adminand other liabilities are invested in a balanced portfolio of investments that include equity, property and money market investments.
Pension contributions that are paid to NSSA have to finance current pension payments and pension payments for those still in employment when they eventually retire, which for some people could be in 40 years’ time or even further away.
It is important that surplus funds are invested wisely in a manner that will ensure the pension fund grows.
NSSA is required, in terms of its investment policy, to have a balanced investment portfolio that provides optimal returns.
The investment criteria laid out in this policy include the preservation of assets’ value, liquidity, profitability, investment diversity, security and matching assets with liabilities.
The guidelines also provide for the inclusion of investments that generate productive employment, higher productivity and export competitiveness; investments in residential accommodation and other social amenities; and investments that support empowerment initiatives.
In line with this investment policy NSSA has a spread of investments on the equity market, the money market and the property market.
Equity market investments involve direct buying and selling of shares on the stock market, participating in rights issues, warehousing arrangements, underwriting arrangements and taking part in quasi-equity instruments such as preference shares.
Money market instruments provide treasury bills investments, negotiable certificates of deposits, banker’s acceptances, debentures, fund management as well as project loans issued directly by the authority or through financial institutions.
Property market investments include real estate where the authority invests in commercial properties in good primary and secondary markets. Investments include development financing of commercial, industrial and residential properties.
Real estate investments to date that benefit communities include shopping centres in Mutare’s Sakubva suburb and Gwanda, a commercial centre in Bindura, the Social Security Centre office block and Ximex shopping mall in Harare, South Medical Chitungwiza Hospital, Ekusileni Medical Centre in Bulawayo and Biri Dam in Mashonaland West.
Investments in residential accommodation include the servicing of 660 high-density residential stands, on 204 of which NSSA has built houses, in Marondera’s Rusike suburb and the servicing of 490 medium-density residential stands in Glaudinia, in Harare. NSSA plans to service a further 1 510 residential stands in Glaudinia.
These investments are intended to both provide the pension fund with a good return on its investment and contribute to the well being of the communities where these property investments have been made.
When it comes to supporting empowerment initiatives, NSSA fulfils this investment goal by providing funds to the Small Enterprises Development Corporation and various commercial banks for on-lending.
Such funds are normally secured by the financial institution concerned through a bank guarantee and further secured by means of bank acceptances by the borrowing company.
NSSA recently advised banks that the money it provides them with for on lending to businesses should not cost the borrower more than 15 percent per annum of the total amount lent, including interest and handling charges. It has an interest in businesses succeeding and creating employment, since its social security schemes are employment based.
NSSA also recently made available to two commercial banks a total of US$5 million for lending, at an interest rate of 10 percent, to former contributors to the national pension fund who have been retrenched to help them finance business projects.
While investments in equity and money market instruments are intended to maximise returns in order to grow the national pension fund, investments that have a social or empowerment objective tend to have lower interest rates in order to attain that objective. Nevertheless these investments must still contribute to the pension fund’s growth.
NSSA’s investments policy is designed to develop a working, efficient and balanced investment portfolio that facilitates the provision of care and financial protection to all Zimbabweans, optimises returns and plays a major role in national development.
When analysing the different investment options the authority looks at the risks involved. It carefully checks whether the investment will be profitable and safe. It ensures that funds are channelled into relatively secure but diverse areas and investment instruments to maintain and grow asset value and spread the risk.
It also ensures that its investment programme is generally in harmony with the nature of its liabilities and actuarial valuation reports.
NSSA’s funds come from employee and employer contributions and the return on investments made with these funds. NSSA has a responsibility to these contributors to look after and grow the funds they have contributed.
It is unable, therefore, to provide money for projects that are unlikely to result in a reasonable return on the investment. It has a responsibility to maintain and grow the assets it has been entrusted with for the benefit of social security scheme beneficiaries.
Only by managing the funds and investments wisely can it ensure that those who have contributed to the fund will be able to receive the retirement benefits they are entitled to when the time comes for them to claim them.
- The Talking Social Security Column is published each week by the National Social Security Authority as a public service. Readers who have any questions they would like dealt with in this column are welcome to e-mail their questions to [email protected] or send an SMS to 0772 469 801. Those who have specific questions should contact their local NSSA office or telephone NSSA on (04) 706517-8 or 706523-5).
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