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NSSF to lose Sh50bn in risky investments

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by regam, Apr 14, 2011.

  1. regam

    regam JF-Expert Member

    Apr 14, 2011
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    Source: The Citizen, Wednesday, 13 April 2011

    By Frank Kimboy
    The Citizen Reporter
    Dar es Salaam. The National Social Security Fund (NSSF) stands to lose a whopping Sh50.27 billion in risky investments, the Controller and Auditor General says.The CAG’s annual report says the NSSF invested some of the money in non-performing ventures. In his 2009/10 audit report tabled in Parliament in Dodoma on Tuesday, Controller and Auditor-General Ludovic Utouh said the NSSF lent Sh32.7 billion to six companies that had failed to repay the money.

    All the firms are in breach of agreements entered into with the NSSF and have for several years not demonstrated ability or willingness to pay, as stipulated in their respective contracts.According to the CAG’s findings, the principal sum and accruing interest now amount to a total of Sh50.3 billion. Mr Utouh said that due to the difficulty of recovering the loans, the management was considering writing them off as bad debts.

    The companies are Kiwira Coal and Power Limited, General Tyre East Africa, MediTech Industrial, Kilimanjaro Bazaar, Mbowe Hotels and Continental Ventures. Efforts to reach the NSSF yesterday for comment on the audit report failed, as director-general Ramadhan Dau’s mobile phone was not answered. However, an official, who pleaded that he was not authorised to speak to the media, said the amount was within manageable levels and could not affect their operations in any way.

    “The NSSF has a huge finance base and what you are asking about is within acceptable risk lending levels and should not raise the alarm,” he said.Kiwira Coal and Power Limited, which owes some Sh9.009 billion, was controversially linked to former President Benjamin Mkapa and a former minister in his government, Mr Daniel Yona, who reportedly bought the underperforming venture from the government.

    However, the state has since rescinded the privatisation of the coal mine located in Mbeya Region. This followed intense pressure from the public and anti-corruption campaigners, who accused the retired President of using his influence to acquire the property at a throwaway price.

    Recently, in a statement issued in Parliament, the government dissociated Mr Mkapa and his family from the failed venture. The current Leader of the Official Opposition, Mr Freeman Mbowe, has had a long running court battle with the NSSF over Sh174.9 million owed by Mbowe Hotels.

    Mr Mbowe, who is also the Chadema national chairman, has denied owing the sum in accrued interest on a loan given to his business over two decades ago. The case is still before the High Court. Mr Utouh said Kiwira’s repayment period lapsed in January 2008, but the NSSF board of trustees extended it upon the request from the borrower.

    However, the CAG report indicates that no payment has been made despite the extension. As a result, the interest on the loan has accumulated to Sh2.689 billion to make the total loan as of June 30, 2009 to stand at Sh11.698 billion.

    Early this month, the Public Organisations Accounts Committee (POAC) chaired by Kigoma North MP Zitto Kabwe recommended that NSSF take over the Kiwira Coal Mine and invest in the venture to help end recurrent power shortage. The MPs felt the sum owed could be turned into shares in the business with a capacity to yield up to 400MW.

    The committee has since tabled its report in Parliament and warned pension funds against entering into suspect ventures, risking losing billions of shillings in members’ savings. It was also recommended that the NSSF be allowed to revive General Tyre East Africa at Arusha instead of trying to sell it off to a private investor.

    Mr Kabwe warned that the NSSF could lose the Sh14 billion lent to the tyre manufacturing company.
    General Tyre loan, which had 85 per cent government guarantee to cover the principal amount, was supposed to have been fully repaid by November, 2007.

    According to the audit report, the NSSF wrote to the ministry of finance to call for the guarantee as the balance would be recovered through the sale of security. MediTech Industrial Company owes $1.45 million (Sh2.03 billion) borrowed in 2007. However, the company failed to meet its debt servicing obligations when due.

    The report indicates that the company entered into a joint venture with investors from Denmark, Emunio Tanzania Limited, who injected Euros 1.8 million (Sh3.78 billion) in January 2007. This allowed the borrower to request for capitalisation of interest up to December 31, 2007 and extension of repayment of the loan for two years.

    “The request was approved by the board of trustees at its 44th meeting and interest of $74,645 was paid. The loan was restructured and was supposed to be fully repaid by 2011 instead of 2009. Due to lack of working capital, the company has not started full commercial production and could not repay the debt. The total amount outstanding was Sh2.653 billion as of June 30, 2009.

    Kilimanjaro Bazaar owes Sh105 million. The principal loan was issued in three instalments between 1990 and 1992.
    Mbowe Hotels, the report shows, borrowed Sh15 million in 1990. The borrower failed to service the loan, resulting in an accumulation of interest Sh229.898 million by June 2001. The borrower has paid only Sh55 million.

    Continental Ventures took a loan of $3.5 million (Sh2.03 billion) in 2005. The loan, which was to be guaranteed by the government by 85 per cent of the amount, has neither been guaranteed nor paid.The Fund is now in the process of selling the company’s assets. The loan, according to the report, was declared a bad debt.