The Perspective
Atlanta, Georgia
November1, 2021

The Liberian People’s Party (LPP): Calls on our Liberian Lawmakers to encourage “The National Social Security and Welfare Corporation (NASSCORP)” to reduce “risky portfolios, or private equity such as real estate” and invest into stocks, bonds, etc. The General Audit Commission of Liberia (GAC), in its Audit Report, dated October 2020 for the fiscal period ended on 6/30/2019 and 6/30/2018, stated that the entity reported USD 141M “Assets Available for Benefits” or which NASSCORP called “Total Reserve.”

What is the purpose of NASSCORP? Long before Liberia enacted its first Pension Act in 1976, which was revised in 2016, Europe envisioned the concept, and North America adopted it in the 1930s. Then, as it is now, everyone agrees that it has become difficult for siblings and/or communities to finance the costs of living of injured, employees, retired workers, and their dependents.

Therefore, the government should create a SUSU/type organization since poor employees might find it difficult to individually accumulate adequate savings. The employee-retired entity is responsible to collect withholdings from employees and employers. Management shall invest the net withholdings into less risky portfolios but yield a profitable rate of returns.

Instead of reporting a profitable rate of return on investment, NASSCORP’s rate of return was 2% ($3.5M/$141M ). (See Page # 4 Audit Report.)

1. NASSCORP earned $2.3M investment income from $6.7M invested in securities of the Liberia Bank for Investment and Development (LBDI). (See pages #  22 & 29).

2. NASSCORP generated $0.6M rental income from real estate investment of $35M ($49M minus $13M invested in Medical Diagnostics Center). The $49M includes the buildings used by the Liberian Revenue Authority and 19 additional real estates. (See Page # 29.)

 

3. NASSCORP received $0.4M interest income from $62M investment ($69M minus $6M invested in LBDI). The $69M includes $40M lent to the GOL and $3M loaned to the Central Bank of Liberia. GOL and CBL did not pay interest income. (See page # 23).

4. NASSCORP generated $0.05M from other income from other assets.

 

Is NASSCORP’s 2% rate of return acceptable? Yes, if a significant portion of the investment were stocks, bonds, etc. since the 2% is within the average range of 5%, according to Private Equity. https://www.oecd.org/finance/private-pensions/Pension-Funds-in-Figures-2021.pdf). However, NASSCORP invested into risky portfolios as per the list below:

A. NASSCORP bought USD 40M of Liberian government T-bills and Treasury notes, which is 28% ($40m/$141M). But NASSCORP did not report USD 8M (20% of USD 40M) as interest income received or interest income to be received in exchange for buying the government’s promissory notes. (See Page # 23 of the Audit Report).

 

B. NASSCORP recorded USD 23M as “Receivable and prepayment”, which is 20% of the USD 141M “Assets Available for Benefits.”  NASSCORP did not record interest income. (See Page # 23).

C. NASSCORP invested USD 14M into real estate located at the ELWA and Tubman Boulevard, Paynesville, which is leased to the Liberian Revenue Authority, a government agency, which is 10% of $141M. Worse the government has not paid rent for two years, USD 1.3M and USD 0.7M for 6/30/19 and 6/30/18 respectively. (See page # 32 of the audited report).

 

D. NASSCORP invested USD 14M into real estate property that it uses as headquarters, which is 10% of the USD 141 “Assets Available for Benefits. (See page # 29)

E. NASSCORP invested USD 13M into Medical Diagnostic Center/Jamale. NASSCORP did not report any income (dividend from subsidiary capital) from this investment, which is 9% of the $141M. (See page # 29).

 

Why NASSCORP continues to invest 49% (i.e., 20%, 10%, 10% and 9%) of its funds into private equity (i.e., risky portfolios), even though it generates 2%? Or better yet how come other pension funds generate a 12.5% to 15% rate of return from the same type of portfolios? www.oecd.org/daf/pension/pensionmarkets.)  Table 3.1 on page # 6 shows that pension funds generated 12.7% to 15%. The table did not provide information on how well African countries performed with private equity.

However, African countries invested in private equity ranged from unclear to 2.5% and 10%. Please see page # 15 within (www.oecd.org/daf/pension/pensionmarkets.)  Ghana did not authorize a specific percent, while Botswana authorized 2.5 percent to private equity, and pension funds in Kenya were allowed to allocate 10% in private equity.

It is true that Ghana’s allocation to private equity was unclear, but it invested 10% in stocks and 74% in bills and bonds, according to figure # 2 on page # 4 within this report. https://www.oecd.org/finance/private-pensions/Pension-Funds-in-Figures-2021.pdf).  Pension funds in Jamaica invested 40% in stocks and 54% in bonds, while Namibia invested 55% in equity and 40% in bonds. Pension funds around the world invested 74% in equity and bonds in 2020, the report stated.

Real estate offers predictable cash flow, but it has limited transparency, thus experts link it to corruption, according to www.researchgate.net/signup.SignUp.html). Also, it is not easily exchanged into liquid assets. Other factors that affect the values of real estate include political crisis (chaos, rallies, military insurrection, etc.). Further, volcanoes, earthquakes, floods, etc. could affect the values of real estate.

If Liberians are to benefit from their investment, LPP recommends these measures:

1. Regulatory Commission to regulate and supervise the functions of NASSCORP.
2. Reduce the (11) eleven-member Board members to five and select a six-member Regulatory Commission.
3. Civil society, employees, and employers should appoint one member of a regulatory commission and one member of the board of directors. The President of the Republic of Liberia shall appoint the remaining members of the regulatory commission and board of directors.
4. The regulatory commission should be responsible to approve the percent of private equity the pension funds can purchase.
5. The President of the Republic of Liberia should appoint a special investigation team to review NASSCORP investment portfolios.
6. The regulatory commission should advise and recommend the foreign investment portfolios the pension funds can purchase especially since Liberia does not have many corporations selling securities and our government is broke.

(https://www.oecd.org/finance/private-pensions/Pension-Funds-in-Figures-2021.pdf)

(https://gac.gac.gov.lr/wp-content/uploads/2020/12/AUDIOT1-1.pdf)

www.oecd.org/daf/pension/pensionmarkets.)  

www.researchgate.net/signup.SignUp.html).

LPP Secretariat
J.Yanqui Zaza
Tel: +011-231-776-491-322           Info@LIberianpeopIesparty.org  
80 Broad Street,
Monrovia, Liberia