{UAH} NSSF Abandons Ugandans at their Hour of Most Need

Richard Byaruhanga the NSSF Managing Director (L) a Ugandan mother (C) and Geraldine Ssali (R). There is public outcry that the social security fund did not do enough for Ugandans employees during the Coronavirus lockdown.

At the height of COVID-19 lockdown, Ugandan employees suggested a 20 percent payment off their savings from East Africa's laudably major social security fund, the NSSF.

This partial payment was needed urgently to ease the impact of the COVID-19 related financial difficulties.The Fund's management in a letter to the Finance Minister stated that a fire-sale of the Fund assets in the region and in Uganda would have dire macro-economic consequences for the country.

An Op-ed commentary by Raymond Mugisha in the Daily Monitor of May 5, affirmed the organisation's narrative; NSSF fund cannot be used as a boundless source of money to address potential, yet recurrent crises.

To tamper with NSSF for #coronavirus purposes is not only a joke but a dangerous precedent as its members are poised to face recurrent crises such as floods, wildfires, earthquakes, volcanoes and chronic disease in the future.

"If such scenarios play out regularly, NSSF will be required to continue making early payouts and finally fold, possibly." He noted.

However, Ms. Geraldine Ssali, the former Deputy Managing Director of NSSF has a different opinion altogether; Ugandans deserve their hard earned saving.

In a her carefully penned tirade published by the CEO East Africa magazine, Ms. Ssali destroys NSSF rickety claims of scheming off Ugandans.

"NSSF is simply abandoning its members at their hour of most need and is choosing to hide behind all sorts of flimsy reasons." Her letter read in part.

Take a read of her memo in guidance to an unnamed member of parliament.

Good afternoon Sir.

Yesterday you asked for my opinion on the letter NSSF wrote to the Minister with regards to the Covid-19 relief for its members: Paying of 20% of each member's balance.

I'm not sure if the minister also asked Management to indulge in the Macro economic impact of this "transaction" but I think that would be MoFPED and Central Bank to competently handle macroeconomic policy and give the final position. NSSF management should concern themselves with their primary strand of responsibility- providing social security to its members.

There's a school of thought on the theory of the half glass. Basically stating that the optimistic mind (sighting opportunities and possibilities) sees the glass half full and the pessimistic mind (seeing difficulties, impossibilities and challenges) will always see the same glass half empty!

A quick scan of the document (NSSF's letter) would suggest the Fund's managers have decided to fall under the latter, in order to discourage such a proposal from ever seeing the light of day. An optimistic Fund manager on the other hand would have used this opportunity to ("do what it says on the tin") and entice/attract a bigger (including voluntary savers) membership to the Fund by demonstrating their relevance and usefulness to existing members at such a time when most governments are extending financial assistance to their vulnerable citizens in form of social welfare programs- I trust you have been following at International level so I shall not belabour.

Of course, the UGX 380 m that NSSF gave to the National Task Force efforts under the Prime Minister's office was appreciated by the country at large but now it's core members need NSSF support for some of their money to bail them out as they struggle to sustain their families and meet their day to day obligations.

The Fund management in citing dire negative economic consequences (to the economy) is stealthily and technically avoiding their natural responsibility – the purpose and cause on which NSSF was formed. Any systemic economic risk that was meant to happen due to the global pandemic, Covid-19, is happening right now and there's nothing NSSF can do about it.

This risk is already crystallising in the Ugandan market and every player in the market will feel its heat! So whatever must go wrong is going wrong as we speak. However, the non- systemic risk anticipated by the Fund managers prior to Covid-19 can be hedged by simple instruments going forward. For example if the treasury desk officers find that their asset interest rates are falling, they can acquire a liability whose interest rate will offset any loss on that asset.

There are simple Zero cost financial instruments being offered by banks in our market like Stanbic, Standard Chartered Bank, Equity Bank and the like. I'm fully aware that the Fund has got a risk management framework, that takes into account scenarios and simulations like "a run on the Fund" and any competent crisis management plans would have been put in place to cater for such contingencies as standard procedure for any given financial or quasi financial institutions in this market.

So the net Cash of  UGX 2.5 trillion needed within the next one year (12 months) to fulfil this obligation, boils down to affordability, without any political innuendo or undertones.

Going by the content of the letter you shared and their (NSSF's) last published Financial statements of Financial Year ending June 2018/19, my unbiased/unprejudiced thoughts are as follows:- 

1. In order for NSSF to fulfil the liquidity needs of 20% of member balances alluded to, they would need to look at their liquidity position. First the UGX 125 billion tacked away in reserves for a rainy day; it's raining now!

2. Secondly, the current assets at about UGX 280 billion are immediately available if they chose to operate an 'accident and emergency' system – it attends to the most fatal not who came first or who is more important; on a case by case basis. Those Government Securities held by the Government of Kenya that are over a UGX 1 Trillion can also be unlocked! In a nutshell, this is Ugandan savers' money being used to build Kenyan infrastructure, and this is okay!

3. Thirdly, a phased liquidation of the treasury bills, bonds and fixed deposits within the Ugandan market. This assured fixed income albeit with different maturity tenures falling under 3 – months, 6- months, 1- year, 5 years, 10- years, etc. They would have to dive in and look at these assets concurrently with the monthly contributions they collect from members. These assets never have the same maturity times. This asset class accounts for over 70% of the whole investment portfolio of #NSSF so a phased transaction can be used to cushion any negative effects anticipated on this asset class alone without needing to touch the real estate and equities classes. The payments required for the fulfilment of the contractual obligations under the real estate contracts (which contracts normally span over 5-years plus, are already planned for and fall under business as usual. Management is not required to pay 100% of these obligations upfront in one year and each contract has pre-negotiated terms in case of delayed payments. Never mind that an average NSSF saver will not be able to afford those houses for example in Lubowa. You heard right, 75% of the Fund is owned by 100K members (who are 4% of members) who probably already own homes anyway. This lot may not even need their 20% at this time. The Fund collects UGX 100 billion in cash from savers every month and only approximately 3% of this goes to paying monthly benefit claims to members. The rest of the cash can also be added on the 20% settlement.

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"When a man is stung by a bee, he doesn't set off to destroy all beehives"

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