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NSSF bosses face tough choices as savings suffer

By Patrick Kagenda

Interest payments plunge from 14% to 3 %, inflation hits 15%

As the July deadline for the National Social Security Fund (NSSF) to declare the annual interest to its members nears, speculation is mounting that the compulsory saving scheme for all private sector workers could announce a paltry 3%.

Nothing is in black and white so far and the 3% interest is being peddled by sources privy to the dealings of the Fund that have provided reliable information regarding its activities.

A member of the Fund’s Public Relations office, Victor Karamagi, gave a rhetorical response when asked.

“How you can say the fund will give a 3% interest rate when the funds projections and accounts are not yet out,” he said.

But if a 3% interest is announced, it would be a 75% drop from the all time 14% interest it paid on workers savings last year. If compounded the drop in the value in workers savings could be much higher because the inflation rate, on which it is pegged, has swollen from about 7% to 14% over the same period.

Whatever the interest NSSF declares, it will be very low rate and it will not come as a surprise.

NSSF’s financial performance lost luster since the Temangalo saga in which it paid Shs 11 billion to Defence minister Amama Mbabazi and businessman Amos Nzei in a controversial deal.

David Chandi Jamwa, the managing director who oversaw NSSF’s aggressive portfolio shift and rapid growth in members share value was suspended for his role in the saga and the Fund’s board was changed.

Since then, the company secretary who is acting as MD, Martin Bandebire , has adopted a visible aversion to risk associated with investment. That has left the workers funds lying idle.

NSSF collects up to Shs 15 billion per month in member subscription and pays out only an average of Shs 28 billion per year in mature claims.

The balance is supposed to be invested in shares, bonds, and real estate in accordance with its five-year strategic plan.

Before it was suspended from trading, NSSF controlled 80% of the market share worth between Shs 150-180 billion.

NSSF’s new board

Chairman of the Board

Vincent Ssekono

He is the former Permanent Secretary for local government

Members representing the government (2)

Chris Kasaami, the permanent secretary of Ministry of Finance.

Christine Guwatidde, the permanent secretary Ministry of Labour.

These two are to ensure that any transaction involving the fund should be in line with the government interest.

Members from trade Unions (5)

Romano Ojambo Ochieng, the General Secretary of Amalgamated Transport and General Workers Union

Joly Aripa Kirabo, the Secretary General of Uganda Public Employees Union

Arinatwe Rwakajara, the deputy Secretary General Uganda Government and Allied workers Union

These were elected by the central governing council of the National Organisation of Trade Unions (NOTU) and they are senior trade unionists.

The two who were elected by the Central governing council of the Confederation of free trade unions (COFTU) include,

Christopher Kahirita, the Chairman General of Coftu and retired senior meteorological officer

Richard Bigirwa from Hotels Union

The five representatives are going to look into disbursement of the NSSF funds, its allocations in the various banks and how the fund is being safeguarded by the ministry of Finance. In case of any mismanagement or good management, they must report back to the workers because they are the beneficiaries of the fund.

Employer represented (1)

Martin Kasekende from the Federation of Uganda Employers

He was elected by the federation to foresee how NSSF activities are transacted and give a feedback to the employers because they contribute to the fund.

This board was named by the Minister of Finance Ms Syda Bbumba last month.

Karamagi denied NSSF was likely to pay a loss interest because it has not made a profit, especially in trading on the USE.

“The fund has other investments. It’s not only the equities market that the fund deals in,” he said.

Last year NSSF made Shs131 billion in profits, a 22% raise over the previous year.

Announcing the profits, the board attributed the growth in value to “aggressive equities allocation, trading in shares, and reallocation of investments from treasury bonds and bills to commercial paper”.

Not surprisingly, the USE Chief Executive Officer Simon Rutega told The Independent that NSSF must remain a major player on the bourse.

“NSSF brings more liquidity in the market as a domestic institutional investor with a base and dominating as a major player with long term funds in Uganda’s financial market”.

Earlier Rutega said up to four issuers of bonds are ready to raise long term money in the market on the back of NSSF returning to the market. He named Nation Insurance Corporation (NIC), National Water and Sewerage Corporation (NWSC), Stanbic Bank and Equity Bank as some of the issuers of the bonds.

Tambudzai Maswaya the manager investment trading and research at Renaissance capital stock brokerage said NSSF’s participation in the stock market brings investor confidence, especially among retail investors who are dependent on market stability to invest on the stock market.

The USE has had a bad first quarter of 2009 compared to the first quarter of 2008. Its ALL Share Index has declined by over 80 % since NSSF quit trading and the global financial crisis hit.

But MBE`A stock brokerage firm sales and trade analyst Musa Nsubuga said: “The eight months they have spent out of the market and the way they are seeing the trend of the market is reason enough for them to exercise caution by not putting in a lot of money.”

Debate is raging about how NSSF should approach trading.

Kenneth Kitariko the general manager investment banking at African Alliance brokerage firm said NSSF should base its activity on the bourse on its five year strategic investment plan.

“If their strategic plan was close to completion, then their return won’t add much to the market but if they were still in the early stages of their investment plan or half way, then their return will have a considerable impact, ” he said.

However, another market expert was more bullish.

“NSSF should exploit its dual role as a market maker and market player,” the expert said, “It should invest heavily across all counters and reap when the price index picks.”

According to this model, if NSSF invested Shs 30 billion, it would earn up to Shs 10 billion in under a month. But then we are talking the stack exchange i.e. nothing is ever a sure deal here.

 

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