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Pensioners’ plight: How Kenya Railways retirees’ billions were plundered

By Standard On Sunday Reporter | Aug 17th 2014 | 3 min read

Pensioners’ plight: How Kenya Railways retirees’ billions were plundered

At the beginning of the 2006 working year, Vitalis Odongo dispatched an official memo to every department within the mammoth Kenya Railways organisation. Attached to the acting managing director’s memo were a series of instructions that underlined the importance of the message he was passing to close to 20,000 of his employees.

First, every member of staff was to be held responsible for seeing or learning the issues raised in the memo. Second, it was the duty of all literate staff to read and make themselves acquainted with the provisions of the memo.

Thirdly, all supervisors and other employees in positions of authority were to ensure that paragraphs in the memo that affected illiterate staff under them were explained verbally to them. Fourth was a warning that ignorance of any paragraph contained within that memo, Staff and General Notice No. 1 of 2006, would not be accepted as an excuse for failure to comply with the instructions that were to be issued.

With these made clear, the acting managing director of the collapsing freight giant began to relay the message that would lead his soon to be former employees to anguish cheered on by a cabal of unscrupulous wheeler dealers within and out of government.

Face value

Top of the agenda was the joint concessioning of Kenya and Uganda Railways. “This concessioning provides a unique opportunity for improvement and modernisation of Railways to make it a commercially viable entity,” Engineer Odongo said in the memo. “It is the best way to revitalise the railways.”

The concession of KR was won by Sheltam Rail Company of South Africa, under the umbrella of the Rift Valley Railways Consortium. All this made perfect sense at face value. But beneath the surface of this message was a chilling prospect. In layman’s terms, this meant that staff would be sent home... in their thousands.

“It is true that some of the corporation’s employees are to be retrenched. The numbers affected will be determined after the concessionaire chooses those to be absorbed into their system,” continued the memo. “The government has facilitated a retrenchment package and in addition, training geared towards self or employment elsewhere.”

But, there was to be no cause for alarm. The Kenya Railways was formed to look into the welfare of the then current and future retirees, whose productive working years were spent at the rail track company.

The scheme was formed in 2006 to take care of the retirement benefits for approximately 9,500 pensioners and 2,021 active members (deferred members).

The pension liability at the time of the formation of the scheme was Sh12.6 billion and to cover this liability, the Government approved the transfer of assets worth Sh12.4 billion from Kenya Railways Corporation to the scheme. Kenya Railways, being the sponsor of the scheme, is obliged to ensure that the it succeeds for the benefit of its past and current workers.

“It was thought at the time that these properties, either through selective sales or rental income, would be more than enough to cater for the pension needs of former employees. But the delays in disbursement of pensions to our members persisted,” says a former chief finance officer at the scheme.

There are ample explanations for these delays as given in numerous court cases pitting the pensioners against their scheme’s managers and its sponsor, Kenya Railways.

That same year, after the concession was announced, the Kenya Railways Corporation Act was amended to transfer these properties listed to the pension scheme with the approval of the minister. A valuer for the process was appointed.

But there was a major problem to this arrangement. At the time of the formation of the scheme, more than 95 per cent of its assets were invested in immovable property, mainly land and buildings. This resulted in illiquidity, making it difficult for benefits to be paid as they arose.

The board of trustees resolved to dispose of some of the scheme’s assets to raise money. To date, this disposal remains one of the biggest scandals within the scheme that has resulted in the loss of billions of shillings in property meant to cater for the pensions of thousands of retirees.

This has forced the State retirement regulator to step in between the trustees, the sponsor and angry, hungry pensioners.

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