason you decide to move on?
JM: We have a succession policy in place and a succession planning committee which ensures that should the CEO leave at any given point, there is someone to ensure business continuity.
Our primary consideration is first and foremost for business continuity and not for someone to take over from the CEO as that appointment lies in the hands of the line Minister.
I have a very competent senior management team who are ready to ensure that business continues at any time should I leave. They have been part of the successful transformation journey.
PF: Jerry Muadinohamba, thank you for your time. PF
Who is Jerry Muadinohamba?
Born 39 years ago, Jerry Muadinohamba is the Chief Executive Officer (CEO) of the Motor Vehicle Accident (MVA) Fund with over 12 years of combined experience in development finance and public management with the Namibia Development Trust, African Development Foundation, Social Security Commission and the Motor Vehicle Accident Fund.
A man who eschews formal clothing, Muadinohamba is a transformational leader who continuously energizes and inspires people around him to reach greater heights.
He has successfully turned around the Motor Vehicle Accident (MVA) Fund into one of the leading state agencies in superior and broad based service delivery; innovative and continuous business process improvement as well as sustaining an organizational culture of execution with high performing individuals and teams.
He completed his Matric/Grade 12 at the St’ Joseph High School/Dobra in 1990 with Matriculation exemption and holds several post graduate qualifications in Development Finance, Administration, International and Intercultural Management, from universities in the United States of America, Namibia and South Africa.
Muadinohamba has travelled extensively in Sub Saharan Africa and South East Asia and has attended professional development programs in Bangladesh, Nigeria, Uganda, and University of Manchester in the United Kingdom and Washington DC in the USA.
To date he serves on several boards, such as Standard Bank Namibia; Namibia Chamber of Commerce and Industry and the Namibia Development Foundation. He was awarded Business Communicator of the Year 2006 and this month became the new board chairman of the National Port Authority in Namibia, Namport.
Muadinohamba is married to Alexinah Nansunga, a Hubert Humphrey Fellow and a Public Health Specialist. The Family is blessed with four daughters, Ivy Swaniso (adopted) final year B Tech ( Oral Hygiene) student at the University of the Western Cape, Lydia Ndeshiuda and Katulife Nsala - grade 11 and grade 5 learners at St’ Paul’s College respectively, whiles the last born Ndahafa is two years old. The family is also blessed with a grandson (two years of age), Jerry Fabio Muadinohamba Bras. PF