How Rwanda can streamline consultancy services

Dr Bosire believes Rwanda’s consultants can streamline their activity. Courtesy photo.

As the Chamber of Deputies’ standing Committee on Economy and Trade and the Ministry of Public Service and Labour (Mifotra) sort out technicalities in the Bill on the organisation of management consultancy services, an expert in the field suggests that Kenya has a few best practices to emulate.

Listing aspects that can be replicated in Rwanda, Dr Josephat Bosire, a management consultancy expert and lecturer at Mount Kenya University, Kigali, said consultants should attempt to give services that exceed expectations so as to have competitive advantage and sustainability.

“In Kenya, consultants are many and thus cheaper. The uniqueness I observe among the Kenyan professional consultants is that they belong to professional bodies like association of accountants, institute of procurement and supplies, institute of human resources management, association of medical practitioners, architectures, lawyers, and so on. This makes them accountable to their associations, and a client can report them in case of breach of contract,” said Dr Bosire.

“The global best practices shared in workshops, seminars and conferences help from time to time, besides the various consultancy firms have attempted to be certified by relevant bodies in their profession so that the uncertified  can get work through outsourcing and or networked franchising.”

Dr Bosire said the quality certification body—Kenya Bureau of Standards—is working with international standards organisation to verify consultants and encourage then to comply with ISO standards because not many meet the threshold.

“They resort to consortium—many related consultant firms working under same umbrella. The zeal is continuous improvement. These are few of the aspects that can be replicated in Rwanda.”

While tabling the Bill recently, Minister Anastase Murekezi, told Parliament that the draft law’s main purpose is to guarantee that there will be organised management consulting services in the country. The minister said many consultancy firms were opening shop yet they had no track record.

The Bill’s scrutiny in the Committee recently stalled as lawmakers requested legal drafters in Mifotra to “first iron out many issues” that are mixed up, MP Gonzague Rwigema, the deputy chairperson of the Committee on Economy and Trade, said yesterday. 

“We provided guidelines and directed technicians in Mifotra to redo the Bill, with help from our own staff, because it is poorly drafted,” said Rwigema.

Kenyan insurers benefit from turnaround at NSE in 2012

By PETERSON THIONG’O The EastAfrican

Posted  Saturday, March 30  2013 at  18:09

In Summary

• An analysis of the insurance sector shows that companies recorded a steep increase in investment income and revaluation gains, helped by a 30 per cent rise in the value of the NSE as at the end of last year, as well as a drop in interest rates.
• The insurance industry is likely to benefit more, as analysts predict better market penetration buoyed by the use of technology and establishment of more distribution centres.
• Insurance companies have been trying their best to increase penetration, and investing in property to protect themselves against the vicissitudes of the stocks market.

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The rebound of the Nairobi Securities Exchange (NSE) coupled with falling interest rates has boosted insurance sector earnings, helping reverse the losses players made in 2011.

An analysis of the insurance sector shows that companies recorded a steep increase in investment income and revaluation gains, helped by a 30 per cent rise in the value of the NSE as at the end of last year, as well as a drop in interest rates.

Interest rates in Kenya went down from 28 per cent in 2011 to an average of 18 per cent after tightening of the country’s monetary policy.

READ: Insurance stocks rally at NSE, investor focus off bank shares

Since bonds and interest rates have an inverse relationship–meaning a drop in rates leads to a rise in the value of bonds–the value of bonds for insurance companies has risen significantly.

Boosted earnings

At CIC, while the increase in NSE’s value boosted earnings, it also pushed up its unit trusts, leading investors to withdraw their earnings to cash in on their performance.

Standard Investment Bank (SIB) said this partly contributed to the firm’s poor loss ratio, which is the difference between the premiums it generates and what it pays in claims.

“Increased unit trust value also contributed to the rise in claims due to the upswing of the equities market,” said Standard Investment Bank in a note to investors. “This led to loss ratio deteriorating to 64 per cent from 59 per cent in the year ended December. Due to focus on retail business, CIC’s loss ratio is historically higher than our sector.”

SIB says in the first three months of 2013, CIC’s loss ratio has improved, driven by reduced loss ratios in the medical insurance business class after the introduction of biometric recognition software in hospitals for its policy holders.

The insurance industry is likely to benefit more, as analysts predict better market penetration buoyed by the use of technology and establishment of more distribution centres.

This could replicate the success in the banking industry, where branch expansion and the use of mobile phones has enabled many Kenyans to open accounts and access banking services.

Kenya’s insurance penetration stood at 3.1 per cent at the end of 2012, the highest in East Africa. But this pales in comparison with the more developed markets like South Africa, where at least 11 out of every 100 people have insurance cover.

The recovery of both the money and equity markets helped boost insurance profits, with Britam’s comprehensive income jumping to Ksh4.18 billion ($49.17 million) compared with a loss of Ksh4.19 billion (49.29 million) in 2011.

Liberty’s comprehensive income rose with Ksh1.2 billion ($14.11 million) compared to a comprehensive loss of Ksh484 million ($5.6 million) in 2011.

CIC’s comprehensive income stood at Ksh1.4 billion ($16.79 million) compared with Ksh597 million ($7.02 million) in the previous year.

Pan Africa Insurance’s comprehensive income rose to Ksh698 million ($8.21 million) compared with Ksh443 million ($5.21 million) in 2011.

Insurance companies have been trying their best to increase penetration, and investing in property to protect themselves against the vicissitudes of the stocks market.

But one of the biggest challenges of non-life insurance, of which a large component is compulsory auto insurance, is the fact that the margins remain low.

Efficiency remains a problem too, with many firms searching for ways to reduce costs and install information technology systems.

Uhuru’s victory gives East Africa its second youngest president

President-elect Uhuru Kenyatta addresses a press conference after the Supreme Court upheld his election.  

By SEKOU OWINO Special Correspondent

In Summary

• At 51, Mr Kenyatta will become the second youngest president in the East African Community after Pierre Nkurunziza of Burundi, who is 49. President Yoweri Museveni of Uganda is the oldest at 68, followed by Jakaya Kikwete of Tanzania, 63, and Paul Kagame of Rwanda, 55.
• Mr Odinga accepted the court verdict and wished Mr Kenyatta and his team well, an hour after the president of the Supreme Court Willy Mutunga read the judgement.
• The judgment now paves the way for Mr Kenyatta and Mr Ruto to embark on delivering on the promises contained in their campaign manifesto.

Kenya’s Supreme Court on Saturday, March 30, dismissed two petitions challenging the election of Uhuru Kenyatta as the country’s next president, ending an anxious three weeks’ wait for the country and the region as they awaited the court rulings.

The Supreme Court of Kenya rejected the applications filed by Raila Odinga —Mr Kenyatta’s main challenger in the March 4 election—and the African Centre for Open Governance (Africog) whose prayers were that the presidential election was not validly conducted and tallied, and therefore should be nullified.

Mr Odinga also contested the declaration by the Independent Elections and Boundaries Commission (IEBC) that Mr Kenyatta had been validly elected as president.

At 51, Mr Kenyatta will become the second youngest president in the East African Community after Pierre Nkurunziza of Burundi, who is 49.

President Yoweri Museveni of Uganda is the oldest at 68, followed by Jakaya Kikwete of Tanzania, 63, and Paul Kagame of Rwanda, 55.

Uncertainty had gripped the country over the as the country’s top legal minds considered the possible scenarios around the outcome of the case.

Meanwhile, Kenya’s landlocked neighbours—who experienced bruising shortages after delays in releasing results in the country’s hotly contested polls slowed business activity, hurting supply chains—have keenly been watching the unfolding events in the country, in the hope the transition period would end smoothly.

Their biggest fear was that had the petition sailed through and the Supreme Court called for fresh elections, the polls would have had to be carried out in 60 days, further extending the transition period. There were also fears the outcome of the court cases would trigger widespread violence.

READ: Inside Raila, Uhuru’s historic court battle

Mr Odinga accepted the court verdict and wished Mr Kenyatta and his team well, an hour after the president of the Supreme Court Willy Mutunga read the judgement.

Diplomats from the European Union as well as Britain congratulated Mr Kenyatta following the verdict of the Supreme Court. When Mr Kenyatta was declared President, fears were mounting in the diplomatic community especially around the ICC issue.

The diplomats’ persistent interest in the issue had left analysts and politicians concerned that they could be planning to impose sanctions on Kenya.

Although there was a third petition, the focus was on the two petitions mentioned above because of their prayer for the nullification of the elections and their call for fresh elections.

At the heart of the two petitions were issues as to whether the electoral process, from registration and the compilation of the register, to the voting and the tallying of the votes was conducted as required by law.

The judges summarised the issues raised by the petitions into four questions or issues that the court was required to determine.

These were: Whether Mr Kenyatta and his running mate William Ruto were validly elected; whether the presidential election was conducted in a free, fair, transparent and credible manner that met the standards required by the Constitution; and whether the rejected votes ought to have been included in determining the final tally of votes. The fourth issue was on declaration orders and reliefs the court should make after making determination on the above issues.

The court unanimously decided the first two questions in the affirmative, meaning that having looked at the evidence and the law, in the judges’ view, the elections had been conducted in a free and fair manner and that the persons declared elected had actually been lawfully elected to the office of president and deputy president respectively.

The judgment now paves the way for Mr Kenyatta and Mr Ruto to embark on delivering on the promises contained in their campaign manifesto. Besides this, the two are facing charges of crimes against humanity at the International Criminal Court in The Hague over their suspected role in the 2007/8 post-election violence.

ALSO READ: Great manifestos, but where’s the money?

Both leaders have stated that they intend to co-operate with the ICC to the end.

The judges further declared, on the third issue as to whether the rejected votes should have been included in the final tallying of votes, that the rejected votes ought not to have been included in the aggregate of votes for the purpose of calculating whether a candidate had received enough votes for the purpose of the requirement that the winning candidate had received more than half the votes case at the election.

As a consequence of the findings, the judges of the Supreme Court declared that the two petitions that had sought to challenge the declaration of election of the president and the deputy president be dismissed.

The decision, however, was rendered in summary in that it simply outlined the effect of the judgment but without giving the reasons for the decision and how they resolved the competing claims by the parties as to the effect of the evidence or the interpretation of the law.

The main reasons for the decision will be seen when the full judgment is delivered and handed down within 14 days as the court promised at the time of delivery of what were effectively highlights of the judgment.

It is therefore not possible to determine how the competing claims were resolved by the judges and the basis on which they determined the case, such as whether the petitions did not succeed because the petitioners did not muster sufficient evidence or whether the judges took the view that the evidence presented even if credible could not justify the prayer by the petitioners for a fresh election.

Another important issue that the judgment will need to reveal is what the judges defined as “a free and fair election” and what it entails as of necessity.

Equally important is the issue as to whether the judges were persuaded by the point made by the respondents to the effect that they ought to act in restraint and consider among other things the economic and political effects of the orders that would ensue from the orders by the court, especially with regard to a fresh election.

Sekou Owino is Nation Media Group’s head of legal services.

Workers, government disagree on future of the pension sector

NSSF chairman Ivan Kyayonka (2nd R) chats with Mr Elly Karuhanga (R), Tullow General Manager Jimmy Mugerwa (L) and Ms Olive Lumonya , the NSSF head of Marketing and Communication, at the general meeting in Kampala yesterday. PHOTO BY Faiswal Kasirye 

By ISMAIL MUSA LADU

In Summary

The meeting was aimed at promoting transparency and accountability at the Fund.

 

Breaking away from the earlier tradition, the country’s main social security provider, NSSF, has for the first time in the history of the Fund held a general meeting.

In the meeting, the Fund did not only declare its achievements and future plans, but also subjected itself to criticism from its members.

Although there was a general agreement that the initiative should become an annual event for transparency and accountability reasons, industry players, particularly government and workers unions, could not agree on the future of the (pension) sector.

Workers’ view 
According to the workers’ representatives, the Liberalisation Bill in Parliament stands to disintegrate the workers and it is on that ground that it should be opposed.

The Bill seeks to regulate the pension sector and open it up for other players providing social security services.

“The National Social Security Fund (NSSF) should be protected from interests that want to tear it apart,” the acting Secretary General of the Central Organisation of Free Trade Unions, Mr Robert Wanjusi, said yesterday.

He added: “We have conflict with the Ministry of Finance who are not accommodating our interest quite well.”

According to Mr Wanjusi, the liberalisation Bill in its current shape, can easily be manipulated by the employers at the expense of workers, a claim the employers deny.

He argued that the government ploy to give workers their money in bits as stipulated in the proposed law only serves to perpetuate poverty.

And the fact that the proposed law will permit workers to move to schemes of their choice, will only help to weaken the united bargaining power of workers as they would be acting independently.

But according to the National Organisation of Trade Unions, chairman-general, Mr Usher Wilson Owere, the other contention originates from the way the regulatory body - the Uganda Retirements Benefits Regulatory Authority - was formed.

Mr Owere claimed in an interview that most of the members in the regulatory body were the same ones, who drafted the proposed liberalisation Bill with the view to selfishly benefit from it.

No way
The position has, however, been denied by the government, saying there is no way the regulators can make laws that they are going to oversee themselves.

“This law will help the pension industry managed better,” Mr Aston Kajara, the state minister for privatisation, who represented the Minister of Finance, Ms Maria Kiwanuka, said.

He added: The proposed law will oversee smooth transition of NSSF and its ultimate prize will be competition something that is good for the sector.”

The Funds Managing Director, who said the institution has excess of Shs3 trillion, a compliance rate of over 70 per cent and a monthly income of nearly Shs100billion, said he is not afraid of liberalisation.

He said: “We are ready for anything. In fact we can’t wait for the new law to come in.”

Meanwhile, NSSF has once again avoided queries that could soil its books of accounts. The Auditor-General has issued the Fund unqualified opinion, meaning the institution’s financial statements for the year ended June 30, 2012 presents a fair and accurate picture of the Fund and comply with generally accepted accounting principles.

Roles of trustees in the retirement benefits Act

 

A section of the Pension Towers currently under construction. Some stakeholders say the Fund is investing in unviable ventures. Photo BY RACHEL MABALA. 

By Hamza Mutebi
In my previous article, I wrote about an overview of the Uganda Retirements Benefits Regulatory Authority Act in general.

I highlighted the implications of the Act to both new and existing retirement benefit schemes. In my next series of articles I will talk about the duties of the different parties as stipulated by the URBRA Act.

The major parties in this regard include the trustees of the scheme, the fund manager, the custodian and finally the administrator of the scheme. However, schemes may from time to time use the services of other distinguished professionals such as auditors, lawyers and actuaries.

In 1921 the trust became the universal basis for private occupational pension schemes because of the introduction of tax relief. The word TRUST refers to the duty or aggregate accumulation of obligations that rest upon a person described.

The responsibilities are in relation to property held by him or under his control. He will be compelled by a court in its equitable jurisdiction to administer that property in the manner lawfully prescribed by the trust instrument.

As a consequence, the administration will be in such a manner that the consequential benefits and advantages accrue, not to the trustee, but to the persons called the beneficiaries. A retirement benefit scheme must be run and managed under the guidance of a “constitution” or what is technically called a trust deed.

It is necessary to obtain professional advice on the preparation of a trust deed as it is an extremely important document. The trust deed entails rules which are the operational particulars of the scheme and everything that a member needs to know about the scheme.

If possible it should be summarised into a small booklet and distributed to members. The Retirement Benefits Act requires that schemes be established under an irrevocable trust. After the preparation of the trust deed and therefore the establishment of the right nature and design of the scheme, the sponsor (employer) can now appoint trustees, one-third of whom must be nominated by the members in a defined benefit scheme.

In a defined contribution scheme half of them must be member-nominated. In the event that the employer does not want to appoint member trustees, he can appoint a corporate trustee (a body corporate) to run scheme affairs. The regulations provide that there should be at least three trustees (unless a corporate trustee is appointed) and the number must be odd.

There is no maximum allowable number of trustees. Section 46 of the Retirement Benefits Act requires that on the acceptance of the trust, the trustees have among many others the following duties: The duty to manage and oversee the operation of the scheme in accordance with this Act and regulations made under this Act;
Trustees must ensure that the scheme has a prudent investment policy on the investment of its funds so as to maintain the capital of the scheme and to secure market rates of return on its investments.

The investment policy of a scheme must be implemented subject to any regulations made for that purpose by the minister in consultation with the RBA; Trustees must ensure that no scheme funds can be used to make direct or indirect loans to any person or invested contrary to any guidelines prescribed for that purpose or invested with any institution with a view to securing loans at a preferential rate of interest to the sponsor, trustees, members or the manager of such scheme.

Trustees are also required by law to keep proper books and records of account of the income, expenditure and assets of the scheme fund and within a period of six months after the end of each financial year, ensure that accounts are prepared.

Hamza Mutebi, is the manager, business development at UAP Financial Services

Helb eyes funding from unclaimed assets

Helb CE0 Charles Ringera. The agency is seeking new fund-raising methods. Diana Ngila 

By DAVID HERBLING

The Higher Education Loans Board (Helb) has started talks to access billions of shillings whose owners cannot be traced to meet the growing financing needs in Kenya’s expanding universities.

It is negotiating with the board of the recently created Unclaimed Financial Assets Authority (UFAA) —which was established last year to take charge of among others, bank deposits, unpaid dividends and pension savings said to be worth Sh200 billion.

The financier says it wants to create a revolving fund from the money that will be held by the authority and use it to finance students in Kenya’s universities and tertiary colleges and plug the growing financing gap.

The CEO of the board Charles Ringera said the agency is exploring new fund-raising models to cut its reliance on the government and recoveries from beneficiaries of the fund.

“We are studying models that have been used in other parts of the world where a fraction of the unclaimed assets is channelled towards education financing,” said Mr Ringera in an interview with Business Daily Thursday.

“There is need for innovation in terms of resource mobilisation to meet growing demand and reduce reliance on the Treasury. We have been meeting board members of the authority to see how we can use the unclaimed assets to finance education.” 

For example, the State of Florida in the US uses proceeds from unclaimed assets to fund public education.

Besides this, it is targeting international development agencies and private lenders to bridge the growing funding gap.

It plans to partner with institutions such as MasterCard Foundation, Ford Foundation and USAID by turning their bursary and scholarships schemes into a low-interest revolving fund to benefit more students and ensure sustainability of the funds.

Helb projects that the number of students seeking tertiary education financing will grow almost sevenfold from the current 118,000 students to about 800,000 in 2015 when the first batch of beneficiaries of free primary education join universities and colleges. The free schooling was started in 2003.

The board estimates it will require Sh56 billion to meet higher education needs in the year 2015 hence the need to explore alternative sources for its revolving fund.

Finance minister Njeru Githae in November appointed members of UFAA who are expected to appoint a management team—which is yet to happen.

The establishment of the board paves the way for transfer to the government all financial assets held by both public and private institutions whose owners cannot be traced.

Publicly listed companies have been issuing public notices to shareholders to collect unclaimed dividends, which form a substantial portion of the unclaimed financial assets estimated to be worth more than Sh200 billion.

Other funds that the agency will collect include unclaimed initial public offering (IPO) refunds, bonus shares, insurance payments, pension dues and bank account balances.

The new body will be expected to announce procedures for surrender of the funds.

Money held by the agency will be invested in socially beneficial projects and public infrastructure.
Institutions that hand over such funds will cease being held liable for them, passing over the liability to the UFAA.

The University Act which was passed by Parliament early this year requires HELB to fund learners based on the Differentiated Unit Cost (DUC) where students will be given loans according to the cost of the course being studied.

“Beginning next financial year, we will disburse loans based on programme of study as is required by law,” said Mr Ringera.

Currently, the fund gives out loans ranging from a minimum of Sh35, 000 to a maximum of Sh60,000 and the amount loans is based on the students financial health rather than the course.

Under the new scheme, students taking science courses such as medicine, nursing and engineering will be given more money in line with the requirements of these courses, which tend to be expensive compared to social science degrees.

Elderly urge government to check Pension thefts

 

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Government Chief Whip Justine Lumumba (R) and Buyende Woman MP Veronica Kadogo (C) hand over an envelope to a priest in Buyende District during consultations recently. PHOTO BY OPIO SAM CALEB 

 

By SOLOMON ARINAITWE

KAMPALA

Elderly persons under their umbrella body, the Uganda Reach the Aged Association, yesterday urged the government to institute strong institutional measures to curb corruption in the Pensions sector. The group also called for the decentralisation of access to pension funds, to reduce the costs incurred by beneficiaries in the process of chasing payments.

Mr David Obot, the chairman of the association, told a breakfast meeting of old persons in Kampala yesterday that corruption in the pension sector had left them without access to basic necessities like food, accommodation and medical care.

“The pensions have been mismanaged by a few individuals and people have to travel from very far and get nothing, while one pensioner even died on the road. Government needs to put in measures to curb corruption,” Mr Obot said.

Mr Obot also urged the government to equip health centres with drugs, equip the youth with information in order to bridge the “generation –gap” between them and the aged, and also to encourage families not to abandon the elderly persons.

Case in point
He cited the case that this newspaper broke last week of Ms Salume Angwec, the mother of Uganda’s first gold medallist John Akii-Bua, who lives in a dilapidated structure in Corner Abako village, Ojul Parish Alebtong District.

State Minister for the Elderly and Disabled Suleiman Madada, acknowledged the corruption that has plagued the pensions sector, but countered that measures are being implemented to eliminate it. “Government is aware of the challenges faced by pensioners such as delays in accessing their pensions and high costs of transport to reach pay points, and will continue advocating for decentralisation of the processing and disbursement of retirement benefits,” Mr Madada read from a speech he delivered on behalf of the Minister for Gender, Labour and Social Development, Mr John Nasasira.

sarinaitwe@ug.nationmedia.com