aurora
Business Writer
At least 20 investors are looking to take up the National Social Security Authority (NSSA)’s shareholdings in Turnall Holdings and First Mutual Life Holdings while others are eyeing stake in the authority’s National Building Society (NBS), Business Weekly can reveal.
The pension firm is seeking to streamline its investment portfolio.
Out of the 20 investors, seven are eyeing a stake in the NBS.
Over the past years, the Authority has moved towards improving its investment strategies, by implementing measures such as bringing in a new investment team and increasing the frequency of actuarial valuations of its investment portfolio.
This is guiding the pension fund’s investment vision.
NSSA investment refocus strategy that involves realignment and consolidation of the fund’s portfolio is expected to be completed by April, with several local and international players having responded to the Authority’s call for proposals from those interested in acquiring its shares in three entities.
Earlier in January, NSSA invited suiters through a statement wherein it announced that it was offloading shares in First Mutual Holdings Limited (FMHL) and Turnall. The compulsory pension fund also announced that it was looking for strategic partners for its wholly owned building society.
Deadline for submissions elapsed last Monday and 20 players successfully submitted their proposals.
NSSA general manager Arthur Manase, said the response was very good as it indicated the market’s appreciation of the value that NSSA generates.
“We received 20 proposals for the three, broken down as follows, FML – seven, Turnall – six and NBS – seven. The responders were a mixture of institutional and private equity investors. The exciting thing is that all three entities quoted interest from both local and international suitors,” said Manase.
He said NSSA would enlist the services of an independent financial advisor to validate the bids and offer their recommendation, which would be escalated to the NSSA board for ratification.
“Of course, transactions of this nature will need to be approved by the various regulatory authorities, including the Reserve Bank of Zimbabwe, IPEC, the Securities Exchange, the Competitions and Tariffs Commission, among others. The public will be duly advised once the process has been completed, which we expect to be in April,” said the NSSA general manager.
NSSA is currently implementing a refocus strategy that involves divesture, consolidation, and optimisation of its investments to unlock value for the benefit of its members who include pensioners and contributors.
Industry expert and Zimbabwe Pensions and Insurance Rights Trust (ZimPIRT) general manager Martin Tarusenga, said the divesture was long overdue, particularly with regards to the FML investment.
“Pension and insurance funds must always be invested in accordance with an investment policy to match assets to the obligations of the pension fund to its members. Such investment policies or strategies should take due consideration for the need diversify the investments, among other considerations.”
“The declared need for NSSA to streamline its investment policy suggests that the investments have now become misaligned to NSSA’s obligations for one reason or the other, or the investments have always been misaligned, again for one reason or the other,” said Tarusenga.
“NSSA’s investment in First Mutual Life, a company already invested in assets typically attractive to pension funds, suggests undue concentration (lack of diversification) for a pension fund. Those familiar with pension fund investment, have always wondered on the wisdom of NSSA investing in First Mutual. It might be that NSSA is turning the corner, in recognition of proper pension fund investment strategies.”
Following requisite board approvals, the authority is offloading its entire 32,55 percent stake in Turnall as part of refocusing and optimising the investment portfolio.
NSSA is also in the process of implementing phase three of the insurance cluster consolidation strategy which involves reducing its stake in FMHL totalling 66,22 percent through offloading up to 31,22 percent to a strategic partner.
Said Manase: “This strategic move will see NSSA keep a majority shareholding at 35 percent, in compliance with Zimbabwe Stock Exchange and IPEC requirements, while bringing in a strategic investor with solid financial resources, synergistic, technical, and strategic benefits to catapult First Mutual into a regional insurance powerhouse. NSSA has been non-compliant since 2012 and now intends to be a responsible corporate entity in line with its new values of transparency, honest and accountability. NSSA also needs to share its investment risk in line with good corporate governance.”
Economic analyst Persistence Gwanyanya said previous poor investment strategies on NSSA’s part could now be seen on current returns, and that the Authority was right in making amends.
“The whole idea of investing or divesting by NSSA is to create value for the contributors. If the investments are no longer creating value, the only responsible thing by NSSA to do is to divest.
“In the past NSSA had invested heavily in entities or ventures that left a number of us wondering whether the whole issue has been well-thought out including necessary diligence and investment appraisals. These included investment in banks and failed entities which could not be salvaged at the end.
“As such its unsurprising that body is contemplating divesting, ostensibly to enhance value creation. Currently the beneficiaries of NSSA are not satisfied with the value they are getting from the it typified by very low monthly payouts.”
The first phase of the insurance cluster consolidation was initiated in 2017 and involved the merging of short-term insurer, NicozDiamond into FMHL through a disposal of NSSA’s stake in NicozDiamond in return for shares in FMHL. The transaction helped strengthen FMHL’s short term insurance business and solidify its market standing as one of the leading insurers in the country, said Manase.
The second phase, which was implemented late last year, saw NSSA support the consolidation of Zimre Holdings Limited (ZHL)’s strategic business units – Fidelity and ZPI – through the disposal of NSSA’s shareholdings in Fidelity Life and ZPI in a share swap deal with ZHL. This leaves NSSA’s insurance sector investments centred around FML and ZHL with vital cross linkages.
The banking sector consolidation saw the execution of the divesture from First Capital Bank (formerly Barclays) and ZBFH in 2020 as the first phase of the strategy. The second phase involves creating a strategic alliance for its investment in NBS.
Manase said NBS had managed to establish itself as a significant player in the housing space, within five years and that “NSSA believes it is time to engage a strategic partner to broaden NBS’ product offering and enhance its capacity to deliver on affordable housing”.
Bongani Ndlovu