Watchdog probes questionable pensions investment projects

02Aug 2016
The Guardian Reporter
The Guardian
Watchdog probes questionable pensions investment projects
  • According to the regulatory authority’s chief, the inspection NSSF's real estate projects had raised some red flags about possible impropriety in their management

The government's pensions regulator is in the process of conducting a special inspection of real estate projects being run by the country’s many cash-rich social security schemes amid long-standing allegations of corruption

Irene Isaka

and misappropriation of funds in the management of these schemes, it has been revealed.

Many of these real estate investments by local pensions funds have been marred by suspicions of impropriety including the gross inflation of project costs and abuse of public procurement laws and regulations.

The director general of the Social Security Regulatory Authority (SSRA), Irene Isaka, told The Guardian in an interview that the special inspection covers all five major pensions funds in the country – the National Social Security Fund (NSSF), PPF Pensions Fund, Public Service Pension Fund (PSPF), LAPF Pensions Fund, and GEPF Retirement Benefits Fund.

"The main objective is to establish the extent to which these funds are complying with prudent investment management practices ... aimed at protecting members’ interests, grow assets of the funds, and ensure sustainability of the schemes," Isaka said.

"The inspection has been concluded in some (funds) and is still ongoing for others in line with our annual inspection plans," she added.

She said the inspection started with NSSF - the country's biggest pensions fund - and revealed that the scrutiny of the fund's real estate investments raised some red flags, prompting SSRA to report the matter to the fund's board of trustees.

According to Isaka, the inspectors went through the feasibility studies for each proposed investment and analysed cash-flows to see whether they matched with the projections made in the feasibility study.

"For undeveloped plots, we looked at the acquisition price to establish if it is according to the market, and we also checked whether the relevant title deeds were in place," she explained.

Just two weeks ago, the NSSF board of trustees suspended 12 high-level executives of the fund pending a formal investigation into allegations of big-time funds embezzlement and abuse of office in the course of several transactions, including real estate investments.

Isaka confirmed that SSRA has presented the findings of its inspection into NSSF's real estate deals to the fund's board of trustees, but declined to give details of what the findings contain.

"Regulators are obligated to issue inspection reports to the chairmen of the boards of trustees of the respective schemes, who are then supposed to ensure that all the observations are cleared as per issued directives," the SSRA boss said.

"This being the case, the regulators are not in the position to divulge contents of the report. However, as the report is currently issued to the fund (NSSF) you are humbly advised to consult the fund for details of the report," she added.


Sources close to NSSF have hinted at serious impropriety in the handling of the fund’s $653 million Dege Village Project being jointly implemented with a private company in Dar es Salaam’s Kigamboni suburb.

It is understood that an audit report on the project prepared by the Controller and Auditor General (CAG) uncovered major financial irregularities in the execution of the project, including grossly inflated land acquisition costs.

According to Isaka, the NSSF board of trustees chaired by Prof Samwel Wangwe took the action to suspend the senior management officials en masse on the basis of the findings of both reports from SSRA and the CAG.

"Following the findings (in the two reports), the board of trustees had to invoke its powers under ... the NSSF Act," she said.

The suspended NSSF executives are director of operations Crescentius Magori, director of internal audit Pauline Mtunda, director of finance Ludovick Mrosso, director of planning, investments and projects Yacoub Kidula, director of human resources and administration Chiku Matessa, and director of actuarial and risk management Sadi Shemliwa.

Also suspended are the NSSF administration manager Amina Abdallah, planning and investment manager Abdallah Mseli, projects manager Eng. John Msemo, chief accountant Davis Kalanje, chief manager (Temeke) Chedrick Komba, and project manager (engineer) John Ndazi.

The suspensions came just months after President John Magufuli removed NSSF's long-serving director general Dr Ramadhan Dau from his position. No reason was given for his removal.

Apart from NSSF, other local pensions funds have also in the past faced strong allegations of impropriety in real estate investments.

But Isaka assured Tanzanians that their contributions in the funds will stay safe under the joint watchful supervision of SSRA and the Bank of Tanzania (BoT).

Said the SSRA boss: "We want to assure our members on this because we the regulators have taken timely intervention by identifying risky areas and directed the board of trustees to take appropriate action in line with the legal and regulatory framework."

"SSRA is mandated to conduct inspection on any scheme and take any necessary measure against the scheme, including to direct the board of trustees to take appropriate actions, where necessary. This is what has been done."

She said the watchdog has tightened controls on investments by pensions funds as evidenced by the issuance of revised investment guidelines of 2015 as well as the ongoing special property inspections.

"To ensure that pension funds are better managed, the authority (SSRA) collaborates closely with the Bank of Tanzania, which is regulating social security funds investments," she said.

"We have issued investments guidelines of 2015, which are very tight," she added.