Pension fund looks to private sector investment

Real Estate, Horticulture possible targets

The Private Organizations’ Employees Social Security Agency, is looking for an option other than treasury bills to increase pensions. The new investment study which is currently being carried out by the agency and an international labor organization will discover the potential investment areas which have a very low risk.

According to Tesfaye Gashaw, the Agency’s Communication Director, treasury bills have an interest rate below one percent and as result the administrative cost of using them doesn’t make sense.

“Inflation has not kept up with interest rates for pension funds so to increase payments we need to make other investments, we plan to complete this study this year and bring it to the council of ministers for ratification,” he said. Sources say the agency will likely look to low risk investments like horticulture and real estate to increase their revenue.

Ethiopia has a pension plan which makes up part of its social insurance system in which it collects contributions from employees to then pay for retirement, disability or a death benefit to family members.

The institution responsible for administrating the funds is SSA. Even though it largely funds this through employee contributions it also must obtain funding through other means.   Historically this has come through treasury bonds as they are seen as a conservative investment.

In many nations social security administrations are managed by stakeholders separate from the government but in Ethiopia the agency is run by the government. Currently there is not a committee responsible for overseeing retirement pensions.

The 2011 proclamation compels private sector employers to contribute 11pc of the employee’s salary to the pension fund. The employee then contributes seven percent of their salary which is channeled to the common treasury for administration.

Currently the agency has registered 994,032   private employees and 129,668 companies but it has been affected by high turnover. In the last fiscal year alone over 200 hundred employees left the agency often looking for better paying jobs. Currently the agency has 1,500 workers.