The National Social Security Fund (NSSF) has clarified that the Fund does not exist to hamstring or cripple businesses but instead an employer who demonstrates and commits, through a binding agreement, that they will pay arrears, along with interest earned, the Managing Director exercises his discretion to waive the penalties.
The clarity follows parliament select committee report on the state of affairs at the Fund. The Fund’s Acting Managing Director, Ayota Patrick, flanked by the Board Chairman, Peter Kimbowa, and the NSSF Executive Committee, shared the update on the adopted cause.
The Fund noted instances where the committee appears not to consider the facts which the Board members availed to them during the hearing, for instance, the issue of onboarding of Geo-mapping technology to help the Fund to easily trace the locations of all employers.
“We explained to the committee that our geo-mapping exercise was successful. The Fund was able to map all the employers. It is now fully operational and there is value for money. We wonder how then the committee concluded that our Geo-mapping technology failed. Many examples such as the case of staff restructuring, payment of performance bonuses, corporate social responsibility, and legacy investments like West Nile Golf Club and Workers House land title fall into this category,” Ayota said.
Ayota further noted that the committee ignored the context within which the Fund operates & assumes that it operates like a government ministry. For example the budgeting process, hence their conclusion on the Fund’s budgets for land purchase.
Because of this, the Committee assumed that budgeting means spending at the Fund, which is far from the truth. Budgets are plans that are informed by market assessments.
Before any funds are committed, the user department must provide justification for the procurement process to commence or satisfy the Accounting Officer, among others, of the value for money. Just because an item appears on the budget does not mean the money has to be spent.
In some instances, the committee did not consider the existing provisions in the legislation governing the Fund. One such case is the waiver of penalties, which is at the discretion of the Managing Director as provided for by law.
The committee’s report highlights areas where the Fund must improve, and we appreciate them for that insight. However, we would like to clarify a few issues where the committee did not consider the context or information provided.
Ayota added that the Fund’s investment philosophy is guided by the Investments Policy and Guidelines and the Uganda Retirement Benefits Regulatory Authority (URBRA) Investment Guidelines. One key component is the principle of investment diversification both in terms of asset class and sector.
“The basic rule of diversification is that an investment that may not be performing well at a specific time is offset by another investment that is performing well. Any fund’s investment performance must be analyzed as a portfolio, rather than just one investment,” he said.
An analysis of the Fund’s investment portfolio over the last 12 years shows consistent growth of the assets and a competitive return.
Whereas we appreciate the Committee’s efforts to obtain information from the Fund, in many instances, it appears that not all the information was used.
“For instance, in the case of Uganda Clays Limited, NSSF is a major shareholder in Uganda Clays, which is listed on the USE. We considered the risk of letting the company collapse with the Fund’s initial investment against injecting capital of Shs11b to help it survive & return to profitability. The Fund chose the latter,”
The loan was approved by the NSSF Board and the then Minister of Finance, Planning & Economic Development. It is also important to note that the loan was approved before the passage of the URBRA Act which bars direct loans. The action at the time was regular and legal.
“Uganda Clays is now profitable & has already planned to pay back the loan with interest. The company contributes over Shs1.5 billion a year to NSSF. Our action helped Uganda Clays survive, saved more than 1,000 jobs, and saved the 33% equity NSSF had made into Uganda Clays,” Ayota clarified.
Patrick Kimbowa the NSSF Board Chairman applauded the Committee saying it is not easy to investigate an entity of their size and complexity over a 20-year period in 2 to 3 weeks, but they were able to do so. “We, therefore, like to register our appreciation for the rigorous and robust probe,” he said.
“The Committee in Section 7 appreciates the entire management team for the good performance of the Fund. The mere fact that the Fund is growing and has continued to grow reiterates the good governance structures at the Fund and the experienced team of technocrats at the Fund.”
Kimbowa said that there is neither evidence nor conclusion that any individual at the Fund had stolen member funds, despite the numerous allegations in the media purporting bribery and mismanagement of Funds.
“The report did not look at issues of growth, the sustainability, drivers, and risks/dangers to that growth. One critical aspect which should have been used to justify these costs would have been the staff-related costs and performance-driven culture within the organization,” Kimbowa said.
The Fund has a total of 210 investments, however, only the Arua investment property has lost value. The fact that the Committee had to go back almost two decades to find one investment that has lost value is not a bad performance per se.
