THE National Social Security Authority (Nssa) is on a journey to reinvent and reinvigorate itself as it seeks to become a world-class provider of social security by 2030. With investments playing an integral role in preserving and creating value for the fund, the Zimbabwe Independent (ZI) caught up with Nssa general manager Arthur Johnson Manase (AM) for an update on arguably the biggest transaction by the Authority this year, the disposal of shares in First Mutual Holding Limited. Below are excerpts from the interview:
ZI: Nssa’s disposal of a significant stake in First Mutual Holdings Limited is arguably one of the much-anticipated deals of the year; can you tell us the outcome of the bidding process that was just concluded?
AM: The National Social Security Authority (Nssa) is currently implementing a Board and Government approved refocus strategy that involves divestiture, consolidation, and optimisation of its investments to unlock value for the benefit of its members who include pensioners and contributors.
In line with our new mantra of honesty, accountability, and transparency, Nssa issued a statement on January 14, 2021 advising the public on its intended partial divestiture from First Mutual Holdings Limited (FMHL).
Through the statement, Nssa invited interested parties to submit expressions of interest for the 31,22% FMHL stake. The disposal of this stake will still leave Nssa as the majority shareholder in FMHL, with 35%. Seven parties responded to the invitation.
ZI: How much did you receive from the transaction, and did you get an independent opinion from financial advisors?
AM: The successful bid was evaluated from a technical and strategic fit, followed by a financial evaluation. Nssa enlisted the services of an independent financial advisor who ensured that the set premium would be good for the Authority and its beneficiaries. The proposed settlement is in line with the advice of our financial advisors but at this time we cannot disclose the quantum or nature of settlement as the other party still has housekeeping issues to attend to. I am however confident that we have an agreement, and the market shall be informed accordingly.
ZI: What are you going to do with the cash proceeds from the transaction?
AM: Proceeds from the disposal will be a hybrid of blue-chip equities and hard currency. The hard cash will be allocated to impact investments and value preservation assets with a currency hedge, which will help stimulate economic activity, generate foreign currency, and create jobs for the benefit of all Zimbabweans.
ZI: Did you follow the relevant governance processes in consummating the deal?
AM: We received requisite approvals from the Nssa board, the Ministry of Public Service, Labour and Social Welfare and the Ministry of Finance and Economic Development.
ZI: There have been allegations that Nssa is depriving pensioners by offloading vital assets, such as this one, what is your comment?
AM: Nssa was holding equity in FMHL that was more than the permissible 35% listing rules threshold. As a result, a partial divestiture from FMHL was inescapable and was thus intended to meet compliance issues in line with the new Nssa ethos of good corporate citizenry. I am glad to say that Nssa by following this transaction will now be compliant.
ZI: Now that the disposal of FMHL shares has been concluded, can we expect more consolidation and divestitures to come, particularly from RTG where you hold a very significant stake?
AM: As an Authority we are bound to make sure we get the optimal returns from all our investments. Asset classes like RTG will be realigned so that they are fit for purpose in terms of our optimisation strategy.
ZI: What is your investment strategy going into 2022?
AM: Our investment strategy is guided by the National Development Strategy 1 (NDS1) “Towards a Prosperous & Empowered Upper Middle-Income Society by 2030”, the Nssa Strategic Plan 2021-2025, National Development Goals, including gender mainstreaming and environmental and social safeguards. Our investment philosophy is premised on a holistic approach to investment and not just pure monetary profit but impact investments.
ZI: Apart from RTG, which other companies will Nssa divest out of?
AM: As communicated through various update statements, Nssa is currently implementing a refocus strategy that involves divestiture, consolidation, and optimisation of its investments to unlock value for the benefit of its members who include pensioners and contributors. The sectors affected include banking, where we divested from ZB Holdings and NBS, where we are seeking a strategic partner. In the insurance cluster consolidation we focused on our investments in NicozDiamond, Fidelity Life, Zimre and FMHL. Outside the two sectors, we are revisiting our investment in Turnall. That is the current situation and if there are any changes the market will be advised accordingly.
ZI: This programme is completely the opposite of a Nssa that had the appetite to expand previously. What lessons were learnt from the expansion drive? Were there any mistakes? Please give examples.
AM: Nssa is simply realigning its portfolio to conform with relevant governance guidelines. Ultimately, Nssa will continuously seek ways of deriving maximum value from its investments for the benefit of its members, pensioners and the economy at large. As a pension fund, our investment strategy always adopts a long-term perspective.
ZI: As Nssa embarks on this new direction, what measures have been put in place to guard against making the same mistakes? This question becomes more relevant considering that you are looking into the possibility of investing offshore.
AM: Due diligence is a central component for every investment decision we make supported by sound documentation, condition precedent checklist and legal review of transaction documentation. Investment governance structures have been strengthened through a review of the terms of reference for the management investment committee and board investment committee.
ZI: Please update us on your offshore investment plans. Are there promising transactions? When can these come into fruition?
AM: Offshore investments are made in the interest of safeguarding the sustainability of the fund. Nssa is still a young scheme, as it is less than 40 years old, the maturity stage for any social security scheme. This is because members of such schemes are expected to contribute for at least 40 years, the average working life, before they start to earn a pension. As a result, management has the responsibility of implementing requisite measures to guarantee the sustainability of the fund, for the benefit of current and future beneficiaries.
ZI: Pensioners are lounging in poverty. Are there plans to increase their monthly payouts?
AM: Nssa benefits are determined through periodic actuarial valuations to safeguard the sustainability of its schemes. The minimum monthly retirement pension payout for Nssa currently stands at ZW$3 900 for those under the Pension and Other Benefits Scheme and ZW$5 200 for those under the Accident Prevention and Workers Compensation Scheme. At the time of the last review in October 2021, this pegged the minimums at the auction rate equivalent of US$45 and US$60, respectively.
Earlier this year, the Minister of Public Service, Labour and Social Welfare, Professor Paul Mavima communicated a clear roadmap of pension pay-out reviews, which Nssa has stuck to. The reviews, which are pegged at the Reserve Bank auction rate, were as follows, April, US$25; July, US$30; October, US$40; and January 2022, US$60 minimum retirement pension respectively.
However, Nssa exceeded expectations because it reached US$35 and US$45 in July and October respectively. We intend to pay a minimum equivalent of US$60 by January 2022 and pensioners are aware of this roadmap of periodic reviews.
It is important to appreciate that Nssa is a social security scheme that was designed to co-exist with occupational pension funds where contributions are at a higher level, with no ceiling on the pensionable salary.
The Nssa pension scheme was designed as a safety net. The role of the Nssa pension is to augment what pensioners earn from their respective occupational pension funds. However, Nssa knows some pension funds collapsed, while others pay paltry amounts or do not pay at all. For this reason, the authority has had to be innovative by coming up with non-monetary benefits to augment pensioners’ incomes.
ZI: How has been the impact of Covid-19 in terms of companies contributing and number of contributors?
AM: Generally, the Covid-19 pandemic coupled with lockdown restrictions has drastically affected the financial viability of many employers. Resultantly, the capacity of companies to remit Nssa contributions within the prescribed timeframes was adversely affected and this in turn has a direct bearing on Nssa’s capacity to execute its mandate. To alleviate the financial burden on companies severely affected, Nssa extended relief on a case-by-case basis. On the other hand, the number of contributors has remained subdued as more and more companies are gravitating towards automation of processes, reduced headcount and working hours as they try to stay afloat.