The ongoing wholesale restructuring exercise of social security provider National Social Security Authority (Nssa) is set to trigger sweeping changes across the country’s investment market. This comes amid indications the new Robin Vela-led board is considering divesting from troubled institutions and non-performing counters on the Zimbabwe Stock Exchange (ZSE).
The move is said to be driven by a general push for corporate transformation by the new board and an attempt to model Nssa in line with international best standards.
Nssa board insiders who spoke to businessdigest on condition of anonymity earlier this week said a relook at Nssa’s investment in the country’s largest reinsurer Zimre Holdings is among the new board’s immediate priorities.
Nssa, said the insider, was unhappy with the coming in of a consortium led by Simon and Hamish Rudland that snapped up a 40% equity in Zimre following a US$15 million rights issue earlier this year and its material impact on shareholding. Nssa curiously did not follow its rights.
“Zimre is an asset which was of huge value and we had 40%. We had been told NMB bank were underwriting that but that is clearly not what happened, companies like Zimre are companies which we say we need to take a hard look at, they have taken advantage of the long suffering shareholder through hyperinflation and dollarisation whereby Nssa has been there and acting as lender-of-last-resort until somebody, a pirate from a boat with the promise of new cash, came and they went ahead and forgot they are going to dilute Nssa who they had never paid a dividend to,” said a board insider.
After the coming in of the new shareholder, government and Nssa’s stake in Zimre was diluted to 22% and 19% respectively.
Another board member confirmed the thinking in Nssa was to maximise value on its investments and abandoning underperforming portfolios.
“Nssa success is derived from the success of business it has invested in, so where we have non-performing funds, even in money markets or equity — companies that we have no influence to direct — we would rather take our funds out of there and move them to areas that are more lucrative,” said the board member, adding Nssa’s investments on the ZSE will also be reviewed.
“Nssa has shares in 53 of the 59 counters on the ZSE and more than half of these are troubled companies, and the board wants to look at them.”
Nssa’s 2014 annual report lists Aico, FBC Holdings, FBC Building Society, Rainbow Tourism Group, Starafrica, Ok Zimbabwe and ZB Bank as associates. Nssa held 51% shareholding in First Mutual Holdings as of June 2015.
The information comes as Nssa convened a press conference on Wednesday to announce its restructuring exercise that saw former general manager James Matiza being booted out together with other top managers. Board member, Hashmon Matemera, the former managing director of BancABC Zimbabwe, has been appointed interim general manager until a substantive general manager has been identified.
In a statement at the press conference, vela said Nssa was looking at questionable investments made in the past that have caused capital loss, apparently confirming the looming restructuring results.
“Nssa also plans to diversify its current portfolio in line with the changing market trends. Freeing up funds locked in non-performing equity and money markets and redirecting these longer-term capital projects will help support national goals while securing sustainable returns,” said Vela.
Nssa also withdrew its representation on investee companies as a means to make them fully accountable for their actions, according to Vela.
Asked by businessdigest concerning the specific investment plans and in particular, the fate of Nssa investment in Zimre, vela said, “The reality is I don’t want to talk about specific issues, but the broad picture is Nssa has a lot of underperforming businesses that are weighing us down.”
He said the authority would be proactive on all its investments so that it is not caught flat-footed, adding it will also try to ensure managers think outside the box.