A section of National Social Security Fund headquarters in Nairobi. FILE
What you need to know:
The Privatisation Commission told Parliament that it had started a fresh privatisation plan for National Bank, which would ensure that an agreement between the government and the NSSF was reached.
The cause of the dispute has been how to treat the elimination of preference shares held by the government and NSSF.
The commission suggested a formula where preference shares would be converted into ordinary stocks on the basis of 1:1.
The government has retreated from the fight with the National Social Security Fund over the sale of National Bank after it agreed to include the workers’ pension body’s proposals on how to auction the bank.
The Privatisation Commission told Parliament on Tuesday that it had started a fresh privatisation plan for the bank, which would ensure that an agreement between the two protagonists was reached.
The cause of the dispute has been how to treat the elimination of preference shares held by the government and NSSF. The commission suggested a formula where preference shares would be converted into ordinary stocks on the basis of 1:1.
NSSF protested, arguing that the conversion plan would cause the fund to lose money, stalling the sale that was approved by the Cabinet in 2008.
“The updated work will facilitate an agreement between NSSF and the Treasury on conversion of the preference shares held by GoK ( the government) and NSSF to ordinary shares,” Mr Solomon Kitungu, the executive director of the commission told the Public Investment Committee.
Currently, the bank’s shareholding is categorised into preference and ordinary shares, with the NSSF owning 48.05 per cent of ordinary shares and 21 per cent of preference shares.
The government owns 22 per cent of ordinary shares and 79 per cent of preference shares. Members of the public own 19 per cent of ordinary shares.
Preference shares are stocks that pay a fixed dividend and do not have voting rights, National Bank has 1.13 billion.
The shares have their roots in 2000 when the bank was facing a crunch due to bad loans, which saw the government and NSSF inject Sh4.5 billion and Sh1.1 billion respectively into the lender as a bailout package.
Concession by the State comes in a period that has seen NSSF tightened its grip on NBK’s board, which saw the fund replace four directors with its representatives in 2011.
NSSF dominates the bank’s 10-member board. Three seats are occupied by the bank’s executives including Mr Munir Ahmed, with NSSF managing trustee and the principal secretary to the Treasury representing major shareholders.
Five directors; Francis Atwoli, Mohammed Hassan, Erastus Mwongera, Sylvia Kitonga, and Wangui Mwaniki sit on the board courtesy of NSSF.
The fund was also actively involved in head-hunting Mr Ahmed, the bank’s managing director who took the helm last August following the retirement of Reuben Marambii. Mr Ahmed was formerly with Standard Chartered Bank.
Another area where the shift in the balance of power in NBK’s boardroom is being felt is the plan by the government to privatise the bank.
An increasingly assertive NSSF has resisted the privatisation drive if it goes against the fund’s interests, maintaining that it’s not keen on a strategic investor.
In 2008 the Cabinet approved the sale of government and NSSF shares in the bank in two phases.
The first phase involved selling 25 per cent of the bank’s shares held by NSSF to a strategic investor. The second phase would see the sale of 17 per cent of shares held by the government and 23 per cent held by NSSF to the public.
“We do not need a strategic investor since our shareholders can raise the required capital. We also have the necessary expertise,” Mr Ahmed told the Business Daily in May.
