National Social Security Fund (NSSF) Acting Managing Director (MD) Patrick Ayota and Board Chairman Peter Kimbowa on Monday, March 13, 2023, led the Fund’s Executive Committee to respond to the adopted parliament select committee report on the state of affairs at the Fund.
Kimbowa and Ayota insisted that they had not stolen money and would not resign unless the executive (cabinet led by President Yoweri Kaguta Tibuhaburwa Museveni) orders them to go home.
The following is what Ayota and Kimbowa said:
The committee’s report highlights areas where the Fund must improve, and we appreciate them for that insight. However, we would like to clarify a few issues where the committee did not consider the context or information provided.
On the Fund’s Investment Philosophy: Our investment philosophy is guided by the Investments Policy and Guidelines and the URBRA Investment Guidelines. One key component is the principle of investment diversification – both in terms of asset class and sector.
The basic rule of diversification is that an investment that may not be performing well at a specific time is offset by another investment that is performing well. Any fund’s investment performance must be analyzed as a portfolio, rather than just one investment.
An analysis of the Fund’s investment portfolio over the last 12 years shows consistent growth of the assets and a competitive return.
Usage of data and information by the committee: Whereas we appreciate the Committee’s efforts to obtain information from the Fund, in many instances, it appears that not all the information was used. For instance, the case of Uganda Clays Limited.
NSSF is a major shareholder in Uganda Clays, which is listed on the USE. We considered the risk of letting the company collapse with the Fund’s initial investment against injecting capital of UGX 11b to help it survive and return to profitability. The Fund chose the latter.
The loan was approved by the NSSF Board and the then Minister of Finance, Planning & Economic Development. It is also important to note that the loan was approved before the passage of the URBRA Act which bars direct loans. The action at the time was regular and legal.
Uganda Clays is now profitable & has already planned to pay back the loan with interest. The company contributes over UGX1.5bn a year to NSSF. Our action helped Uganda Clays survive, saved more than 1,000 jobs, and saved the 33% equity NSSF had made into Uganda Clays.
We explained to the committee that our geo-mapping exercise was successful. The Fund was able to map all the employers. It is now fully operational and there is value for money. We wonder how then the committee concluded that our Geomapping technology failed.
Many examples such as the case of staff restructuring, payment of performance bonuses, corporate social responsibility, and legacy investments like West Nile Golf Club and Workers House land title fall into this category.
Context in which the Fund operates: In other instances, the committee ignored the context within which we operate & assumes that we operate like a government ministry. For example our budgeting process, hence their conclusion on the Fund’s budgets for land purchase.
Because of this, the Committee assumed that budgeting means spending at the Fund, which is far from the truth. Budgets are plans that are informed by market assessments.
Before any funds are committed, the user department must provide justification for the procurement process to commence or satisfy the Accounting Officer, among others, of the value for money. Just because an item appears on the budget does not mean the money has to be spent.
Existing Legislation governing the NSSF: In some instances, the committee did not consider the existing provisions in the legislation governing the Fund. One such case is the waiver of penalties, which is at the discretion of the Managing Director as provided for by law.
The Fund does not exist to hamstring or cripple businesses. Where an employer demonstrates and commits, through a binding agreement, that they will pay arrears, along with interest earned, the Managing Director exercises his discretion to waive the penalties.
Before I conclude, allow me to share a record of performance facts:
– We have grown the Fund from UGX 1.7 trillion to 18 trillion in just 12 years.
– We are the only noteworthy mobiliser of a large pool of long-term domestic capital for development funding.
– We have consistently grown the value of members’ savings by paying a real return, better than our peers in the region.
– We have the lowest cost of administration among our peers in the region and global social security funds of our size.
– Through building efficient systems, we pay all qualifying members their benefits when they are due.
– Going forward, through product innovation, we are partners to our members through lifecycle value addition from the point of entry until they exit the Fund.
As mentioned by the Acting MD, the recommendations of the select committee were adopted by parliament. Today we would like to focus on two broad aspects of the report:
- The positive aspects of the report.
- Aspects that require Clarification.
We applaud the Committee; it is not easy to investigate an entity of our size and complexity over a 20-year period in 2 to 3 weeks, but they were able to do so. We, therefore, like to register our appreciation for the rigorous and robust probe.
The Committee in Section 7 appreciates the entire management team for the good performance of the Fund. The mere fact that the Fund is growing and has continued to grow reiterates the good governance structures at the Fund and the experienced team of technocrats at the Fund.
From the report, there is neither evidence nor conclusion that any individual at the Fund had stolen member funds, despite the numerous allegations in the media purporting bribery and mismanagement of Funds.
In effect, the committee report brings to light the fact that the famous 6Bn was never disbursed, nor was the 1.8Bn shared among board members. This is not only a vindication of the integrity of the Fund but also an affirmation that members’ savings can be trusted with the Fund.
In other instances, we find the report devoid of important context. The Committee did not assess how the Fund’s growth happened, how it can be sustained, and how we can ensure that the Fund continues to grow to the benefit of the savers.
The report did not look at issues of growth, the sustainability, drivers, and risks/dangers to that growth. One critical aspect which should have been used to justify these costs would have been the staff-related costs and performance-driven culture within the organization.
The Fund has a total of 210 investments, however, only the Arua investment property has lost value. The fact that the Committee had to go back almost two decades to find one investment that has lost value is not a bad performance per se.
As a board, we have not, and will not compromise our fiduciary duty to all NSSF members to ensure prudent & profitable management of the Fund. We welcome positive criticism with an intention to build not tear down.
The committee report followed the grilling of NSSF bosses and Minister Betty Amongi. In one interaction former NSSF MD Richard Byarugaba said that allegations by Minister Amongi made him shed tears while in another, Finance Minister said that he warned Minister Amongi against playing with savers’ money and that she should therefore carry her own cross. (See Details Here and There).