eBusiness Weekly
Tawanda Musarurwa
State-run pension fund, National Social Security Authority (NSSA)’s moves to consolidate its insurance portfolio was premised on the need to establish an investment structure that can effectively play a leading role as an economic enabler. NSSA has consolidated short-term insurers NicozDiamond under First Mutual Holdings.
NSSA is the anchor shareholder in both firms, controlling 51,33 percent of First Mutual Holdings and 50,09 percent of NicozDiamond.
Typically, the insurance industry is the largest source of domestic financing, which is the backbone of any economy.
NSSA chief strategic investments officer Chakanyuka Nziradzemhuka, said they viewed a single giant short-term insurer as having better capacity to pool resources, which can be utilised as long-term capital.
“NSSA plays a critical role in being a consolidator. We can consolidate and we can reshape industry. For instance, the insurance industry is one sector we have already started working on. Why? Because we have deployed capital into three or four different type insurance firms.
“If all of them require capital injection, it is going to cost NSSA three layers of capital injection. But if we pool them together, and their capital migration improves, NSSA is not going to invest more money into insurance because it has already invested into insurance,” said Nziradzemhuka.
He was addressing a programme co-hosted by ZimSelector.com and the Insurance and Pensions Commission (IPEC) recently.
He added: “The products that these companies provide are the same. What are they fighting for? The market. But the market is not really growing, so they are all going to give you mediocre performance. Alas, there is a giant in the room, and that’s Old Mutual, which has gone in one particular direction and are running.
“We had three different cats chasing small balls; it’s not helping the pension fund, and it’s not helping the insurance fund.
“In the consolidation agenda what we are trying to do is say re-evaluate your positions by bringing these things together; reshaping industry, because what you probably knew as one short-term insurance player as a standalone is now a subset of a giant investment structure that NSSA has, and that’s where we have put NicozDiamond merging with Tristar and all of them are under First Mutual Holdings.
Since the consolidation, Nziradzemhuka said “First Mutual Holdings has been generating significant returns.”
Besides accruing benefits to the parent entity, the bigger First Mutual Holdings is now expected to play a greater role in mobilising resources for infrastructural support through investments in property development (which the company already has been involved in) and in prescribed assets.
The significance of the insurance and pensions sector is highlighted by the fact that about 80 percent of commercial buildings in every city in Zimbabwe are owned by the sector.
Other common investment destinations for pensions and insurance funds are the Zimbabwe Stock Exchange (ZSE), the banking sector as money market investments, Government and quasi-Government bonds, as well as private equity.
NSSA itself, as a case in point, has around 70 percent of its investments in the local bourse, with interests in 53 of the companies listed on the ZSE.
