On August 1, detectives attached to parliament quietly visited the National Social Security Fund (NSSF) head office in Kampala, interviewed key officials and left with batches of documents after a couple of hours.

The visit was part of an investigation ordered by parliament into the Ush3.5 trillion ($1.34 billion) pension fund, which holds Uganda’s largest stash of cash after the Bank of Uganda.

The Inspector-General of Government, Uganda’s public ombudsman’s office, is already investigating NSSF following a series of allegations by a whistleblower of abuse of office.

The parallel probe by the august House, though not unprecedented, points to a struggle for control of Uganda’s biggest public financial institution, an investigation by The EastAfrican can now reveal.

Reliable sources told this newspaper a Member of Parliament had a couple of weeks earlier met a senior NSSF official and attempted a shakedown, with the threat to “make life difficult” for the executives when they appear before the House.

The MP declined to comment and the allegation could not be independently verified, but previous witnesses have spoken of extortion attempts when they appear before parliament.

Jobs to be re-advertised

Finance Minister Maria Kiwanuka recently announced that top jobs at the Fund — including that of managing director Richard Byarugaba and company secretary David Nambale — would be re-advertised this year following the allegations.

She told The EastAfrican the decision was a precaution in light of the ongoing investigation.

Mr Byarugaba’s contract is due to expire at the end of this month while Mr Nambale’s has already lapsed, but both are expected to receive extensions until the end of the year to allow for continuity, Finance Ministry sources said.

The whistleblower’s dossier details serious and diverse allegations of conflict of interest, in-fighting and other lapses in corporate governance.

It has created a sense of déjà vu around an institution whose past three top executives were fired and are either on the run, in jail or unemployable.

Two of the allegations revolve around recent transactions by NSSF: The purchase of a 8.1 per cent stake in power distributor Umeme during its initial public offering (IPO) in November, which was allegedly done without the necessary approvals; and the sale of a prime plot of land in Kampala allegedly at sub-market prices.

The latter allegation has similarities to Temangalo — NSSF’s controversial purchase of land from Prime Minister Amama Mbabazi and businessman Amos Nzeyi that cost then finance minister Ezra Suruma and NSSF boss David Chandi Jamwa and his deputy Prof Mondo Kagonyera their jobs.

The EastAfrican has seen documents that show the NSSF bought the land without due diligence and at an inflated price during Mr Jamwa’s tenure.

Its price of Ush650 million ($249,549), representing a loss of Ush100 million ($38,392), was also higher than that recommended by at least two independent valuations, including by the Chief Government Valuer.

The investigation will seek to prove whether the NSSF did enough to acquire a road access to the land and whether officials personally benefited from the transaction.

Selling a real estate asset at less than its purchase price four years later in a rising market raises eyebrows.

However, NSSF has been unable to sell off other parcels bought during the Jamwa regime due to ownership disputes and lack of offers for what turned out to be poorly appointed land.

One piece of land “bought” by the Fund in Tororo turned out to belong to the Uganda Police, NSSF sources say.

The Umeme transaction has already given NSSF a paper profit after the share price rose from Ush270 ($0.103) at the IPO to Ush365 ($0.140).

The company also received Ush1.97 billion ($756,325) in dividends. But NSSF bought the shares without approval from the Solicitor-General, despite asking for it.

Mr Byarugaba now says it was a “mistake” to seek approval as it was not required but the IGG is also investigating allegations of conflict of interest around the key figures in the transaction and in the energy sector.

NSSF board chairman Ivan Kyayonka, who approved the deal, was also chair of Shell Uganda, which supplies fuel to thermal power firms in the country and whose electricity is distributed by Umeme.

Officials have denied conflict of interest in the transaction.

The power play at NSSF however goes beyond the two deals.

The Byarugaba-led team of ex-private sector executives inherited some of the problems at the Fund, such as those in the real estate sector. They then created some of their own.

For instance, the Pension Towers project, started by the Jamwa-led team, has stalled after the IGG cancelled a tender for its construction following “persistent allegations of corruption.”

The IGG found that the contract was awarded to China Civil Engineering Corporation despite its defective bid and at a price of Ush20 billion ($7.6 million), higher than that of China National Aero Technology International Engineering.

There have been allegations of nepotism in recruitment and claims of infighting in the executive suite, while Mr Byarugaba received a slap on the wrist over an illegal salary increment.

The board, too, has not been spared: Mr Kyayonka is accused of approving the Umeme transaction without consulting fellow board members.

But some of them do not come out with clean hands either; one of them failed to repay a loan owed to DFCU Bank, on whose board he sat by virtue of NSSF’s shareholding.

At least two of the five worker’s representatives remain on the NSSF board despite failing to pass a fit-and-proper person test set by the central bank.

The NSSF executive “dream team” rebranded the Fund earlier this year and looks down at motorists from billboards around Kampala as part of their efforts at transparency.

That transparency is now turning into very close scrutiny. The NSSF team is, ironically, a victim of its relative success.

Take the case of Alcon. After losing a 14-year court battle to the firm, NSSF had provisioned up to $16 million ($6.14 million), including costs, in the matter.

The Solicitor-General wrote a legal opinion to President Museveni advising him on the inevitability of the Alcon payout.

NSSF then put together a new legal team comprising in-house counsel Nambale, the Attorney-General’s chambers and a private law firm, Sebalu and Lule.

They appealed to the Supreme Court on new grounds and won, much to the chagrin of many well-connected legal and political power brokers in Kampala who stood to benefit from an Alcon victory.

NSSF was soon in dispute with its former lawyer on the matter, senior counsel Joseph Byamugisha, for rejecting his claim for Ush32 billion ($12.28 million) in costs. When the matter went to court, the costs were reduced to Ush1 billion ($383,921).

The execs have also made few friends by rolling back some of the patronage networks they inherited — including trimming the payroll by almost half, from 720 to 400, and withdrawing from political deals, such as the promise to fund construction of an office tower for Uganda National Farmers Association.

Plans for more brick-and-mortar offices across the country were shelved for smarter e-platforms.

Higher compliance

Reforms to create a leaner NSSF have started paying off. Collections have grown from about Ush22 billion ($8.4 million) to Ush50 billion ($19.2 million) per month since 2010, mostly through higher compliance — which has risen from 49 per cent to 80 per cent — rather than new members. Last month, collections rose to a record Ush56 billion ($21.49 million).

The time taken to process retirement benefits has dropped from 105 days to 10 days on average since 2011 and operational costs have been held largely constant over the past three years despite a growth in revenue.

With cost-to-income ratios held at around 18 per cent, net profits have risen from about Ush100 billion ($38.39 million) three years ago to Ush260 billion ($99.82 million).

If a more efficient Fund means more money for its savers, it also means more enemies among the well-connected city cowboys who have been milking the NSSF dry.

And so, the biggest battle facing NSSF is, however, not necessarily over its leadership; it is existential, as Uganda seeks to liberalise its pensions sector.

This has put the Fund in a lose-lose situation.

Every reform that brings financial success fattens the cow and attracts the interest of those who wish to carve it up and access its large cash stash; every whiff of scandal whips up a panic among workers anxious about the safety of their money.

Both push the NSSF closer towards being broken up but, as we argue in Part II of this article next week, this may not necessarily be the panacea many make it out to be.

We argue that NSSF Uganda has an investment dilemma, governance challenges and a Government of Uganda problem.

READ: Uganda's NSSF exceeds limit on securities, assets