If all assets of the troubled Kenya Railways pension scheme were to be sold all at once, each of the 8,829 pensioners would become instant millionaires.
And if the proceeds would be shared equally, each pensioner would take home Sh3,397,893.30 after the disposal of 13,194 houses and huge chunks of prime land at the heart of the city.
But since wishes have never been horses, the pensioners must get used to a life of squalor as managers of the pension scheme try to find buyers for some of the assets worth more than Sh30 billion.
This week, the pensioners who have been anxiously waiting for their pension received just one month’s pay.
Cumulatively, these former workers of the Kenya Railway Corporation are owed arrears for six months. Majority get a monthly pension of Sh2,000.
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Yesterday, the Kenya Railways Staff Retirement Benefits Scheme (KRSRBS) investment manager Zamara, told Sunday Standard that they were waiting to be paid about Sh600 million from the sale of two properties to settle the arrears.
“We have done two transactions. We are waiting for Sh226 million and Sh400 million in both deals. This money will cover the arrears,” said Anthony Kilavi, the chief operating officer at Zamara.
And the cycle will continue.
The tribulations of the pensioners is aptly captured by Simon Godia. He explained his nightmare every month as he has to pay Sh22,500 for a two bedroom house in Land Mawe, which ironically is owned by the pension scheme which also owes him accumulated arrears of six months.
“If I do not pay rent because they have not been paying my pension, I will be thrown out. It is bad enough to be jobless but I can’t bear being homeless,” Godia said.
Another pensioner, James Ouma, said he lives in a KRSRBS house in Upper Hill, Nairobi, where he has to pay Sh40,000 every month to the pension scheme which has not paid his pension for six months.
George Odada, a retired train driver, recounted how he was evicted from his house and his household effects confiscated in Land Mawe after he complained that he was not getting his pension in time.
“It is sad when you have to painfully pay rent every month to a landlord managing a property you theoretically own but at the end of the month you don’t get your pension,” Ouma said
Kariuki Kimiti, who was retired in 1998 at 33, explained how in 2010, he was able to collect Sh20 million in a month from houses in Muthurwa and submitted to the pension scheme.
“I collected rent for four months and then realised I was being targeted by cartels which had been collecting rent in the past, money that never reached the pension scheme. I did not want to die, so I quit,” Kimiti added. According to KRSRBS audited accounts for 2018, there were 8,829 members and the scheme had assets worth Sh30.3 billion. All in land.
An audit by Deloitte for the year ending June 2018 however offered a qualified opinion, saying that “most of the assets were carried at forced sale value” and that a full valuation of the investment properties had not been carried out at the end of the reporting period.
“This is not consistent with the requirements that fair value of property should reflect market conditions at the end of the reporting period and that value of property should be determined based on highest best use of the property respectively,” reads the Deloitte report.
When we called Kilavi yesterday, he protested that he needed a structured meeting where he could respond with reports and data.
Kilavi explained that the scheme was closed and solely relied on sale of property to pay the pensioners.
The scheme required Sh73 million per month, he said, or Sh873 million annually, whereas the rental houses only produced Sh45 million per month which translates to an income of Sh540 million annually.
However, the Deloitte report indicated that in 2017, the scheme received Sh1.466 billion as rental income which reduced to 646 million in 2018.
When asked why the income from rent had fallen by more than half in just one year, Kilavi explained that some of the assets had been sold.
“We need to sit down so that I can explain these things. We do not want you to write things which just create excitement,“ he said.
Later, Kilavi texted another message: “You called as I was driving. As I said, I am ready and willing to meet you on appointment and provide proper and supported details and documentation on the scheme and response to your queries that will make an accurate article.”
He added:” I am not agreeable to a hurried process in creating a story that may not properly inform the public and your readership.”
According to the scheme’s financial statement for 2018, they got Sh220 million from the sale of assets.
Rift Valley Workers Union, which has been agitating for the rights of retired and current workers of Kenya Railways, is convinced that the houses owned by the pension scheme can generate enough income to pay the pensioners.
The trade union’s inventory of the KRSRBS assets shows the scheme has a total of 13,194 houses in Nairobi, where the lowest paid rent is Sh1,500 in Muthurwa while the most expensive is Sh45,000.
The scheme has 11,431 houses in Muthurwa, 971 units in Land Mawe, 87 in Ngong Road, 20 in Valley Road, four in Hurlinghum, 24 in Nairobi West and 41 in Matumbato.
It also has 262 units in Ngara Estate, 205 in Chambilo, six in Gakuo Court as well as goods shed, open spaces and office blocks in Nairobi, which all rake in an estimated rental income of Sh119 million per month.
This translates, according to Rift Valley Workers Union Secretary General Isaac Munai, to Sh1.28 billion every year, which is enough to pay the pensions of all the retirees without the need to sell assets.
Munai is concerned that the value of the assets has been undervalued and cited the 56-acre Muthurwa Estate whose value in 2012 was given as Sh2.4 bilion and had not appreciated by 2018.
He also protested what he termed as sale of prime assets at a throw-away price without the involvement of the pensioners.
However, Retirement Benefits Authority (RBA) acting CEO Charles Machira said he was not aware of any such undervalued sales.
He said the pension scheme has liquidity problems and has been unable to pay for six months.
“The scheme has funds according to the audited accounts, but from an actuarial point of view, if the value of liabilities of all pensions were to be paid against the value of assets, it is more than 200 per cent funded as per the last audit,” he said.
He explained that the problem of failing to pay pensioners was because all the assets, whose value he gave as more than Sh30 billion, for a scheme which required Sh900 million every year was in immovable assets. When the scheme was formed in 2006, he said, assets worth Sh12 billion were transferred to the scheme through a vesting order.
At the time, the employer, Kenya Railways, had no cash and only provided about Sh200 million and the Minister of Transport at the time offered the assets.
Machira said that from day one, the scheme did not have cash for day-to-day operations, although it required Sh30 million per month at the time to pay the pensioners.
According to RBA, the scheme was collecting rent amounting to Sh30 million per month.
“The problem is the scheme is generating between Sh40-50 million per month while it was paying about Sh75 million every month,” Machira added.
The Deloitte report touched on the liquidity problem and cautioned that the pension managers had contravened some regulations.
“Guidelines require that investment in immovable asset property in Kenya be limited to a maximum of 30 per cent of the scheme’s investment. As at June 30, 2018, 99.8 per cent of the scheme’s investment were in immovable assets.”
And although RBA and Zamara believe the problem of liquidity will be solved by the disposal of assets, the auditor was pessimistic.
“Due to the high concentration of the scheme’s assets in immovable property, and the injuctive orders against disposal of the scheme’s properties worth Sh21,379,901,000, the conditions indicate a material uncertainty on the scheme’s ability to meet its obligations as they fall due,” said Deloitte.
Machira suggested that if the pension scheme was unable to dispose of its assets, the government should bail out the pensioners and take control of the prime assets.