Andrew
Tawanda Musarurwa
Senior Business Reporter
The National Social Security Authority (NSSA) has increased the frequency of actuarial valuations of its investment portfolio as part of wider measures to ensure significant yields.
The State-run entity uses a liability-driven investment strategy that is based on the cash flows needed to fund future liabilities, and is commonly observed in the defined benefit (DB) space.
And it also allows NSSA’s investments to be multi-asset class.
But the authority’s investment strategy has come under heavy criticism over the years following a number of questionable decisions particularly related to property investments, not least a US$44 million investment in the Beitbridge Hotel and an overpriced acquisition of Celestial Park in Harare.
A forensic audit report tabled in Parliament last year by then Public Service, Labour and Social Welfare Minister Dr Sekai Nzenza indicated that NSSA was broadly prejudiced an estimated US$88 million due to poor investment appraisal, inflated costs, mismanagement and inefficiencies. In an interview, acting general manager, Mr Arthur Manase, said NSSA’s investment strategies and mechanisms had been reviewed in line with the current economic and financial risks.
“NSSA has suffered from dubious investment decisions in the past and the nation would be happy to hear that it has now cleaned up its act. New expert investment team players have been recruited to replace the old lot. Very soon the nation will see the changes taking place. The ways of corrupt investments are now dead and buried,” said Mr Manase.
“NSSA implements a liability-driven asset mix which is guided by actuarial recommendations conducted from time to time. While statutorily these actuarial valuations are carried out once every three years, the authority is permitted to conduct such valuations more frequently when the environment is unstable.”
Due to the unstable economic environment, the authority has been conducting these actuarial valuations annually.
The last such actuarial valuation and asset modelling process was in late 2019.
“This valuation informed a revision of the asset mix, which was subsequently approved by the board in December 2019. The current asset mix requires the investments to be skewed towards real assets that help to preserve value in an inflationary environment,” said Mr Manase.
Some observers have, however, questioned the annual re-evaluation of pension assets especially in a hyperinflationary environment.
Latest official statistics show Zimbabwe’s annual inflation rate at 673 percent.
The Insurance and Pensions Commission (Ipec) has issued asset valuation guidelines for pension funds in the country in view of the impact of hyperinflation.
But NSSA does not fall under Ipec’s purview.
NSSA is also reportedly strengthening adherence to corporate governance.
“The new board has set in motion several strategic initiatives in the investments sector underpinned by sound corporate governance principles. These governance practices are centred on prudent management of investments, which is critical to preserving NSSA’s balance sheet,” said Mr Manase.
NSSA’s investment processes are guided by the NSSA Act [17:04], Public Finance Management Act [22:23], Public Entities Corporate Governance Act [10:31], and Investment Policy and Investment Strategy approved by the board from time to time. The authority has strengthened due diligence requirements in its investments.
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