AS a statutory corporate institution sustained by deductions from employees’ salaries and whose mandate is to provide social security to workers upon retirement or in the event they are injured at work, the National Social Security Authority (Nssa) is expected to make prudent investments which attract substantial returns to help contributors at the appropriate time.
However, analysts say Nssa has repeatedly failed to put contributors’ precious funds to good use by making sound investment decisions, instead pouring millions of dollars down the drain in a spate of bad outlays over the years amid suspicions of patronage and corruption.
Nssa, which administers social security public funds on behalf of about 1,3 million contributors following its establishment in 1989, has a well-documented history of poor and even disastrous investment decisions. These have cost contributors millions and span various sectors, including deposits in non-performing indigenous banks, listed companies and non-profitable properties. The bungling has been at the expense of suffering pensioners who are getting meagre monthly payments of as little as US$40 from Nssa.
Last year Nssa appeared before a parliamentary portfolio committee on finance and economic planning to defend its investments and answer to allegations of corruption surrounding tender processes and investment portfolios.
The committee accused Nssa of misdirecting pension contributions and called for an immediate review of the Social Security Act with a view to cushioning pensioners from the current harsh economic environment that has seen the country’s unemployment and poverty levels rise to unprecedented levels as companies retrench and close down en masse.
In 2010, just a year after Zimbabwe introduced the multi-currency regime (dollarisation) following the hyperinflation-induced demise of the Zimbabwean dollar, Nssa started making headlines for the wrong reasons, after it emerged that it was making poor investment decisions with pensioners’ money.
The parliamentary portfolio committee on public service, labour and social welfare in late 2010 blasted the Nssa board for lack of sound investment decisions after the authority lost substantial amounts when the country dollarised.
The committee felt that contributors were being let down by the Nssa board due to its poor investment decisions. The committee was concerned Nssa failed to take into account the lack of liquidity and adequate security on loans.
Despite this Nssa says it has applied for a licence to establish a building society by end of June this year. This is despite the fact that it owns 35% of FBC Holdings, parent company of FBC Bank and FBC Building Society.
The social security authority also plans to build a US$12 million shopping mall in Chipinge.
Economist Tapiwa Mashakada said Nssa’s problem has to do with governance issues. He said there was need for government to scrutinise the Nssa board and its investment committee to avoid dereliction of duty as many decisions are being made to the detriment of pensioners.
“Board members are not doing their fiduciary duty, I particularly call upon Emcoz (Employers Confederation of Zimbabwe) and the ZCTU (Zimbabwe Congress of Trade Unions) deployed in the boards to revisit their mandate because they are the vanguard of the employees,” said Mashakada in an interview.
He said most of Nssa investments were done without proper due diligence.
“What needs to be done is for Nssa to start making safe investments like in the property market, for instance, where returns are almost guaranteed. The returns may not be as high as one would want, but they are there and to me it’s a better option,” said Mashakada.
Nssa’s prime goal is to take care of the social security needs of workers, but they have been venturing into uncharted waters and taking up risky assets such as banks leading into loss of millions of pensioner’s funds, he said.
Nssa sunk a total of US$48 million in Capital Bank — after government declared that the investment was in the national interest — becoming an 86% shareholder in a bank that later shut down.
Nssa also lost about US$16 million in other banks that shut down. It had US$15 million deposited with Interfin Banking Corporation, which closed down in 2012 after abusing depositors’ funds and was later placed under liquidation. The authority also owned 10,02% of Interfin Financial Services, the parent company of Interfin Banking Corporation.
Nssa had more than US$750 000 in Genesis Bank, which collapsed in 2012.
Econometer Global Capital (Econometer) head of research Takunda Mugaga said Nssa was behaving like “an impressionable teenager who admires every woman who passes by”.
“They had fallen in love with Capital Bank, but divorced it when they realised it was inherently undercapitalised; they are in ZB Bank as we speak, but they can’t help write off more than 30% in bad loans carried by the bank,” said Mugaga. “They slashed a promising asset in Zimex Mall only for a low-value business of a car parkade; the fund is just in a greedy mood.”
He said setting up a building society when most banking units are merging with their mortgage units to avoid heavy capital requirements as required by the Reserve Bank of Zimbabwe was “foolhardy”, adding there was need for government to come up with a more serious board of directors for the social security provider.
Nssa paid US$7,4 million in 2012 for 650 hectares of land near Regina Mundi High School in Gweru. The land has been at the centre of an ownership wrangle and Nssa could lose its money after the High Court empowered the land owners to reverse the purchase.
Controversy is also brewing over plans by Nssa to construct a shopping mall in Chipinge, amid claims that the authority has ignored advice to locate the project in more viable centres like Chinhoyi and Marondera.
The move comes as some of the country’s shopping malls are turning into white elephants. Tenants are vacating space in shopping malls due to high rentals amid depressed business as the liquidity crunch persists.
Apart from the high rentals, statistics show companies are downsizing or shutting down as the economy suffocates in a hostile climate.
As reported by the Zimbabwe Independent in March 2014, Nssa ignored advice from its own management investments committee against sinking the US$11 million of public funds into buying shares in a private unlisted company, Dubury (Pvt) Ltd.
At the time, sources said the amount was spent to purchase 3 621 shares at a cost of US$3 037,83 per share in a company which reportedly owns the Joina City shopping mall located in Harare’s central business district.
A discussion paper by the office of the Comptroller and Auditor-General Mildred Chiri, presented to Nssa, criticises the social security authority for making “inappropriate investment decisions” and warned of the possibility of irregular activities going “undetected as a result of improper due diligence on the part of management and the board”. This certainly appears to be the case with Nssa’s investment in Beitbridge Rainbow Hotel which was also marred by controversy amid reports it made unprocedural payments to contracted companies despite shoddy or lack of delivery on the multi-million-dollar project.
Nssa’s 2009 share purchase into Zimbabwe Stock Exchange-listed company Starafrica Ltd at a US$2,5 million premium to market prices has also been questioned by the National Economic Conduct Inspectorate. Analysts said Starafrica was declining and resulted in a more than US$14 million net loss for Nssa.
Given this poor investment record, analysts say that if realised, Nssa’s plan to establish a building society by mid-year could result in more public funds being frittered away in yet another poor investment — down a bottomless pit.