The Auditor-General has flagged non-performing investments totaling Sh630.3 million in the National Social Security Fund (NSSF), a State-controlled entity in Kenya. These investments include assets that have either lost their value or failed to generate returns.
The NSSF’s underperforming portfolio comprises stakes worth Sh161 million in UAP Holdings and Sh247 million in Consolidated Bank. The total investment in these two companies amounted to Sh408.7 million in the fiscal year ending June 2022.
The Auditor-General noted that the fund continues to hold investments that have not yielded any returns through dividends or capital appreciation. The carrying valuation for these investments has not been determined, raising concerns about their value.
Additionally, the NSSF holds investments in ARM Cement (Sh16.4 million), East African Portland Cement Company (Sh194.4 million), and Sameer Africa (Sh10.8 million). The values of these investments are uncertain due to factors like suspended shares, financial stress, redundancies, and profit warnings.
The Auditor-General’s unease over the valuation of these investments stems from uncertainties surrounding the financial health and future prospects of the companies in question.
Equities, alongside bonds and property, are among the major investments of the NSSF. The returns generated from these investments play a significant role in determining the annual interest credited to savers in the fund. In the fiscal year ending June 2022, the NSSF’s investment income amounted to Sh26.8 billion, derived from net assets worth Sh285.7 billion.
Opinion: The Auditor-General’s concerns regarding the non-performing investments in the NSSF highlight the importance of prudent investment decisions and ongoing due diligence. Investment portfolios, particularly those managed by government entities like the NSSF, have a responsibility to safeguard the interests of savers and taxpayers. While investment risks are inherent, close monitoring, transparent reporting, and proactive steps to address underperforming assets are essential to maintain the fund’s credibility and protect the financial interests of those relying on it. As the NSSF seeks to maximize returns for its members, it’s crucial for it to conduct thorough assessments of its investment strategies and, where necessary, take corrective actions to enhance the fund’s overall performance.