National Social Security Authority (NSSA) posted a surplus of US$180,6 million in 2018, a 21 percent increase from the 2017 surplus of US$149 million in 2017.
The improved surplus came on the back of growth in total income, which rose 11 percent to US$389,4 million from US$349,6 million in 2017.
The major contributors to total income during the period were contributions, premiums and investment income.
Presenting the 2018 financials at the authority’s inaugural Annual General Meeting (AGM) yesterday, acting finance and cost management executive Hope Mulilo said:
“Contributions and premiums grew from US$291 million in 2017 to US$296 million in 2018, which is a 2 percent growth. This growth is attributable to our rigorous collections strategies which we implemented in 2018.”
“Also with regards to total income, there was also investment income, which grew by 64 percent. But within the investment income, the major driver was our dividend income, which constitutes about 63 percent.”
Claims grew by 19 percent to US$205 million in 2018 from US$172 million in 2017, driven by a 33,3 percent adjustment in pension payouts, which was effected on October 1, 2017.
“Coupled with this growth is also natural growth, because they are also members that joined the scheme. The Pensions and Other Benefits (POBS) scheme grew by 9 percent in terms of pensioners who are on the scheme, and that is the largest scheme that the authority manages,” she added.
During the period under review, NSSA managed to reduce operating costs by 21 percent.
“We managed to contain our costs in 2018. Our total (operating) costs came down by 21 percent from US$79,9 million in 2017 to about US$63,4 million in 2018. This was as a result of cost rationalisation exercises that were implemented within the authority.”
Total assets grew by 17 percent from US$1,37 billion in 2017 to US$1,6 billion in 2018.
“This growth was driven by our investments, which constitute about 81 percent of the total balance sheet,” said Ms Mulilo.
Investments grew 25 percent from US$1 billion in 2017 to US$1,29 billion in 2018.
“The reason for the growth in investments was good performance in investments. There was positive fair value appreciation in both quoted and unquoted equities.
“We also had increases in the value of properties during the period, and we also received a share of profits from our associates during the period.”
The growth in investment came despite the operating environment worsening in the last quarter of 2018.
“After separation of nostro and local balances in October 2018, parallel exchange rates started to increase; the rising premium on United States dollars entrenched multi-tier pricing,” said NSSA chairman Cuthbert Chidoori.
“Inflation then became a huge cause for concern especially from Q4 rising from 5,4 percent to 42,09 percent between September and December 2018.
“This negatively affected the purchasing power of our pensioners. Despite the difficult operating environment, the authority managed to grow and strengthen its asset base through various strategic initiatives.”
Notwithstanding the increase in claims over the period under review, the acting finance executive said it was not out of the ordinary, highlighting that most key fundamentals were in line.
“Our claims were in the red, but we always expect claims to be in the red because this is our core business. As we get new members our claims will also increase.
“In terms of sustainability, there are key metrics that we track on a month-to-month basis, then at the end of the year we then see where the numbers are. The key metric that we look at is the claims to contribution ratio (for the POBS scheme). For this scheme, the ratio grew from 64 percent in 2017 to about 75 percent in 2018.
“So the reason why this ratio is important is that it shows how much of contributions are used to pay current claims. It’s in the red because, according to international guidelines, for a young scheme like NSSA (25 years) this ratio should be below 50 percent,” said Ms Mulilo.
Although NSSA has long been slighted for poor investments over the years, the authority’s 2018 numbers paint another picture.
“We also track our realised investments income to claims ratio. What this ratio speaks to is to say for the investments that we collected in 2018 or 2017 or previous years, how much is being used to cover claims. As for the authority our target is 50 percent. In 2017, the ratio was at 32 percent and in 2018 it grew to 44 percent.”
“We also track the investments to total assets ratio, because it shows our efficiency in applying our monies towards investments. In 2017 the ratio was 75 percent and in 2018 it grew to 81 percent,” she added.
NSSA was constituted and established in terms of the NSSA Act of 1989, Chapter 17: 04, and is the statutory corporate body tasked by Government to provide social security.
Currently, the Authority administers two schemes, namely the POBS and the Accident Prevention and Workers Compensation Scheme.