This week National Social Security Fund (NSSF) reported on its half year performance for the period ending December 2022, which suggested the operations of the fund remain solid despite the distraction of the leadership stalemate.
The renewal of former CEO Richard Byarugaba’s contract has
been held up by gender and labour minister Betty Amongi pending an
investigation by the Inspector General of Government (IGG) into allegations
brought to light by the minister.
The developments have kicked up a storm, making some worry
that the Fund’s operations may be affected.
On the contrary acting managing director Patrick Ayota reported that contributions were up 22 percent to sh786b from sh643b over the same period in 2022. In addition, income was up to sh1.054trillion from sh900b during the same period...
Payouts to members nearly doubled to sh712b from sh364b
during the same period in 2021 driven mainly by the additional sh185b paid out
to those who qualified for mid-term access.
As a result, the Fund is set to grow to meet the target of just
under sh19trillion by the end of June, which is the end of NSSF’s year, from
sh17.9trillion at the end of December. In addition while new employers
subscribing to the Fund are set to double to 4,000 from 2078, new employees
saving with the fund are expected to more than double to 150,000 from the
current 67,277 brought onto to the books in the last six months of 2022.
The true test of whether people were ignoring or taking the
controversy seriously would be the rate at which voluntary members would
signing up. Unfortunately, the gender ministry has not yet operationalised the
voluntary membership clause since the law was accented to by President Yoweri
Museveni in January last year, so its hard to tell whether the controversy is
keeping members away or not.
NSSF is no stranger to controversy. Its last four managing directors left the
fund under a cloud – to put it mildly. None of them lasted as long as Byarugaba
or controlled even a tenth of the resources that he has.
"When Byarugaba joined the fund in 2010 there were about sh2.5trillion in assets under management. The seven-fold increase in assets did not come by mistake...
This has been made possible by an emphasis on compliance by
employers – contributions are up to more than a trillion shillings a year
compared to sh472b in 2012; a conservative asset portfolio – about eight in
every ten shillings in fixed income with double digit yields and a greater
efficiency in administration -- cost to asset ratio of just over one percent
compared to the global average 2.2 percent for a fund of this size.
NSSF has survived previous storms because its members are
mandatory contributors by law. Workers contribute five percent of their gross
pay and their employers top it up with 10 percent.
At the bare minimum members were captive, unlike banks where
if there had been such controversy around a bank, savers would beat a hasty
path for the door.
In addition to this NSSF now has more than a decade of
stellar performance – has managed double digit interest to members in all but
two years, which allows its members to give it the benefit of doubt.
"The figures suggest that for the time being the controversy around the leadership of NSSF is not affecting operations, not only does NSSF continue to collect contributions and pay out benefits, its does so at a higher level than ever before...
It may be too soon to tell, seeing that the controversies
burst into the public space in December, but it must be some consolation that
NSSF has not collapsed like a pack of cards at the first sign of trouble.
In the greater scheme of things this controversy is a bleep
and probably a useful test of the robustness of NSSF’s systems. The challenge
for NSSF’s management is not to let this learning opportunity go to waste. Larger
controversies are going to come in the future – sh17trillion attracts a lot of
flies, and they should not be found wanting in the same way in the future.
That being said resolving the leadership question urgently,
cannot be overstated and even more importantly assuring the membership that
grubby fingered officials will not have easy access to their funds is critical.
While operations seem to going on unhampered, leadership
ensures the strategy continues to be executed and the company culture allows
that.
