The problem of Africa is poverty. We are poor because we are incapable, unwilling or unable to aggregate our resources be it capital, land, human resource or markets.
We are reminded of what we are potentially capable of by NSSF.
Today the Fund has its annual members’ meeting, which will be held online.
Everybody is waiting with bated breath for what the Fund will pay its members for their savings. Last year NSSF shelled out 11 percent interest but Fund boss Richard Byarugaba said for the firs time in a decade we will not receive a double digit interest rate.
While the Fund earned more this year than last, the fall in the value of its equity positions, triggered by the faltering economy due to the Covid – 19 pandemic, means the Fund may only just meet its pledge to pay at least two percentage points above the 10 average inflation rate. The ten year average inflation rate is 6.2%.
"Given the regularity with which the Fund has surpassed this target in past years maybe we need to raise the bar a bit more...but this is a discussion for another day.
But back to the issue of solving the poverty issue of our times and how NSSF plays a role in it.
Ten years ago NSSF had sh1.6trillion under management but has now grown eightfold to sh13trillion. That is roughly a 23 percent annual growth rate .
Part of that growth is the increased contributions of the Fund’s members -- before the lockdown we were averaging about shs120b in contributions monthly and also the increasing efficiency of its operations.
But the bigger part of the growth is the compounding effect of the returns on its portfolio.
There is every reason why the Fund should continue to grow at that rate into the future or at least the next ten years.
The new NSSF law winding itself through parliament will among other things open up to all workers, regardless of whether their employer has more than five employees or not. Secondly voluntary savers – mostly from the informal sector will be allowed in. Already voluntary savings from existing members are topping sh5b a month.
Assuming they maintain the growth rate, because of these new entrants and barring any accidents to the Fund – Its been a while since they had a scandal, we can expect the Fund’s size to jump beyond the sh100trillion mark in 2030.
An amazing achievement by any standards. Which brings us nicely around to how NSSF can be a force for fighting poverty with its growing financial muscle.
"You do not fight poverty by dishing out money. Free money is nice to receive but tends to leave you deeper in the hole you were in....
You fight poverty by creating an enabling environment for people to carry out economic activity.
Already NSSF contributes massively to anti-inflationary activities carried out by the central bank. It is the biggest single holder of government paper of any individual. It holds 40 percent of government bonds.
"Some people may huff at this but without NSSF’s ability to mobilise funds, keeping inflation under double digits like we have done for the last 28 years – except for the bleep in 2011, would have been a harder feat to accomplish....
Most of our money we do not even keep in banks and therefore hard to aggregate.
We take it for granted because for most of us we have never seen high inflation that was a reality before 1990.
NSSF’s power to influence the rate of price increases is an underrated part of its contribution to the economy and the alleviation of poverty.
On a more basic level they are lining up to overtake National Housing Construction Corporation (NHCC) as the biggest real estate developer in the country.
Work is already underway on the Lubowa project’s 2,740 unit and on Thursday Byarugaba said a contractor is already on site in Temangalo to kick start work on the the first phase – 600 units, of the 5000 unit project.
The amendment to the NSSF law will also allow for a creation of housing, medical and education products. Which makes sense because if they are going to be selling hundreds of units in coming years who better to take advantage of this than its own savers.
The education product will be designed to help members upgrade their skills and hopefully become more productive. Increasing productivity is a way to raise incomes.
This is not a story about NSSF. This is a story about what happens when we aggregate our resources. If in 1985, at its inception you had said NSSF would be the biggest financial institution three decades down the road you would have been laughed out of this town....
This is a story too about how we underestimate the power of our small sums and what they can achieve and what they promise when they are brought together.
The biggest pension fund in the world is Japan’s Government Pension Investment Fund (GPIF), which has $1.42 trillion under management.
To put this in perspective this is almost 30 percent of Japan’s GDP. Government pensions in Japan.
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