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Uganda NSSF cuts savings rate to 12.3pc

Friday September 30 2016
UG nssf

The Uganda National Social Security Fund headquarters. PHOTO | FILE |

Uganda’s National Social Security Fund (NSSF) has announced a cut in interest for savers, a move linked to a bad year occasioned by the election fever and poor performance on the equities portfolio.

Interest on savers’ contributions dropped by 0.7 per cent to 12.3 per cent in the 2015/16 financial year, the social security agency announced on Friday.

But despite the rate cut, contributors will receive a bigger cash payout compared with 2014/15, a development attributed to strong revenue growth. The social security provider has allocated Ush606 billion ($176.9 million) in interest payment for the 2015/16 financial year, compared with Ush516 billion ($150.6 million) it paid members the previous year.

The Fund’s revenue, on the other hand, grew to Ush708 billion ($206.7 million) from Ush583 billion ($170 million), while profit-after-tax stood at Ush491 billion ($143 million) as at the end of 2015/16 financial year.

Whereas interest rates earned from government securities averaged 17 per cent in 2015/16 compared with 16.7 per cent registered in the previous financial year, sharp declines experienced in the Fund’s portfolio of listed and unlisted shares weighed down on its performance, NSSF’s managing director Richard Byarugaba said earlier in the week.

The Fund’s fixed income portfolio composed of government securities and fixed deposits accounts for 73 per cent stake compared with 15 per cent share held by equities, but volatile movements experienced in stock trading patterns tend to impact heavily on the overall investment performance.

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“The Nairobi Securities Exchange main index for example fell by 15 per cent while that of the Dar es Salaam Stock Exchange dropped by nine per cent during the period in question, impacting on our earnings,” Mr Byarugaba said.

The Fund invests on both markets.

Mr Byarugaba, however, ruled out that an income tax dispute with the Uganda Revenue Authority may have also affected the Fund’s performance, but did not give details as the matter is still in court. 

“The income tax dispute is still in court and it would be subjudice to discuss it at this point. But the Fund has set aside a sufficient provision for this litigation matter in case it is decided against us,” he said.  

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