Fresh from hitting Rwf1 trillion mark with its asset portfolio and faced with a reduction of appetite for its funds by banks, Rwanda Social Security Board is now looking for an investment firm for its external investments.
“We are looking for expertise in investment. We have already issued a tender, we want the firm to optimise our investments globally, but also maximise local ones,” said Richard Tusabe, RSSB director general.
RSSB has invested up to 33 per cent of its money in commercial banks and 14.4 per cent in properties. By law, RSSB is allowed to invest up to 15 per cent externally. 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 high-end 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.
However, these investments have been faulted in the Auditor General’s report and pensioners umbrella organisations as loss making.
The latest Auditor General’s report indicated that a review of the body’s equity investments worth Rwf43.5 billion in eight companies showed these companies have not paid any dividend from the time of initial investment or establishment.
The fair value of these investments at June 30 stood at Rwf24.4 billion, implying an overall reduction in value of Rwf19 billion.
Although the pension body 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 targeted return on investment.
“We invested less than planned and this had an impact on the returns we expected, this was majorly caused by reduced appetite of our money in sectors we regularly invest in, especially banks. When banks don’t take our money to a satisfactory degree we register a shortfall in returns,” said Mr Tusabe.
He said the 0.5 percentage point fall in interest on their investments in banks has also affected the pension fund’s returns.
“Where we expected to get at least 8 per cent in interest, we got 7.5 per cent because of a general contraction in our economy, where people going for bank loans also reduced,” he said.
Another investment that came under the spotlight is the Vision City, which the auditor’s report says has incurred heavy losses due to selling below cost, low uptake of the houses and cost overruns.
Of 504 houses built in phase one, only 213 customers have signed contracts as of 31 December 2018, while the remaining 291 houses (58 per cent) had not been booked, according to the report.
The total sales revenue stood at Rwf18.86 billion by December 2018 which is 25.09 per cent of expected sale revenue of Rwf75.19 billion.
The report says the original construction cost was estimated at Rwf77.59 billion, however by August 31 2018, a total of Rwf113.65 billion had been incurred, with the additional cost standing at Rwf36.06 billion, losing up to $40 million in cost overruns.
The occupancy rate for its commercial real estate nationwide stands at 58 per cent, but Mr Tusabe said that low occupancy rate now will not deter them since these are long-term investments, indicating that they will actually soon build other pension plaza’s in Muhanga and Rubavu.
This year, the body exceeded the total contributions target for all schemes, generating Rwf181.9 billion beyond the target of Rwf163 billion.
It paid a total of Rwf100.9 billion in benefits pay-outs against the Rwf95.4billion target.