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8 SUNDAY, DECEMBER 27, 2015
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NSSF key transitions and remarkble achievements in 30 years battle ensued until NSSF won it recently after 14 years. Despite the legal battle, construction of the Workers House was in progress up to 2004 when it was completed.
The managing director of NSSF Richard Byarugaba (R) with members of Workers’ Union celebrates at the Supreme Court in Kampala in 2013 after winning the case against Alcon International Ltd. PHOTO BY ABUBAKER LUBOWA
Innovations. With a number of new technological innovations that NSSF has put in place, its members can now track their savings electronically and interface with the Fund. BY Mark Keith Muhumuza
[email protected]
COURT BATTLE
For a period of 14 years, NSSF was in court battling with the Alcon case. At one point, the Fund lost the case and was ordered to pay Alcon.The case went for arbitration in 1999 and on March 29, 2001, Kenya’s High Court judge Edward Torgbor (retired), awarded Alcon damages of US $8,858,469 with interest at 6 per cent per annum, which had over the years accumulated to $16m. The award was filed in the High Court on November 7, 2001.
KAMPALA. The historical perspective of the National Social Security Fund (NSSF) in the last 30 years started way back in the colonial era. The bulk of the events before 1985 were driven by the politics of the day. From Obote I era, which started off with a bang but would later dwindle after the 1971 coup. The coup ushered in new rules for the management of the Fund until 1985 when the independence of NSSF was strengthened, creating an autonomous company. First investment The first NSSF investment was in government stocks. The 1969/70 and 1970/71 Social Security Fund Financial forecast showed the Fund invested Shs2,909,500 in stocks and accumulated an interest of Shs45,500 from the Bank of Uganda. On August 17, 2001, NSSF invested $5m in the New York stock exchange market through the Hong Kong Shanghai Banking Corporation. NSSF first invest-
ment was the Workers House, a project that did not start until 1985. Eventually, the 14-floor building was completed in 2003 after several years of stalling. The investment from the start was a concept of the Fund having its own offices and then rent out the rest of the space to tenants for NSSF to earn extra income in order to make a considerable payment to members. There were several attempts to push for further real estate investments and this drew criticism from organisations such as International Monetary Fund (IMF). At the time, investment in short-term deposits was about 52 per cent of all assets. Real estate came in second place with 40 per cent, whereas 8 per cent was in long-term government debt. The challenge was that the short-term investments were increasing the concentration of deposits and complicated liquidity management. The IMF pointed out that this eventually led to complications in draw downs of maturities once they came through. As the years progressed, NSSF was making adjustments to its investment approach. It adopted an investment posture that is both aggressive and prudent. Efficiencies and cost management
strategies led to higher productivity. Growth in revenues is not matched with increased costs. At end of June 2015, investments in fixed income assets, especially long-term government debt surged to 76.1 per cent. Importantly, the real estate investment shrunk from 40 per cent in the 1990’s to 7.9 per cent in 2015. The first equity investment recorded by NSSF was in 2000, which represented about 0.5 percent of assets. As of 2015, equity investments in listed and none listed companies have grown to 16 per cent. NSSF changes ministry In September 2004, President Museveni ordered the NSSF transfer from the Ministry of Gender, Labour and Social Development to the Ministry of Finance, Planning and Economic Development over corruption allegations, especially the botched Nsimbe Housing Estate project. He also suspended the Fund’s board led by Onegi Obel and top management led by managing director Leonard Mpuuma. But before it was transferred to the Finance ministry, Bank of Uganda took over the supervisory role of NSSF starting from January 1, 2005, until the Finance ministry took over later. This was after reports of al-
leged corruption in which millions of shillings of workers’ savings were feared to have been lost from NSSF. The state Minister for Gender, Labour and Social Development Tim Lwanga, also noted that the President had directed the Inspector General of Government (IGG) to investigate the alleged corruption in NSSF. Workers House completed On July 21, 1994, NSSF entered into a contract with M/s Alcon International Ltd, for the erection of Workers House, which was then a partially constructed structure. Later on, following a breach of contract, the Fund terminated the building contract. NSSF management later awarded the contract to Roko during its meeting held on April 13, 1999. Since Alcon Kenya had reneged on their contractual obligations to co-finance the project, this forced NSSF to step in directly and finance the project. Later on, disputes arose between the two parties, which led to the termination of the building contract by the NSSF board in 1998. In May 1998, Alcon International Uganda Ltd, through their lawyers Tumusiime, Kabega & Co Advocates went to court. A legal
Integrated Management Information System In 2005, NSSF launched an Integrated Management Information System (IMIS) to facilitate the efficient management of its core business processes. The system was developed and installed by the South African company called Arivia.Kom at a cost of Shs3.15b. Although the IMIS initiative initially started in 2004, the process, which involves registration, contribution collection, financial management and payment of benefits were integrated into the new system in 2005. The system was decentralised to all NSSF offices by installing a wide area network. As part of the IMIS launch, NSSF embarked on a nationwide re-registration campaign of all employers and employees. A total of 247,660 members and 5,619 employers were successfully re-registered. The objective of the re-registration was to obtain foolproof biometric information for convenient and prompt identification of members, update and clean members’ records, including dependants and to give members new electronic membership cards. The automation of the identification system went a long way in improving NSSF’s efficiency in benefit payments and issuance of member statements. NSSF rebrands In December 2012, NSSF rebranded changing its look and identity promising its members to commit transparency and accountability in management of the funds. At an event to mark launch of the new brand managing director Richard Byarugaba said that the fund would insure that its members are heard and their views considered in decision making. The fund introduced a flesh green in its brand identity signaling a renewed promise. This was a precursor to the funds very first annual members meeting. First members annual general meeting After 27 years of existence, NSSF held its first annual members general meeting on March 19, 2013, at Kampala Serena Hotel. The meeting was attended by NSSF contributors, employers, workers union representatives, government representatives and members of the public. The second meeting was also held on October 27, 2014.
Tim Lwanga
He confirmed that President Museveni had directed the prime minister to transfer the supervision of NSSF from the Ministry of Gender, Labour and Social Development to the Ministry of Finance, Planning and Economic Development. The NSSF e-statement initiative enables members to easily track and access their savings online. PHOTO BY jOSEPH kIGGUNDU
NSSF wins Alcon case For a period of 14 years, NSSF was in court battling with the Alcon case. At one point, the Fund lost the case and was ordered to pay Alcon. The case went for arbitration in 1999 and on March 29, 2001, Kenya’s High Court judge Edward Torgbor (retired), awarded Alcon damages of US $8,858,469 with interest at 6 per cent per annum, which had over the years accumulated to $16m. The award was filed in the High Court on November 7, 2001. The case arose from a July 21, 1994 contract between NSSF and Alcon International for the erection and completion of Workers House, which was then a partially constructed structure. Technological innovations A customer relationship model was introduced to deliver personalised interactions with all members and customers of the Fund. This model is centred at the branch offices nationwide. The efficiencies at the branch offices and the NSSF customer service centre have been enhanced by
introduction of the electronic service channels for self-service. With a number of new technological innovations that NSSF has put in place today, its members can now track their savings electronically and interface with the Fund. On August 31, 2015, NSSF launched the “NSSF GO”, a blend of electronic service channels, including a mobile app, through which members can access their statements at their convenience and keep track of their savings using their phones or other related gadgets.
By 2011, the deficit was about Shs14b. That however, started changing in 2012 with several reforms bringing up the first surplus in several years to Shs27b. In the 2014/15 financial report, NSSF continues to record a surplus. The accumulated surplus has moved
up to Shs291b from Shs170b in the previous year. This means NSSF can withstand at least three years of shocks without encroaching on members’ funds. This has given NSSF the much required flexibility to pay out interest rates above inflation.
Dr Yoram Barongo
He was appointed as substantive NSSF managing director on January 6, 1999 but was later suspended by the then Gender minister Zoe Bakoko Bakoru and replaced with the then corporation secretary Martin Bandeebire.
From deficit to surplus In 1990s, NSSF was running a deficit but still making payments to members. By 1996, NSSF was running a deficit of Shs8.3b yet its asset base was Shs29b. If by that time NSSF was to shut down, then it wouldn’t withstand financial shocks without encroaching on members’ savings. Notably, that deficit meant that in order to run operations of the Fund, members’ funds were encroached on. This meant members were receiving a negative rate of return on their savings.
SOME OF THE MAJOR ACHIEVEMENTS In the 2014/15 financial report, NSSF continues to record a surplus. The accumulated surplus has moved up to Shs291b from Shs170b in the previous year. This means NSSF can withstand at least three years of shocks without encroaching on members’ funds. This has given NSSF the much required flexibility to pay out interest rates above inflation. On August 31, 2015, NSSF launched the “NSSF GO”, a blend of electronic service channels, including a mobile App, through which members can access their statements at their convenience and keep track of their savings using their phones or other related gadgets. NSSF also launched an Integrated Management Information System (IMIS) to facilitate the efficient management of its core business processes. The system was developed and installed by the South African company called Arivia.Kom at a cost of Shs3.15b.
Martin Bandeebire NSSF Managing Director Richard Byarugaba addresses members at the annual general meeting recently. FILE PHOTO
He was appointed as acting NSSF managing director in 2002 replacing Dr Yoram Barongo.
