Now a major business player in the Solomons

Evan Wasuka
In the Pacific, national superannuation funds have a dominant presence in the financial sector of Pacific economies.

It’s a winning formula with every worker in the country is required by law to submit a percentage of their earnings to a national provident fund. The fund in turn looks after the people’s money by investing it and these returns are added as interest to members’ accounts.

In the Solomon Islands, this formula combined with hard work and incisive investments has helped the Solomon Islands National Provident Fund (SINPF) recover from the disastrous ethnic tension period to make its mark today.

With 130,000 registered members—35,000 active—its investment in 2007 is valued at around SBD$700 million.

Last year was a record year with the fund paying out 18 percent dividends to its members—a payout that was the envy of regional provident funds. Its success has been helped by the relative political stability of the past three years—that is if you don’t take into account the Honiara riots or the leadership problems.

SINPF today can be described as a shining example of a successful financial institution but it wasn’t always like this, says SINPF general manager, Tony Makabo.

Less than seven years ago the Solomon Islands was suffering the throes of a civil conflict—the impact of what was called the ethnic tension which drove the Solomon Islands’ economy to the brink of collapse.

With massive redundancies, the fund found itself shelling out close to SBD$73 million as members withdrew their contributions and with the economic downturn employers simply couldn’t afford to pay their contributions.

Those were the dark days says Makabo. With the arrival of the Regional Assistance Mission to the Solomon Islands, RAMSI, and improvement in law and order, government operations and finances improved.

Combined with this, Solomon Islands’ Central Bank took on a supervisory role of SINPF while internally the fund began to restructure itself to be more efficient. This included the setting up of a well resourced investment department.

A period that chairman Adrian Wickham described as hard work. “We were meeting so much that it took so much energy.”

He said the regulatory requirements from the Central Bank ensured that SINPF matters were disciplined with the fund forced to meet banking standards.

Since then, SINPF’s investments have undergone an impressive growth from a S$350 million in 2004 to around S$700 million three years on.

SINPF is now a majority shareholder in the national telco—Our Telekom—an investment valued at SDB$86 million. And when the investment opportunities turned for the better, NPF jumped at it at full throttle. For instance, when Mobil Pacific decided to give up its business operations in the Solomon Islands, NPF stepped in with S$21milion to fund a new operation called Pacific Oil, managed by local operator GRP and Associates.

SINPF’s biggest local investment still lies in government securities worth some S$138 million through historical government loans which the government is still servicing.

In early 2007, with returns from investment on a high, the fund found itself in a common position experienced by its regional contemporaries.

“The situation was so good that we had a problem of cash sitting in the bank earning a very low interest,” says Wickham.

The answer for SINPF was to go offshore with permission from the Solomon Islands Central Bank and the government for better returns.

This followed with S$70million in three offshore fund managers while it pushed hard for the sale of the National Bank of Solomon Islands to Papua New Guinea’s Bank of South Pacific.

SINPF sold off its non performing shares in NBSI and purchased shares in BSP.

SINPF is now the 12th largest shareholder in BSP with a S$38 million investment.

Within two months we were making returns on this, revealed SINPF investment manager Michael Wate.

Wate says the real impact of the BSP investment will be felt during the next financial year.

On the local front, SINPF is one of the major property owners in Honiara but says it suffers from poor management of its real estate.

An independent study has been commissioned on its property portfolio while its board is contemplating the establishment of a new company to look after the fund’s properties.

Wickham says with low returns from its property investments, it might be in the fund’s best interest to hire a third party to look after the properties.

One of SINPF’s biggest property projects is a S$50million, three-storey, three tower, 24 unit executive apartment complex in the center of Honiara.

Work has yet to start but once complete, the units will cost up to $20,000 per month to rent.

“It’s got the advantage of being in the middle of town, it’s got security and everything is in walking distance,” said Wickham.

Other projects in the pipleline include an industrial and residential housing estates in Honiara.

SINPF is also considering taking over Home Finance, a home loan company. But the chairman says this will only take place if it makes business sense.

The fund is still reeling from the effects of its own housing scheme that collapsed after its hundred plus borrowers failed to make repayments. Some S$24 million is still being owed by SINPF’s clients. But Wickham says that amount is still being serviced.

As for the future, SINPF is in a good position to hand out good returns to its members but only if the investment climate stays stable Wickham told ISLANDS BUSINESS.

“It’s all about employment, when investors have the confidence to employ people then (SI)NPF will always do well.”

The lessons from the ethnic tension have been learnt the hard way, to back itself from any possible problems should a downturn in the economy reoccur, the fund is keeping 30 percent of its investment portfolio, worth around SBD$15 million, offshore.

"At least," says Wickham, "if there’s any problems our members contribution will be still performing in the overseas market."