adminIt should come as no surprise, given the diversity and scale of its investments, that NSSA boasts of highly qualified and well experienced professionals within its investment division. It has among its senior staff a qualified and experienced architect, engineer and real estate manager, as well as experienced equity and money market investment analysts and dealers.
Every investment is carefully considered taking into account NSSA’s investment policy and the guidelines of the International Social Security Association (ISSA) and the International Labour Organisation (ILO).
Ensuring minimum suitability standards for all staff within the investment unit, is one of the recommendations that are included within the ISSA 2011 Good Governance Guidelines for Social Security Institutions.
Under the heading Guidelines for Institutions with Internal Investment Units, ISSA states as its first guideline what it calls the prudent person principle.
“The investment unit should follow the prudent person principle in managing funds of the social security institution,” the guidelines say.
“The prudent person principle is integral to the fiduciary duties of the board and management in administering the funds of the social security institution,” they continue.
Expanding on the prudent person principle, the ISSA guidelines say there should be minimum suitability standards for all staff in the investment unit.
They say there should be a code of ethics and conduct for the unit’s staff and an office external to the investment unit to monitor compliance with the minimum suitability standards and the code of ethics and conduct.
NSSA has established a code of ethics, in line with this guideline.
To establish clear accountability, the organisational structure of the investment unit should reflect the decision-making process and should have embedded within it a system of checks and balances.
The decision-making process must be clear and transparent. As mentioned last week, prospective NSSA investments are first considered by investment analysts within NSSA’s investment division, who make recommendations to the investment manager, who forwards his recommendations to the management investment committee, which in turn passes on its recommendations to the board investment committee.
The board investment committee makes its recommendations to the full board, which makes the final decision or, where the investment requires ministerial approval, makes its recommendations to the Minister of Public Service, Labour and Social Welfare, who consults with the Minister of Finance, before giving his approval.
All real estate investments have to be approved by both ministers, as does a shareholding of 10 percent or more in any one equity counter. The office of the internal auditor may dedicate competent staff to the investment unit, the ISSA guidelines continue. There may be an office external to the investment unit to evaluate, monitor and review the overall risk of the investment portfolio.
NSSA has, in line with this recommendation, appointed a chief audit executive to evaluate, monitor and review the investment portfolio.
The recruitment by NSSA of well qualified and experienced professionals for its investment division is in line with the ISSA guidelines, which also state that staff compensation “should provide the correct incentives to do right and not do wrong”.
Given NSSA’s extensive investment in housing schemes and other property construction, the authority decided to recruit a qualified architect, in addition to the qualified engineer and registered real estate consultant it already employed.
The ISSA guidelines say management should establish standards and benchmarks to evaluate the performance of the investment unit, with the evaluation period taking into consideration the nature of the assets invested in.
Manuals of procedures should document how investment policies are to be implemented in accordance with the prudent person principle. Compliance with the manuals of procedures should be monitored and reviewed.
NSSA is guided in its investment of social security funds by the ISSA guidelines, as well as ILO guidelines and its own guidelines and procedures, which in turn are influenced by the ISSA and ILO guidelines. It is also guided by actuarial advice.
Key to ensuring that its investments are sound are the professionals that it employs, not only to recommend where investments should be made and manage the investment portfolio but, where property investments are concerned, to manage the design and construction of buildings and the establishment of on-site infrastructure.
Talking Social Security is published weekly by the National Social Security Authority as a public service. There is also a weekly radio programme on social security, PaMheponeNssa/Emoyeni le NSSA, at 6.50pm every Thursday on Radio Zimbabwe and Friday on National FM. There is another social security programme on Star FM on Wednesdays at 5.30 pm. Readers can e-mail issues they would like dealt with in this column to [email protected] or text them to 0772-307913. Those with individual queries should contact their local NSSA office or telephone NSSA on (04) 706523/5, 706545/9, or 799030/1.
Online Reporter