The Minister of Finance and Economic Planning, Uzziel Ndagijimana has said that Rwanda Social Security Board (RSSB) has started getting dividends from its investment in a drug research firm.
Ndagijimana was on Tuesday, July 6, appearing before a virtual Plenary Sitting of the Chamber of Deputies to respond to legislators’ queries on issues pertaining to the investments made by the pension body.
The Chamber of Deputies said that the audit carried out [by the Auditor General for the fiscal year ended June 30, 2019] indicated that RSSB made investments in different business companies, which do not yield returns because they were not well studied or were not being monitored effectively.
For instance, they said that the body invested over Rwf9.5 billion in Rwanda Foreign Holdings Investments, but this portfolio was reduced to over Rwf1.5 billion as of July 2019 [as the value of the share plummeted].
Ndagijimana said that this company is a special purpose vehicle (SPV) established by RSSB in partnership with the MMI (Military Medical Insurance) so that they jointly invest in Merrimack Pharmaceuticals, a biopharmaceutical company based in the United States.
The firm specialises in developing drugs for the treatment of cancer.
Regarding the issue that the company was not making profit, he said that as a research firm, its profit is achieved when its research has yielded results in terms of money.
He said that since the company (Merrimack Pharmaceuticals) developed a cancer treatment drug called Onivyde, and sold it at about $1 billion, it started making profit and paid dividends to its shareholders.
"RSSB has gotten about $3 million in dividends since 2018,” he said.
Concerns over losses
The Auditor-General (AG) said in his report of State Finances for the year ended June 30, 2019 that he was concerned with underperforming equity investments which do not bring direct return in form of dividend or capital gain to RSSB, adding that the loss of value of invested funds was increasing.
In eight companies, the loss increased from Rwf19 billion in 2017 to Rwf28 billion in 2018 due to their poor financial performance. Out of eight companies, four companies made capital loss for five consecutive years, which cast doubt on whether their financial performance will improve in the future to earn a return on investment.
The AG said that part of RSSB’s mission includes high-quality management and prudent investment of members’ funds, adding that there is a need to re-assess the relevance of poor-performing investments towards creation of value to RSSB members.
"Vivid strategies should be crafted to align these companies’ financial performance with investment objective,” the AG recommended in his report.
MP Beline Uwineza wanted to know who will be liable for the losses that RSSB made from investments in the eight companies and what was being done to improve investment performance.
Given such losses, MP Veneranda Nyirahirwa questioned the work of the Public Investment Committee (PIC) under the Ministry of Finance and Economic Planning. PIC is in charge of ensuring the public investments are made in profitable ventures.
"If this Committee has weaknesses, it should be strengthened, or its structure be changed because it has been realised that the Government continues to incur losses,” she said.
Minister Ndagijimana said that RSSB makes diversified investments, adding that, overall, it has made profit, though this does not mean that each single investment is always gainful.
"RSSB has embarked on diversifying investments in different ventures that reduce risks of huge loss that can occur in case investments are accumulated in one project,” he said.