‘Workers’ savings safe with NSSF’
Aug 26, 2009
WORKERS have been reassured that they will not be adversely affected by the court order to the National Social Security Fund (NSSF) to pay $8.8m (about sh20b) to the Alcon International Company in damages.
By Sylvia Juuko and Anne Mugisa
WORKERS have been reassured that they will not be adversely affected by the court order to the National Social Security Fund (NSSF) to pay $8.8m (about sh20b) to the Alcon International Company in damages.
However, the workers should not expect increase in the interest rates soon.
Solicitor General Billy Kainamura yesterday said the fund would pay Alcon from investments which help workers get better returns. “The seed money is there. The only effect the award will have is to delay upward movement of interest rates to the members of NSSF.â€
On Tuesday, the fund lost a $8.8m (sh20b) case to Alcon, a Kenyan construction company it contracted to build the 19-storey Workers’ House.
The Court of Appeal dismissed NSSF’s appeal and upheld the lower court’s decision allowing a multi-million dollar award to Alcon International by an arbitrator. Alcon has the land title for the property.
Some economists have warned that NSSF members can expect some reduction on their return on investment if the fund agrees to pay Alcon.
“It will not be difficult for the fund whose asset base is about sh1.2 trillion to pay out this award to Alcon. But the implication is that a pay out of this nature reduces the net distributable return to members,†said the official who declined to be named.
But Kainamura allayed fears that the interest rates which were recently raised to 14% may come down because of the award to Alcon. Other lawyers in the city had the same opinion.
They said NSSF, which appealed to the Court with Sentoogo and Partners, an architects company, against the Alcon award are likely to split the award as co-appellants who lost. But lawyers warned that NSSF may end up paying the whole amount.
“There is what is called the deep pocket theory where one trying to recover money goes for the one he deems has more money to pay up unless the judgment specifically states the percentages each must pay,†a city lawyer said.
The protracted dispute between the NSSF and Alcon has put the spotlight on the fund’s flawed procurement and contracts management process.
“There is need to improve contracts management in the fund. Enforcement of contracts has been weak. You need to have in mind the issue of whether clauses are deliberately broken. There is a fine line between incompetence and fraud,†said a source.
David Chandi Jamwa, the fund’s former managing director, last July told journalists that if the liability arising from the Alcon dispute was cleared seven years ago, the workers would have saved $7m (sh11.2b).
“Alcon is like a chronic cancer eating into our funds. The liability is $13.6m minus legal costs, so it is likely to rise to $20m (sh32.2b). This is the money that was budgeted for Workers House. These people have our title,†Jamwa explained.
He lamented that this was a historical error which had to be resolved by management.
“If it is not solved 10 years from now, these guys will take over the fund.â€
Pension industry players have in the past called for the liberalisation of the sector which will pave way for the appointment of a regulator.
They note that while a regulator may not have done much to stem this dispute, they would state the investment limits in different classes of assets of which real estates falls.
WORKERS have been reassured that they will not be adversely affected by the court order to the National Social Security Fund (NSSF) to pay $8.8m (about sh20b) to the Alcon International Company in damages.
However, the workers should not expect increase in the interest rates soon.
Solicitor General Billy Kainamura yesterday said the fund would pay Alcon from investments which help workers get better returns. “The seed money is there. The only effect the award will have is to delay upward movement of interest rates to the members of NSSF.â€
On Tuesday, the fund lost a $8.8m (sh20b) case to Alcon, a Kenyan construction company it contracted to build the 19-storey Workers’ House.
The Court of Appeal dismissed NSSF’s appeal and upheld the lower court’s decision allowing a multi-million dollar award to Alcon International by an arbitrator. Alcon has the land title for the property.
Some economists have warned that NSSF members can expect some reduction on their return on investment if the fund agrees to pay Alcon.
“It will not be difficult for the fund whose asset base is about sh1.2 trillion to pay out this award to Alcon. But the implication is that a pay out of this nature reduces the net distributable return to members,†said the official who declined to be named.
But Kainamura allayed fears that the interest rates which were recently raised to 14% may come down because of the award to Alcon. Other lawyers in the city had the same opinion.
They said NSSF, which appealed to the Court with Sentoogo and Partners, an architects company, against the Alcon award are likely to split the award as co-appellants who lost. But lawyers warned that NSSF may end up paying the whole amount.
“There is what is called the deep pocket theory where one trying to recover money goes for the one he deems has more money to pay up unless the judgment specifically states the percentages each must pay,†a city lawyer said.
The protracted dispute between the NSSF and Alcon has put the spotlight on the fund’s flawed procurement and contracts management process.
“There is need to improve contracts management in the fund. Enforcement of contracts has been weak. You need to have in mind the issue of whether clauses are deliberately broken. There is a fine line between incompetence and fraud,†said a source.
David Chandi Jamwa, the fund’s former managing director, last July told journalists that if the liability arising from the Alcon dispute was cleared seven years ago, the workers would have saved $7m (sh11.2b).
“Alcon is like a chronic cancer eating into our funds. The liability is $13.6m minus legal costs, so it is likely to rise to $20m (sh32.2b). This is the money that was budgeted for Workers House. These people have our title,†Jamwa explained.
He lamented that this was a historical error which had to be resolved by management.
“If it is not solved 10 years from now, these guys will take over the fund.â€
Pension industry players have in the past called for the liberalisation of the sector which will pave way for the appointment of a regulator.
They note that while a regulator may not have done much to stem this dispute, they would state the investment limits in different classes of assets of which real estates falls.