NSSF slipping again
Aug 19, 2008
The National Social Security Fund never gets out of news, for good and bad reasons. As contributors were rejoicing over a promise of 12% interest on their savings, Fund leaders dropped two bombshells.
The National Social Security Fund never gets out of news, for good and bad reasons. As contributors were rejoicing over a promise of 12% interest on their savings, Fund leaders dropped two bombshells.
First, they bought land at a price far higher than what professional surveyors had recommended. Secondly, it lent out money at an interest far less than the market rate at which contributors borrow.
Management tried to defend the land purchase but questions remain. Why was the land bought at sh6m and sh10m more than the lowest and highest prices respectively? The NSSF boss announced a value of sh30m per acre, far higher than the sh14m-18m given by expert valuers, but did not say whether he was himself a valuer or there were other valuers.
It is also unclear why the transaction was shrouded in secrecy. Why didn’t the Fund advertise to solicit for bids from land owners? Competition among potential sellers would have given the Fund more bargaining power and probably land of the same size would be bought at less than the sh14m per acre and nearer to the city centre.
Transparency is what will distinguish the new Fund leaders from the old ones who left in disgrace. Otherwise it pains the contributor that such controversy could come when the Nsimbe Estates scandal is still fresh in the mind. The latest deal even looks worse. Nsimbe Estates, located on a trans-Africa highway, was on 843 acres and valued at sh4.5b but inflated to sh8.5b. Why then should 300 acres in a village be bought at sh11b?
Questions also arise about the sh17b loan to URA at 12%, recoverable in 15 years. If NSSF is now a money lender, why is it not lending at market interest rate? And why can’t contributors also borrow at such favourable interest rate and repayment period?
It is sad that a contributor with say sh20m in NSSF but without collateral can only get a salary loan from a commercial bank at 25% payable in three years, so as to buy land or build a house, when NSSF is lending to a non-member at 12%.
First, they bought land at a price far higher than what professional surveyors had recommended. Secondly, it lent out money at an interest far less than the market rate at which contributors borrow.
Management tried to defend the land purchase but questions remain. Why was the land bought at sh6m and sh10m more than the lowest and highest prices respectively? The NSSF boss announced a value of sh30m per acre, far higher than the sh14m-18m given by expert valuers, but did not say whether he was himself a valuer or there were other valuers.
It is also unclear why the transaction was shrouded in secrecy. Why didn’t the Fund advertise to solicit for bids from land owners? Competition among potential sellers would have given the Fund more bargaining power and probably land of the same size would be bought at less than the sh14m per acre and nearer to the city centre.
Transparency is what will distinguish the new Fund leaders from the old ones who left in disgrace. Otherwise it pains the contributor that such controversy could come when the Nsimbe Estates scandal is still fresh in the mind. The latest deal even looks worse. Nsimbe Estates, located on a trans-Africa highway, was on 843 acres and valued at sh4.5b but inflated to sh8.5b. Why then should 300 acres in a village be bought at sh11b?
Questions also arise about the sh17b loan to URA at 12%, recoverable in 15 years. If NSSF is now a money lender, why is it not lending at market interest rate? And why can’t contributors also borrow at such favourable interest rate and repayment period?
It is sad that a contributor with say sh20m in NSSF but without collateral can only get a salary loan from a commercial bank at 25% payable in three years, so as to buy land or build a house, when NSSF is lending to a non-member at 12%.