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NSSA: Looking at the bigger picture

This would have translated into a maximum monthly contribution of US$40 from both the employer and employee. No doubt the decision was well received as it brought back relief to the already overstretched worker. However, the worker will have to bear the brunt of reduced payouts on retirement as the insurable limit is very low.

By definition, NSSA is a corporate body that was established in terms of the National Social Security Act Chapter 17:04 to put in place social security schemes for the provision of benefits to the contributors of the scheme.

The main objective of establishing the authority was to create a fund to be used for one’s well-being on retirement, that is, at 65, or in the event of suffering an occupational accident. Clearly the idea is noble, which explains why such schemes are created elsewhere in the world. In Zimbabwe, both the employer and employee each pay 3% of the employee’s basic wage towards the pension.


For the Accident, Prevention and Workers Compensation Scheme, the employer is the one who is mandated to make the full contribution. The role of NSSA is to administer these contributions and derive value for the intended beneficiaries.

NSSA is arguably one of the biggest players in the financial markets. For the first time since dollarisation, NSSA released its full-year results to December 2010, which showed a net surplus of US$142,6 million, representing a growth of 36,5% from 2009. Income grew by 13,4% to US$200,2 million. Premiums and contributions were US$181,4 million in total, against claims of US$27,1 million, representing a payout ratio of 15%.

Despite negative comments that have come from labour unions pertaining to the lower sums that NSSA pays to pensioners, there seems to be a lack of appreciation of the significant role played by the institution in the economy. Ironically, NSSA has become a big player in the financial markets, with investments worth more than US$200 million.

In its financial results, the authority revealed that 30% of its funds are invested in equity. Notable equity investments include a stake in FBCH, Fidelity Life, OK Zimbabwe, Turnall, Zimplow, AICO, ZHL and ZBFH. Quite a number of corporates and institutions have been rescued financially and owe their continued viability to NSSA. Some of them could have gone under, with devastating consequences to workers in particular.

The institution has also supported a number of capital raising initiatives on the Zimbabwe Stock Exchange (ZSE) and some of the companies have done exceptionally well. A case in point is the support provided for Fidelity Life’s capital raising through a private placement. Fidelity Life is doing well and has emerged as a stronger institution after the capital raise. In 2011 the share price rose by a significant 629%. Quite a good investment indeed and in US dollars!

Whilst we do not seek to exonerate the institution from other unfavourable investment outturns, it would not appear unusual for an investor to make a few bad investment decisions every now and then. In any case, a pension fund has a longer term investment horizon and investments that might not be favourable in the short-term might turn around in the long run.

Turning to the banking sector, for most bankers, NSSA is their biggest client. With 20% of NSSA’s funds sitting in the money market, this has benefited the banks and borrowers, and has to some extent helped ease liquidity challenges. The authority last year announced a favourable deal to the banks that its deposits would cost 10% but, however, gave a condition that banks in turn are supposed to on-lend these funds at 15%.  Clearly, both the banks and the borrowers have benefited from this arrangement. 

NSSA has quite a number of social responsibility programmes. It has partnered with FBC Building Society to develop medium density housing units in various suburbs, which to some extent has eased the housing shortage in the country. Plans are also underway to develop low cost housing units for civil servants in partnership with government.


The institution has also been at the forefront in supporting small to medium enterprises by making available funds for various projects. A US$5 million facility was also made available to two commercial banks at an interest rate of 10%, to help former contributors to the National Pension Fund who have been retrenched to finance business projects.

In partnership with RTG, NSSA is building a hotel in Beitbridge and is separately building a commercial centre in Bindura. The authority has also contributed to national development through building projects in small towns such as the Gwanda Shopping Mall, something that other property investors overlook.

The operating environment has also been tough. Property investments are suffering from low yields and high default rates from sitting tenants. Equity investments have been negative due to the lacklustre performance of the ZSE. 


Essentially, it means that the large portion of obligations to pensioners have to be met from current contributions made by those that are working. It also does not help that the number of people in formal employment has reduced and will continue to do so as a result of the harsh economic environment. This has had an impact on monthly contributions.

As the economy improves and more jobs are created, we might also see an improvement in NSSA’s payouts to pensioners.

No doubt conflicts of interest are bound to emerge as workers and pensioners seek to safeguard their contributions. But looking at the bigger picture, NSSA plays a far bigger role in the economy than is immediately obvious, which at the end of the day could prove beneficial to both the worker and pensioners.

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