SSNIT To Sell Stake In First Atlantic

The Social Security and National Insurance Trust (SSNIT) says it plans to offload its more than 50 percent stake in First Atlantic Merchant Bank Limited to a strategic investor.

�Currently, we�ve received a proposal from Kaderi Nominees Limited expressing their interest in acquiring the shares, but it is subject to Bank of Ghana (BoG) approval,� Evangeline Amegashie, Corporate Affairs Manager of SSNIT, told the Business and Financial Times by phone.

B&FT sources say Kaderi is a Nigerian-based company with holdings in a number of banks in Nigeria.
SSNIT�s move is seen as consistent with attempts by its board to limit the fund�s involvement in the financial sector, especially in the areas where it holds significant equity positions.

The International Monetary Fund complained in a recent financial stability assessment of Ghana about the dominance of SSNIT, which it said distorts the operations of the financial system.

�An unresolved issue is the role of SSNIT in the financial system. Being a majority shareholder in several banks and a large depositor of others conflicts with its role as a manager of pensions, and distorts the operations of the financial system,� the IMF said.

But the Bank of Ghana disagreed, arguing to the contrary that SSNIT functions as a �stabilising force.�
Being a pensions-manager, Governor Amissah-Arthur said, SSNIT adopts a medium- to long-term approach in its investments -- and is unlikely to be one to withdraw frequently from its deposits and investments -- and therefore brings stability to the financial system.

However, a worry for the Central Bank, he said, is that SSNIT does not seem to have an exit-strategy for its investments, and lacks the required expertise to manage the banks and institutions in which it holds majority shares.

As a result, the board of the Trust has been considering ways to limit its involvement in these entities.
Since its establishment, SSNIT has held a dominant position within the financial sector. Besides being the biggest provider of pensions, it has significant shareholding in 9 of the 27 commercial banks -- including majority shareholding in a number of them. It also holds a substantial amount of deposits in the banking system.

In the capital market, it holds positions in 23 of the 35 companies listed on the stock exchange, and accounts for over 81 percent of local funds under management.

Additionally, SSNIT is a primary dealer in government securities and holds significant equity in two insurance companies, including the biggest, SIC. For the financial system as a whole, the fund controls about 12 percent of total assets. As at December 2010, it held assets valued at GH�2.74billion (US$1.88billion), representing 6 percent of Gross Domestic Product (GDP).

Analysts say most of SSNIT�s financial-sector investments have been highly rewarding, and as it attempts to reconfigure its holdings it faces a delicate task of creating the right balance of investments that guarantees returns so it can continue to achieve its mandate as trustee of pensions.

In the past, the fund has often been criticised for venturing into failed investments, and for running a bloated and expensive bureaucracy. But it has also had much success in several ventures, and has been able, generally, to meet its obligations to pensioners.

In the government�s new pension law, the burden of pensions-management will be shared by SSNIT with private fund-managers, while workers could take advantage of a third tier under the new scheme to build up their own savings. This new arrangement is intended to broaden risk-sharing, and improve benefits that accrue to pensioners.

Source: B&FT