A friend of mine stopped me recently to comment on my article entitled “Triggers”. He did not disagree with my argument, but felt that I did not go far enough. He was particularly passionate about Government’s access to the people’s money, and how that money was used. His explanation was that when Government borrows money, only people of a certain hue are allowed to use the money and only people of that hue are allowed to benefit from the money. He is not alone in this concern; it has been raised in several of our public meetings.
My intimate contact with Social Security started when I became a member of the Board of Directors in 1994. I recall my first encounter with the Actuary who was on loan to us from the Social Security of the USA. He warned then that as our fund matured, managing the money would become a major component of our operations because we would run out of options for investments if we relied on our local market. He advised that two of our best options would be to invest in real estate and government borrowing. He was right.
Currently, our investment portfolio comprises loans to Governments (including loans to statutory bodies); fixed deposits in Banks, Credit Unions, Finco, FND; real estate; shares (in Cable & Wireless St Kitts-Nevis Ltd, TDC, S L Horsford & Co Ltd, St. Kitts-Nevis National Bank, St Lucia Electricity Services); stocks, bonds and equities. By law, only 1% can be placed in overseas international markets, the remaining 99% must be kept and invested within the Federation and the region. Furthermore, about 65% of all our money is held in short term fixed deposits, with a small amount kept on call for daily expenses. Experts have advised that the asset mix is too short term oriented and should be changed: long term benefits such as pensions are best matched with long term investments. Notwithstanding, this portfolio gave us an overall return in 2006 of EC$47.8million. Kudos to our staff, past and present, especially of the Finance and Compliance Departments, the Board of Directors and the Investment Committee! We have built an empire on 11cents!
By 2006, the loans portfolio, mostly to Government (both Federal and the NIA) stood at $174 million or 23% of all investments. These loans have been used largely for infrastructural and social development – health, education, sports complexes, port facilities, roads, housing, and education. The money is being paid back plus interest. Most importantly, payments are up to date.
A member of the public asked at one of our meetings whether our funds were insured against natural disasters etc and who underwrites us. Government does. By law, it is the ultimate guarantor of pensions. So if, God forbid, Social Security runs out of money, Government must take up the slack and pay pensions. Taxes would then become really burdensome!
Part of my friend’s concern was that there was no consultation with him before Government got the money, and why can’t he get some money to borrow too? The former raises the larger issue of governance and the latter gets us into a whole new ball game. To answer the latter, we on-lend to institutions like the FND and the Development Bank, and place money in all the financial institutions.
On the governance issue, Social Security is governed by a Board of Directors drawn from Employers’ organization (the Chamber of Industry and Commerce), Workers organization (the St. Kitts-Nevis Trades & Labour Union) and Government (Federal & NIA). Each party has three members. The Chair is appointed by the Minister and the Minister must also approve the appointment of the [Executive] Director. Board members are appointed for a 3 year term except the Chair who has 4 years. This at least ensures some degree of stability and continuity. The tri-partite composition is an international requirement. There is also an Investment Committee, legally mandated, comprising at least one member of each Board component and a representative from the Ministry of Finance. Our investments are also subject to scrutiny of the ECCB. Only three other Social Security Boards are ahead of us when it comes to prudent investments, and only because they can invest more internationally.
Is this structure sufficient to ensure proper representation and to have the public consultation that people seem to want? Will it be to anyone’s advantage to hold public hearings whenever a loan is requested? Is this one of the aspects of reform to be considered? Interestingly, when we conducted a survey in 2007 on this very issue, an overwhelming 79% of the respondents approved lending money to Government, provided that it is paid back and with interest.
When we worshipped at the Eden Browne Church of God in February, the Pastor suggested that a good use of your money would be to pay off the national debt, whatever it is. Take that burden from the future generation and let us be debt free. Wow! Other people suggested that we should not lend to the Government, period. Let the Government borrow internationally, they say, forgetting that it is still us, the tax payer who would have to pay back the principle and the interest, and all of that money will go to making some rich country richer. People want a developed St Kitts and Nevis, but at some-one else’s expense. This will never work!
So we continue to lend to Government for the good of the country. And we reap good returns for you in the process. After all, money is like manure. It is no good to anyone unless it is spread around, helping things to grow. Left heaped up, it is merely a pile of … well, disgusting material. Government, for Social Security, is very fertile ground.
So my friend, take heart. Continue to engage us. We are at the Bay Road, Basseterre and Chapel Street, Nevis. You can reach us at 465 2535 or 469 5245 or by email at ssb.reform@socialsecurity.kn. We still want to know what you think.
