Wednesday, November 5, 2014


Last week Richard Byarugaba was offered a renewal of his tenure as boss of the National Social Security Fund (NSSF), almost a year after his previous contract ended.

It was also the week that NSSF had its second annual members meeting in which it was revealed that the Fund’s asset base had grown by sh4.4 trillion($1.7b), making it bigger than its Kenyan and Tanzanian counterparts which stood at $1.6b and $1.3b respectively.

Unfortunately for Byaugaba if he accepts the job he will find himself faced with the same problems he left behind a year ago, the main one of course is the imbalance in the fund’s portfolio.

The Fund’s portfolio may be described as super conservative with eight in every ten shillings placed in the lower yielding fixed income assets – government paper, corporate bonds and fixed deposits, with the rest distributed between equities and real estate on a ratio of two-to-one.

Since we are dealing with people’s long term savings it makes sense to adopt a conservative stance, but industry experts argue that by bringing the fixed income segment down to half the portfolio while leaving the ratios for equities and real estate the same,  would add a few more percentage points on the 11.5% interest rate they paid us this year.

But for Byarugaba to shift this balance he needs time and a conducive environment, where he is not dogged by red tape, sniping and rear guard action.

Time, not only because it will take time to redress the portfolio’s imbalance but also because he is dealing with long term savings and while it might be good for the cameras to highlight annual improvements, it’s the long term results that will count.

If the boss of NSSF has a three-year contract (which we now know is not renewable even if you do a good job) then real estate projects or even equity investments will not have matured or begun to mature during such a duration.

You could very well have a situation where a new boss inherits the success or mess of his predecessor, restructure the Fund and his successor then benefits from his sweat.
A longer contract than three years would not only be ideal but logical.
But related to that you need a better quality board.

The Uganda Retirement Benefits Regulatory Authority (URBRA) has already indicated that half the ten member board do not live up to the requirements of the NSSF board, those should be ejected and replaced with more deserving members.

"Just because NSSF has a lot of money does not mean it cannot fail. Part of that failure would be as a result of a board, which even if it is not sleeping on the job, just doesn’t – as it is constituted now, have the requisite skills or sense of urgency to revamp the Fund...

In addition the proposed unbundling of the NSSF in response to the impending liberalisation of the sector should be shelved. In the new environment, it has been proposed, NSSF would only collect money and hand it over to investment agents to do things it is already doing now, albeit not very well.

These investment managers would be charging the Fund just to hold on to their money, that is, before they take a share of any potential profits that may come from their work. Additional costs the Fund does not need.

NSSF should collect and invest its own money and if and when they deem it necessary, parcel out money to selected managers to invest on their behalf. An in house investment department is already being built up and hiring the needed skills shouldn’t be a problem.

And finally we need to resolve the distinction between procurements and investments and put a halt to the maddening running battles between the Public Procurement & Disposal of Public Assets Authority (PPDA) and NSSF.

NSSF is literally the pot of gold at the end of the rainbow and a lot can go wrong and has gone wrong there. It boils down to the integrity and competence, or lack of thereof, of the managements.
But beyond that there are external players, often with internal agents who have conspired to make the Fund the burial ground of careers.

Byarugaba, may have come away largely unscathed during his last tenure but he can be sure the sharks are circling the water already.

It is obvious for anyone to see that managing NSSF is not a job for the faint hearted and Byarugaba – if he accepts the appointment, despite his extensive experience in the private sector will have his time consumed with issues which seem peripheral on paper but can have far reaching repercussions for him and the NSSF.

Is it unreasonable to insist that the boss of NSSF has the protection or at least the perception of protection that the leaders of other hot zone agencies have in order to do his or her work?



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