NSSF fears poll jitters, costly loans to hit returns

The National Social Security Fund projects its investment income to come under pressure this year due to the upcoming General Election, high interest, and inflation rates.

The outlook came after the fund posted a 5.1 per cent drop in its investment income in the year ended June 2011 to Sh6.3 billion from Sh6.6 billion the year before.

A drop in the value of its investments cut its operating surplus to Sh11.5 billion  from Sh17.3 billion. A significant dip in its investment income means the fund may find it difficult to replicate the 7.5 per cent interest it paid members last year, which was up from five per cent in 2010.

“With the impending General Election, high inflation and interest rates regime, the Fund’s investments performance, especially at the Nairobi Securities Exchange, may be adversely affected,” NSSF said in a statement.

Quoted equities form the single largest investment of the fund at Sh39 billion or 35 per cent of the Sh111 billion total investment it held in the review period.

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NSSF members’ contributions rose marginally to Sh6.8 billion from Sh6.7 billion as claims benefits paid dropped to Sh1.7 billion from Sh2.2 billion, raising the fund’s net additions to Sh5 billion from Sh4.5 billion.

Acting NSSF managing trustee Tom Odongo said dividends account for the bulk of its earnings and it is looking to re-organise its investment portfolio with its eye on blue chip firms and reduction of its investments in real estate.

“We are actively restructuring our investment portfolio to enable us realise maximum returns and also comply with regulatory requirements,’’ Mr Odongo said in a recent interview.

In the financial year ended June, 2012, its quoted equities investment earned it Sh2.1 billion, a 16.6 per cent rise from 2011 as the blue chip firms in which it has stakes rewarded shareholders with higher dividend payouts.

Its share of property market is in breach of statutory requirement of 30 per cent and it plans to sell Hazina and View Park Towers, and a parking lot in Upper Hill to bring the fund into compliance with the set guidelines.