The Liberia Peoples Party (LPP) is calling on the members of the national legislature Calls to encourage “The National Social Security and Welfare Corporation (NASSCORP)” to reduce “risky portfolios, or private equity such as real estate” and invest into stocks, bonds, etc. The party said that the General Audit Commission of Liberia, in its Audit Report, dated October 2020 for fiscal period ended on 6/30/2019 and 6/30/2018, stated that the entity reported USD $141M “Assets Available for Benefits” or which NASSCORP called “Total Reserve” which implies that the entity is in a good financial standing to invest in stocks and bonds.
Explaining the concept of social security, the party said that long before Liberia enacted its first Pension Act in 1976, which was revised in 2016, Europe envisioned the concept, and North America adopted it in the 1930s. It added that then, as it is now, everyone agrees that it has become difficult for siblings and/or communities to finance the costs of living of injured employees, retired workers, and their dependents.
“Therefore, the government should create a susu/type organization since poor-employees might find it difficult to individually accumulate adequate savings. The employee-retired-entity is responsible to collect withholdings from employees and employers. Management shall invest the net withholdings into less risky portfolios but yield profitable rate of returns”, the party said.
Making use of the General Audit Commission(GAC) 0f 2020, the party said Instead of reporting a profitable rate of return on investment, NASSCORP’s rate of return was 2% ($3.5M/$141M ) (See Page # 4 Audit Report.)
Giving further breakdown on what the audit reported, the party said NASSCORP earned $2.3M investment income from $6.7M invested in securities of the Liberia Bank for Investment and Development (LBDI). (See pages # 22 & 29) and that it generated $0.6M rental income from real estate investment of $35M ($49M minus $13M invested in Medical Diagnostics Center) where the $49M includes the buildings used by the Liberia Revenue Authority and 19 additional real estates. (See Page # 29.)
LPP also stated that NASSCORP received $0.4M interest income from $62M investment ($69M minus $6M invested in LBDI) where the $69M includes $40M lent to the GOL and $3M loaned to the Central Bank of Liberia. GOL and CBL did not pay interest income. (See page # 23) and that NASSCORP generated $0.05M from other income from other assets.
The party said the 2% rate of return would have been acceptable if a significant portion of the investment were stocks, bonds, etc since the 2% is within the average range of 5% according to private equity. It however said that the institution invested into risky portfolios and listed some of the risky transactions it undertook. It said NASSCORP bought USD40m of Liberian government T-bills and Treasury notes, which is 28%($40m/$141m) but NASSCORP did not report $8m(20% of 40m) as interest income received or interest income to be received in exchange for buying the government’s promissory notes(Page #23 of the Audit Report).
“NASSCORP recorded USD $23M as “Receivable and prepayment”, which is 20% of the USD $141M “Assets Available for Benefits.” NASSCORP did not record interest income. (See Page # 23).
“NASSCORP invested USD $14M into real estate located at the ELWA and Tubman Boulevard, Paynesville, which it leased to the Liberia Revenue Authority, a government Agency, which is 10% of $141M. Worse the government has not paid rent for two years, USD $1.3M and USD $0.7M for 6/30/19 and 6/30/18 respectively. (See page # 32 of the audited report).
“NASSCORP invested USD $14M into real estate property that it uses as headquarters, which is 10% of the USD $141 “Assets Available for Benefits. (See page # 29)
“NASSCORP invested USD $13M into the Medical Diagnostic Center/Jamale. NASSCORP did not report any income (dividend from subsidiary capital) from this investment, which is 9% of the $141M. (See page # 29)”, the party further provided information on the risky investment NASSCORP undertook”, the party said
With the use of comparative data from other African countries, LPP wondered why NASSCORP continues to invest 49% (i.e., 20%, 10%, 10% and 9%) of its funds into private equity (i.e., risky portfolios), even though it generates 2%? Or better yet how come other pension funds generate 12.5% to 15% rate of return from the same type of portfolios? Quoting from a global pension markets report as published by OECD, the party said that Table 3.1 on page # 6 shows that pension funds generated 12.7% to 15%. The table did not provide information on how well African countries performed with private equity.
It said however, African countries invested in private equity ranged from unclear to 2.5% and 10% (Please see page # 15) and that Ghana did not authorize a specific percent, while Botswana authorized 2.5 percent to private equity, and pension funds in Kenya were allowed to allocate 10% in private equity.
“It is true that Ghana’s allocation to private equity was unclear, but it invested 10% in stocks and 74% in bills and bonds, according to figure # 2 on page # 4 within this report. https://www.oecd.org/finance/private-pensions/Pension-Funds-in-Figures-2021.pdf). Pension funds in Jamaica invested 40% in stocks and 54% in bonds, while Namibia invested 55% in equity and 40% in bonds. Pension funds around the world invested 74% in equity and bonds in 2020, the report stated.
“Real estate offers predictable cash flow, but it has limited transparency, thus experts link it to corruption, according to www.researchgate.net/signup.SignUp.html). Also, it is not easily exchanged into liquid assets. Other factors that affect the values of real estate include political crisis (chaos, rallies, military insurrection, etc.). Further, volcanoes, earthquakes, floods, etc. could affect real estate”, the party said.
The party said If Liberians are to benefit from their investment, LPP said it was recommending some measures among which are that regulatory commission to regulate and supervise the function of NASSCORP, Reduce the (11) eleven-member Board members to five and select six-member regulatory Commission, Civil society, employees, and employers should appoint one member of a regulatory commission and one member of the board of directors. The President of the Republic of Liberia shall appoint the remaining members of the regulatory commission and board of directors and the regulatory commission should be responsible to approve the percent of private equity the pension funds can purchase.
It also recommended that the President of the Republic of Liberia should appoint a special investigation team to review NASSCORP investment portfolios and that the regulatory commission should advise and recommend the foreign investment portfolios the pension funds can purchase especially since Liberia does not have many corporations selling securities and our government is broke.
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