I have been planning to reach Health Cabinet Secretary Mutahi Kagwe to deliver to him some good news. That is, lying idle in a bank account somewhere is Sh1.7 billion, which he can easily unlock for use in the battle against the Covid-19 pandemic.
That money just sits in an account of an entity by the name Kenya Hospital Authority Trust Fund (KHATF). Established way back in 1968 by the Ministry of Health, the fund seems to have been forgotten after the government failed to appoint trustees to run it. It has not had trustees for the past 30 years!
The last trustee of the fund was former vice-chancellor of the University of Nairobi, Prof Joseph Maina Mungai, who passed on in 2003.
IDLE BILLIONS
The reason I find this issue intriguing is not just because billions are sitting idle somewhere when it is needed badly. Indeed, in terms of scale and scope, and considering the amount of money required for the fight against the coronavirus pandemic, these idle funds are a drop in the ocean.
What astonishes me is the thinking, vision and foresight that went into establishing this fund. It humbles me that, more than three decades ago, our people had the vision of establishing a healthcare sovereign wealth fund. When did we lose the capacity to innovate and think big?
Our civil service was run by people with cutting-edge knowledge. The capacity within the bureaucracy was equal to the very best in emerging markets. The public service was staffed by qualified citizens chosen on meritocracy.
Which is why it does not surprise me that, long before the Johannesburg Stock Exchange started dealing in municipal bonds, the Nairobi City Council was already issuing bonds on the then-Nairobi Stock Exchange (Nairobi Securities Exchange).
One might ask, how is it that the political elite didn’t craft a scheme to steal the money from the KHATF all those years it has been moribund? The answer is simple: It is in the way the smart founding fathers crafted the rules governing withdrawal of money from this fund.
Long before the Retirement Benefits Authority (RBA) came to town and introduced separation of powers and responsibilities in management of funds, the founders of the KHATF were smart enough to design ways to protect the cash.
Long before the RBA came up with rules requiring appointment of fund managers that operate separately from custodians and with the oversight of independent trustees, the framers of the laws governing the KHATF had transparent systems of running such funds.
That is how the fund became insulated from greedy elites. Part of the money was put in fixed deposit accounts to earn interest. Some more was invested in shares and bonds for long-term capital appreciation.
The rest — cash in current accounts for short-term liquidity — was held across three banks. Company secretaries — the entity Livingstone Registrars — played the role of fund managers.
Mark you, the fund was started with an injection of a mere Sh1.5 million. Here is a bit of the history of this fund.
What was its main the purpose? The money was to fund grants and book loans for students studying medicine in foreign universities. The last grant was disbursed in 1987.
The last year for which the fund’s accounts were audited was 1982. Then, the trustees were the late Prof Mungai, the late Dr W.K. Koinange and Mr A. Githinji.
After many years of inactivity, the money was surrendered to the Unclaimed Assets Authority.
NEW TRUSTEES
All Mr Kagwe need do is operationalise the fund by appointing new trustees. If I were the minister, I would build on the foresightedness of the founding fathers of this fund by building and expanding its scope.
But what are the broader policy issues which the current predicament of the KHATF raise?
First, we need to tighten the laws and rules governing withdrawal of money from entities such as the Unclaimed Financial Assets Fund to protect it from greedy elites. Secondly, let us revive the idea of a sovereign wealth fund.
I read somewhere that the British government is contemplating to establish a £25 billion (Sh3.3 trillion) sovereign wealth fund to support private businesses that have suffered from the impact of Covid-19. I also read that Kuwait has decided to turn to its sovereign wealth fund into money to tackle difficulties brought about by the coronavirus pandemic.
Norway’s $950 billion (Sh101.7 trillion) sovereign wealth fund, the world’s biggest, is preparing to liquidate assets to cover government expenses on the Covid-19 pandemic.
