Govt sucked into US$30 million NSSA loss

Govt sucked into US$30 million NSSA loss
nssa yakanaka

The audit triggered the ouster of NSSA general manager, James Matiza, investments director, Shadreck Vera and other executives after the new board made sweeping changes at the authority in October last year.

THE country’s controversy-mired National Social Security Authority (NSSA), whose key executives were late last year sacked for alleged delinquency, lost US$30 million through an ill-fated investment in a distressed bank, the Financial Gazette can report.
This was after the Ministry of Finance forced the compulsory pensions administrator, over which government has control, to back down on a plan to halt the transaction in 2013.
Tendai Biti, now president of the People’s Democratic Party (PDP), was finance minister in 2013 when government insisted that NSSA pour millions to bailout ReNaissance Merchant Bank, which was later to be rebranded Capital Bank but eventually twisted in the wind due to lack of capital.
ReNaissance was one of seven distressed banks that sunk with a combined US$34 million worth of investments from the authority, according to a 124-page audit of NSSA operations by Deloitte Advisory Services dated October 30, 2015.
The audit was carried out at the instigation of the Robin Vela-led NSSA board, which was appointed in July last year and has been asked to address a myriad of problems at the authority.
NSSA manages about US$1,2 billion worth of public assets, with close to US$700 million investments spanning across sectors.
Biti left government after the July 31, 2013 polls when his former party, the Movement for Democratic Change (MDC-T) led by Morgan Tsvangirai, was spectacularly defeated by President Robert Mugabe’s ZANU-PF to end an inclusive administration formed in 2009.
He is now the leader of the PDP.
The audit triggered the ouster of NSSA general manager, James Matiza, investments director, Shadreck Vera and other executives after the new board made sweeping changes at the authority in October last year.
The new board said NSSA executives had failed to adequately serve their 600 000 members after abuse of the institution’s financial resources.
For instance, Matiza and a finance director blew a combined US$114 400 on holidays within a space of two years, according to the investigation, which also unearthed extensive spending on posh cars, exclusive mansions and generous personal loans by management.
The report indicated that several of dubious investments were inked after former public service, labour and social welfare minister, Nicholas Goche, and permanent secretary, Ngoni Masoka, endorsed the transactions on NSSA’s advice.
However, the authority had previously failed to demonstrate an aptitude to select viable investments, which made it imperative for a reliable oversight team at the ministry.
This demonstrates endemic weaknesses in government oversight and exposes the quality of key staff at NSSA, which is supposed to employ the country’s best brains.
NSSA was established in 1994 with the mandate to administer the national pension and other benefits scheme, the accident prevention and workers’ compensation scheme and every scheme or fund that could be formed in terms of its founding Act.
With its huge investments that grew to US$700 million at the end of June 2015, from US$246 million in 2009, NSSA has emerged as the biggest financial institution in Zimbabwe.
This extraordinary growth has been laced with controversy as NSSA bosses, as seen through the new audit, swim in luxury, oiling themselves with US$2 million housing loans while members qualifying to receive pensions have been condemned to downright poverty due to low payouts.
The politicians’ signatures on the deals have formed a strong cover for extravagance at the institution as directors would always say whatever they were doing had been approved by government.
Three reports have been tabled before government recently pointing to plunder of NSSA finances but it appears it has been difficult to nail the abusers.
“Proposal to invest in ReNaissance Merchant Bank (Capital Bank) was supported by the Ministry of Finance in a letter dated 31 January 2012 subject to other conditions being met,” Deloitte said.
The audit report said the previous NSSA board had declined funding the bank after it had failed to turn around. However, this position was changed after a letter from Ministry of Finance.
This week, Biti described as wrong reports that NSSA was forced to invest in Capital Bank under his watch.
He said NSSA had long taken interest in Afre Corporation, now First Mutual Life (FML) and through Capital Bank, which controlled 36 percent shareholding in FML, it had seen an opportunity to take control of the country’s second largest investment company after Old Mutual.
“It was a decision of NSSA. Once they got what they wanted, they pulled out of Capital Bank. If you ask now who the largest shareholder in FML is, it is NSSA. They got into FML through Capital Bank,” he said.
After being referred to the contents of the Deloitte audit, Biti said: “That is not true, that is not true”.
Capital Bank was part of seven distressed financial institutions, including Interfin, Royal Bank, Tetrad Securities, Trust Bank, Genesis Bank and Kingdom AfrAsia Bank where NSSA was exposed and had lost further investments worth US$34 million as at June, 30, 2015.
It was part of a previously successful financial services empire headed by Patterson Timba, brother to Jameson Timba, an MDC-T minister during the inclusive government.
On March 12, 2013, NSSA signed an Memorandum of Understanding to provide US$4,3 million to starafricacorporation Limited, which was followed by a further request for an additional US$986 400.
Another US$960 000 proposal was received on May 13, 2014.
But in July 2013, NSSA analysts recommended that NSSA leases machinery to the loss making sugar producer instead of extending loans.
On December 20, 2013, analysts turned down the US$986 400 loan, while a risk manager gave the same advice.
On January 24, 2014 based on NSSA recommendations, Masoka approved the additional US$984 400 payment to starafricacoporation.
There were delays in commissioning the plant, which prejudiced the authority of potential rentals and as at October 30, 2015, the US$7,3 million NSSA loan advanced to starafrica was accruing 10 percent interest.
“An analysis by acting chief economist Isaac Isaki on the US$600 000 request note that starafrica management do not appear to be serious about the project as this was the third time they came with request for additional funding and also notes that there was a risk that the US$10 million convertible debenture would dilute NSSA’s interests in the entity.
“Analysis on the US$960 960 proposal on May 13 2014 recommended funding. Director of investment recommended on the real possibility of NSSA losing out on its investment of US$4,3 million if the plant did not become operational. In November 2013, the main board was then informed that Capital Bank had not found a buyer for the Afre shares which had been used as security for the US$3 million meant for starafrica and converted by the bank for its own use,” the auditors said.
In a Rainbow Beitbridge Hotel transaction, NSSA made payments to the main constructor’s workers worth millions of United States dollars during construction of a US$3 million property that ended up costing US$49 million.
This was approved by the Ministry of Public Service, Labour and Social Welfare even after professional evaluations had indicated that the project would drain taxpayer funds.
Questions were not raised on why the construction bill had suddenly shot to US$49 million from as low as US$3 million in 2007.
The report also exposes a likely risk of a US$13 million impairment on a loan to Kwekwe Woodlands Farm; cumulatively US$12 million had been lost in other investments between 2009 and 2014, and NSSA was going through a taxing time, with the taxman breathing down its neck after failing to remit certain taxes that cost the authority US$10 million in penalties and bank accounts being garnished.
NSSA’s top brass were on a spending spree, awarding themselves cash for fast cars and posh houses and coming up with all sorts of reasons to continue earning huge salaries and perks after Cabinet directed in 2014 that all State institutions should review salaries to not more than US$6 000 per month.
NSSA bosses established a scheme to benefit chefs who had risen through the ranks after dollarisation.
These had accessed loans in Zimbabwe dollars to purchase houses but were said to now qualify for new loans under a US dollar regime.
The loans, called the long service loans, were worth US$795 523 with a five percent interest, while under the vehicle loan, managers received US$185 000 each, with executives getting US$71 000.
“NSSA said it had spoken to the director of finance in the Ministry of Public Service, Labour and Social Welfare about the challenges in effecting the Cabinet directives and she had given the greenlight (to pay ) salaries at current levels. Management informed us that there were oral directiveS/approvals to continue paying salaries at existing levels…pending the results of a remuneration audit and finalisation of deliberations by the Cabinet committee,” the report said.

Follow us on Twitter on @FingazLive and on Facebook – The Financial Gazette

Connect With Us

Fingaz Polls

Is the market ready for bond notes?