By Luke Anami

Queries have been raised over a decision by National Social Security Fund (NSSF) to dispose property to comply with Retirement Benefits Authority (RBA) investment guidelines.

There is concern that RBA’s requirement that pension schemes reduce investment in property and land to 30 per cent could see assets hurriedly sold under questionable circumstances. However, the pensions regulator has warned the requirement is not a leeway for NSSF to hurriedly dispose off assets.

NSSF, which is still on the spot over its decision to pay debtors, including Lugari MP Cyrus Jirongo, millions of shillings, is now under scrutiny after it advertised for sale a prime plot in Nairobi at a time when the issues surrounding the controversial payments have not been resolved.

RBA and the Auditor General’s office have since taken issue with the impending transaction.

“We are aware NSSF wants to sell land and other properties to comply with RBA’s investment guidelines,” Charles Machira, the regulator’s supervision manager told Business Weekly. “However, the RBA Act does not in any way say if you have in excess of certain assets, you sell them hurriedly.”

The Auditor General has raised a number of queries, including a disclosure to dispose of property indicated in last year’s audited accounts, which are due to be released this month.

Invited tenders

“NSSF submitted an audit report last month, we have raised issues and we were expecting comments last week,” Auditor General Edward Ouko said. “When they respond we will be able to share the findings with the public.”

NSSF recently advertised for sale Hazina Towers (valued at Sh2 billion) and View Park Towers (Sh1.4 billion), all located in Nairobi’s Central Business District.

In an advertisement placed in local dailies, the Fund invited tenders from prospective buyers for its assets that include an undeveloped plot next to the Israel embassy in Nairobi’s Upper Hill area. The estimated value of the two-acre plot is Sh1 billion.

NSSF has since cancelled the sale of the two towers.

“NSSF has been accused before a number of Parliamentary committees for failing to follow due diligence when executing transactions of this nature. We want due diligence followed,” Tom Odongo, acting Managing Trustee explained.

“We also do not want the public to get the impression the sale had anything to do with politics, especially with elections the upcoming General Election,” he said.

“We will re-advertise the properties at an appropriate time after consultations with stakeholders, including the Government.”

NSSF’s investment portfolio was Sh110 billion as at June last year, and the value of land and property was worth more than the permitted Sh33 billion.

NSSF is Kenya’s single largest investor in the real estate sector. Some of its notable investments include the NSSF complex in Nairobi, Hazina Trade Centre which houses Nakumatt Lifestyle, Kitisuru Estate, Mountain View Estate in Kangemi, Kapsoya Estate in Eldoret, and NSSF House and Hazina Polana Hotel in Mombasa.

Hazina Estate project in South B belonged to Sololo Outlets, which ran into financial distress and sold the project to NSSF in 1993. The estate consists of 365 units comprising maisonettes and flats.

Nyayo Estate, whose construction began during the Moi era in the late 90s, will comprise of 4,774 units when completed, making it the Kenya’s single largest residential estate in Sub-Saharan Africa (excluding South Africa). The Fund is currently selling 1,581 houses in Phases IV and V (final phase) of Nyayo Estate, which are expected to be ready for occupation later this year.

NSSF owns land adjacent to Barclays Plaza in Nairobi. The 1.9122 hectares land, which was part of a dispute with Delta over rent is valued at more than Sh1.3 billion. Also in its property portfolio is a 10-acre piece of land in Mavoko — an area emerging as one of the most attractive residential areas for middle-income workers.

RBA regulations give details of the maximum exposure for various asset classes that a pension scheme can invest in. These guidelines are meant to ensure adequate diversification and they do not mandate investment in a particular asset class.

The guidelines stipulate that pension schemes should hold a maximum of five per cent of asset portfolio in cash, 30 per cent in fixed income, 70 per cent in Government securities, 70 per cent in quoted equity, five per cent in unquoted equity, 15 per cent in offshore investments and five per cent in any other assets.

The guidelines restrict schemes to invest a maximum of 30 per cent in immovable property (such as land and real estate), 100 per cent in guaranteed funds and five per cent in other investments to ensure schemes are able to meet the monetary obligations to retirees.

Meeting requirement

When defending the decision to sell property, Odongo cited a RBA requirement that the assets be reduced to 30 per cent.

“As you are aware, the Fund’s property portfolio stands at 36 per cent and the sale will enable it scale it down to 28 per cent. We have to sell property because the portfolio is beyond the stipulated 30 per cent,” Odongo said.

Retirement schemes are free to choose which asset classes to invest in or which to exclude. But with regard to the maximum percentages that have been set for the particular asset classes, Machira explained that does not mean the asset can be urgently disposed.

“All investments must be guided by an investment policy that also guides the sale of assets,” Machira said.