Last week National Social Security Fund (NSSF) reported despite strong head winds it would pay its members 11 percent on their savings, a bit of a let down given the previous year's 15 percent payout but stil better than anything in the market.
But what may have far reaching ramifications for the economy as a whole, is the new NSSF product Diaspora Connect which will help Ugandans abroad save with the Fund.
The fund estimates that Ugandans sent home $700m (sh2.5trillion) last year.
For now this product allows previous savers with the fund who are working abroad, to credit their accounts using their credit or debit cards.
This is important because under the proposed amendments to the NSSF law prople can voluntary sign up to NSSF -- currently you have to be an employee, and any voluntary contributions will be accessible at 45.
NSSF as an investment ticks many boxes a Ugandan in the diaspora would be looking for in order to park his or her money.
To begin with the NSSF is set up by law and whereas the savings are not explicitily guaranteed by government, savers have some recourse if things go belly up. There is better safety of capital for ones savings than with a family member who it maybe uncomfortable to pursue through the courts of law.
In addition since 2012/13 the Fund has paid members a real return -- interest higher than the rate of inflation. This means that their savings are not losing value over time.
NSSF is commited to paying two percentage points over and abovrbthe tennyear average inflation rate. The figue they were working with this year was 6.7 percent so making their target 8.7 percent.
There maybe one caveat on this depending on what the saver's future plans are. If the saver doesnt intend to return to the country but one day cash out his savings and repatriate them -- change to hard currency so he can access them abroad the exchnage losses may make this option unviable. However, if he intends to return home his money will still have retained if not grown in value.
The perennial shilling depreciation against major currencies may actually play in his favour, as over time he will be saving more shilling for the same amount of dollars sent.
NSSF is planning for a modest ten percent increase in those remittaces next year. They expect to collect sh770m. It is estmated that there are 1.5m Ugandans in the diaspora assuming half of them, 750,000 are working adults sending $100 annually the ensuing $75m would be a health addition to the money they already send home.
But that is an extremely conservative estimate given that they sent home $1.4b in 2017 or about $2000 each for those estimated workers.
Some people have worked abroad for 10-, 20-, even 50 years and have nothingnto come back to, so they are signed to living the rest of their days abroad. If they had a credible investment vehicle back home they could retire to some level of comfort back home at much lower cost of living.
On a macro level these increasing amounts could very well help the economy.
Currently 79 percent of NSSF's portfolio is invested in fixed income securities, mostly government paper. This money is used to support the budget which is biased heavily towards infratsructure development, health and education, the building blovks of serious economies.
In addition the Fund places billions of shillings with commercial banks which onlend these to the private sector stimulating economic growth.
The figure of $1.4b is understated it is believed with a lot more money comingbthrough informal means to provide substinence for people at home. While useful fornthenconsumption of family and friends it would be more useful for the economy generally if it was channeled through more formal structures as NSSF provides.
But what may have far reaching ramifications for the economy as a whole, is the new NSSF product Diaspora Connect which will help Ugandans abroad save with the Fund.
The fund estimates that Ugandans sent home $700m (sh2.5trillion) last year.
For now this product allows previous savers with the fund who are working abroad, to credit their accounts using their credit or debit cards.
This is important because under the proposed amendments to the NSSF law prople can voluntary sign up to NSSF -- currently you have to be an employee, and any voluntary contributions will be accessible at 45.
"The challenge for many Ugandans abroad is
finding credible investment vehicles to sock away their hard earned monies. Stories abound of workers abroad sending back funds to build houses or start businesses only to discover to their horror years later that their money has been swindled by their relatives or friends....
NSSF as an investment ticks many boxes a Ugandan in the diaspora would be looking for in order to park his or her money.
To begin with the NSSF is set up by law and whereas the savings are not explicitily guaranteed by government, savers have some recourse if things go belly up. There is better safety of capital for ones savings than with a family member who it maybe uncomfortable to pursue through the courts of law.
In addition since 2012/13 the Fund has paid members a real return -- interest higher than the rate of inflation. This means that their savings are not losing value over time.
NSSF is commited to paying two percentage points over and abovrbthe tennyear average inflation rate. The figue they were working with this year was 6.7 percent so making their target 8.7 percent.
There maybe one caveat on this depending on what the saver's future plans are. If the saver doesnt intend to return to the country but one day cash out his savings and repatriate them -- change to hard currency so he can access them abroad the exchnage losses may make this option unviable. However, if he intends to return home his money will still have retained if not grown in value.
The perennial shilling depreciation against major currencies may actually play in his favour, as over time he will be saving more shilling for the same amount of dollars sent.
"Looked at another those increased remittances may very well help support the shilling and minimise exchange losses as well....
NSSF is planning for a modest ten percent increase in those remittaces next year. They expect to collect sh770m. It is estmated that there are 1.5m Ugandans in the diaspora assuming half of them, 750,000 are working adults sending $100 annually the ensuing $75m would be a health addition to the money they already send home.
But that is an extremely conservative estimate given that they sent home $1.4b in 2017 or about $2000 each for those estimated workers.
Some people have worked abroad for 10-, 20-, even 50 years and have nothingnto come back to, so they are signed to living the rest of their days abroad. If they had a credible investment vehicle back home they could retire to some level of comfort back home at much lower cost of living.
On a macro level these increasing amounts could very well help the economy.
Currently 79 percent of NSSF's portfolio is invested in fixed income securities, mostly government paper. This money is used to support the budget which is biased heavily towards infratsructure development, health and education, the building blovks of serious economies.
In addition the Fund places billions of shillings with commercial banks which onlend these to the private sector stimulating economic growth.
The figure of $1.4b is understated it is believed with a lot more money comingbthrough informal means to provide substinence for people at home. While useful fornthenconsumption of family and friends it would be more useful for the economy generally if it was channeled through more formal structures as NSSF provides.
