Yesterday Finance Minister Maria Kiwanuka an 11.5% interest
for savers at National Social Security Fund (NSSF) but observers could not help
but wonder what could have been had the fund not been hobbled by bureaucracy
and red tape.
In total the Fund will payout sh366b in interest.This is the
highest rate of the return members have enjoyed since the 14% they earned in
2007. Last year the Fund paid its members 11.23%
In addition the fund grew to sh4.38 trillion from sh3.5
trillion in June 2013.
But more importantly the interest of member savings have
kept ahead of the average inflation over the last ten years of about 9%.
"On the surface of it this laudable performance but on closer scrutiny the Fund is probably underperforming, given the privileged position it enjoys...
Last year NSSF’s investments were split between fixed income
assets (bank accounts and government securities), Equity and real estate. A
conservative enough mix the problem is in the mix of these various assets.
Last year the fund’s portfolio was biased spectacularly
towards fixed income assets, which accounted for at eight in every ten
shillings the Fund held. The rest of the monies were parcelled out to equities
and real estate on a ratio of about two-to-one.
Industry experts suggest that if the portfolio was
rebalanced so that fixed income accounted for half the portfolio and equities
and real estate took up 35 and 15 percent respectively NSSF would be able to
pay out at least 18%.
“Fixed income is safe but the returns are not optimum. NSSF
has an extremely conservative asset mix. If they shifted the balance, a few
more percentage points could be managed without risking members money
unnecessarily,” a senior industry official told Business Vision.
"Two of the last three managements at NSSF have made it their goal to rebalance the portfolio but have come up against too much bureaucracy and political sniping...
The development of Temangalo and Pension Towers have been
frozen by invetsigations. Construction on Pension Towers started around the
same time as Centenary Bank’s Mapeera House and before dfcu’s spanking new
headquarters in Nakasero, both of which are now occupied while Pension towers
is barely off the foundation.
Currently parliament is probing the acquisition of power
distributor Umeme’s shares, which NSSF holds about 15% stake. Allegations of
insider trading and connivance by the board and management have been bandied
around on the basis of whistleblower allegations.
A planned acquisition of a significant interest in a
Tanzanian firm fell through a few years ago after NSSF failed to meet the
deadline due to delays in regulatory approvals. The company has since seen its
shares appreciate significantly and NSSF has missed billions of shillings in
dividend payouts.
In addition there are requirements that the Fund’s
investments be vetted by the Public Procurement and Disposal of Assets
Authority (PPDA), another layer of scrutiny NSSF has argued is unnecessary in
the case of potential investments. PPDA should be overseeing consumption items.
Former NSSF boss Richard Byarugaba appearing before
parliament recently reported that in addition to the red tape, competing
interests are always looking to frustrate deals if they fail to get contracted.
Nevertheless the Fund has continued to execute its other
mandates.
Income is up 14.1% to sh479b from sh420b last year. Member
contributions had risen to sh638b from sh558b last year and compliance stood at
around 79%. The cost income ratio – a measure of management’s efficiency stands
at 15% lower than the banking industry’s average figure of 55%.
Also since 2010
the Fund has managed to bring down the time it takes to process cl aims to
about five days from 1005 days at the beginning of the decade.
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