The fund’s overall investment income stood at Ush1.847 trillion ($519.8 million) at the end of June.
Uganda’s National Social Security Fund (NSSF) weathered the Covid-19 storm to record an improvement in the 2020/21 financial year despite the pandemic.
Financial results published last week show the fund’s total assets rose to Ush15.6 trillion ($4.4 billion) in financial year 2020/21 from Ush13.3 trillion ($3.7 billion) in the last financial, while members’ contributions increased to Ush1.37 trillion ($385.6 million) from Ush1.27 trillion ($357 million) in the same period.
The fund’s overall investment income stood at Ush1.847 trillion ($519.8 million) at the end of June, which was reinvested in an attempt to minimise risks of uncertainty related to members’ contributions during the unpredictable Covid-19 pandemic period.
Although lockdown restrictions forced nearly 1,700 employers to seek deferral of contributors’ obligations in the 2019/20 year, and cause significant job losses, there were temporary signs of recovery in hard hit sectors such as education, transport and hospitality, that partly inspired moderate growth in members’ contributions between July 2020 and June 2021.
“Fewer salary increases, pay cuts, few new employees hired in some sectors and a small number of new employers brought on board in the NSSF database are to blame for the reduced growth momentum in members’ contributions. But only 15 percent of the working population is covered by the fund and this raises questions about the untapped potential that lies in the 85 percent of the working segment that remains uncovered,” said Martin Nsubuga, the CEO of the Uganda Retirement Benefits Regulatory Authority.
“Most of the local employers have either been non-compliant or less compliant with their NSSF obligations in the past. This practically skewed contribution growth momentum towards a few, high end employers like commercial banks, Uganda Revenue Authority, Bank of Uganda, telecommunications companies and fuel companies that regularly offer salary increases and bonuses to their employees unlike certain sectors,’’ said Richard Byarugaba, NSSF Uganda’s managing director.
He added that “slight recovery in the education and tourism sectors directly boosted growth in members’ contributions and reversed the slump experienced last year.
‘‘We also invested heavily in the new 25year Tanzania government bond that offered a yield of 16 percent to investors. ”
Total benefits paid out during the period under review amounted to Ush700 billion ($197 million), with roughly Ush1.79 billion ($503,833) alone disbursed to Covid-19 patients.
The Fund’s investment mix consists of fixed income assets that include treasury bills and bonds, corporate bonds and fixed deposits.
It accounts for 78 percent of its assets while equities that represent listed and unlisted shares account for 15 percent.
Real estate investments accounted for seven percent of the Fund’s assets during 2020/21. The fixed income portfolio generated a 16 percent return on investment compared to 19 percent registered by the equities portfolio during the period under review.
Despite steady enforcement activities carried out by the Fund, average growth rates recorded in members’ financial contributions have gradually dropped from 17 percent in 2009 to around eight percent between 2019 and 2021; a disturbing trend attributed to a significant pool of less compliant employers, a spike in unemployment levels triggered by the Corona virus pandemic and stagnant salaries offered in some sectors. Around 63,000 employers are registered in the Fund’s database but the number of active employers dropped to 14,000 by end of June 2021 while the overall number of registered employees is estimated at more than two million but the volume of inactive savers grew to one million during the same period. Uganda’s working population is estimated at 19 million out of 44 million people, according to government data.
The Fund incurred currency related losses worth Ush300 billion ($84 million) during 2020/21 on account of a 6.1 percent gain in the value of the Uganda shilling against the Kenya shilling.