THE National Social Security Authority (Nssa) has decided to offload its stake in ZB Financial Holdings (ZBFH). Concerns have been raised that if one of the bidding investment vehicles clinches the deal, the transaction would potentially violate banking regulations. The Zimbabwe Independent (ZI) this week caught up with Nssa acting general manager Arthur Manase (AM, pictured) to discuss the ZB issue, the society’s investment plans and its fight against the Covid-19 pandemic. Below are excerpts of the interview:
ZI: Why have you decided to offload your stake in ZB?
AM: The move is designed to create a leaner and more manageable portfolio that can create stakeholder value and consistently pay sustainable dividends to Nssa for the benefit of pensioners and other vulnerable groups such as orphans, widows and widowers.
Nssa is a significant investor in various banking institutions which compete against each other, while at the same time demanding significant capitalisation assistance of more than US$3 million. Nssa does not have this capacity. The pension fund holds significant shareholding in FBC, ZB, CBZ and wholly-owned subsidiary, NBS.
The authority’s strategic focus is a combination of divestiture and consolidation to reduce duplications, improve efficiency and minimise capital requirement while creating a formidable financial sector investment that guarantees shareholder returns, value preservation and with a strategic fit into the Nssa’s mandate.
ZI: Is your decision going to be confined to the ZB stake only or are there plans to do the same in CBZ and FBC?
AM: There are no plans to do the same to CBZ and FBC.
ZI: The question which has raised the red flag is why you are offloading in a hyperinflationary environment, so why now and don’t you stand to lose out more now?
AM: The pricing and consideration has been carefully designed to retain value in real terms for the benefit of the pensioners and contributors. The stake is not being sold for purely monetary consideration and the consideration has been carefully thought out to avoid monetary loss. We are well aware of the dangers of loss of value in a hyper-inflationary environment and this has been taken care of.
ZI: What is the implication of this transaction on pensioners’ investments and its impact on the banking sector at large?
AM: The move is designed to create a leaner and more manageable portfolio that can create shareholder value and consistently pay sustainable dividends to the pension fund.
The re-alignment process is expected to unlock additional funds that will be channeled towards boosting benefits pay-outs. Nssa is committed to improving the benefit levels of its pensioners and to cushion them from economic hardship. Since April the authority has been paying a monthly bonus to its pensioners as part of interim measures to cushion them against the rising cost of living.
We have engaged an actuary to carry out an actuarial valuation to establish a sustainable yet liveable pension level. Of course, a transaction of this nature will need to be approved by the various regulatory authorities, including the Reserve Bank of Zimbabwe.
ZI: There are reports that this transaction was not discussed by the Nssa Board, you did not make other key consultations and that you do not have a resolution to exit the investment, what is your comment?
AM: Investments at Nssa are governed by an Investment Policy and the Public Finance Management Act (22:19) with respect to investments classified as significant. The authority followed all the required governance procedures. Everyone who needed to be consulted was consulted. All board resolutions are in place.
ZI: Did the government or line ministry approve of your investment realignment strategy, given that the government is an interested stakeholder in Nssa?
AM: While internal procedures have been completed, consultations with regards to the Public Finance Management Act (22:19) are in progress and until these are concluded we cannot divulge much regarding this.
ZI: There is market speculation that ZB and CBZ are going to be merged by the entity buying your stake, why would you sell now and yet you already have an equity stake in CBZ?
AM: The transactions are being brokered by agents with the underlying beneficial owners only revealed when the parties have signed non-disclosure agreements and are ready to consummate the deal. This is in the interest of evaluating the transaction based on merit. As things stand, Nssa is not aware of the parties that are represented by the respective agents nor what they intend to do with the stake.
ZI: A listed company requires a cautionary statement if a transaction of this magnitude is about to happen involving the shares of a listed stock, is Nssa not in breach of ZSE regulations?
AM: This is a transaction between shareholders who are not bound by listing requirements. Similar transactions have been executed in the market between and among shareholders which does not require the company itself to issue cautionary statements
ZI: Is it wise for Nssa to talk about the exit from ZB ahead of the transaction given that other stakeholders like employees, customers and investors who are holding the share may react in panic, withdraw their interest in the investment leading to loss of value?
AM: Nssa never initiated discussion on this and indeed would have preferred not to comment. We were only responding to adverse reports on the transaction, which could have scuttled discussions on the transaction.
ZI: You have investments in ZB, CBZ and FBC, what criteria did you use to choose to sell ZB and how best can you describe the historical performance of ZBFH as an investment asset?
AM: Nssa conducted a detailed confidential expert evaluation of its investments in the financial sector before it settled on this. The move is designed to create a leaner and more manageable portfolio that can create shareholder value and consistently pay sustainable dividends to the pension fund.
ZI: There is currently a shareholder dispute at ZBFH involving Nicholas Vingirai’s Transnational Holdings Limited, how will your exit from ZB impact this and is it true that Vingirai is one of the potential buyers? Did the dispute influence your decision to offload the stake?
AM: The decision by Nssa was not influenced by this at all. Nssa is not involved in any dispute at ZB. Nssa is only influenced by the desire to safeguard and grow value in its investments. As things stand, Nssa is not aware of the parties that are represented by the respective agents nor what they intend to do with the stake.
ZI: How will your intended exit from ZBFH affect management and staff, how are their interests being protected? We have seen loss of jobs management changes and so on when transactions of this magnitude happen.
AM: Nssa as a provider of social security considers job security of employees as top priority. Modalities will be discussed and agreed by the parties as part of negotiations to conclude the transaction.
ZI: What are you going to do with the proceeds of the disposal, and do you now have benchmark returns that you expect from listed equities?
AM: The re-alignment process is expected to unlock additional funds that will be channelled towards boosting benefits pay-outs. The pricing and consideration has been carefully designed to retain value in real terms for the benefit of the pensioners and contributors. The stake is not being sold for monetary consideration and the consideration has been carefully thought out to avoid monetary loss.
ZI: Can you brief us on Nssa’s current investments and future investment plans.
AM: Nssa’s investments are spread across several asset classes covering equities, properties and fixed income. The strategic drive is to generate sustainable investment income to fund benefit improvements while growing the investments assets in real terms.
So far, the portfolio has managed to outperform the ZSE, inflation and exchange movements implying that the Authority has managed to create positive value.
The portfolio’s growth since the beginning of the year is higher than inflation and has also outperformed movements in the exchange rate implying that the USD value of the portfolio has increased.
Some of Nssa’s strategic investments that have entered the top 10 ZSE stocks include RTG, CBZ and FBC. The future strategic thrust is to invest in real assets that generate income, growth and impact on the social welfare of pensioners.
As part of the transformative journey, the authority has earmarked the agriculture value chains as part of our impact investment strategies. One of the key objectives of Nssa is to invest in companies and projects that generate substantial social and economic impact on a commercial basis.
According to FAO, “Agricultural activities provide employment and income for 60-70% of the population, supplies 60% of the raw materials required by the industrial sector and contributes 40% of total export earnings and contributes approximately 17% to Zimbabwe’s GDP”.
ZI: In view of Covid-19 infections, is Nssa doing inspections of workplaces to ensure that they follow the minimum standards to prevent infections and to also ensure that there is adequate ventilation?
AM: In line with our mandate to promote health and safety at work, we are conducting joint operations with the Ministry of Public Service, Labour and Social Welfare to inspect whether companies are complying with Covid-19 guidelines as set by the Ministry of Health and Childcare.
Unfortunately, we sometimes face resistance from some people due to a general fear of regulators, but regulation is not always there to arrest you, but to assist you. We are also facing challenges with the informal sector, which is very difficult to regulate and to access.
Our mainstay of interventions has been promotions rather than enforcement because when one goes with a stick people tend to be very resistant. Nssa embraces the notion of social dialogue in pursuit of overcoming challenges employers and employees face.
The challenge for business is how to strike a balance between the safety of the worker and productivity. It is about surviving as a business and ensuring that workers continue to earn their wages. Unfortunately, some of the current work processes put the worker at risk in terms of Covid-19 and those must be reengineered.
We have seen the number of cases continue to increase and the numbers have been growing exponentially across the globe. The workplace is where we spend most of our time and therefore an area where we are put at risk.
The workers are equally important players in the fight against the virus and these calls for a sense of responsibility on every individual. The simple things that have been shown to be effective against the Covid-19 lie within the individual — issues such as social distancing and hand washing.
The most important right workers have is the responsibility to monitor their own health. Once you suspect that you have symptoms of the virus, or you’ve been in contact with someone with Covid-19 you must self-isolate. You should be able to protect your co-workers and others.