HomePoliticsNSSA exposure to local banks up to US$200m

Corruption trial fails to take off

This came to light following investigations into allegations against NSSA conducted by the National Economic Conduct Inspectorate (NECI), a department under the Finance ministry whose main duties include carrying out investigations into white-collar crimes and checking on compliance auditing by both private and public companies.

The investigation was established to probe a series of corruption allegations rocking NSSA, which had been turned into lender of the last resort by some businessmen and their political handlers and an easy take-away place for those looking for cheap funds.

According to the report, two non-banking institutions, Tetrad –– US$18 million, and National Discount House (figure not given), also accessed funds from NSSA, which administers social security public funds on behalf contributors and pensioners.

The funds invested in banks were mainly contributions for the Workers’ Compensation Insurance scheme (WCIF), National Pension Scheme (NPS), Occupational Safety and Health (OSH), Employees Funeral Fund and rentals received from NSSA’s tenants. 

“In general, it can be observed that NSSA placed its funds with nearly all the indigenous-owned banks, though at varying intervals and levels of funding.  Rates were also noted to be fairly uniform across the banks, with variances obtaining for varied instruments and tenors,” the NECI says in its report on the investigations it carried out in 2010 at the instigation of Labour and Social Welfare minister Paurina Mpariwa (pictured) under whose portfolio NSSA falls.

The NECI report reveals apart from NSSA investing in the banks or placing funds in their instruments, the same banks also secured bailouts from NSSA to cover their precarious positions. The report notes that while the idea of supporting local banks was good, this left NSSA exposed as most banks, including the ones it had invested in, were battling with liquidity problems.

A case in point was the previously troubled ReNaissance Merchant Bank, where NSSA’s total exposure amounted to US$35 million. RMB faced closure before it was put under the management of a curator and was only resuscitated after NSSA opted to convert a US$8,5 million debt owed to it by RMB into equity, and assumed a US$5,7 million debt owed to Econet by RMB and its parent company RFHL.

Sources close to NSSA questioned the wisdom of the social security institution’s decision to assume RMB’s debts to Econet. They also warned NSSA could end up taking over shells in the banking or general corporate sector in a bid to recover from poor investment positions. After losing money in RMB, NSSA found itself being forced to pour more funds into the troubled bank.

“The curator only worked with NSSA to convert deposits into equity, yet there were other significant depositors who could have also gone for a similar debt-to-equity arrangement but ultimately it was NSSA alone. Why did they assume the debt of a non-performing entity? What was in it for them?” the source asked.

Sources also accused NSSA of doling out money to troubled institutions as though they were dishing out worthless Zimbabwe dollars, not hard currency. They said that NSSA should have been prudent enough to consider new risk and protection measures following the dollarisation of the Zimbabwean economy as the US dollar was way too valuable to throw around like confetti.

“Given what has been happening at NSSA government needs a much more thoroughgoing investigation to root out rampant corruption and fraudulent activities at the institution,” a former NSSA senior manager said. “It’s irresponsible and criminal to allow such things to take place while contributors and pensioners are suffering.”

The NECI report –– dated April 2011 –– details a series of acts of corruption and fraudulent activities involving senior company officials and various economic actors. Although NSSA has been struggling to play down the NECI findings, the report exposes corrupt activities in the organisation, including how influential and well-connected individuals and companies accessed funding for themselves at the expense of contributors and pensioners –– the real owners of the institution.

Despite spirited denials by NSSA, the report exposes acts of corruption spanning a wide range of areas, including tender processes, real estate projects that included building of houses and hotels, structured finance in all sorts of areas, even purchases of wheat that never materialised.
NSSA directors and management also splashed money on buying mansions and luxury cars for themselves, while paying out pensioners a meagre US$20 a month.
NSSA, constituted and established in terms of the NSSA Act of 1989, is a statutory body tasked by government to provide social security to workers so that they have an income to look forward to upon retirement. However, contributors and pensioners have found themselves getting meagre payouts averaging US$20 per month, while business executives and politicians enjoy the benefits of their sweat and tears.

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