NSSF gets Sh1.4bn shares frozen after Discount collapse

What you need to know:

  • The freeze had denied the NSSF an opportunity to find better investment opportunities for the holdings, slowing down the rate of return for contributors and forcing it to appeal to the Director of Public Prosecutions for the release of the share certificates.

The National Social Security Fund (NSSF) has been given back shares worth Sh1.4 billion frozen by the Ethics and Anti-Corruption Commission (EACC) for four years as evidence against the collapsed broker Discount Securities.

The freeze had denied the NSSF an opportunity to find better investment opportunities for the holdings, slowing down the rate of return for contributors and forcing it to appeal to the Director of Public Prosecutions for the release of the share certificates.

“The equities that were released by the EACC were moved to fund managers,” said NSSF managing trustee Richard Langat.

The International House-based Discount Securities is said to have opened more than 80 nominee accounts through which it invested workers’ cash in the stock market before it collapsed under massive liquidity challenges. After the collapse it emerged NSSF issued cheques to Discount Securities for the purchase of shares that on calculation totalled more than Sh15 billion.

The fund has been carrying a Sh1.2 billion provision in its books for losses on shares held by the collapsed broker.

In a report last year, the Retirement Benefits Authority (RBA) had indicated that the value of shares frozen by the anti-corruption watchdog was Sh14.3 billion. “December 2012 does not include Sh14.3 billion securities held directly by NSSF (frozen by EACC),” RBA said in its report.

Efforts to reach NSSF for clarification were not successful by the time of going to press.

Apart from the actual shares unaccounted for, the stockbroker has been accused of failing to pass on dividends payable to NSSF worth more than Sh100 million. The fund has a considerable stake in KCBNational BankBATBamburi, Britam and EABL.

Most of these counters performed above market average in the past three years, underlining the potential in lost opportunity. NSSF holds more than a third of its assets in equities.

It appointed six fund managers in 2012 to manage its equities portfolio and successfully improved its performance in the market. The fund has become an active trader in the market following appointment of the managers and its management disclosed that it was currently profit taking on some of the counters that have been on a rally.

The fund has been making efforts to deal with its historical issues that exposed members to huge financial losses. Last year, the fund made an out-of-court settlement with Cyrus Jirongo’s Sololo Outlets in which it paid Sh490 million. The settlement has, however, been challenged in court by Mr Jirongo.

Closure of the historical issues will help NSSF boost members’ confidence as it moves to increase statutory collections. The fund has also been working on boosting its efficiency so as to increase its payout to members as it pushes to come to grips with the new business expected with the enactment of the new law.

Apart from staff restructuring NSSF is also leveraging on technology and use of collection agencies such as Kenya Revenue Authority to boost its performance.