The National Social Security Authority (Nssa) will reconstitute boards and management of investee companies as the pension fund seeks to give shareholders a return for their investment.
In an interview recently, chairman Robin Vela said boards and management of companies the fund is invested in that are performing dismally will be reconstituted and replaced with competent individuals.
“Where there is evident failure of the board, we will absolutely see board changes. We also want to see management changes in companies where there is evidence of failure,” he said. “But they are companies we are invested in such as FBC and Seed Co, who have paid dividends to us. Those obviously are exceptions.”
“This is not business as usual as Nssa has to be about delivering value for the fund and the contributors.”
Asked on whether the social security agency had taken a position on some of its investments, he said his board had taken a hard look at its investment, but was yet to make a decision.
“We took a hard and long look at our various investments but we have not yet taken a position on that. But one thing is certain: we need to change our processes and invest in businesses that generate cash,” he said.
Vela in October indicated his intention to have the fund divest from some of its investments on the ZSE.
He also expressed dissatisfaction with the performance of Beitbridge Hotel, which he said had yielded very little for Nssa.
Nssa spent US$32 million on the construction of Beitbridge Hotel and signed a management contract with RTG.
“We are investigating a different use of that property. It can become offices or a medical facility. It can become many things,” Vela said.
“The yield being achieved is poor. We are also rescheduling our loans with RTG and putting in new covenants.”
RTG’s total debt decreased to US$21,1 million from US$22,2 million as at December 31, 2014 while cost of debt reduced to 10% from 11%.
Vela also told businessdigest that Nssa was keen on getting to the bottom of the Zimre Holding Limited (ZHL) US$15 million rights issue debacle. “We have a strong resolve to pursue the Zimre issue,” he said.
“Some board members have taken it upon themselves to single handedly run some of our investee companies. It is the responsibility of the board not individuals,” Vela said.
He said he was willing to pursue legal routes to have the transaction set aside. Vela attacked the ZHL board’s handling of the transaction. “Investigations are still ongoing. But definitely, the investigations will form the basis for a legal challenge,” Vela said. In a letter dated December 11 2015 to Sec CE Tafadzwa Chinamo, Vela said he was dissatisfied with the ZHL transaction.
“I would firstly like to reiterate the National Social Security Authority (‘Nssa’ or the ‘Authority’) remains unsatisfied and concerned that the above transaction was indeed not above board and that adequate disclosures were not provided to existing shareholders to make an informed decision. There are some fundamental issues that continue to be overlooked, namely: it is now apparent that NMB did not have the capacity it purported to have to underwrite the US$15 million rights issue, if this is indeed proven, then it follows that this singular misrepresentation could be a basis to have the entire rights issue set aside,” read the letter.
“There was never any disclosure that the Rudlands, through an entity called Day River Corporation (DRD), would become a major shareholder,” Vela said.
“You will understand that the Authority partners with investors who share our investment ethos. A private investor is unlikely to have the same long term investment ethos as a pension fund which is open ended and invests for the long haul.”
Rudland last year insisted the deal was underwritten by NMB, adding all disclosures were made according to ZSE and other regulators.
“We did not expect to get to the level we got, this was due to Nssa only following a portion of their rights. We expected below 20% of the company,” he said.
“Deals done in the public domain run according to regulatory protocols, these I believe are robust and transparent and cannot be manipulated as there are rigid checks and balances at every level. As an investor in the ZSE, I hope this is the case or all investments are then not safe!”
This comes as it emerged recently that NMB Bank could have had a sub underwriter’s agreement with Day River Corporation, a consortium of Simon and Hamish Rudland, and withheld this information to the investing public.
Information obtained by businessdigest this week shows that NMB could have been engaged by Day River Corporation to act as lead underwriters in a US$15 million rights issue but withheld the information in order to make a profit.
Sources said the bank could have had an agreement with Day River as sub-underwriters, a reflection they did not have the capacity to underwrite the US$15 million rights issue.
NMB has not responded to the allegations.
This comes amid allegations the bank could have deliberately concealed the structure of the deal for personal gain and caused the prejudice of ZHL shareholders.
Sources close to the developments said NMB pocketed millions of dollars in the deal. Underwriters charge various percentages of the value of a transaction with the highest being 10% of the value.
The deal raises moral and ethical questions on the part of NMB as a corporate and shows desperation for non-funded income in market loan defaults are on the rise.