National Bank of Kenya headquarters in Nairobi. The government has for years influenced the appointment of the bank’s head on the strength that the lender is a State corporation —which culminated in the hiring of Reuben Marambii as managing director in 1999 from the Central Bank of Kenya (CBK). Photo/FILE
The search for the new head of National Bank of Kenya (NBK) is set to open a fresh battle between the government and the National Social Security Fund over control of the lender’s executive suite.
The government has for years influenced the appointment of the bank’s head on the strength that the lender is a State corporation —which culminated in the hiring of Reuben Marambii as managing director in 1999 from the Central Bank of Kenya (CBK).
But the board of NBK—which is in the firm grip of NSSF — insists that it will shepherd the search and make the final appointment of the MD without seeking the blessings of the Treasury.
The bank on Friday started the search for Mr Marambii’s replacement whose two-year contract ends in December, and will this morning open bids for consultancy firms that will help in the hiring process.
“This is the responsibility of the board since legally speaking NBK is not a state corporation and the directors are not obligated to forward names to the government to choose the MD,” said a director representing the interest of NSSF in the board and who declined to be named.
The fund has a 48.05 per cent stake in NBK while the Treasury owns 22.5 per cent and it has been running as a State-owned company on the strength of the combined stake —which is 70.55 per cent.
The government has listed the bank as a State corporation on its website and Investment Secretary Esther Koimett maintained that the bank is under government control. This means that the board is expected to forward three candidates to the Finance minister to appoint the new MD, going by the government’s argument.
There is no recent precedent on the appointment of the head of NBK—whose boss used to be hired with the blessing of the former President Moi.
Mr Marambii took the helm from John Simba —who was executive chairman — with the approval of the then Finance minister Simeon Nyachae to turn around the bank that was on the brink of collapse under the weight of bad debts.
Mr Marambii was tapped from CBK where he was the chief manager of banking and was instrumental in returning NBK to the profit territory, which culminated in the bank paying its first dividend in 12 years in 2010.
In the nine months to September, the bank made a net profit of Sh1.23 billion compared to Sh1.35 billion a year earlier. Its share has lost 23 per cent in the past six months to Sh22 on the bearish run at the Nairobi Securities Exchange (NSE).
The position of the NSSF on the appointment of the new managing director has been emboldened by the recent opinion by the Attorney -General Githu Muigai that the government can only have a controlling stake in Portland Cement if it consolidated its ownership with that of the NSSF.
At present, the fund has a 27 per cent stake in EAPCC while the government owns 25.3 per cent of the firm — a structure the AG says does not make the cement firm a parastatal, an opinion that raised fresh questions over the decades-old relationship that NBK has had with the government.
The AG’s position is the product of the State Corporation Act which defines a parastatal as a firm incorporated under the Companies Act which is wholly owned or controlled by the government or by a State corporation.
“The use of the word “or” means that for EAPCC to be considered a State corporation, the ownership or control can either be through the government or a State corporation and not necessarily through both of them,” said Prof Muigai.
For decades, the State has leveraged on the NSSF shareholding to push its agenda in NBK with the most telling one being the decision by the Treasury to sell its stake and that of the NSSF in the bank.
The fund protested the move and in June ousted three State appointees from the board of NBK and replaced them with its own representatives.
It replaced Jennifer Riria, Paul Ngumi and Alfred Juma—all government appointees—with Mohammed Hassan (now chairman), Sylvia Kitonga and Erastus Mwongera.
Other NSSF directors sitting on the bank’s board are Francis Atwoli (Cotu boss) and NSSF managing trustee, Alex Kazongo, giving the fund five of the bank’s eight voting rights.
