NAIROBI, Kenya – National Assembly Finance and National Planning Committee has summoned the Capital Markets Authority (CMA) to explain its failure to act on irregular bond transactions that contributed to a KSh 2 billion loss at the National Social Security Fund (NSSF).
The matter, flagged by Auditor General Nancy Gathungu, has exposed potential regulatory failures in overseeing listed securities, with lawmakers seeking accountability from both the CMA and the Central Bank of Kenya (CBK).
Appearing before the committee, CBK Governor Kamau Thugge revealed that the bank had formally alerted CMA about the irregular transactions involving NSSF and two other entities as early as August 2023.
“We are the ones who informed the CMA. We wrote to them on August 1 and August 19, providing all the information we had regarding the training and transactions conducted by NSSF and two other entities. You may want to ask why they have not acted on it,” Thugge stated.
Despite these warnings, the CMA only recently requested additional information, writing to CBK on March 5, 2024, for transaction details covering the period from September 2023 to September 2024.
Thugge assured the committee that CBK would comply with the request.
CBK’s Director of Financial Markets, Dennis Luusa, who also sits on the CMA board, clarified the regulatory roles in the matter.
“As the governor mentioned, there has been communication from the Central Bank when we noted some of these concerns. CMA has the responsibility of oversight over licensed and listed securities trading,” Luusa said. “As joint regulators in this space, we will provide all necessary information back to CBK and to this committee when required.”
Beyond the irregular bond transactions, Auditor General Gathungu has also raised concerns over NSSF’s investment strategy, particularly its continued holding of stakes in financially struggling companies.
According to the latest audit report, NSSF purchased shares worth KSh 247 million in Consolidated Bank of Kenya.
However, by June 30, 2023, the value of these shares had dropped by KSh 209 million, leaving them worth just KSh 38 million.
The fund also suffered additional losses from investments in East Africa Portland Cement, Sameer Africa, and Athi River Mining.
The audit revealed that shares in these companies, initially valued at KSh 221 million in June 2022, had depreciated by KSh 50 million, reducing their worth to KSh 170 million by the end of the review period.
