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Opinions of Thursday, 27 September 2018

Columnist: Opanyin Kwadwo

Is SSNIT wasting funds on real estate development? - Part 1

The Social Security and National Insurance Trust (SSNIT) is the largest non-bank financial institution in Ghana and one of the most prestigious institutions in the country.

The Trust was first established in 1972 to administer the National Social Security Scheme. The primary responsibility of the Trust is to manage the Tier 1 pension contribution of workers in Ghana.

As at June 2018, the Pension Scheme had registered 1,471,564million members with over 190,079 pensioners receiving regular monthly pensions, paying over GHS172 million each month.

SSNIT statutory function is governed by the National Pensions Act, 2008 Act 766, also amended in 2014 as the National Pensions (Amendment) Act 883. It is this law that tells us what SSNIT can or cannot do as it seeks to fulfil its statutory mandate.

The entire Act 766 focuses mainly on financial instruments such as bonds, bills, debentures and other securities. Reference to property investment is only made under Permitted Investment Section 176(h) (i.e. real estate investment).

The current legislative instruments are too bias towards the management of pensions, financial products and securities. Given the increased real estate activities undertaken by SSNIT, it is concerning that both Acts are silent on approach to real estate investment. It is unfortunate the framers of both Acts did not consider the real estate part significant enough to cover extensively.

SSNIT first committed funds to real estate development in 1974 for a residential housing scheme. However, from 1987 to 1988 it increased the funds for housing development considerable. The Trust took a strategic decision to make real estate development, one of the pillars for financing the pension scheme.

Hence from 2006 to 2016, SSNIT partnered with the Government, local and foreign companies to develop other properties such as commercial buildings, student hostels, health centres and industrial facilities. These investments showcase the physical contribution SSNIT is making towards the economy.

Given the significance and associated cost of these projects, it is important a legislative framework is enacted to safeguard the investments. This will promote more openness, transparency and prevent abuse of discretionary powers, especially since capital investment can be the root of corrupt practices.

It must be noted that the expansion of the property investments leads to increase risk and added complexities which the Board members might not be adequately equipped to scrutinise or manage. This raises questions of whether real estate developments should now be spinoff as a new national commercial entity but maintain a strong link with SSNIT. Therefore, if SSNIT’s real estate investment is to be pursued as along-term strategy, then the framework for developing it must be redesigned.

In a democratic dispensation, there is also the question of how we make the Board and the Executive team more accountable to the people and not the Central Government purse. The SSNIT leadership are not elected officials and therefore by extension are not directly accountable to the people. One would argue that the leaders are appointed by an elected Government and therefore they are accountableto the people through the Government. Who then should SSNIT be accountable to – the workers, pensioners or ruling Government?

When it comes to capital investment, ideally what we need is an independent Trust which is able to determine its own priorities. The fund belongs to workers and pensioners but not the government, and therefore the body that direct its affairs must be more accountable to the people.

Over the years SSNIT seems to align itself with the ruling government agendum like building the Sports Emporium during the Mahama Administration. There is nothing wrong with investing in residential and commercial properties but the project must offer a return on investment and not tick political boxes. What is the economic value of a stadium which is used once a while?

SSNIT and its Board must be seen to be independent. Public confidence could be undermined if there is the slightest inclination the Board is just rubber stamping real estate investments for political reasons. The Board must also not be seen to lack the capacity to scrutiniseprojects properly. The Board’s actions need to assure the public, workers and pensioner’s that their contributions are been used judiciously. It is timeas a nation we decide the strategic direction of SSNIT’s real estate development programme. This means:

Assessing the performance of past investment to establish best practice and
Secondly, design an entirely new legislative instrument to govern the activity.

The challenges facing real estate development in Ghana is huge but we mustonly support priority projects of economic value and notwhitewash projects likethe National Cathedral. Since SSNIT has the resources and capacity to initiate programmes, this area of activity needs to be properly constituted to provide a nationalroad map for SSNIT to implement.

To be continued…


Kwadwo Owusu-Darko is an architect but specialises in Housing. He has over 20yrs experience in real estate development, regeneration and housing management in the UK. He was a Director and Board Chairman of two Housing Associations. Currently the Director of UDeserve Limited, a firm setup to promote Housing and Assets Management in Ghana. Email: