Questionable investments and unsecured loans leave investors, mostly pensioners, in the lurch.
The National Social Security Authority (NSSA) is experiencing a corporate governance crisis in which it has lost millions of dollars in questionable investments at a time when it is exposed to a number of failing banks.
A report by the parliamentary public accounts committee said it is clear that there have been significant and serious lapses of judgment by the NSSA’s management. This will cost the authority millions of dollars that should have been securely and profitably invested on behalf of contributors.
The NSSA is a statutory body that makes it compulsory for all employees in both the public and private sectors to contribute 3% of their basic salaries to the pension fund.
The committee’s report comes on the back of complaints by pensioners at a recent workshop – organised by the Zimbabwe Pension and Insurance Rights Trust – that after making pension contributions for years, they were getting a raw deal from the NSSA.
According to the NSSA, someone who was earning $200 when they retired receives only $60 in pension. The amounts vary, but some pensioners receive as little as $20 a month.
At the workshop it was said that insurance companies and pension funds were also using pensioners’ money to invest in property.
“The committee concluded that there was a corporate governance crisis in the NSSA and most parastatals. There are major weaknesses, which, if not addressed, would continue to create headaches for [the] government,” reads the report.
“There is also the challenge of too much political interference, which is brought to bear on these entities to [such] an extent that they are not able to independently execute their mandate.”
The committee noted with concern that the NSSA is susceptible to undue pressure and influences and had put pension funds under high risk by investing in Capital Bank. The authority’s exposure in that financial institution, whose licence has since been withdrawn, was put at nearly $57-million.
The report also stated that Local Government Minister Ignatius Chombo had put pressure on NSSA to put money into the Metropolitan Bank.
“In a related matter, the NSSA had also poured funds totalling $15-million into Metropolitan Bank. It said it came as a directive from the Minister of Local Government, Public Works and National Housing Dr Ignatius Chombo, through its parent ministry, in anticipation of a cholera outbreak in local authorities.”
Chombo has no direct control over the NSSA, but the government has previously directed it to assist local authorities to provide houses. An example of this is Harare’s Glaudina suburb, a new project carried out using the entity’s funds.
More than 4 000 people died in the 2008 cholera outbreak, which was mostly blamed on the local authorities’ failure to provide clean water.
This week Chombo refused to comment saying he would respond to issues raised in the National Assembly in accordance with parliamentary procedures.
The report noted that some NSSA board members sat on more than two boards in violation of the NSSA’s corporate governance framework, thereby reducing their effectiveness.
NSSA directors were also said to serve on boards of companies in which the authority had interests.
The public accounts committee expressed concern that the directors were paid incentive bonuses biannually from fees generated from representing the authority on the various boards as well as receiving allowances from the NSSA.
In another questionable decision by the authority, the report said that the NSSA terminated an incomplete computerisation project on which it had spent $2.2-million. The committee noted that due diligence was not exercised and, as a result, the authority incurred a significant loss.
The actual cost of the project was about $1-million and about $1.29-million was incurred in legal costs to terminate the contract.
The parliamentary report said the NSSA had also disbursed $2.7-million to employees as housing loans without any form of security. It added that the housing loan policy stipulates that title deeds of properties acquired under this scheme should be kept by the NSSA until the employee pays back the loan, but this is not the case.
An audit is said to have revealed instances where employees who owe the NSSA unsecured housing loans had resigned without settling the loans and there was no clarity on how the loans would be recovered.