Wednesday , February 21 2018
Home / ARTICLES 2008-2015 / Facts on NSSF-Umeme shares debate

Facts on NSSF-Umeme shares debate

By Geraldine Ssali Busulwa

Contrary to some sentiments, NSSF investments in Umeme were made in good faith and did not break any laws

I feel obliged to reassure our members by clarifying on the numerous misrepresentations being attributed to various witnesses called to the ongoing Parliamentary probe particularly in regard to NSSF’s investment in Umeme.

  • Specifically these baseless allegations centre around three issues, namely;
  • NSSF did not seek the clearance of the Solicitor General during the Umeme IPO transaction.
  • NSSF did not secure the Minister’s clearance during the second Umeme transaction.
  • The NSSF board did not approve the second. Umeme transaction

The NSSF Act squarely puts the responsibility of investment on the board and the managing director, in consultation with the minister. “In consultation with the minister” is not the same as “with the minister’s approval” and as such, the Act does not bestow upon the minister, explicit veto powers over the Fund’s investments. The minister’s role is advisory and advice given may or may not be considered while making investment decisions.

While appearing before the Parliamentary Committee on September 3, Minister Maria Kiwanuka, said: “I gave my guidance to the board and management of NSSF, and theirs was a business decision to make.”  I would also like to clarify on the role of the Solicitor General in NSSF investments.  The need to consult the Solicitor General is contrived from Section 119 (5) of the Constitution of Uganda, which states that no agreement, contract, treaty, convention or document by to which the Government is a party or in respect of which the Government has an interest, shall be concluded without legal advice from the Attorney General. I wish to draw the attention of everyone to earlier advice by the Solicitor General to the Fund, dated October 28 under Ref: ADM/190/01. The advice emanated from the Fund’s requests for advice dated Sept. 17, 2013 and Sept.25, regarding NSSF’s planned investments in Tanzania Breweries Limited & Cooperative Bank of Kenya Ltd. The Solicitor General in his response, among others advised the Fund as thus:

“When we read your submissions, there is no indication that they are a contract or a document creating any legal relationship. It is simply an expression by NSSF on how and where they intend to invest the surplus money collected and unnecessary for paying for benefits at the moment. Secondly, according to Section 30 of the NSSF Act, it is the responsibility of the Managing Director, Board and Minister to decide on investment of surplus money collected by NSSF.   It is therefore our opinion that your request is not a contract or a document creating a legal relationship to necessitate our clearance in accordance with Article 119 (5) of the Constitution. We therefore advise you to conduct the investment in accordance with Section 30 and 39 of the NSSF Act.”

As clearly pointed out by the Solicitor General, NSSF’s intentions to invest are not a contract and therefore do not require the Solicitor General’s no objection. However, whenever possible, the Fund has consulted the office of the Solicitor General for guidance.

It is also important to note that other than the NSSF Act, NSSF is also guided by the Uganda Retirement Benefits Regulatory Authority Act, 2011. It should be recalled that NSSF in May 2013, received a license to operate as a Retirement Benefits Scheme. Section 67 of the URBRA Act clearly states that all investment decisions of the Fund should be guided by a prudent investment policy whose major aim is to secure adequate rates of return on member savings. A Fund’s investment policy is however subject to regulations made by the minister, in consultation by the board.

Section 91 (1 & 2) clearly states that the minister can only do this by a statutory instrument and not any other means. Again the UBRA Act does not give the minister veto powers over investment decisions, but rather acknowledges the advisory role of the minister. It should also be noted that on April 17, 2014, in line with section 91(1) of the URBRA Act, it issued Investment guidelines by way of Statutory Instrument 2014 No.44.  The guidelines state that the investment policy statement of a scheme shall not require that a decision to make an investment shall be subject to the consent of the sponsor.

In line with the URBRA Act 2011, the NSSF board in June 2013, revised the existing  investment policy and key to note is that new policy gave the Management Investment Committee (which is chaired by the MD) exclusive powers to decide on a range of investment decisions including equity acquisitions. The MIC would then refer the investments to the Board Investment and Projects Monitoring Committee (IPMC), which would then make recommendations to the board.

The board would then approve all investments while the minister would be consulted in line with the NSSF Act.

Unlike the Umeme IPO, which was carried out in the framework of the NSSF Investment Policy that did not require board approval but instead required that NSSF secures a “No Objection” from the Minister, the acquisition of the second tranche of Umeme shares was approved under a new Investment Policy that did not require a “No Objection” from the minister.

In conclusion, it should be noted that Umeme transactions were done within the frameworks of all the guiding laws.

The decision to invest in especially Umeme Two was approved by the board on a simple majority of 6:5. The presence of dissenting views by some board members does not make the decision of the board illegal.

The listing and trading of Umeme shares was approved by a series of government regulators such as the Capital Markets Authority, Uganda Securities Exchange, Electricity Regulatory Authority after extensive due diligence. Umeme’s listing was also approved by government through the Ministry of Energy and Mineral Development so we have reason to doubt the credibility of these approvals.

The Inspectorate of Government has previously investigated the investment into Umeme shares at IPO and concluded that the investment in Umeme was driven by the benefit for the Fund and did not find evidence of the alleged personal interests. This same issue has been investigated and cleared by the Auditor General.

We welcome the parliamentary investigation and wish to pledge our total commitment to give all the required information. We trust that the committee will run its proceedings in a fair and equitable manner. We strongly believe that we will be vindicated by the probe committee.


The writer is acting managing director of NSSF

Leave a Reply

Your email address will not be published. Required fields are marked *