How a tiny minority of trade unionists have used politics to wrest control from the majority of the fund’s subscribers.
In his State of the Nation address, President Yoweri Museveni said government was going to borrow money from the National Social Security Fund (NSSF) to finance infrastructure development. Later, the Chairman of the Uganda Investment Authority, Patrick Bitature, said government should do so without consulting workers. Since then, Bitature has been under attack.
Like most debates in Uganda, the current debate on NSSF is based on ignorance. NSSF’s portfolio today is worth Shs 2.7 trillion. Of this, Shs 1.4 trillion is held in government bonds, Shs 800 billion on fixed deposit accounts with commercial banks, Shs 200 billion in stocks and Shs 300 billion in real estate. Government is the largest borrower from NSSF. The fund has been investing in government bonds because, even though they provide lower yields than alternative investments (whether in stocks or real estate), government bonds carry much lower risk and tend to generate much less political controversy.
If, just for argument’s sake, government has to seek consent from workers before it borrows from NSSF, how should this happen? Should it call a referendum of all workers, use workers’ representatives in Parliament or have representatives of workers’ take a majority on the NSSF board which makes investment decisions? The first option is perhaps too complicated. The second is less attractive since workers’ MPs already have too many legislative responsibilities to keep a close eye on the workings of the Fund. Therefore, the third option seems the best. And that option is already in place right now.
Out of the current ten members of the board, workers have five directly elected representatives. In fact, the current chairman of the board, Ivan Kyayonka, is a subscriber to NSSF and holds the second largest stock of savings in the Fund at over Shs 760m. Kyayonka is also board chairman of Shell Uganda. The other member is the NSSF Managing Director, Richard Byarugaba. He is the largest subscriber with the Fund, holding about Shs 870m worth of savings. Given the size of their savings, these two have the greatest stake in the Fund’s operations; its failure would make them lose more than anyone of us. Therefore, out of ten board members, seven are workers.
The third and fourth members of the board are the Permanent Secretary in the Ministry of Finance, Planning and Economic Development, Chris Kasami; and the Permanent Secretary in the Ministry of Gender, Christine Guwatunde Kintu. They are not subscribers to the Fund but represent the government, which manages NSSF on our behalf. The government of Uganda, regardless of its fiddling with elections, is an elected government that is responsive to pressures from mobilized demand-groups.
Workers contribute only five percent of their salary; employers contribute 10 percent of their own money towards their workers savings. Yet employers have only one person on the board. Given that most employers are investors and therefore know investments with a good rate of return, they should have been given more say in how the Fund invests the savings of their employees. But democracy, where the majority decides, has enthroned ignorance perhaps because we have a lot of it.
Workers’ representatives on the board are elected by the unions through a democratic process. The problem is that of the 450,000 subscribers of the Fund, workers’ unions contribute only 47,000 employees (11 percent). Over 400,000 of the other subscribers (89 percent) are not unionized and hence not represented on the board. Secondly, out of NSSF’s total annual collections, employees from workers’ unions contribute only five percent; non-unionized workers, 95 percent. This tiny unionized minority, because it is organized and therefore able to make noise by petitioning the president, controls 50 percent of the board. That hurts. But it also subverts democracy.
Who are these five eminent men and women whom the democratic process has thrust onto the NSSF board? How competent are they to guide the Fund when making long term investments? The fund has to decide a portfolio mix of whether to invest in stocks (and there are different types), precious metals, fixed deposit accounts in banks and real estate (different types as well). This means that the board has to have members with wide knowledge of investments in different sectors that give good yields over time.
Do the current workers’ representatives on the NSSF board have such profile to guide the Fund? One of the members, Agnes Kunihira, is a stenographer in RVR – the company that runs our railways. She has a diploma in adult education. The other member, Musa Okello, is a custodian at Makerere University. He has a certificate. The third workers’ representative is Henry Mukasa. He used to work as a record keeper in Sugar Company of Uganda Limited (SCOUL)’s sugar plantation. The fourth, Chritopher Kuhirita, has a certificate in meteorology, done in 1962. And the fifth, Richard Bigirwa, used to be in charge of laundry at Sheraton Hotel in Kampala.
If this is what democracy brings for those of us who save with the Fund, then we are better off without it. There was an attempt to reduce the number of workers’ representatives when the current board was being appointed. The president rejected this saying he did not want to have a war with workers’ unions. Clearly, the decision to have such people on the board was influenced by politics rather than professional considerations. I am personally sick and tired of this so called democracy in Uganda. For fear of the unions, the president is not ready to fight for workers.
Workers who want to be consulted before government can borrow their savings from NSSF also have their money held as deposits in commercial banks. Yet they are not demanding to be consulted when commercial banks lend their deposits to government. The attraction to government control of sectors of the economy is not simply ideological or a result of self interested motives by those within the state. It has become apparent to me that state control is attractive because it gives every Tom, Dick and Harry a sense of power over decision making. It is out of a desire for a sense of power (egotism) that NSSF is held hostage. If we became less egotistical, perhaps we would get better returns.