NSSF set to write off Sh251m lost in fallen Shah Munge

The National Social Security Fund is preparing a controversial write-off of the Sh251 million it lost through collapsed stock broker Shah Munge & Partners.

NSSF said it is unlikely to recover the cash which it lost in 2002 when the stock broker deposited the money in Eurobank that subsequently collapsed.

The fund argues that the write-off has been necessitated by the liquidation of Shah Munge on October 18, 2002 and the death of former NSSF’s boss Ben Mutweta — who was at the helm when the cash was lost.

The write-off of the claim comes in a period that saw the fallen stockbroker receive a seat or ownership of the Nairobi Securities Exchange (NSE) estimated at Sh251 million — the exact amount lost by NSSF in Eurobank.

“The board has been requested to approve a write-off of the debt as it appears unlikely to be realised,” NSSF told the Parliamentary Investments Committee.

The fund was responding to questions raised by the Auditor General over its financial statements including recovery of the Sh251 million from Shah Munge.

It is unclear why NSSF’s board has given up on recouping the money despite Shah Munge being offered a stake at the Nairobi bourse.

Stockbrokers have an equal ownership in the NSE and the market intermediaries value their stakes at Sh251 million based on the last sale of a seat at the bourse. The seat was sold to Investment firm Renaissance Capital in 2007 after a bidding process.

But since then Equity Bank and Old Mutual have acquired seats at the NSE through the acquisition of Francis Thuo and Reliable Securities. CBA Bank in August also got a seat for undisclosed fee.

The NSSF won a court battle against Shah Munge in 2003 that saw the stock broker ordered to pay the fund a higher amount of Sh258.1 million.

Shah Munge had made a counterclaim of Sh500 million on NSSF but this was dismissed by the courts.

Mr Mutweta, who died in November last year and had served at the helm of the fund for two months, was found responsible for the loss of the fund’s Sh258 million, which was sourced from the Central Bank to buy stocks.

He was accused of instructing the broker to irregularly transfer the cash from the Central Bank to Eurobank.

The botched transaction came ahead of the 2002 General Election, repeating a cycle in which the scams at the fund rise around polls.

A tribunal formed to investigate Shah Munge’s conduct found that the stock broker had flouted Capital Markets Authority’s regulations by placing client’s money in its office account instead of the client’s account.

John Munge, who served as head of Kenya Revenue Authority, was partner at the brokerage unit that was run by Arthur Namu.

The looming write-off by NSSF is the latest loss of contributors’ money at the workers’ pension funds. It comes as the fund prepares to raise contributions by up to 50 times from the current flat rate of Sh200.

The draft NSSF Bill 2013 seeks to increase members’ monthly contributions to Sh360 in the first year of implementation of the new Bill.

The deductions will rise to more than Sh10,000 in the fifth year, with high-income earners making the biggest contributions.

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