Rwanda Social Security Board is upbeat about the shares it owns in Safaricom, as the company’s profitability continues to soar, At the end last November, Safaricom’s profits soared by 14.4 per cent, registering up to $352.3million in the first six months of 2019, bolstering its position as the region’s most profitable company.
The telco has opened talks with some investors to form a consortium that will bid for one of two Ethiopian telecoms licences, with the deal likely to be closed by April.
“RSSB invested during the Safaricom IPO when the price was Rwf46 per share. Today, the price averages around Rwf128, which means our value has increased by more than five times” “Over the years, the dividend has also been very attractive to investors, nearing about 5 per cent, therefore this is an attractive return to RSSB as an investor,” said Eric Gasana, the head of Investment & Real Estate Department at RSSB.
Data from RSSB indicates that it currently has a total of 17 million shares in Safaricom, with a current market value of about Rwf4.8billion.
In the past, the pensions body has suffered a backlash from pensioners who accused it of investing funds in loss-making ventures, allegations, which have been severally confirmed by the auditor general’s reports.
Last year, the Auditor General’s report indicated that a review of the body’s equity investments worth Rwf43.5 billion in eight companies showed the companies had not paid any dividend from the time of initial investment or establishment.
The fair value of these investments stood at Rwf24.4 billion, implying an overall reduction in value of Rwf19 billion.
In a bid to stem the poor management and loss-making trajectory of its external investments, the body decided to hire an external fund manager who will handle their external investments which stand at $100million.
“We are in the process of hiring an investment advisor to advise us on some of the processes needed for bringing on board a reputable and reliable fund manager,” said Mr Gasana.
RSSB has invested up to 33 per cent of its money in commercial banks and 14.4 per cent in properties. By law, it is allowed to invest up to 15 per cent in external markets.
It has already hit 8 per cent, investing in companies like Kenya’s Safaricom and TDB bank.
Over the years, RSSB has invested heavily in real estate, venturing largely in highend residential houses, which targeted the country’s growing middle class, while another chunk of its money was invested in pension plazas in different districts around the country.
Although the pension fund continues to invest its money in key sectors like real estate, banks and telecoms, the size of investment in some sectors is reducing.
RSSB had planned to invest up to Rwf487billion between July 2018 and June 2019, but ended up investing Rwf418 billion.
From this investment, RSSB made Rwf48.6 billion in profits against Rwf56 billion as targeted return on investment, which was largely due to the a reduction in appetite for RSSB’s money by banks.
There was a 0.5 percentage point fall in interest on their investments in banks last year, the fund expected 8 per cent in interest but got 7.5 per cent, which affected returns.
“The demand and supply for funds in the financial system is driven by market forces.
The increase and reduction in interest rates is always brought about by changes in these forces. Interest rates are always changed based on what makes business sense for the Fund.”
“However, every year, we have witnessed an increase in the uptake of our deposits and they are a good source of income for RSSB,” he said.
When asked which are the fund’s most performing investments, Mr Gasana said it is mostly fixed income investments.
“Bonds, bank term deposits, government paper are a source of a larger proportion of our total income, however, we are also witnessing an increase in income from our real estate portfolio and public equities” “As the economy continues to grow, we believe the performance of the other asset classes will also get much better” he said. Last year the body hit Rwf1 trillion in assets.