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Stanbic Bank
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Stanbic Bank
Stanbic Bank

NSSF examines its successes and challenges, registers growth of 15%

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Simon Kabayo
Simon Kabayo
Reporter whose work is detailed

The National Social Security Fund (NSSF) has examined the successes and challenges the Fund experienced during the previous Financial Year, 2022/23. Key to note is that the Fund’s revenue witnessed a notable growth of 15%, surging from Shs1.9 trillion to Shs2.2 trillion by the close of the Financial Year ended June 30, 2023. Dividend income exhibited substantial growth, expanding from Shs84 billion to Shs139 trillion. Furthermore, the income generated from the Fund’s real estate projects experienced a modest uptick, moving from Shs13.4 billion to Shs14 billion, accompanied by She16 billion in other income.

Speaking to the media today, Ayota Patrick, the Fund’s Managing Director said that the investment environment in Uganda and the region had been generally challenging in the Financial Year 2022/23. He mentioned that, despite inflation being under control, the decrease in the value of the stock markets in Kenya and Uganda, the strengthening of the Uganda Shilling against the regional currencies, and the decrease in long-term bond interest rates had all contributed to a depressed market.

The Fund’s investment portfolio mix is predominantly skewed towards fixed income, which is in line with the overall modest risk profile. As of June 30, 2023, the following was the investment mix. Equities at 12.5%, Real Estate at 9.01% and Fixed Income at 78.48%.

Ayota said, “The stock markets witnessed a decline in prices, with the following notable decreases: Uganda Securities Exchange Local Index: A decline of 11.47%. Nairobi Stock Exchange All Share Index: A significant drop of 14.04%. Tanzania Stock Exchange Share Index: A decrease of 4.02%. Rwanda Stock Exchange Share Index: A modest decline of 2.27%.”

Exchange rate volatility was observed as the Ugandan Shilling displayed strength against various portfolio currencies:

The Uganda Shilling appreciated significantly, notably against the Kenyan Shilling (KES), appreciating by 22.2%. Conversely, it depreciated by 16.4% against the Rwandan Franc (RWF). It also exhibited a 5.2% depreciation against the Tanzanian Shilling (TZS). Against the US Dollar (USD), the Uganda Shilling experienced a more modest depreciation of 2.6%.

Based on the performance indicators outlined, the Fund experienced a slight decline in Interest Rates: As the Fund primarily allocates its investments to long-term bonds, this decrease in interest rates had a direct effect on our investment portfolio.

The Fund also experienced diminished Stock Market Values: The devaluation of East African stock markets had a notable impact on the valuation of the Fund’s equity investments.

The Fund also noted Ugandan Shilling Appreciation against Portfolio Currencies, Especially the Kenyan Shilling: This currency appreciation influenced the value of the Fund’s investments denominated in Kenyan Shillings.

In 2015, the Fund developed the 2015-2025 Strategic Plan as course to achieve our Strategic Objectives by 2025, and even earlier in some instances:

Growth of the Fund – Assets under Management: The Fund’s Assets under Management (AUM) increased from Shs17.26 trillion in Financial Year 2021/22 to Shs18.56 trillion in Financial Year 2023/24. This growth was driven by:

Member contributions increased from Shs1.49 trillion in Financial Year 2021/22 to Shs1.72 trillion in Financial Year 2022/23

Total Realized Income earned increased by 15% from Shs1.9 trillion in the Financial Year 2022/22 to Shs2.2 trillion in the Financial Year 2022/23

The cost-to-income ratio improved from 11.7% in the Financial Year 2021/22 to 9.4% in the Financial Year 2022/23

Cost Management – the Fund’s cost of administration reduced from 1.18% of total assets to 1.02%. We created more value for members using less money compared to last Financial Year

Rate of Compliance slightly improves from 55% in Financial Year 2021/22 to 57% in Financial Year 2022/23

“With the current asset base, we project that the strategic goal of growing the Assets under Management of shs20 Trillion by 2025 will be achieved by June 30, 2024, one year ahead of schedule,” Ayota said.

ii. Innovation for Process Efficiency, in 2015, the Fund set a strategic goal to pay more people in less time – on average in 24 hours.

“In Financial Year 2022/23, the turnaround time declined slightly from 12 days to 13 days. Benefits paid to qualifying members increased from Shs1.19 trillion in the Financial Year 2021/22 to Shs1.202 trillion in the Financial Year 2022/23. The number of qualifying members was over 46,000,” Ayota said.

He added, “Although we are behind this target, we are confident that once we achieve 100% stabilization of the new Pension Administration System (PAS), and members’ uptake of self-service channels improves, we will move closer to achieving this objective.”

iii. Customer Satisfaction, in 2015, the Fund set a strategic goal to increase customer satisfaction to 95% by 2025.

In the Financial Year 2022/23, customer satisfaction remained flat at 86% compared to the previous Financial Year.

iv. For Staff Satisfaction, in 2015, the Fund set a strategic goal to increase our staff satisfaction to 95% by 2025. In the Financial Year 2022/23, staff satisfaction declined to 86% compared to 93% in the previous Financial Year.

Thus, the performance on customer and staff satisfaction reflects the challenges the Fund went through in the 2nd half of the year. However, they are confident that given the continuity and stability going forward, these strategic objectives are within reach.

Ayota further noted, “Ten (10) years ago, we committed to pay NSSF members a real return – at least 2 percentage points above the 10-year rate of inflation. We have consistently delivered on the promise and will continue to do so. I am therefore extremely confident that the Fund will pay a competitive interest rate for the Financial Year 2022/23.”

However, the Minister of Finance, Planning and Economic Development will declare a new rate at the forthcoming 11th Annual Members Meeting that will take place on September 26, 2023.

“While our performance remains strong and the Fund is a profitable institution, and in some years, we will experience some volatility, our strategic focus is on the long-term sustainability of the Fund,” Ayota promised.

“Our new “Vision 2035” is the bedrock of our long-term strategic focus– where we want to grow the Fund to Shs50 trillion, cover at least 50% of the working population, and achieve 95% and both customer satisfaction and staff engagement,” Ayota asserted.

10% interest rate

Eagle Online has established that due to bad economic hardships experienced in the last financial year, the fund is struggling to raise above last year’s 9.6% interest rate. However, internal sources within say the fund was torn between paying much lesser than last year’s or increase it to 10% so as not to demoralize the savers.

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