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Sierra Leone Business: NASSIT investments not doing badly – Dr Brima Kargbo

Director of Investments of National Social Security and Insurance Trust (NASSIT) Dr Brima Kargbo has told Journalists in a one day seminar at Golden Tulip that their investments are not doing badly as they are lifetime investment. He said NASSIT was established by an Act of parliament, Act No 5 of 2001, and it was established to administer the country’s National Pension Scheme. It covers three major contingencies: Old age, Invalidity and Death and it is a partially funded scheme. He averred that the financing of the scheme primarily comes from contributions and investment earnings. Talking about NASSIT investment activities, Dr Brima Kargbo said the amount of current contributions not needed to pay benefits is accumulated in a reserve fund. “Such reserve amounts are used to cover future liabilities in benefit payments to members and expectedly, a time will come when benefit payments might exceed contributions. At such point in time, accumulated reserves might be drawn to pay these benefits. NASSIT was therefore mandated by law to invest accumulated funds, and investment of accumulated funds is subject to safety, yield and liquidity considerations. “In fulfillment of this mandate, NASSIT has entered into various joint venture investments and these joint venture investments aimed to strengthen the foundation for strong economic growth with multiplier effects including but not limited to job creation, increase in contributions etc. The following are the equity companies in which NASSIT has invested so far:

Dr Brima Kargbo said Regimanuel Gray Ltd as a subsidiary of RGGhana, RGSL was incorporated in Sierra Leone in the year 2004. RGSL he said is principally engaged in real estate development. “Post conflict reconstruction and development of the country was the prime reason for its establishment in SL and a total of 52 bungalows of 3 bedrooms have been constructed by RGSL within the Seaview Estate. Also, RGSL has constructed 6 blocks containing 48 apartments as a turnkey project for the Trust. Five of the bungalows have been sold and the NASSIT exclusively owns the remaining 10 and all six blocks containing 48 apartments. This estate has ancillary facilities such as : a swimming pool, a club house and a generator house, in which NASSIT participated in 40% equity stake in RGSL in October 2005.” Explaining about Sierra Concrete Block Product (SCPL) Dr Kargbo said it was established in 2005 as a complementary company to RGSL and SCPL is principally engaged in the production of blocks and other concrete products in which NASSIT owns 60% equity stake. Commerce and Mortgage Bank PLC Dr Kargbo said was initially called Home Finance Mortgage Company (HFC). This concept he said was conceived in 2005 to help reduce the lack of housing finance in SL. “Housing finance has been identified as one of the major contributing factors to housing shortage in Sierra Leone and HFC was later incorporated in July 2007 under the financial services Act of 2001 to provide Mortgage financing to qualifying individuals. HFC operated as a mortgage finance and savings company effective January 2008 right through early 2016 when it applied for commercial banking license to operate as Commerce and Mortgage Bank (CMB). This license permits the entity to operate as a mortgage and commercial bank and prior to operating as CMB, HFC used to pay dividends annually in excess of Le500 million.  Additional capital (LE21B) in the form of equity was injected into the bank as requirement imposed by the Bank of Sierra Leone.” On West African Holdings Ltd, Dr Brima Kargbo told Journalists was Initially incorporated in Sierra Leone as Mammy Yoko Hotel Ltd and It is mainly engaged in the hospitality business. “In 2009, NASSIT participated in 84% equity holding of Mammy Yoko Hotel which at that time was called West African Holdings Ltd. By 2015, the minority shareholders sold out their remaining16% holdings to the Trust. This outcome lead to NASSIT owning 100% of the company’s equity valued at US$15.588M and the assets of the company. RBMY is currently a 172 bedroom five star hotel located at Aberdeen and WAHL is currently managed by a management company called Radisson Blu. Since reopening, the hotel has generated Earnings before taxes amount of Le67.42B” On Sierra Akker Agricultural Product Company (SIERRA AKKER), the Director of Investments averred that it is a registered company incorporated under the Company’s Act in 2003, and the company is mainly engaged in the business of chicken and other meat processing and egg production, as the company operates at Kossoh town and Sumbuya. Dr Kargbo said NASSIT participated in 30% equity holdings of Sierra Akker valued Le6.75 billion in December 2014. About Kambui Property Holdings (SL) Limited (KPHL) Dr Brima Kargbo said KPHL was incorporated on 31st May 2007 and registered on 1st June 2007. “It is owned by NASSIT and the Kenema City Council (KCC), and NASSIT invested Le848 million in equity whereas KCC invested Le200 million in equity in the form of land. KPHL is mainly engaged in the business of providing ultra modern shopping facility for rental to Small and Medium Enterprises (SME’s) in Kenema and the facility was opened in November 2012 but started full scale rental operations in January 2013. This is the business that is not doing well as the upper floors are yet to be rented.” “Golden Tulip Essentials Kimbima is another investment of NASSIT as it was originally called Kimbima Hotel Ltd, which was registered and incorporated in Sierra Leone in the year 2004 under the company Act of 2003. The company is mainly engaged in hospitality business. And based on the hotels performance then (2004-2006), and after thorough due diligence, NASSIT acquired 60% equity holdings in the hotel valued at US$1.765 million in 2006. The hotel ceased operations in the first quarter of 2010 for the purpose of rehabilitation and refurbishment works on the hotel. This exercise lasted until March 2016 and the hotel reopened for business in April 2016 with a new name called Golden Tulip Essentials Kimbima and managed by Golden Tulip brand. Currently, the hotel is 100% owned by the NASSIT valued at Le20.85 billion.” Talking about other Equity Companies, Dr Brima Kargbo averred that NASSIT also invested in other equity companies in further fulfillment of its mandate to invest the Trust’s reserve funds subject to safety, liquidity and yield as shown in the following slide: “From the companies listed below, NASSIT has been receiving returns in the form of dividend income effective 2010 financial year from Rokel Commercial Bank (RCB), Standard Chartered Bank (SCB), EcoBank Transnational (ETI) and Sierra Estate Management (SEMCo).” In other projects, Dr Kargbo said NASSIT in addition to the equity companies NASSIT, also undertake projects. We have the following current active project: On Sewa Grounds, Dr Kargbo said the Trust in a bid to constructing an ultra-modern Shopping Centre and Multi-Storey Car Park facilities at Sewa Grounds and in keeping in harmony with the public interest,  sought Board approval. “This project involves Government of Sierra Leone; National Social Security and Insurance Trust; Freetown City Council;  Anglican Diocese; Contractor (MKD JASS Distributors and Construction company); Consultant (Capital Infrastructure Partners-CIP, terminated). FCC owns 25% of the equity component of the project whilst NASSIT owns 75%. Dr Brima Kargbo said the Sewa Grounds has different components that the public must know about. Dr Brima Kargbo said the Sewa Grounds development project comprises of the market, school, car park and office space, of which the market have the following facilities: Market stalls constructed at the central section; and Upscale lock-up shops constructed around the perimeter of the development. “The upscale shops are divided into: Rawdon Street; Rawdon Street entrance; Former Sanusi building and Former mayor Herbert Building. The lock-up shops are in the Rawdon Street and Former Sanusi Buildings which are 6 and 4 story buildings respectively and are  approximately 80% and 65% complete respectively. The market stalls is a three (3) storey building which is approximately 75% complete and the car park is yet to start because the Trust is yet to reach an agreement with the Anglican Diocese to legally give the Trust access to the Cathedral School land. Talking on the way forward for NASSIT, Dr Brima Kargbo said considering the length of time this project has come to a halt, there is urgent need to restart active construction; therefore, there is the need to engage a new Project Management Consultant, which is paramount and contingent upon progress of works and preparation of comprehensive project financial statement, valuation of all works and verification of variations. “Also we have to obtain technical instructions from consultants for the outstanding buildings and works as well as request the contractor to resume work on on-going activities with immediate effect and Review and Amendment of contractor’s contract; and urgent resolution of the impasse between NASSIT and the Anglican Diocese. Dr Brima Kargbo talking on the hostel projects, a turn-key project that will deliver 5 blocks of standard student hostels with full reticulation and furnishing. The hostels he said will be constructed by Sierra Leone Guoji Construction & Investment Company Ltd and Each block will comprise of 216 rooms accommodating 432 students and the 1,080 Rooms Hostel Project is targeting the following institutions: Fourah Bay College, Eastern Polytechnic, Milton Margai College, Njala University College and University of Makeni with each having one block. He said the Trust is in partnership with the institution and they have an agreement wherein the Trust will bear the construction cost. The institutions he said will provide land and its valuation will be their own contribution to the business venture. “The hostels will be managed by a property management company and this will require a Joint Venture agreement between the Trust and the institutions that requires a lease rent waiver as the two parties will receive dividend at the end of each year.” The current status of the project includes Survey plans that have been signed and released by the Ministry of Lands and they are on the verge of engaging the different institutions to sign the agreements. Dr Kargbo said they are also engaging the services of engineers for geotechnical investigations that will properly determine the foundational designs. The Director of Investment said the Freetown International Conference Centre beleongs to the Trust and pursuant to the Trust’s Investment Policy and Strategy (2011-2013), the Board of Trustees at its meeting held on the 3 July 2008, approved the proposal to invest in the refurbishment of Bintumani Conference Centre. “After securing a 25 years lease with an option to renew for an additional 25 years from the Government of Sierra Leone, a comprehensive regime of rehabilitation and upgrade of the facility including some additional mixed development to make the investment more viable was launched. The total cost of the project (now known as the Freetown International Conference Centre) is US$ 16,251,073.92. Funds disbursed in this project so far are in the tune of US$ 15,746,766.91 and the facility is now complete, handed over in July 2016 and fully operational, and has hosted a lot of functions.” The Director said the land which was meant for the project and property is 13 acres, this piece of land was meant for the reconstruction of the International Conference Centre and construction of luxurious apartments for hosting people attending conferences and workshops, and a diamond cutting and polishing office. “These additional facilities were meant to complement the income that would be generated from the Conference Centre because the payback period for the Conference Centre will be too long if we depend on the income generated from the Conference Centre alone.  However, this could not be achieved because the land has been encroached upon.” He averred that the Trust have faced Challenges that can’t be ignored. He said ineffective Corporate Governance system negatively affecting the Trust’s investments and lack of investment the necessary platform including but not limited to a running stock exchange, capital market, property market to ensure smooth transfer of investment assets from one ownership to another. Lack of effective land tenure system, hence land acquisition is associated with the risk of encroachment, grabbing etc. as well as inadequate human capital in the various sectors. Unfavourable investment environment (highly variable macro economic factors such as interest rate, inflation rate and exchange rate). The lack of national investment policy to guide institutional investors and lack of national housing policy to guide housing development and investments as well as high infrastructural cost in terms of the following: high energy cost or availability, poor water supply, and poor road infrastructure.”

By Zainab Iyamide Joaque

Monday May 20, 2019.

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