By Korsi DZOKOTO
The Social Security and National Insurance Trust (SSNIT) has historically stood as a pillar of financial security for Ghanaian workers. However, recent events including the sale of SSNIT-owned hotels and the escalating concerns voiced by worker unions have cast a shadow over its reputation. Mismanagement issues, political interference, and questionable decisions have plunged SSNIT into a deep financial and operational crisis, necessitating urgent restructuring. In this analysis, we delve into the financial missteps, governance challenges, and contentious decisions that highlight the imperative for sweeping reforms at SSNIT.
Financial Performance Analysis
Deteriorating Financial Health: In stark contrast to a surplus of GH¢1,141,873,000 recorded in 2020, SSNIT reported a substantial deficit of GH¢301,097,000 for the year ended December 31, 2021, marking a decline of 126.4%. This alarming downturn in financial health can be attributed to a series of questionable management decisions, heavily influenced by undue interference from government appointees.
Income and Expenditure Trends: The financial year 2021 witnessed a significant decrease in total income, primarily due to an 18.0% reduction in net contributions received, dropping from GH¢4,106,623,000 in 2020 to GH¢3,368,335,000.
This decline reflects poorly on the institution’s capacity to effectively manage and grow its primary revenue stream, a situation exacerbated by political appointments lacking the requisite expertise in financial management and social security administration.
Moreover, the total expenditure saw a 9.6% increase from GH¢3,847,254,000 in 2020 to GH¢4,217,700,000 in 2021, with benefits payments witnessing a 9.9% rise.
This increase in expenditure, against the backdrop of declining income, underscores a lack of fiscal discipline and strategic planning, likely influenced by politically motivated decisions rather than prudent financial management practices.
Financial Position and Mismanagement
Increasing Liabilities and Mismanagement: The Trust’s financial position as of December 31, 2021, further highlights the dire consequences of mismanagement under the influence of NPP government appointees. While non-current assets saw a 13.6% increase and current assets a marginal 0.9% rise, current liabilities surged by 30.6%, indicating a significant increase in payables. This escalation in liabilities, coupled with a deteriorating current ratio from 1.8:1 in 2020 to 1.4:1 in 2021, signals a troubling inability to meet short-term obligations, posing a risk to the Trust’s operational viability.
Political Interference: The deterioration in the Trust’s financial health can be directly linked to the undue influence of government appointees, who have prioritized political interests over the institution’s core mission of serving Ghanaian workers.
The appointment of individuals based on political affiliation rather than competence has led to a series of misjudgements and inefficiencies, compromising the integrity and sustainability of the Trust.
Governance Issues and Conflict of Interest
Controversial Sale of Hotel Stake: The government’s insistence on selling a 60% stake in hotels owned by SSNIT to the Minister of Food and Agriculture, Bryan Acheampong’s Rock City Hotel Limited, has angered the general public and workers’ unions, prompting calls for a nationwide strike. Concerns have been raised about corporate governance, conflict of interest of the minister, fiduciary issues, and the low valuation of the hotels.
Valuation Discrepancies: SSNIT’s objective expectations, based on valuation reports of a 60% stake in the four hotels (Labadi, La Palm, Ridge Royal, and Elmina), ranged from a minimum value of US$80,406,630.00 to a maximum of US$121,315,643.00.
However, . Bryan Acheampong’s Rock City offer fell far below the minimum value, with a bid of only US$61,200,000.00. This below-par bid highlights significant undervaluation and potential loss of value for SSNIT, further eroding trust and financial stability.
Financial Projections and Sustainability
Actuarial Valuation Findings: A recent report by the International Labour Organisation (ILO) projected that SSNIT reserves would reach zero by 2036 based on actuarial valuations.
The administrative expenses of managing pension funds have steadily increased as a percentage of member contributions, raising questions about the allocation of funds.
Investment Performance: From 2008 to 2020, the average return on total assets was 12.2%, with a real average return of 0.9% after adjusting for inflation. Treasury Bills (T-Bills) in Ghana have provided a higher average return of about 17.5% over the past 12 years compared to the nominal return on SSNIT assets.
Contribution Rate and PAYG Projections: Actuarial projections highlight the necessity to reduce administrative expenditures to sustain the pension scheme. The pay-as-you-go (PAYG) rate is projected to increase from 11.5% in 2020 to 29.5% in 2095. The current legal contribution rate of 11% is inadequate, with the average PAYG rate forecasted at 11.6% from 2021 to 2031.
The SSNIT Board’s Failure in Safeguarding Workers’ Future
The SSNIT board has failed its fiduciary responsibility by allowing a series of poor financial decisions, mismanagement, and political interference to compromise the trust’s integrity and sustainability.
The board’s oversight deficiencies are evident in the significant financial downturn from a surplus of GH¢1,141,873,000 in 2020 to a deficit of GH¢301,097,000 in 2021.
This alarming decline reflects a lack of strategic planning and fiscal discipline, exacerbated by the appointment of individuals lacking the requisite expertise.
The board’s approval of the undervalued sale of SSNIT-owned hotels to Rock City Hotel Limited, despite clear conflicts of interest and significantly lower offers, further highlights their disregard for prudent governance and the protection of the trust’s assets. Their actions and inactions have jeopardized the financial security of Ghanaian workers, indicating a gross negligence of their fiduciary duty to act in the best interest of SSNIT’s beneficiaries.
Reforming SSNIT’s Administrative Spending to Protect Pension Contributions
There is a pressing need to amend the Social Insurance Pension Scheme governed by PNDC Law 247 to impose stricter limits on the proportion of workers’ contributions that SSNIT can allocate towards administrative expenses, a practice observed in various jurisdictions.
As administrative costs continue to rise as a percentage of member contributions, it is crucial to adopt models from countries where similar reforms have been successful.
For instance, in some countries, legislation stipulates a specific cap on administrative expenses relative to the total fund size, ensuring that a substantial portion of contributions is directed towards benefiting retirees rather than operational costs.
This approach not only enhances transparency and accountability but also safeguards the long-term sustainability of pension funds by maximizing the funds available for future payouts.
Implementing such reforms in Ghana can help mitigate the inefficiencies and financial strains currently faced by SSNIT, ultimately ensuring a more secure retirement system for Ghanaian workers.
Call for Resignation: The call for the resignation of key figures following the nationwide strike declared by labour unions is rooted in the profound mismanagement and governance failures within SSNIT and the broader pension regulatory framework.
The entire SSNIT board and the SSNIT Director-General must step down due to their direct involvement in the financial missteps, inefficiencies, and controversial decisions that have compromised the integrity and sustainability of the Trust. The NPRA board and its Chief Executive Officer should resign for their failure to effectively regulate SSNIT, allowing these issues to fester unchecked.
The Minister of Employment and Pensions, who oversees SSNIT and NPRA, has demonstrated a lack of leadership and accountability in addressing these systemic problems, warranting their resignation. Furthermore, the Minister of Food and Agriculture must also resign, as the proposed sale of SSNIT-owned hotels to Rock City Hotel Limited, linked to this minister, exemplifies a severe conflict of interest and raises significant ethical concerns.
This action has eroded public trust and has been a catalyst for the current unrest, making their continued presence in the government untenable. These resignations are essential steps towards restoring confidence in the management of SSNIT and ensuring that the interests of Ghanaian workers are adequately protected.
Conclusion
The combination of financial mismanagement, political interference, governance issues, and questionable decisions underscores the urgent need for restructuring SSNIT.
Addressing these challenges requires a comprehensive overhaul to restore fiscal discipline, enhance governance, and ensure the sustainability of the Trust for future generations. The proposed restructuring should focus on professionalizing management, eliminating political interference, improving transparency, and adopting strategic financial practices to safeguard the interests of Ghanaian workers.
Labour unions must remain resolute and steadfast in their efforts to protect the future of workers. Their commitment to advocating for necessary reforms and holding accountable those responsible for the current state of SSNIT is crucial. Together, through unity and determination, we can secure a more stable and secure future for all Ghanaian workers.
