Rwanda Social Security Board (RSSB) has been faulted by senators for making poor investment decisions after some of the body’s investments recorded a decline in value.
This is part of the problems that the institution, also faulted by Members of Parliament for maintaining poor accounting practices, is grappling with.
While appearing before the senate yesterday, the RSSB Director General, Richard Tusabe, and the Chairperson of the Board of Directors, Ephraim Turahirwa, pledged to fix the issues.
New Forest Company is one of the companies in which RSSB expects to reap dividents in future. Courtesy.
The discrepancies in accounting, which involve the institution’s failure to produce its financial statements on time, are contained in the Auditor General’s report for the 2016/17 fiscal year.
This indicated a serious problem at RSSB where the body has chosen to perform the accounting and financial reporting function of the medical, pension, Community-Based Health Insurance (CBHI) and maternity leave schemes in one set of books of account.
The report said that the practice “poses a challenge of inherent commingling and failure to differentiate transactions and balances of each scheme”.
The MPs are currently meeting various government agencies to establish the causes of accounting and performance flaws as highlighted by the AG’s report.
RSSB leadership promised to fix the challenges by deploying technology and automating many operations as well as identifying the right people to work for the institution.
“We guarantee you that by early July we will have finished separating books. Every scheme will have its own accounts,” Turahirwa told the legislators.
Tusabe also emphasised the pledge to correct mistakes, explaining that the body has enough resources to hire the best people in the area of management and accounting so they can help reverse the current situation.
RSSB hasn’t yet produced its financial statements for the past fiscal year 2017-2018. Tusabe said such level of weakness is not acceptable for an institution that doesn’t have any financial constraints to limit its performance.
“It’s not too late, give us an opportunity to address this mess,” he told the MPs, pledging to organise RSSB’s books of accounting.
RSSB has been faulted for undertaking unprofitable equity investments, which have shrunk in value.
According to the AG report, six entities in which RSSB invested a staggering Rwf21 billion had not generated any dividends from the time of initial acquisition.
In addition, the investments continued to lose value. As at June 30, 2016 the value of these investments stood at slightly over Rwf11 billion, reflecting an overall reduction in value (cost of acquisition) of over Rwf9.4 billion, the AG’s report states.
Tusabe said some investments are still expected to give returns in the future.
“Investments that we do at RSSB are long term in nature. So far, there is return of about 7 or 8 per cent on the body’s entire investment portfolio,” he told the MPs, emphasising that RSSB remains a profitable entity.
Tusabe says that the fact that some investments are yet to return dividends shouldn’t be interpreted as a loss since returns can still be obtained in the future.
“We don’t sell sugar or salt; ours are long term investments. We can’t expect returns in five or ten years. Let’s look at the role of these investments today and in the future,” he told The New Times in an interview shortly after meeting the senators.
Some of the investments where RSSB has not yet earned returns include KT Rwanda Networks Limited where the pension body invested Rwf3.7 billion and New Forest Company Rwanda in which it holds preferential shares worth Rwf438 million.
Equity investments account for 25 per cent of RSSB’s total investment portfolio of Rwf655 billion, according to the Fund’s official figures.
But most of the Fund’s investments, accounting for 33 per cent, are in commercial bank deposits while investments in real estate, the third largest, account for 14.4 per cent.
RSSB also currently manages five schemes, including pensions, occupational hazards, community-based health insurance (CBHI) and maternity leave benefits.
As a new RSSB director general, Tusabe has promised to improve the body’s performance by increasing consultations and engagements with different stakeholders to bring about neccessary reforms.
The Auditor General, Obadiah Biraro, emphasised that the public pension body needs more proper financial management, challenging its leaders at yesterday’s hearing that they need to embrace the highest standards of financial management in order to address the institution’s challenges and maximise returns for its subscribers.