THE CASE FOR AN AUTONOMOUS NSSF

Last week National Social Security Fund (NSSF) released it financial results for 2022/23 which at the bare minimum showed the institution had shrugged off the political attacks on its management earlier this year.

Realised income was up 24 percent to sh2.20trilion from sh1.78trillion in the previous year. Last year income was depressed by the introduction of the mid-term access that led to a slide in revenue from the previous year’s sh1.85trillion.

The midterm access continued to drive up benefit payouts but despite this the Fund broke the sh2trillion mark in revenues for the first time in its history. Benefits paid out rose marginally to sh1.20trillion from sh1.19trillion in 2021/22.

"Member contributions rose 15 percent the fastest in the last five years, to sh1.72trillion from last year’s sh1.49, a function of improved compliance after the Covid-19 lockdown and new contributors under the new voluntary scheme, which while the law has not been operationalised has not stopped existing members from contributing voluntarily beyond the statutory requirements....

All this against the backdrop of an increase in asset under management to sh18.56trillion giving management confidence that next year, a year ahead of target, the Fund will meet its target of sh20trillion in assets.

The change in the law which was passed in 2021 that widened the scope of contributors to all employers regardless of whether they had less than five employees and the voluntary contributions from anyone wanting to save with the Fund, may have come just in time.

The rate of growth in the assets under management has slowed down, falling to below double digits growth for the first time since 2018/19, suggesting maturity may have set in with the old model and we were due for a revamp.

On the other hand drops in the three regional equity markets it is involved in, was a major contributor to the slowing down in their portfolio growth.

With the new law NSSF management have set themselves the ambitious target of almost tripling their asset base between 2025 and 2035 to sh50trillion.

"The long and short of it is that NSSF continues to perform and the entrance of new members, previously unserved – the fund wants to cover half of Uganda’s workforce by 2035, may ensure it maintains its winning ways...

But as the fund becomes bigger and critical to the economy, where it currently controls more than 90 percent of long term savings, the issue of political interference needs to be addressed.

Its centrality to the economy like the Bank of Uganda, it should be insulated from political interference even if government continues to supervise.

The temptation for politicians to dip their fingers in the till at best or finance whimsical projects at worst, is a very real one and our politicians need to be protected from themselves.

It is a human condition that when the money starts rolling in, we get all sorts of ideas on how to spend the money, especially when the source of the money – the regular member contributions seem limitless.

NSSF pledged more than a decade ago to pay members interest that is two percentage points more than the 10-year moving average inflation. This now stands at under five percent.

"Maybe its time to revise this, raise the bar, so the NSSF management can be forced to exercise their brains a little more to optimize asset allocation and maintain cost discipline. Political interference can put paid to such efforts...

In 2011 the Bank of Uganda noticed that money in circulation was growing at unsustainable levels. In February they started mopping up excess liquidity, which lead to increases in lending rates and much gnashing of teeth in the business community.

The politicians started jumping up and down. Baying for the blood of then governor Emmanuel Tumusiime-Mutebile’s head. They even hauled him before parliament where Mutebile, who did not suffer fools gladly, informed them he was there as a courtesy but nothing they could say or do would change the central bank’s course on monetary policy.

Despite the central bank’s efforts inflation that year peaked at 30 percent in October, the highest it had been in 19 years. One shudders to think what would happen if Mutebile had caved in to political pressure how high inflation would have reached.

NSSF’s size, its importance to the economy and the specialty required to manage money are justification enough to make NSSF a more autonomous agency, like BOU.