Nssa consolidates bank investments
THE National Social Security Authority (Nssa) has enhanced its business strategy by consolidating investments in CBZ Bank Limited, FBC Bank Limited and National Building Society to reduce the capitalisation burden on the authority while creating solid growth and dividends.
This follows the implementation of a portfolio refocus and restructuring strategy designated to consolidate its investment in the insurance sector and banking sector, so as to create companies with economic scale that are able to grow capital and pay substantial dividends.
Nssa currently holds 35% shares in FBC, 100% shares in National Building Society (NBS) and 18% shares in CBZ with an intent of later becoming a major shareholder in CBZ when transactions are finalised.
Speaking to The NewsHawks, Nssa’s deputy director of marketing and public relations, Tendai Mutseyekwa, said solid investments in companies that are leaders in their industries guaranteed the sustainability of Nssa and its schemes.
“Creating a solid banking portfolio is certainly helping the Authority in its sustainability drive. Solid and well-capitalised banking institutions will also not require frequent capitalisation from the shareholders,” he said.
He said refocusing investments in these three banks helped reduce the burden of capitalisation. The minimum capitalisation for big commercial banks is US$30 million while for tier-2 institutions like NBS it is US$20 million.
Mutseyekwa said Nssa is providing services to pensioners through these banks and so these investments would benefit the retirees, as there has been solid growth in capital and dividend income from FBC and CBZ, which has been part of the investment income used to pay out pensioners.
“Having significant holdings means that the Authority is able to implement value-adding proposals such as pensioner revolving facility and zero-rated facility that benefit members,” he said.
He added that Nssa was actively pursuing opportunities with the government’s privatisation and commercialisation agenda in a bid to support the government vision of revitalising the economy towards Vision 2030.
“One such focus area is the fast-moving consumer goods (FMCG) sector in which the Authority is undertaking due diligence on Silo Foods. Such an investment will help in ensuring food security while providing solid returns for Nssa,” said Mutseyekwa.
The social security entity has two active projects which are part of the investment into the FMCG sector that includes the construction of modern shopping centres with leading retail shops as anchor tenants. These are anticipated to deliver consistent rental income and solid asset growth in the near future.
Economist Prosper Chitambara said that investing in banking was a positive development as the sector was robust and strong; and it had been able to weather a lot of storms in the past.
“Definitely, these kind of investments are critical in terms of the preservation of value. The banking sector is one of the sectors that has been making a good profit compared to other sectors,” he told The NewsHawks.
“Obviously establishing its investments in these institutions goes a long way in terms of ensuring the preservation of value which also ultimately benefits pensioners in terms of their pension payouts,” added Chitambara.
However, one of the beneficiaries of the fund was not convinced that Nssa was doing a great job in investing in the banking sector, as some of the investments made by the fund had not yielded good returns.
“I do not think them investing in the banking sector would help us in any way nor add value to the payouts that we receive from the fund,” said Musa Muchenje in a phone interview with The NewsHawks
.A pensioner, only identified as Muchenje, cited the Beitbridge Hotel as an example of one bad Nssa investment deal.
“Last time the fund built a hotel in Beitbridge, which was a waste of time and money; also they built houses but we are not aware of how they are adding value to our pensions,” he said.
In the past, Nssa has made a series of overpriced property investments that ended up being a liability to the fund rather than an asset. The social security invested US$44 million in building the Rainbow Towers hotel in Beitbridge, which to date does not operate as one.
“The Beitbridge Hotel has been operating as an isolation centre supporting the government’s health emergency programme during Covid-19. The Authority is currently working on alternative uses for the property in light of the economic dynamics in Beitbridge,” said Mutseyekwa.
In 2019, an audit showed that Nssa had lost up to US$88 million due to poor investment decisions. The authority also lost US$30 million in Capital Bank whose licence was cancelled in 2014 by the Reserve Bank of Zimbabwe.