DSL: Now Munyes fires NSSF Board

October 16, 2008 12:00 am

, NAIROBI, October 16 – Labour Minister John Munyes on Thursday dissolved the National Social Security Fund (NSSF) Board of Trustees with immediate effect.

At a press conference, Mr Munyes cited a preliminary report which showed that the Fund stands to lose nearly Sh1.4 billion from shares bought through Discount Securities Limited (DSL), for which it didn’t get share certificates. They were trading using nominee accounts.

“We have established that the Board approved a purchase of shares worth Sh2 billion but it has since emerged that NSSF does not have share certificates worth approximately Sh1.4 billion. NSSF could lose this money, if Discount Securities does not deliver the shares in form of the certificates,” Munyes told reporters.

He said the investigations by the Inspectorate of State Corporations also uncovered impropriety in the disposal of a plot of land located along Kenyatta Avenue, recruitment of staff and procurement proposals.

“The investigations have revealed impropriety in all these areas thus the need for the board, which has the oversight responsibility, to step aside to facilitate a full audit,” he stressed.

It had emerged that some people at NSSF were colluding with some officials from the brokerage firm to buy shares at a much lower price and later selling the same to NSSF at a higher rate. Also when former Managing Trustee Rachel Lumbasyo was leaving on a compulsory leave, the fund is said to have dumped millions of Kenya Commercial Bank’s shares at a throw-away price.

Mr Munyes called it a scam and said a forensic audit of the NSSF would be carried out to ascertain whether its asset portfolio of about Sh82 billion exists.

“A lot is going to be unearthed and all these issues and more will come out. I have said before I look at NSSF as a cloud, I don’t understand it and that is why I wanted to make those changes. We have to look for that money,” vowed the Minister.

The Labour minister also revealed that the matter was never detected by the Controller and Auditor General.

The matter also came up in Parliament on Thursday afternoon and Mr Munyes promised to issue a ministerial statement next week.

Mutito MP Kiema Kilonzo told legislators that the matter was urgent, as the bulk of the money belonged to peasant workers.

On Wednesday, the Board held a meeting and sent copies of a statement to newsrooms insinuating that they had just come across the problem and were addressing it. They also wrote to the minister to inform him about the “developments” which included sending the top management and the fund’s Investment Committee ‘home’ for withholding information (from the Board).

Two deputies have since been appointed to head the Fund in an acting capacity.

NSSF had been trading with the stockbroker but the minister disclosed that they they stopped dealing with them in 2007 when problems emerged. NSSF has also invested in the equities market through seven other stockbrokerage firms but it is not clear what percentage has been put in the stock market.

“On whether the board was aware about what was going on at Discount Securities, I would like to say that the matter came to the Board yesterday (Wednesday),” said the Labour Permanent Secretary Beatrice Kituyi who also sits on the Board.

Mr Munyes also revealed that the Capital Markets Authority (CMA) advised him in April that NSSF should not trade with Discount Securities adding that they had disqualified the broker.

“We held a meeting with the CMA boss Stella Kilonzo and Prime Minister Raila Odinga and they (CMA) confirmed that they had suspended the firm from the Nairobi Stock Exchange,” he said.

However the Authority still gave the firm “a clean bill of health” and renewed the stockbrokerage license in May.

This revelation once again put the regulator on the spot and it remains to be seen what step the government will take to protect investors.


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