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?
