Back to basics: Why good corporate governance is crucial for the pension industry

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By Bryson Hamanzuka

LUSAKA, ZAMBIA: Good corporate governance is a key factor underpinning the integrity and efficiency of any organisation. For those entrusted with the management and administration of wealth on behalf of others, such as pension funds, effective corporate governance is even more crucial.

Corporate governance encompasses every aspect of management and therefore calls for deliberate observation. In the absence of sound corporate governance principles, corporate strategies run the risk of failure.

The pension industry operates on and is sustained by a mutual trust between pension scheme members and their fund managers.  Participating members contribute to pension schemes trusting that their managers and administrators will act in their best interests.

The business landscape in Zambia has undergone various changes mostly influenced by the disruptive force that is technology. Social and political changes have also had notable influence on the industry.  Coupled with these changes, a slew of corporate scandals over recent years have put a dent in public trust in Corporations and increased public skepticism and mistrust in some business and political elites.

The Corporate world, however, has renewed hope in the pronouncements of the New Dawn Government who have made public declarations of their intentions to restore the rule of law in the management of national affairs. This is an opportunity for corporates to recommit to the tenets of good corporate governance in Zambia so as encourage transparency and rebuild the trust that is critically needed.

As Zambia’s largest private pension scheme, Saturnia Regna prides itself in championing this. It operates within and in accordance with existing legislation and the recommendations for good and effective corporate governance.

One of Saturnia Regna’s main priorities is ensuring that its administration and operations reflect the interest of shareholders and members, and that the fund’s activities and risks are responsibly monitored and managed. This ethos has been the invisible force propelling the fund, its administrators and fund managers, to be Zambia’s largest player in the pension market. Building the fund on clear principles of sound governance has helped maintain trust in the pension fund among its shareholders and members.

Bryson Hamanzuka, Saturnia Regna Pension Fund Board Secretary.

At Saturnia Regna, we see good corporate governance as a journey of accountability and visibility. Over the years, management of the fund has been broken down into two separate entities; African Life Financial Services Limited (Aflife) as the investment manager and Benefits Consulting Services Limited (BenCon) as the administrator, to ensure greater transparency and accountability.

We are in tune with the complexities and realities of the business environment in Zambia, and the challenges shaping our industry today and in the future. As an industry that plays a crucial role in the economy relating to key channels of transmission, especially financial and labour markets, it is important that government, business and society work together to set out a shared vision for delivering prosperity. To be successful, it must be underpinned by trust and understanding of the roles played by all parties involved.

Good governance is, and always will be, a work in progress, but it has come a long way in recent years. The Pensions and Insurance Authority (PIA) in its various guises takes much of the credit for that. Our understanding of the factors that contribute to good governance has also evolved to encompass core values such as stewardship, business innovation, ethics and service excellence.

From a policy and regulatory perspective, the PIA’s corporate governance guidelines have been a guiding light in the promotion of sound governance practices and safeguarding the discharge of fiduciary duties.

Overall, it is hoped by stakeholders in and around the industry that these guidelines will raise the minimum standard by which business is conducted. By raising the bar, trust from members will no doubt increase. Any previous loopholes and oversights that may have inhibited growth and transparency will become a thing of the past.

As the old adage goes: ‘what gets measured gets done’, this holds true in the context of good corporate governance. And as a business, we have decided to take the lead; to hold ourselves to account and not just be forced to change through legislation. Holding ourselves up to greater scrutiny and seeing how we compare is a very good way to motivate change.

By being transparent, reporting to corporate and individual members on a regular basis about the performance of their pension funds, members will be better able to compare and judge the performance of their managers, bringing competition to the market and ensuring the whole industry moves up to a new level.

That has to be good for the pension industry, and by extension, the availability of capital for investment in the nation’s growth and development, and the long-term financial security of our Zambian people.

Bryson Hamanzuka is Saturnia Regna Pension Fund Board Secretary.

About Saturnia Regna Pension Fund

The Saturnia Regna Pension Fund is Zambia’s largest private pension fund, providing pension plans to employees at 195 corporates covering more than 34,500 employees.

The fund manages K3 billion of net assets including shares in most of the companies listed on the Lusaka Securities Exchange (LuSE) and investments in Zambian Government Treasuries.