As the temperature to industrialise in the country heats up, social security funds are seeing themselves in a position to invest in development of industries as their risks have been mitigated by existing guidelines.
The Social Security Regulatory Authority (SSRA) Director General, Ms Irene Isaka, said in a statement that with the existing investment guidelines, investments in the industries can be in the form of loans, equities, properties or corporate bonds.
“There is no provision for direct investment in the industries in the existing Investment guidelines so the risk is mitigated,” she said in the statement. Ms Isaka explained that one would expect that when social security schemes invest in the industries, the investment will be in the form of syndicated loan Ltd, Corporate Bond or the schemes can build industrial parks and sell to the industry owners.
She said that it should be made clear that the move to invest in the industrial sector, does not mean that the entire investment portfolio will be in the industry. It is only for the selected portfolio such as buildings, loans, part of equity or part of corporate Bond.
Investment is one of the functions of the Social Security Funds, other functions include; registration of members, collection of contributions and payment of benefits. Traditionally, Social security Schemes have been investing in asset classes that matches their matured obligations.
After the enactment of Act No 8 of 2008, which was followed by the establishment of Social Security Regulatory Authority (SSRA) in 2010, investments of the schemes were harmonized. SSRA in collaboration with the Bank of Tanzania, which is the custodian of the schemes investment issued investments guidelines.
These guidelines stipulate benchmarks for each asset class for instance, Treasury Bills and Bond should carry a maximum of 70 per cent of Assets of the schemes; Corporate bonds carry 20 per cent; equity carry 25 per cent; infrastructure 25 per cent, loans to the Government 10 per cent; loans to corporate and SACCOS 10 per cent; Fixed Deposits Reserves 35 per cent; investment in collective investments 30 per cent and investments to properties 30 per cent.
SSRA and BOT in accordance to the law conduct four offsite supervision and two onsite supervision per annum per each scheme to ensure that schemes comply with legal and regulatory framework.
The statement cited that schemes can invest in industries in the form of direct loans and syndicate with other financial institutions and issue loans to the industries. Examples of such loans are the ones made to the Agricultural sector (Sugar industries), textile industries and power generating company.
Under this category scheme can invest up to 10 per cent of their assets. The safety of schemes funds is guaranteed due to the high level of governance structure. Schemes may also invest in industrials through corporate Bond as they did to ALAF and TBL.
The investment limit allowed in this category is 20 per cent. However as of June 2015 only 1 per cent was invested. Therefore, there are still 19 per cent that schemes can invest. Schemes can invest in industrial park in the form of real estate.
According to the investment guidelines schemes are allowed to invest up to 30 per cent of their assets in real estate. Currently, the investment level in this category is 18 per cent hence at least 12 per cent can go to industrial building.
The most important thing is to ensure the investment is in line with investment principles.
Source: All Africa