NSSF reveals Shs402bn loss

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NSSF Managing Director, Richard Byarugaba

On Tuesday morning, the National Social Security Fund [NSSF] Managing Director, Richard Byarugaba, announced the Fund’s interim financial performance of the year 2018 / 2019 during a media dialogue at Workers House.

He said during the year, the Uganda economy witnessed stable growth at 6.1% compared to 6.2% in the previous year.

This was supported by an accommodative monetary policy stance, improvement in the agriculture sector because of favourable weather conditions and growth in public infrastructure developments.

“We further witnessed positives to consumer spending like an uptick in private sector credit to 14% from 7.2% a year ago,” he told press.

“We attribute the slower growth to policy uncertainty in the country that have affected FDI and driven private sector credit to lows of 4% from an average of 20% between 2013-2016.”

Going forward, Byarugaba expects global effects from trade wars and Brexit to spill over to frontier economies as seen with the escalated sell offs during the year.

During the period, headline inflation was stable as commodity prices and food prices remained stable due to improved weather conditions and oil gluts.

Uganda Inflation remained low at 3.4% and below the long-term target of 5%. Kenya’s inflation was up closing at 5.7% from 4.28% driven by food inflation following delayed rains in the year. Tanzania’s inflation remained low as well at 3.7% compared to 3.4% a year ago.

Interest rate remained relatively stable in FY 2018/19. However, long-term bond yields dropped with the 15-year moving from 17.75% at the start of the year to 15.85% as at the end of June 2019.

“This was significant for the Fund, given that we hold over 70% of our total investment portfolio in long term bonds.”

During the year, the East African stock markets suffered significant losses in value. The NSE lost 14%, the USE lost 10% in Uganda and Tanzania plummeted by 21%.

“We believe the main driver was as a result of foreigners remaining net sellers on the back of global uncertainty regarding trade wars, US interest rates and Brexit. However, other factors like the policy uncertainty and slowed economic activity in Tanzania exacerbated the sell offs.”

There was general appreciation of the Uganda Shilling in the Financial Year against all major currencies. For instance, the KES depreciated, falling from 37.97 at the start of the Financial Year to close just below 36.

Assets under Management increased by 13.1% from Ugx 9.98 trillion to Ugx 11.3 trillion at 30th June 2019.

The growth was mainly driven by increased contributions and interest income. There was 20.4% growth in realized income from Ugx 1.04 trillion in 2017/2018 to Ugx 1.25 trillion in 2018/2019 due to increased gross Interest income from Treasury and Infrastructure bonds.

The Fund’s holdings in all foreign exchange markets and its equity positions have accumulated to an unrealized loss of 402 billion shillings as at June 30th 2019.

“Nevertheless, we believe that this is just a slump in the market and that as a long- term investor these downturns shall recover.”

There was 17% growth in contributions collections from Ugx 1.049 trillion to Ugx 1.208 trillion. The growth in contributions was driven by growth in the economy which increased the new members registered, the historically competitive performance of the Fund which is attracting voluntary contributors and overall improvement in compliance.

The compliance level based on 1 month is now at 61%. The amount of money paid in benefits increased by 25% from Ugx 360 billion in 2017/2018 to Ugx 450 billion in 2018/19.

The Average Benefits Turn-Around-Time 2018/19 remained flat at 8 days. The increase in benefits is attributed to both an increase in the average payout and members paid.

Byarugaba said the cost of Administration improved slightly from 1.31% in 2017/2018 to 1.28% in 2018/2019 with the cost income ratio remained flat at 11.6%

The customer satisfaction slightly dipped by 1% from 85% in 2017/2018 to 84% in 2018/2019 while staff engagement increased from 84% in 2017/2018 to 88% in 2018/2019.

“Given our performance this year described above, the Fund will not match the interest rate paid the previous Financial Year 2017/2018. As we await the declaration by the Minister of Finance, Planning & Economic Development, our members should therefore expect a reduction in the interest rate this year compared to last year.”

He added: “However, in fiscal year 2012/2013, we committed to pay members a real return – at least 2 percentage points above the 10 year rate of inflation. Since then, we have consistently delivered on the promise. We are therefore extremely confident that the Minister will declare a rate that will achieve and even surpass this target.”

In the short, medium and long term, the Fund remains financially stable and growing.

“The Fund can withstand any shock in the economy, given our aggressive but prudent investment approach and our investment diversification strategy. “Safety” and “Security” of members’ funds will remain the guiding principle in our decision making.”

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