THE ENVIRONMENT NSSF NEEDS, TO BE EFFECTIVE

Last week Richard Byarugaba was offered a renewal of his tenure as boss of the National Social Security Fund (NSSF), almost a year after his previous contract ended.

It was also the week that NSSF had its second annual members meeting in which it was revealed that the Fund’s asset base had grown by sh4.4 trillion($1.7b), making it bigger than its Kenyan and Tanzanian counterparts which stood at $1.6b and $1.3b respectively.

Unfortunately for Byaugaba if he accepts the job he will find himself faced with the same problems he left behind a year ago, the main one of course is the imbalance in the fund’s portfolio.

The Fund’s portfolio may be described as super conservative with eight in every ten shillings placed in the lower yielding fixed income assets – government paper, corporate bonds and fixed deposits, with the rest distributed between equities and real estate on a ratio of two-to-one.

Since we are dealing with people’s long term savings it makes sense to adopt a conservative stance, but industry experts argue that by bringing the fixed income segment down to half the portfolio while leaving the ratios for equities and real estate the same,  would add a few more percentage points on the 11.5% interest rate they paid us this year.

But for Byarugaba to shift this balance he needs time and a conducive environment, where he is not dogged by red tape, sniping and rear guard action.

Time, not only because it will take time to redress the portfolio’s imbalance but also because he is dealing with long term savings and while it might be good for the cameras to highlight annual improvements, it’s the long term results that will count.

If the boss of NSSF has a three-year contract (which we now know is not renewable even if you do a good job) then real estate projects or even equity investments will not have matured or begun to mature during such a duration.

You could very well have a situation where a new boss inherits the success or mess of his predecessor, restructure the Fund and his successor then benefits from his sweat.

A longer contract than three years would not only be ideal but logical.

But related to that you need a better quality board.

The Uganda Retirement Benefits Regulatory Authority (URBRA) has already indicated that half the ten member board do not live up to the requirements of the NSSF board, those should be ejected and replaced with more deserving members.

"Just because NSSF has a lot of money does not mean it cannot fail. Part of that failure would be as a result of a board, which even if it is not sleeping on the job, just doesn’t – as it is constituted now, have the requisite skills or sense of urgency to revamp the Fund...

In addition the proposed unbundling of the NSSF in response to the impending liberalisation of the sector should be shelved. In the new environment, it has been proposed, NSSF would only collect money and hand it over to investment agents to do things it is already doing now, albeit not very well.

These investment managers would be charging the Fund just to hold on to their money, that is, before they take a share of any potential profits that may come from their work. Additional costs the Fund does not need.

NSSF should collect and invest its own money and if and when they deem it necessary, parcel out money to selected managers to invest on their behalf. An in house investment department is already being built up and hiring the needed skills shouldn’t be a problem.

And finally we need to resolve the distinction between procurements and investments and put a halt to the maddening running battles between the Public Procurement & Disposal of Public Assets Authority (PPDA) and NSSF.

NSSF is literally the pot of gold at the end of the rainbow and a lot can go wrong and has gone wrong there. It boils down to the integrity and competence, or lack of thereof, of the managements.

But beyond that there are external players, often with internal agents who have conspired to make the Fund the burial ground of careers.

Byarugaba, may have come away largely unscathed during his last tenure but he can be sure the sharks are circling the water already.

It is obvious for anyone to see that managing NSSF is not a job for the faint hearted and Byarugaba – if he accepts the appointment, despite his extensive experience in the private sector will have his time consumed with issues which seem peripheral on paper but can have far reaching repercussions for him and the NSSF.

Is it unreasonable to insist that the boss of NSSF has the protection or at least the perception of protection that the leaders of other hot zone agencies have in order to do his or her work?

WHO IS A MISS UGANDA?

I had to look again. Last week Leah Kalanguka beat off 19 other contests to emerge this year’s Miss Uganda.

From the pictures I saw a tall lady, a dark lady, a winning smile. In my book she is not a spectacular beauty, beautiful yes, but she will not launch ships.

But no sooner had the picture made its way onto social media than the chattering masses went to work. If tweets were knives poor Leah would be dead and buried many times over.

The criticism was all over the place but you know what they say about criticism, criticism often says more about the critic than the object of their criticism.

Going by our criticism of our new Miss Uganda its clear to me that we have been fed a standard of beauty that is not our making and that does not reflect our reality.

To begin with beauty contests are a male construct, made solely for the enjoyment of men. Success or victory is based on the most transient of qualities, physical beauty, which fades with age despite the best efforts of the cosmetic industry, another male construct. The beauty of this (forgive the pun) is we can then have new contestants year after year.

At the much denigrated Mchaka Mchaka schools, instructors insisted that women cut their hair short. There were practical reasons for this – there is no fun crawling in the mud with your braids 

impending progress, there were hygiene issues—who knows what mites had made a home in the beds fashioned of mud that could lodge in the hair and I wouldn’t put it past the instructors’ sadistic streaks to see the ladies squirm as their locks were hacked off.

Beyond that however I learnt the origins or rationale behind cosmetics. Lipstick was created to enhance the lips, high heels to accentuate the derrière of the wearer and rouge to give the impression of good health by adding colour to the cheeks of paler faces.

On average our ladies do not need fuller lips, bigger behinds or darker faces, but then again I could be wrong.

In looking over the criticism of our Miss Uganda it was clear that we, both male and female, have an increasingly western standard of what constitutes beauty. And you cannot blame us.

Every year billions of dollars are spent on promoting an image of women who are tall, slender and are of lighter complexion. Every year we are assaulted by a barrage of images aimed at triggering primordial instincts in us, selling these images as the standard of beauty that women have to match up to and men have to hanker after. It’s been wildly successful. It’s estimated that the beauty economy will rope more than $200b or twice the size of the East African economy by 2017.

And really no one is innocent. Even the most sensible of us are not averse to laying on the lipstick with a ladle or risking whiplash at the lady walking past whose already big behind has been given more prominence by her heels.

"It is not a crime to be held captive by some clever marketing.  It might make you look a bit gullible and even foolish, but it’s not a crime...

So should we ban beauty contests as a cultural corruption, part of a ploy to enslave our women by the multi-billion dollar cosmetic industry? A devious plan to fire up our men’s baser instincts, trick them into thinking with the wrong head?

I imagine the male lobby that promotes these shows, getting off on their annual doze of leering at nubile young things would not let such an idea see the light of day.

I guess to everyone his own.

There is an entertainment value to these meat markets, a chance to fill more seats, sell more beer and generally cause some excitement. They shouldn’t be dismissed on moral grounds, in fact I think our men should be exposed to half dressed women more often so that they can be desensitised to the whole raft of emotions that erupt ( forgive the pun) whenever a woman showing a hint of flesh passes by.

To be fair to Kalanguka’s critics, in the Miss World beauty pageant she will be judged on a western generated standard and even her degree in computer engineering will count for nothing. Her genetic makeup alone disqualifies her from a podium finish.

But then again that just might be my brainwashed mind speaking, who knows!

WOMEN STEPPING OUT OF THE SHADOWS

This week there was a passing of the baton at Uganda Revenue Authority (URA).

After ten years at the helm of the tax collecting body Allen Kagina handed over to Doris Akol, the new commissioner general who was previously the commissioner legal affairs and board matters.

It was a memorable occasion on several fronts.

It was the first time a Uganda Revenue Authority (URA) commissioner general stepped down of his or her own free will. And it was the first time a Ugandan woman had handed over to another Ugandan woman at such a high profile job (Briton Anne Brit Aslund handed over to Allen Kagina in 2004).

Akol’s elevation is the latest exclamation mark in the upward movement of women to take positions of authority that were previously assumed to be the preserve of men. Of course URA is unique, of its five commissioner generals three have been women.

A movement, which started with the first parents to send their daughters to school to much derision in the village, which gained further impetus with the importance of women in the NRA’s bush war, the massive enrolment of girls into primary and secondary school,  seems to be maturing with society barely batting an eye lid at Akol’s appointment.

Of course it helped that she succeeds another woman, Kagina for who there were doubts when she assumed the reins a decade ago, but who not only exceeded society’s low expectations but raised the bar for how public institutions and private companies should be run.

"If Akol just coasts a long and leaves the Authority no worse than she found it, she will have achieved a lot. It is scary to think though, what the authority would look like if she took it an even higher level to the extent that her predecessor raised it from its previous levels!

An interesting phenomenon is emerging...

The lady executive, confident in her abilities yet humble enough to keep learning is the mirror opposite of her gender opposite who is often full of bombast, pomp and often long on promise and short on performance.

The lady executive, while embracing her leadership role is more likely to share the limelight with her team than hog all the glory.

In many ways the lady executive encapsulates the say, “Those who tread softly travel far”.

Sadly we see many female executives forgetting the intuitive tendency for the soft touch for some mistaken urge to be like the boys, turning more abrasive and domineering and often than not backfiring. – as was expected.

Woodrow Wilson, the 28^th president of the US once said,

“If you come at me with your fists doubled. I think I can promise you that mine will double as fast as yours; but if you come to me and say, 'Let us sit down and take counsel together, and, if we differ from one another, understand why it is that we differ from one another, just what the points at issue are,' we will presently find that we are not so far apart after all, that the points on which we differ are few and the points on which we agree are many, and that if we only have the patience and the candor and the desire to get together, we will get together.”

And the ladies seem to be able to step out of their egos long enough to make things work and work sustainably.

It does not make sense to marginalise half your population, in a poor country like our own we need all hands on deck.  Educate them, train them, give them a chance and as we are finding out in Uganda they will explode all those stereotypes that have dogged our patrilineal societies.

Former prime minister Margaret Thatcher, not exactly the poster girl of women’s emancipation, saw little need to uplift other women arguing that it would not help the cause, they needed to do it without any favours to be taken seriously.

She had a point.

UGANDA CLAYS: HOW DID IT COME TO THIS?

An otherwise good investment executed poorly has led to the imminent takeover of tile maker Uganda Clays by the National Social Security Fund (NSSF), inside sources have told the Business Vision.

In a bid to meet growing demand, Uganda Clays Ltd raised money from the public and banks to construct their $15m (sh39b) Kamonkoli plant in eastern Uganda.

“At the time UCL had more than two thirds of the market share but was not effectively meeting demand, so building another plant made sense. It was a good idea,” said a source intimately familiar with the Kajansi based company’s operations.

The choice was between beefing up the Kajansi operation or looking elsewhere. Given that Kajansi’s clay reserves were only good for another 20 years it made sense to find another site. Kamonkoli with its estimated 100 years of clay reserves seemed a promising prospect.

But UCL’s management at the time were clearly not up to the task of making this new investment work.

“The investment was clearly not thought through very well,” the Business Vision’s source said. “To begin with the market research was bad. The anticipate demand from eastern and northern Uganda that was supposed to anchor the investment did not materialise. When they tried to export to Kenya they found the competition was selling at a quarter the of UCL’s price.”

As if that was not enough UCL had little room for manoeuver as the use of heavy fuel oil to fire up the kiln in Kamonkoli was very costly. But even more importantly the clay at Kamonkoli was not as good as that at Kajansi requiring the use of an additive, which meant additional costs.

And that was only the operating costs.

Besides raising about sh10b from its shareholders in a rights issue in 2007, UCL also borrowed from the banks.  Unfortunately instead of getting long term financing they settled for the pricier, short term loans.

This meant that their debt repayments accounted for an average of sh4b a year since 2009, this meant that in four of the five years these costs accounted for more than four in every ten shillings of gross profit, which is was historically high for the 60 year old company. In 2008 the company reported debt repayment costs of sh97m or under two percent of gross profit.

It did not help that revenues did not jump to match the spike in costs.

But one more eventuality must have made the company wonder whether the project was not cursed from the start.

In December 2007 postelection violence in Kenya shut down the route to Mombasa for weeks. This was a problem because the Kamonkoli plant was being imported through Kenya, construction and eventual commissioning of the plant was therefore held up for months, with the attendant cost implications.

"The coincidence of calamities may have accounted for the then managing director John Wafula, who stepped aside at the end of 2010 and his successor  Charles Rubaijaniza, who resigned barely a year later...

In 2010 NSSF loaned the beleaguered company an unsecured loan of sh11.05b with a tenure of 10 years and a two year grace period. The interest on this loan was 15% per year. The company used the money to pay off their creditors, buy spares for the Kajjansi and Kamonkoli plants.

“But they were so focused on restructuring their debt that they forgot they would need working capital. As a result they could not meet their obligations to NSSF and hence the situation UCL is in now,” our source said.

So earlier this month it was announced at the UCL AGM that NSSF was converting the loan to shares raising its interest in the company to 66% from 32.5% previously, as a result they would double the number of chairs the hold on the board to six out of the ten.

“We know that things have been on a decline in the last couple of years, but as major shareholders, we believe in the long term sustainability of the company. We may have to reengineer the way the business operates,” said NSSF acting managing director Geraldine Ssali during the USCL AGM.

“If we pull out, the company will close.”

Ssali suggested that radical changes like moving the Uganda Clays Kamonkoli branch in Mbale to Kampala, the use of managerial contracts and a keen study into the methods the company uses to fire its clay based products may be necessary.

With the hope that the internal dynamics may have been brought under control Uganda’s oldest ceramic tile manufacturer will still have to grapple with totally different market environment, where its market share has been whittled away by private players and changing roofing demands.

“Uganda Clays is still a the market leader in the clay products segment, easily 80% of that market. The problem is that segment is dwindling. There are many more options now for roofing alone than there were say 10 years ago, so its share of the universal roofing’s market is very much smaller. They don’t dominate the sector,” an industry source said.

The new equity composition of the company will see the other shareholders interest in the company halved.

“Our interest shall be diluted but the debt shall go. We have requested NSSF to get better quality board members otherwise they will have more power to do what they have been doing, which is nothing,” said Andrew Muhimbise, general manager of Rats Network Investment Group.

The company, which was the first to have listed on the Uganda Securities Exchange (USE) in 2000 has had a relatively inactive counter with most of its shares held as investments by local and regional institutions.

It was listed at sh4,000 share which price rose to sh11,000 before a 1-for-100 share  split saw its price coming down to sh113 and adding a bit more action on the counter. At the close of business yesterday a share of the company was trading at sh20.

The moral of the story is,

“Despite being a monopoly, complacency can run a business into the ground,” said Ken Kitariko, the CEO of investment bank African Alliance.