HARARE: The National Social Security Authority (NSSA) has reported a 68 percent decline in full-year profit for 2015 after a $93 million asset write-down relating to its Celestial office park in Harare and an ill-fated Beitbridge hotel project.
An asset write-down occurs when the book value of an overvalued asset is reduced to levels that reflect market value.
There have been concerns that the state run pension fund overpaid for the Borrowdale office park, while construction costs for the Beitbridge hotel vaulted from $17 million when the tender was floated to $49 million upon completion in 2014.
At the final cost, the 140-room hotel, planned as a four-star property, cost $350,000 per room to construct, more than an average $250,000 per room for a five-star hotel, according to some hotel construction experts.
NSSA’s new board, appointed in July 2015, has instituted a forensic audit into the statutory pensions fund’s investments, which chairman Robin Vela has described as influenced by “historically delinquent decisions.”
Financial statements for the year ended December 2015, published over the weekend, show NSSA’s profit at $32,3 million, down from $103,8 million in 2014, mainly due to the property revaluation losses.
In a statement accompanying NSSA’s financial results, Vela said his board was still in the process of verifying all assets held by the fund to ascertain their real balance sheet value.
“Informed by the outcome of that process, the board has had to be prudent in cases where stated values have been rendered out of sync with prevailing fundamentals and thus unjustifiable,” Vela said.
“Investment properties were written down by $92,9 million being mainly due to the recently purchased Celestial Park and Beitbridge Hotel and Office building, both of which are the subject of a continued forensic investigation, the results of which may have an additional financial impact in subsequent financial statements.”
In June, NSSA closed the Beitbridge hotel, which had been operated since 2014 by Rainbow Tourism Group, after as the hotelier struggled to pay rent for the loss-making property.
NSSA’s total assets declined two percent to $916 million.
Total income was also lower, at $331 million in December 2015 compared to $335 million the previous year.Advertisement
NSSA, whose investments include property, equities and money market placements, registered a decline in investment income to $22,8 million from $35 million previously on the back of reduced dividend income and declining money market rates.
The pension scheme’s total investments declined from $603 million in December 2014 to $508 million at the close of last year.
NSSA holds significant investments in many listed companies, including RTG, FBC Holdings and FML.
Registered employers rose by five percent to 28,739 in 2015, but NSSA was quick to point out that this was not due to any growth in the economy, but down to the fragmentation of businesses into smaller companies.
Reflecting the weakening economy, contribution collections under NSSA’s pension scheme were two percent lower in 2015 at $242,8 million.
NSSA, which has frequently been called upon to bail out government, closed 2015 sitting on $95,2 million cash.