NSSA mulls merging banks

The National Social Security Authority (NSSA) is mulling merging financial institutions in which it holds shareholding to enable them to meet the Reserve Bank of Zimbabwe’s (RBZ) new $100 million minimum capital requirements.

Report By Victoria Mtomba BUSINESS Reporter

Sources close to the development told NewsDay that merging the institutions in which the pension fund had interest was one of the options being explored.

NSSA holds investments in FBC Bank, ZB Bank, Interfin Bank Limited, FBC Building Society and Capital Bank Corporation.

The authority is constituted and established in terms of the NSSA Act and is tasked by the government to provide social security.

“We have already come up with a strategy. Generally, when we look at commercial banks, there is talk to rationalise them,” one of the sources said.

“Building societies don’t pay taxes and we have capacity to merge them. There is a definite plan so that there is compliance with the central bank.” In an interview early this month, RBZ governor Gideon Gono said most financial institutions had submitted viable consolidation for mergers and outright capitalisation.

Early last year, NSSA gained control of Renaissance Merchant Bank, now Capital Bank, after acquiring an 84% stake in a deal worth $24 million.

The bank was placed under curatorship in June 2011 following investigations that uncovered systematic abuse of depositors’ funds, high level of non-performing insider loans and related party exposures that included a $9,8 million loan to former chief executive officer Patterson Timba.

NSSA is the country’s leading investor in property.

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10 Comments

  1. It makes economic sense to merge the small commercial banks into one large commercial bank which will enjoy economies of scale,eg merging three or more banks into one large one will require one ceo instead of three or more, one chief financial officer etc and one headoffice. This will go a long way in cutting operational costs. Small banks like Capital Bank do not a viable branch network to meet its operational costs and additional capital requirements. The proposed maximum shareholding levels will mean that that institutional shareholders like nssa will have to shed some of their shareholding and this will mean new shareholders have to come aboard. Its easier if one commercial bank is involved than where we have ZB and Capital whose major shareholder is nssa who will be required fund additional capital requirements into the two banks.

    1. I Know Nothing About Politics

      @Vakeni you’re a genius, its useless to have dozens of poorly funded banks. Zim needs at most 4 retail banks. Synergies synergies synergies ………… surely how can one shareholder have competing interests. Gono must make you an advisor kwete zvake zveku advizwa nana chinoz et al

    2. I am not sure what the law says about the quality and quantity of investments that management at the national pension authority , NSSA, makes in the Zimbabwean economy. Nothwithstanding , it does not require a rocket scientist to know that the investment managers at NSSA are either incompetent , corrupt or have been swimming in corruption for a long time. The article above clearly exposes that the assets the people’s pensions have been concentrated in are dubious, while others are mere paper tigers at best. Anyone who has basic investment knowledge and some shallow awareness about investment portfolios will most certainly agree with my assertion that money invested in most of these organizations is not recoverable , and most of the enterprises are poorly structured and poorly managed, and therefore loss-making, insolvent and dying.

      Who can justify having one public pension entity investing in almost all of the ingenous banks and building societies in the country? There is not a single reasonable expectation that these monies can be recouped at all. Why are the laws not specific as to where the nation’s pension funds can be invested in? It seems to me that when the big boys need money to re-capitalize their paper tigers they go to NSSA to get money in exchange for useless commercial paper. That is fraud. Such conduct should be criminal in Zimbabwe.

      At best , the law should limit NSSA’s investment portfolio to areas that grow the economy. Banks do not grow the economy, industries, agriculture, fisheries, mining, and other commercial undertakings do. I know NSSA will hoodwink the people of Zimbabwe arguing that putting its resources in banks is tantamount to supporting the economy , especially the startups and the growth sectors. That excuses is a tried and tested one, but it is phoney. As it is we are aware that only a few years ago pensioners were unable to get their monthly payments from NSSA because the entity was practically broke. Does anyone know whether NSSA is even solvent to this date? The point is that the scandals at NSSA have ben swept under the carpet because they benefit the big fish, and the politically-powerful. Who is supervising and or reviewing the activities of the organization? Does the ministry of Finance have oversight responsibilities over NSSA and if so, are they technically and administratively capable to perform that role successfully? Open up your eyes Zimbabwe.

  2. @Allen- you nailed it. Either the fund managers at NSSA are whoseomely corrupt or they have no idea what they are doing. Most sovereign wealth funds have a body like NSSA forming the nucleus of their investments in the cross section of economic activities. Why would this body go and invest in competing banks which in Zimbabwe presently are actually responsible for constricting the growth of Zimbabwean industry via warped credit politicies? I agree with you why does the minister not ensure that NSSA investment portfolio includes investments in industrial bodies like the IDC which is amassing industries to close them? As most of the funds at NSSA are public funds why is there no law that ensures that NSSA’s investment portfolio is not confined to one sector of the economy, in this case financial? We need answers to this or has corruption become so entrenched at the body that it has become a LAW unto itself? And what is the Finance Minister and his Social Services Minister colleague doing about this? And that ‘parliament of owls,’ or ours- why has it not pursued these dark as night investments in a financial sector which is serving nobody except its senior management and ther friends?

  3. @ allen & @ gutter- you are both spot on. In fact the goings on at NSSA point to a sorry state in the governance of state owned enterprises (SOEs) in the country. Unfortunately in this case NSSA report to the Social Services Minister and I suspect the Minister of Finance has limited jurisdiction. There is no doubt NSSA has been a feeding trough for the most powerful and remain the case. At the core of the problem is the vulnerability of the fund to political actors where parliamentary oversight is lacking. Clearly NSSA should have capacity to appraise investment projects and fund them not this idea of on-lending to banks as if its the lender of last resort. NSSA should compliment government in employment creation whilst ensuring that the fund has enough liquidity to meet its obligations to contributors. So the fund needs to be reformed urgently and the opportunity exists in that both the responsible ministers are fairly new and have not learned the tricks of looting!!

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