As the lockdown has dragged on and cash become increasingly short it was inevitable that National Social Security Fund (NSSF) would come under attack.
NSSF is the single largest financial institution in the country, its muscle drawn from the savings of its two million members.
At last count the Fund has sh12trillion in assets.
According to the current law that governs NSSF, the Fund can only pass out money to its members under five circumstances, when they hit retirement age -- 55 years old, if they hit 50 and are out of work for at least a year, if they are incapacitated and can’t work any more, leave the country or join public service, which has its own pension scheme and finally if they die, god forbid, their next of keen can claim their savings.
So under the current law there is no place for NSSF to dish out money to members as a result of the current crisis.
"That is not NSSF being mean with our money, that’s the law...
In August last year when an Amendment to the law that governs NSSF was tabled, the public was more fixated on the proposal that benefits will be taxed at collection, at retirement or whenever, than at the point of contribution.
As it is now URA taxes your gross pay and then NSSF carves off its five percent, which in effect means your contribution has been taxed and hence you suffer no tax when you are collecting your savings.
In the amendment it was proposed that mid term access be allowed for members but under certain prescribed circumstances. The mid term access would be allowed to cater for medical, education, mortgage or unemployment.
"This amendment will better reflect NSSF’s role as provider of social security to its members....
Debate on this bill has been going in parliament since September.
NSSF management were among the first to present to the relevant committee and were reported as being in support of the bill and the mid-term access provision in particular.
What really got people’s knickers in a twist recently, is a leaked letter in which NSSF boss Richard Byarugaba was responding to a querry from the finance ministry about the feasibility of releasing 20 percent of member savings to help them get over this corona crisis.
The lockdown that started at the end of March restricted movement and congregation of people and has led to a collapse in economic activity. As a result jobs have been lost and it is expected there will be a lot of business collapse.
So the argument for relief for your everyday man is impossible to deny.
In his letter to the ministry Byarugaba pointed out that this release would cause an out flow of at least sh2.6trillion and an additional sh800b, which are the budgtted payouts to retirees and other claimants.
He argued that this would force NSSF to liquidate its assets at forced sale value, disrupt and even jeopardise the business irreparably.
"NSSF has assets of just under sh12trillion, but, this is not cash stashed away in the basement of Workers’ House...
Most of this money is held in treasury bills and bonds, company shares in and outside Uganda and real estate. To cash these out will take time and lead to a loss to the Fund and members.
Byarugaba also argued that because they are biggest holders of government paper, issued to stabilise prices, the shilling and support the budget, the ripple effect of such an action may have a detrimental effect on the wider economy.
In response to this analysis several people have come to refute the Fund’s advice to the minister.
They argue among other things, that there are instruments available that can spare the Fund losses, that the Fund is abdicating its role to provide its members’ social security and that the Fund should stop investing abroad because it is developing other countries and not Uganda.
"There really is no contradiction between NSSF’s support for mid-term access as proposed in the amendment bill and it’s technical opposition to release within the next few weeks of a third of its assets to consume....
The key issue really is what can NSSF do within the law that governs it. Byarugaba may wish this, that or the other but is it legal or put another way what can he get away with, without doing a illegality, to help his members?
The finance minister has the right to cause a statutory instrument to effect some changes in the way NSSF works, but for him to make such a far reaching change he would need to consult widely. This is not Idi Amin’s1970s’ Uganda.
The people who feel so strongly about inserting such a clause can have their MPs make the proposals in parliament. Thankfully government is in the middle of amending the NSSF law.
Byarugaba’s experience has been in banking and it probably turns his stomach to hear the clamour to use long term savings to cover short term needs. That is the surest way to poverty.
No doubt that in coming weeks and months we are going to experience financial stress as only the generation that was here pre-1986 can relate to. Those who can appreciate this are less than 20% of the population.
But raiding the Fund is not the way to resolve the issue. What happens when they release the monies and they run out, will we blackmail NSSF to release more?
