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Harare Bureau
GOVERNMENT will soon enact legislation with a view to look at how National Social Security Authority investment can be done to ensure that it is put in a safer project that protects the interests of low income earners and ordinary persons, a Cabinet Minister said.
Finance Minister Patrick Chinamasa said he would look at the current legislation to see if NSSA could make investment in long term.
He said this in Victoria Falls during a pre-budget seminar while responding to a question from legislators.
Manicaland Senator Monica Mutsvangwa, (Zanu-PF), had asked if Government could not intervene in the wake of reports that NSSA intends to write off $30 million invested in Capital Bank, as it winds up operations.
Sen Mutsvangwa said, in her view, it was not prudent for NSSA to participate in short term invest that were risky but long term that were safer like infrastructure.
She said given that NSSA drew its money from poor people most of whom would have retired and were struggling, Government should look at the prudence of such investments where it puts money in a project that eventually collapses as in Capital Bank.
In response, Minister Chinamasa concurred with Sen Mutsvangwa but said he would want to look at the legal provisions.
“I am certainly looking at NSSA will try to see whether I have powers to direct where that money should go. Personally I think it should go into irrigation. We want these organisations to put money into long term projects,” said Minister Chinamasa.
There were reports that NSSA would write off over $30 million it invested in Capital Bank.
NSSA, the 86 percent shareholder in Capital Bank, has also authorised the sale of the bank’s 21 percent stake in First Mutual Life with proceeds being used to partly pay off depositors.
But even writing off $30 million, the authority says it has accrued more benefits than what it invested through Capital Bank-linked investments.
NSSA is benefiting from the insurance business under First Mutual Life which it acquired through Capital Bank, former Renaissance Merchant Bank, and its subsidiary, Pearl Properties.
“If anything, the authority may only lose the $30 million that it has invested in the bank as equity, but that investment has already brought benefits to NSSA through the investment in FML,” said NSSA. Last year, the FML shareholding contributed $176 million to NSSA’s balance sheet figure of $886 million.
The NSSA board resolved to discontinue the operations of the bank by paying off all creditors and depositors and it has since applied for a micro-banking licence.
Initially, NSSA invested $24 million in Capital Bank last year, then under curatorship.
And in February this year, it converted its deposits in the bank to equity in a rights issue.
As such, the total invested in the bank by way of equity amounts to $30,2 million equivalent to 86 percent shareholding of Capital Bank. NSSA resolved to invest in Capital Bank with high expectations of a return on investment. This, however, did not materialise as the debtors’ book did not perform as had been intimated by the curator.
Instead, the fresh capital injected into the bank was used to settle old depositors leaving little or no funds for new lending. The bank rebranded in an effort to attract depositors but non-performing old loans militated against the revival of the bank.
Online Reporter