NSSA strives for optimal returns

responsibilities to beneficiaries when they become entitled to a pension or other benefits.
It is evident that many contributors feel that investment funds should be made available to them in the form of loans or the construction of houses they can afford to rent or buy.
NSSA invests some of the funds it has custody of in projects that benefit contributors and communities. Its investment policy guidelines 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.
However, keep in mind that it is expected, in terms of the same guidelines, to have a balanced investment portfolio that provides optimal returns that at least match or exceed prevailing market standards.
It achieves this through a spread of investments on the equity market, the money market and the property market and through investments with an empowerment or social objective.
Where investments with a social or empowerment objective are concerned, returns may need to be below average market returns if they are to achieve that objective.
For instance, NSSA is providing banks with funds at an interest rate of 10 percent for lending to businesses, so that, after adding the bank’s own interest and handling charges, the loans will not cost those businesses any more than 15 percent.
It could achieve higher returns by investing those funds elsewhere but it is accepting a lower return because of its wish to make money available at affordable interest rates to businesses to help them survive and hopefully grow and generate more employment.
Likewise it has made money available to two banks for lending at an interest rate of 10 percent to contributors who have been retrenched and have viable projects that require capital.
With all its investments, NSSA has to ensure their security. The funds it is investing are, after all, contributors’ funds. The value of these funds has to be preserved and grown for their benefit.
When NSSA makes funds available to banks for on-lending, it ensures that the banks are responsible for repaying the money to NSSA, regardless of whether or not they have recovered the funds from those they have lent them to. The banks, therefore, take the lending risk rather than NSSA.
Moreover, it insists that the end borrowers should be aware that the funds come from NSSA and should acknowledge their ultimate indebtedness to NSSA so that in the event of the bank collapsing NSSA can still recover its money, if necessary, from the end borrower.
Because the banks are taking the lending risk, those applying for loans have to satisfy the lending criteria of the bank through which they seek to access the loans.
NSSA does not lend money directly to individual members of the public or individual businesses. It makes funds available to banks for on-lending. The banks take the risk and assess the creditworthiness of those they on-lend the funds to.
NSSA’s core business is to manage social security schemes, which includes investing contributors’ funds so that money is available to pay for their benefits when they qualify.
It is not to lend money or assess the creditworthiness of would-be borrowers. That is the core business of banks.
Some of those who have applied to the two banks through which the retrenchment loan facility is being provided have complained about the strictness of the banks’ lending criteria. Because the banks are taking the lending risk and could be out of pocket if a borrower fails to repay the loan and they do not have adequate security for it, they have to assess the creditworthiness of those who apply for the loan and ensure their interests are protected.
The same considerations apply when NSSA embarks on housing schemes. It is endeavouring to help overcome the shortage of housing and make more housing available but has to do it in a manner that will see it obtaining a return on the investment.
One of the housing schemes it is currently involved in is the Glaudina housing estate on the outskirts of Harare. The authority acquired the land, divided it into mainly medium-density housing stands and serviced the stands. The stands are being sold – most have been sold already.
Some have been sold to a building society that has built houses on them that it will sell. Roads are currently being tarred there.
NSSA plans to service high-density stands in another part of what was originally Glaudina Farm.
While NSSA is keen to play a part in the country’s development and the improvement of the quality of life of ordinary Zimbabweans and the communities they live in, it has always to ensure that it will receive a return on its investments. This is even if the return is less than it might have obtained if the money had been invested elsewhere.
That means that any project it invests in must be viable, must not put contributors’ funds at risk and must result in a profit, that is it must result in the funds invested increasing in value.

l Talking Social Security is published weekly by the National Social Security Authority as a public service. Readers can e-mail issues they would like dealt with in this column to [email protected] or text them to 0735 041 278 Those with individual queries should contact their local NSSA office or telephone NSSA on (04) 706517-8 or 706523-5.