NSSF PROVES IT DOES NOT TAKE MONEY TO MAKE MONEY

Last week National Social Security Fund (NSSF) released their half-year results in which they showed a 26.5% jump in profits.

These are figures their counterparts in the financial industry will be envious of. The expectation is that bad loans affected the banking industry last year and that the results will not be as rosy as they usually are. We will know by the end of April.

"But on closer scrutiny one can see that NSSF is not doing a good job, a function of a small economy, political interference and inadequate managerial capacity...

NSSF collects member savings over the length of their working lives with the promise that they will provide them a soft landing in the evening of their days.

They seek to fulfill this promise by investing the monies in a way that they grow over time. They have to display enough investment skill that the funds weather the occasional losses, ever present inflation and the cost of managing the money.

So if for instance I deposit sh100,000 with NSSF at the beginning of my career, I would expect that this has grown faster than inflation during the say 20 years of my career, at least. For ease of calculation assume an average annual inflation of seven percent that means prices will have quadrupled during my career and my initial sh100,000 would have lost 75 % of its value.

The government's has a five percent inflation target, we are only just recovering from double digit inflation. The drought might however see us struggling to keep it in single digits for the rest of the year.

In addition, any long term investor knows they will make some bad bets during their career not to mention some years you will not manage a better than inflation return on your investments. And of course there are costs involved in managing this money -- salaries, rent, bank charges among others.

Given these parameters one would expect that NSSF is making more than double digit returns on their asset base year-to-year to cover inflation costs at least. But getting a return on investment is not entirely in the management's hands. What is more in their control is the costs of operation, these have to be kept to a bare minimum.

Given the information in the press, NSSF falls short on giving us the annual returns required to make them a worthwhile investment proposition. Even if one adds depreciation costs--the annual amount fixed assets like buildings lose value for accounting purposes, the return on invested capital barely makes five percent.

They seem to be managing costs better, with a two percentage point drop in the ratio of cost to income compared to the previous year.

Then clearly there are not investing our savings for the most optimal return.

When one looks at what they are invested in one begins to see the problem. 

Eight in every ten shillings the fund has at its disposal is in fixed income assets -- fixed deposits, treasury bills & bonds. This is not so bad given that yields on bills and bonds with a maturity of more than ten percent, but these are the safest investments on offer meaning there are other investments that promise a higher return.

Of course these are workers' savings and managers can not be trigger happy with them.

The unbalanced portfolio is a function of a lack of investment opportunities and managers who were content to pile money into government debt, for fear of getting unwanted attention by sticking their head out on more lucrative but riskier investments.

To cut a long story short for the workers to get a better deal the Fund's portfolio has to be rebalanced with more funds going to real estate and shares, the last two management's had recognized this and were making efforts to redress this imbalance.

But it's like turning a huge ship around, it takes time. For instance if we were to pare the fixed income assets to half of the total portfolio you would have to look for investments equivalent to 20 Workers' Houses.

The challenge is that NSSF has outgrown this economy. It has to either look abroad for investments, which while safe may not meet the criteria of double digit returns, or create its own investments here. That too is tricky because the market for commercial property is fast getting saturated and the returns on residential accommodation are thin, their immediate options.

As workers we shouldn't compromise on how much we demand for NSSF holding our money, what it means is that the managers at the Fund must justify the top salaries we are paying them, with real returns for us.

LUPITA NYONG’O: IT WASN’T ONLY ABOUT THE OSCAR

Last week Kenyan actress Lupita Nyong’o won the Oscar for best supporting actress for her portrayal of slave girl, Patsey in the film Twelve years a slave.

The main plot revolved around the kidnap of Solomon Northup, and his travails as a slave for 12 years, hence the title, but arguably the film would have been nothing without the harrowing tragedy that was Patsey’s life.

I have a theory about black Oscar winners.

Whenever I hear a black actor has been nominated for the Oscar, I am always eager to see what role he or she portrays. Invariably it is a role that perpetuates a stereotype as, flawed entertainers, obsequious servants, sex objects, as a foil for a main white character or depraved gangsters.

A casual perusal down the list of black winners will more than bear that out. This not to take away from the acting skills of Sydney Poitier, Morgan Freeman, Denzel Washington or Forest Whitaker.

It seems to me that the Academy of Motion Picture Arts & Sciences, the institution that awards the Oscars, would experience some cognitive dissonance in trying to award a black actor who portrays a heroic soldier or devious Wall Street broker or a lovable idiot savant.  I am sure back actors have played these roles before and carried them with distinction.

I confess an ignorance of the processes employed by The Academy in nominating its potential weinners, but we judge them by their fruits. It’s a pattern I will be glad to be wrong about.

Which brings us to Lupita’s performance. In the 134 minutes of the film I will be surprised if her parts put end-to-end last 20 minutes – that’s why her Oscar was for supporting actress.

Two things stood out for me.

Patsey called for a character out of Joseph Conrad’s Heart of Darkness, a primitive, gullible, hopeless figure who it is hard to like or pity. That Lupita, a worldly lady, born abroad of middle class parents – she did not fall of the turnip truck by any means, found it in herself to portray this tragic heroine was a feat fit for high praise.

Her portrayal of this African caricature was so compelling it left me thinking the producers of the film should have turned the script around to be about her.

But it also left me wondering – with my theory as a backdrop, whether the esteemed judges of the 

Academy did not see her performance and think, “Ya! That’s what we can relate to as what blacks are about!”

Related to that I cannot remember any other mainstream production in which a character was subjected to the depraved brutality as Lupita’s character endured in one five-minute clip of vicious lashing. Jesus’ flogging in The Passion of the Christ may have come close.

Secondly, while the film was sprinkled with some real psychopathic characters, surreal episodes all through the film reminded you that this was a way of life, supported by a system of administration, authored and supported by some of the fathers of modern democracy.

It was also a scary reminder that a system can be engineered for one purpose – cheap labour in this case and justified to and gain acceptance in a wider society a totally different way: blacks needed civilising and this was the way to do it.

There were a few surreal scenes with one slave master leading his household --- family and slaves, in church service and you had to wonder.

It is a watch-through-your-fingers film, a thought provoking film and when it is all over you slink out of the theatre as if you had witnessed or been party to a crime whose story you will not repeat elsewhere.

The hype surrounding the film may have detracted from its impact but it is a moving snapshot of one of the darkest periods in human history that some would understandably not want to rehash.

This a game changer for Lupita’s budding career, but it is hard to see how it opens the doors for other African aspirants to Hollywood. There are some subjects that just don’t play out well for the money making moguls of Hollywood or for money spending movie goers. 

In the 20 weeks since its release “12 years a slave” has brought in $50m. Gravity an action/adventure film that was released around the same time and in fewer theatres had, by the time of writing, made $270m.

Congratulations again to Lupita, whose latest movie “Non-Stop” opened last week and has already earned $28m, her talent is undeniable, now she can get on with the business of making money.

THE NRM COMES TO A CROSSROADS

This week the happenings within the NRM have dominated our collective imagination allowing us little space to ruminate over Lupita Nyong’o’s Oscar or Vladmir Putin’s brinkmanship in the Ukraine or even the confirmation of news that Manchester United defender and Captain Nemanja Vidic was to leave at the end of this season.

To us onlookers the NRM MPs caucus meeting in Entebbe over two days, looked like an exercise to dot the “i”s and cross the “t”s from the earlier retreat in Kyankwanzi.

It was that and more, as it turned out.

Clearly

enough MPs within the party are convinced that Prime Minister Amama Mbabazi is bent on making a run for the presidency despite his continued protestations to the contrary and his appendage of signature to resolution to have President Yoweri Museveni as unopposed flag bearer for the party in 2016....

Beyond the drama the latest goings-on are about the succession question in the NRM and subsequently Uganda.

With Museveni facing a constitutional last term – since there is a cap on the age beyond which no one can run for president of 75 years, anyone with half an ambition is positioning himself for the eventuality of a Museveni exit.

Love them or hate them but the NRM is the only nationally represented political organisation in the country. It is no surprise that with a critical election around the corner that the secretary general position will come under intense scrutiny, that office in any party holds the key to the kingdom.

In addition, as is becoming the case in every election the intensity of contestation for party positions or nominations as the party’s flag bearer, is increasing.

These tensions are a byproduct of the NRM’s longevity at the top of Uganda’s  politics. With every five year political cycle new entrants into politics start jostling for space with more established politicians, incumbents or otherwise. The NRM’s attraction is that it is a proven winner and everyone loves a winner. The tensions in other parties in relative terms are much more manageable.

Whereas

we would love party reinventions to be as sanitised as the word, often times because of the high political and personal stakes involved, orderly disagreements can quickly descend into bar room brawls with allegiances shifting very quickly....

The stakes are particularly high because this internal contestation for the soul of the party has forced even the most determined fence-seaters to show their hand. One can expect when things calm down there will be bodies strewn all around and many because their commitment wasn’t as definitive one way or the other.

In addition one sees a youthful tendency within the party straining forward to take positions of responsibility. But as they say many are called and few are chosen, the loudest voices now will not necessarily be the biggest winners when the dust settles.

"For the opposition, which got a near heart attack, at the show of unity displayed at Kyankwanzi a few weeks ago, they must be praying that the dissension in the NRM ranks continues to fester because, the truth be told, with their own internal polarisations no one has the capacity to take advantage of the NRM’s current problems...

Observers will be best served to hold judgement until much later date.

It is inconceivable that the battle for control of the party will go on indefinitely and jeopardise the party’s ability to mount a successful campaign in 2016. This means that you can expect a few twists and turns in the tale in coming weeks as the NRM negotiates this major turn in its history.

DUBAI, A USEFUL TEMPLATE

Last week Dubai hosted the third Government Summit, a forum where it interacts with businessmen in order to improve services and encourage new investment.

At the summit Dubai outlined an ambitious project to make interaction between government and the people seamless by 2021.

To illustrate the vision, the crown prince of Dubai Sheikh Hamdan Bin Mohammad Bin Rashid Al Maktoum, showed a video of a lady tourist arriving in Dubai, using messages off off a smart watch being, welcomed to the Emirates, informed that her residence permit has been renewed and of the traffic conditions outside and ow to get to her apartment quicker.

In Uganda we daren't think that far ahead, not to mention the convenience of visitors. The comfort of the everyday man is the furthest from our mind when we are still struggling with the basics of getting good health care, clean water, basic education among other things taken for granted by the residents of Dubai.

Its a distant memory or just the stuff of myth, the story that as recently as 1980 Dubai was a one street town surrounded by desolate desert and blanketed in oppressive heat. Now of course it is a logistical hub, financial capital and entertainment Mecca that shifts more travelers through its revolving doors in a month than East Africa does in a year or two.

At the heart of the transformation is a ruling family that had a vision for the country that would outlive its oil reserves. As it is now oil revenues account for less than a tenth of GDP and are anticipated to run out within the next ten years or so.

To push their dream they were lacking the most important element -- people. As it is now Dubai's population is about two million people, or the daytime population of Kampala, of whom almost two-thirds are foreigners.

They got around that problem by hiring expertise from abroad while embarking on an ambitious program to only upgrade their education system, sent their youth abroad to study, but also ensure the local Emirati understudy the expats with a view to replacing them eventually.

The skilling of locals is a political necessity but truth be told the execution of the Al Maktoum's vision was done by hired hands who generated the economic activity that allows even the locals to enjoy an enviable standard of living.

Moral of the story is, without people you have nothing.

Last week too we saw the release of O-level results. More children are seating exams annually, distinctions are being achieved like they are going out of fashion and for some of us from a bygone era we can't imagine the enormous pressure being brought to bear on these small minds in search of ever better results.

Our education system is designed to create the army of workers needed for an industrial society -- able to read, write, count and respect hierarchical authority. By as we have done with mobile phones isn't there a possibility that we will be forced to vault the Industrial Age and land squarely in the Information Age? And what will become of our industrial-age-exam shattering stars of today? Won't they find they enter a job market for which their skills are misplaced or worse obsolete?

We can talk all we want about infrastructure, but if we don't have the people to leverage this infrastructure we are on a fool's errand.

It is encouraging that Uganda is at the forefront with Kenya and Rwanda to ease the restrictions on the movement of labour, this will help us bridge our own deficiencies while allowing our excess capacity to find a home elsewhere. Tanzania's intransigence on this will come back to bight them.

Countries like Dubai and Singapore have shown that a focus on raising the level of human resource more than an abundance of natural resources is the key to sustainable development.

We of course have committed hundreds of billions to health and education, and for an observer of this country over the last few decades improvements are visible, unfortunately they are not equitably distributed.

But even worse, endemic corruption has made it such that even ever increasing amounts channelled into social services do not guarantee a comparable improvement in service delivery.

Unfortunately the better off take their children to good schools and have them treated in quality hospitals, this alone will ensure a perpetuation of the current income and wealth inequalities into the future.

The economics of a better human resource cannot be overemphasized and even if political expediency does not recognize the benefits, the long term ramifications will inevitably spill over into the politics of the country with disastrous results.