RFA reserves fund arrears millions

The ability of the RFA to continue as a going concern is dependent on a number of factors.
Jo-Mare Duddy Booysen
Jo-Maré Duddy – More than N$317.7 million was paid from the reserves of the Road Fund Administration (RFA) in its 2016/17 financial year to cover outstanding invoices for construction.

These payments were made on request by the ministry of finance and the ministry of works and transport and were approved by the RFA’s board of directors in December 2016, the fund says in its latest annual report, tabled in parliament recently.

The chairperson of the RFA’s board, Penda Ithindi, refers to the payments in his report: “Total expenditure [for 2016/17] stood at N$2.3 billion, this being the quantum of money released in the national economy, of which 81% was on the road sector projects. This is more so because the RFA has been requested to respond to the urgent need for defraying costs associated with the outstanding payments for invoices emanating from road projects funded by the government. To this effect, budgeted expenditure has to be revised upwards to the same score.”

In the annual financial statements, it is stated that the arrears payments were made from the reserves the RFA “built up over years since incorporation”. No payments from reserves were made in the 2015/16 book-year.

Total expenditure in the year under review increased by nearly N$461.3 million or 25% compared to 2015/16. This left the RFA with an operational deficit of N$59.1 million for 2016/17 opposed to a surplus of nearly N$277.4 million the previous year.

On 31 March 2017, the RFA had an accumulated deficit of nearly N$442.5 million compared to an accumulated deficit of about N$65.6 million in 2015/16.

The ability of the RFA to continue as a going concern is dependent on a number of factors, the directors say in the annual report.

“Management is optimistic that the fund will continue operating as a going concern into the foreseeable future,” they say. Their opinion is based on the fact that “strategies have been deployed to contain expenditure within the Road User Charges income” and increases of 7% in these charges that were received in the 2016/17 financial year.

SME Bank

Included in the RFA’s expenses for 2016/17 was a provision of around N$43.55 million for a “doubtful deposit” at the SME Bank. No provision was made in 2015/16. At the end of March 2017, the RFA’s deposit at SME Bank stood at N$80.89 million, up from N$60 million at the end of the previous financial year.

Of the eight financial institutions where RFA deposits were held in 2016/17, two didn’t have a credit rating: SME Bank and E-Bank Ltd.

The RFA annual report states: “Although E-Bank Limited and SME Bank are not rated, they have no history of default. However, the SME Bank was put on provisional liquidation after year-end and the preliminary indications are that only depositors with less than N$25 000 are guaranteed to their full amounts deposited. In light of the above, a provision of 35% of the deposits held at SME Bank was made during the year.”

A final liquidation order for SME Bank was granted by the High Court last November. FNB Namibia has meanwhile acquired E-Bank Ltd.

Expenses

The RFA’s employee costs soared by nearly N$20 million or 47% to N$61.4 million during the year under review. Travel and subsistence expenses rose by nearly N$3.4 million or 171% to N$5.3 million.

Big expense items were: national road network expenditure (nearly N$1.8 billion, up 22%); fuel levy refunds (N$257.5 million, up 23%); urban road maintenance (N$73.5 million, up 7.4%) and traffic law enforcement (N$30.8 million, up 6.4%).

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