NSSF loses Ksh.667 million in botched Imperial, Chase bank bonds

The National Social Security Fund (NSSF) has lost Ksh.666.9 million through subscriptions to the botched Imperial and Chase bank corporate bonds.

The investment has been cited by Auditor General Nancy Gathungu in her audit of the fund’s books to June 2019 which was published on Tuesday and bears a qualified opinion.

In its review of the status of the investments, the audit report has established that the NSSF failed to get requisite approval from the National Treasury before investing in the two funds.

The pair of investments were however cleared and approved by the Capital Markets Authority (CMA).

NSSF entered into contractual agreements with four fund managers including Old Mutual Investment, GenAfrica Asset Managers, Britam and Stanlib Kenya in February 2018 to carry out investments in the bonds on its behalf.

The NSSF has subsequently made a provision for the entire sum invested in line with accounting requirements on impairments as the Auditor General warns the fund may never recover the amounts.

“In the circumstances, the realization of the investment in corporate bonds invested by the fund managers could not be ascertained and members’ contributions are at risk of being lost,” reads the audit in part.

Old Mutual sunk Ksh.174.7 million of the NSSF funds Chase’s bond while GenAfrica invested a lesser Ksh.160 million in the same bond.

Stanlib and Britam sank Ksh.100 million each while Britam and Old Mutual sunk Ksh.90 million and Ksh.42.2 million in Imperial bank’s 5.25 years fixed bond.

Both Imperial and Chase bank went down shortly after issuing their commercial papers with investors yet to recoup their investments in the two lenders to date.

In April this year, the CMA commenced enforcement proceedings against former board members of Imperial Bank over failure to oversight the compromised bond issue to investors.

At the tail end of the commercial paper issue in September 2015, details emerged some directors had sustained financial statement fraud since 2006.

While depositors in Chase and Imperial are assured of part of funds held in the banks, corporate bond holders are likely to walk away empty handed there being no current cover for the asset class.