THE National Social Security Authority (Nssa) is a public institution responsible for pensions. But within Nssa there is a little-known pension fund, the Nssa Employee Pension Fund, which was created for the authority’s own employees. The Zimbabwe Independent business reporter Melody Chikono (MC) caught up with Nssa employee pension fund board chairperson Canaan Dube (CD) on the sidelines of the Zimbabwe Association of Pensions annual congress in Victoria Falls recently. Dube explained how it works and insights into the fund. Below are interview excerpts:
MC: Give us an insight into the Nssa Employee Pension Fund.
CD: Nssa Employee Benefit Fund caters for the employees of Nssa and is a separate entity from the authority, which deals with compulsory arrangements. What you need to know about the Nssa pension fund is that it was going by the defined benefits scheme until the authority realised that the exposure to the authority was growing and they decided to move away from the defined benefits scheme to the defined contribution scheme. So it’s like a hybrid. The bulk of the members are from the defined benefit, about 200 to 300 are from the contribution scheme.
Right now we have challenges about the rules which must regulate the two schemes and we have been operating under the rules of the defined benefits as if they apply to the defined contributions scheme. So from my end, I have been pushing to have this is clarified.
Secondly we are a board of trustees which govern, manage and lead this fund on the basis of a structure, which says if you want to lead properly, have an element of independence from the members and from the sponsor.
I’m coming in as an independent board chair of the fund and that has created some measure of comfort on the board because I tried to be as far as possible. We have members represented and the authority represented as well.
We have also addressed the issue of who represents the retirees in the board. We have a narrative which says these people should have a say and tell us about their needs whether they are being met for the contributions they have made. We hope by year end we should have someone who will be representing the retirees.
We have also started a narrative which says it’s not your qualifications, gender experience or age which matter anymore in leading pension funds. It’s who you are, what you do or say, that’s the core of who you are. We have said let’s look at the character of the person coming onto the board. It’s creating a lot of anxiety because some people come highly-recommended in all criteria but they fall short of the value driven criteria. So that debate is taking shape now. We have also said why we are talking about rules and compliance. The rule book is not enough. While there is codification of people in Zimbabwe, we still have jails full to the brim with people who contravene the law.
Yes, it goes some way but we have said persuasion to behavioural change is important. We do it by preaching, training, educating and so on. We are moving away from compliance, coercive and regulatory mechanism to the changes in behaviour based on persuasion. That is a board which I will lead and where we are heading to.
MC: What are the priorities of the fund? What’s your outlook for 2018?
CD: The conference has been an eye opener to me as a leader. You know there are service providers who were invited and engaged to advise us on investments. We have over US$30 million, how do we ensure that those whom we represent, the beneficiaries, lead comfortable lives? We have also been addressing a froth model of investments, bond, equity and property and now we have been told that’s not giving beneficiaries what they want in terms of their needs.
It is falling short. So I’m going back to the people and tell them yes, it’s important to protect investments but we should also be takers of risk. Let’s try the alternative methods like infrastructure bonds. We must go into other areas to ensure that we have adequate funds to cater for the needs of the beneficiaries. What is also important is we must do needs assessment of the beneficiaries, both active and non-active and say if shelter is a requirement when people retire, how do you address that in the journey to retirement. If health is a requirement how do you address all those issues before one gets to retirement.
In terms of priorities, I want to introduce a rethink on how we can invest to create comfort, to create wealth and endeativity to those who retire and it’s no longer business as usual.
MC: Still on the issue of investments, what portfolios do have so far and what are your plans?
CD: We are into the equity market, we are in the bond market, and we are in the property market, but very insignificant. We have a property in Victoria Falls and another in Harare, but we are saying these brick-and-mortar investments are safe, but there are very little returns in terms of rentals. In terms of the equity markets, we have two advisors, BancABC and Old Mutual. They tell us this is where they will be putting our money and such and such will be the possible returns. That seems to give us fair and decent returns. Bonds have been equally important for us but property is very low.
MC: In monetary terms, what’s the size of your investment so far and how large is the fund?
CD: For investments it’s over US$30 million and the fund is about the same. You see, we invest as something comes in, but remember, we are also taking care of the retirees.
MC: How long has it taken you for the fund to grow this much?
CD: The fund has been in place since the creation of Nssa, which is way before my time. I’ve been the chairperson for only two years. It has grown, but sadly not phenomenally because of our safe investment model that we pursue. We are not risk takers but going forward we are going to do massive investments. There is one point that I want to highlight: during my tenure as chairperson, one important thing happened. The authority decided to reduce its contribution from 13-14% thereabout to 7% and that has reduced the growth of the fund.
That is an issue we have been discussing, but we have not seen closure to it and it has threatened the viability of the fund.
MC: What were the reasons for that decision by the authority?
CD: Well, they simply said they can’t afford. They wanted to ensure that their own funds are healthy, and I’ve been trying to meet the then board chair Robin Vela, but we have not been able to resolve it until he left. But if it pulls though, its again the question of integrating the previous paradigms on investments, saying are we doing well in making investments in property markets, should we not be moving as advised and balance risk and returns.
MC: In a nutshell, what is the major challenge the fund is facing?
CD: Like I said, Nssa reduced its funding and that been introduced viability challenges to the fund and from an actuarial perspective, we have been told of a big challenge that might be a cause for concern over the solvency state of the fund. This is the main challenge. In terms of payout, we have, however, failed to make the payouts when they are due.