Bungling by Munyes leaves NSSF exposed to more risk

Published on 26/02/2009

By Luke Anami

Concerns are growing over the safety of workers’ pension at the National Social Security Fund (NSSF), in the absence of a working Board of Trustees.

The bungled dissolution of the Board by Labour and Human Resources Minister John Munyes, and the resultant court case challenging his move, created a dangerous vacuum in an organisation that controls billions of shillings in workers’ retirement savings, and already has a string of scandals trailing in its wake.

Because of the minister’s bungling, the Fund is now exposed to serious risk, thanks to a court order restraining him from reconstituting a new board, even though the current one is hamstrung by the court challenge.

Out-Of-Court Settlement

The Permanent Secretary in the Ministry of Labour, Beatrice Wasike, following a meeting with Cotu’s Francis Atwoli, and Federation of Kenya Employers (FKE) National Chairman, Patrick Obath last week, now wants an out-of-court settlement to pave way for the re-constitution of the NSSF Board of Trustees, and plug any loopholes that could be used to siphon funds from the organisation. “Following the dissolution of the NSSF Board, and subsequent Court order restraining the Minister from taking any further action, the NSSF is unable to effectively discharge its legal mandate.” Ms Wasike says in a letter addressed to the Secretary-General of Cotu and Executive Director of FKE.

“In the national interest, and to avoid risk and exposure of the fund by virtue of the Board being in-operational, it is necessary to consider an early settlement of the court case.

New Board

The Government therefore proposes that the representatives of workers and employers continue on the Board while the Minister appoints a new chair and one independent member,” the PS said.

Mr Alfred Odero is the acting NSSF Managing Trustee. However, the NSSF Act requires that the Board approve all major investments and financial transactions. The Board is yet to meet since the suspension, although, in a curious turn of events, Munyes last week said the board was still in office, pending a court case.

Before Munyes went on doublespeak mode, however, The Standard confirmed that the NSSF was invited by Treasury to invest in the Infrastructure Bond. The exact amount that the NSSF was expected to put in was not clear, but reliable source put in the tens of billions.

Odero acknowledged that they had been approached over the bond, but said he declined because of the absence of a functioning Board of Trustees. “We were invited to invest in the Infrastructure Bond, but could not take up the offer, as the infrastructure Bond is a new investment instrument in the Kenyan market, which has not yet been determined and approved by the Board of Trustees, as the Board is currently non-functional,” Odero said. NSSF participation would have led to a record subscription for the bond, and allowed Treasury mandarins to trumpet it as a major triumph.

Court Case

Since Munyes softened his stance on the status of the Board, two key members, the Central Organisation of Trade Unions (Cotu) and the FKE have opted to keep off, pending the conclusion of the court case challenging the dissolution of the board.

NSSF is run by the Government, workers and employers, with representation from the Treasury, Attorney General’s office, FKE and Cotu. Under Section 31 of the NSSF Act, policy formulation and implementation is entrusted to the Board of Trustees composed of Government (Ministries of Labour and Finance), Workers (Cotu) and Employers Organisation (FKE).

The Fourth Schedule of the Act also makes the Board liable for any action, suit or legal proceedings related to the Fund.

When the Minister disbanded the board in October last year, he blamed it for approving the purchase of shares worth Sh2 billion through Discount Securities, without share certificates worth at least Sh1.4 billion.

As a result, the Fund stands to lose the money if Discount Securities does not deliver the certificates. The stockbroker is now under special management ordered by the Capital Markets Authority, after it began to face cash flow problems.

The NSSF may have also lost millions shillings at the Nairobi Stock Exchange, after the value of its investment in the equity market nose-dived following the market’s decline.

Culture of Impunity

But it is the safety of workers’ funds that is most worrying. So far, the Labour Minister has not only waffled in his professed zeal to end the culture of impunity in the organisation — seen as a get-rich-quick conduit by the country’s main corruption networks — but may have made things worse by his poorly thought out meddling.

Munyes vowed to put a new board in place, and to ensure that Cotu Secretary-General Francis Atwoli, and FKE boss Jacqueline Mugo, were not part of it.

“Whereas the NSSF Act provides that Cotu and FKE be represented on the Board, the Act does not say that the heads of these institutions be the ones to sit on it. I will be calling these organizations to forward names of their nominees, but not of their heads,” he said then.

The Minister’s action has resulted in acrimonious exchange between the Ministry of Labour and Cotu’s board, which opposed the decision. The FKE too has protested the manner in which the Minister acted in disbanding the Board. However, what is surprising is the failure by Munyes to de-gazette the Board of Trustees. The board is therefore legally in office, but it has not met since the Minister’s order.

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