The Social Security Board (SSB) is an organization that should provide a well-defined social insurance scheme, a safety net, for the Belizean worker and this is financed by contributions from employees and their employers. Over the years the contributions have been in excess of benefits payments as is to be expected from a young scheme. This has led to the creation of a large investment portfolio and made the SSB into what can be considered a major development bank, and the single largest institutional investor in Belize. The SSB is not only a major social insurance scheme but also a major investor in its own right and a source of funding for major industries in Belize.
However, in recent years this has changed and today we are at the point where contributions can no longer cover the operations/expenditures and the investment income has to be used to do so. As the Actuary had advised in consecutive actuarial reviews the SSB fund is past the Point of Equilibrium (POE) hence the SSB is now making the changes that should have been done since 2008. Both the rate of contributions and the insurable earnings are being increased effective July 1, 2019.
In summary the SSB is a major development bank and institutional investor; its operations must reflect this in every respect. This portfolio comprises of investments in key areas of Belize’s economy such as Agriculture, Tourism, Utilities, Education, etc. A key segment of the portfolio is also comprised of mortgages. The success of any investment institution depends heavily on the culture of the organization and the attention given to the risk profile of the portfolio. The culture must by necessity involve the entire organization but special responsibility rests with the Board of Directors and in the case of the SSB also with its Investment Committee (IC). These two bodies must set the tone and develop the investment culture of the organization.
As at end of the year 2017 the total investment portfolio of the SSB stood at $454.5 million and the Reserves stood at some $522.5 million. Some years ago, because of the nature of the organization, special interest was placed in the diversification of the investments bearing in mind the risk on the investment portfolio. So much was the concern that it was set in law, Chapter 44 of the Laws of Belize – Third Schedule Section 22 “Investment Framework” that no single investment shall exceed 20% of the total amount of the Reserves, including economically targeted investments.
As per the 2017 audited financials the SSB’s investment in Belize Electricity Limited (BEL) is approximately $110M in shares and another $6m in debentures. This then would account for almost 22.2% of the actuarial reserves. If this has not changed then the SSB was breaking the law in 2017 and continues to do so now in 2019. The concern should be even more acute now that it is rumored that the BEL is declaring a loss for 2018 and will not be paying dividends. Can the SSB afford not to get a return on its investment of over 20% of its reserves and investment portfolio?
The Actuary has consistently advised the SSB the need to halt the investments in equity investments especially in the Utilities Sector and to increase investment in development sectors. The 2017 Actuarial Review recommends that fresh assets should be re-directed in its entirety to Development Issues, particularly the Agricultural Sector, from 9.2% of the portfolio to 13% in 2020 and by 23% in 2025. Hopefully the SSB heeds this advice and stop investing in GOB projects that need bailing out and substandard infrastructure projects done for political gain only.