Treasury moots plan to tap pension assets for mega projects

National Treasury Cabinet Secretary John Mbadi has directed the formation of a team of experts to explore the possibility of the government using pension funds to invest in capital-intensive infrastructure projects. 

Speaking at the third Annual Meeting for the Public Service Superannuation Fund (PSSF) in Nairobi yesterday, Mr Mbandi said the team would provide a pathway from reliance on external investors and debt in financing the national budget. 

Noting the growth of the pension assets in the country, which is now more than Sh2 trillion, the CS said the move would redirect these funds to meaningful investments. 

Mbadi noted that currently, about Sh100 billion of pension assets are in Treasury bonds and Sh27 billion in Treasury bills. 

He said these funds are substantial for financing the country's infrastructure needs.

"We want a local Adani," he said, referencing the botched power sector and Jomo Kenyatta International Airport upgrade deals by Indian conglomerate Adani Group.

Treasury Principal Secretary Chris Kiptoo will constitute the team of experts. 

"We are in a tight fiscal space, but we want to modernise our airports, superhighways," he said, adding that the country's pension contribution to the Gross Domestic Product (GDP) stands at 11.42 per cent, which he described as significant. 

"Why can't we deploy those savings in those projects instead of waiting for external parties to come and invest?" the PS posed. 

Public Service Superannuation Scheme Fund (PSSF) Chairman Wycliffe Wangamati gave the example of South Africa, which has leveraged its vast pension assets for infrastructure projects, which currently stand at Sh200 billion. 

Mr Wangamati said Kenya has an opportunity to leverage both the pension and life insurance assets that stand at Sh2.5 trillion to invest in infrastructure projects. 

"Infrastructure needs are very long-term in nature. We can sort of see how we can match the two so that at the end of the day, these funds are invested in infrastructure projects," he said. 

But while this is expected to be a win-win for the government and pension funds owing to the easing interest rate on Treasury bills and bonds, Public Service and Human Capital Development Cabinet Secretary Justin Mutui noted challenges with the payment of benefits to retirees.

He commended PSSF, saying one of the key features of this scheme is the timely payment of benefits.

"This issue of people who have dedicated their lives to the service of their nation queuing for years trying to pursue their benefits is an embarrassment not just to them but also to the government. It must be addressed. We must be able to mitigate that and put an end to the suffering," he said. 

CS Mbadi acknowledged the problem saying, "We have lived a lie for too long that we can finance the pension of public servants. That is why we have huge arrears. We crossed over with arrears of unpaid pension to public servants to the tune of Sh26 billion."