Contributors to the National Social Security Fund (NSSF) can expect to receive more than the 10 percent interest they earned this year when the Finance minister announces the yield from the last financial year next week.
NSSF managing director Patrick Ayota said at a news conference in Kampala yesterday that the Fund had performed better in the 12 months to June than in the previous period.
“Given the improved performance, I am extremely confident that the Fund will pay a competitive interest rate for the Financial Year (FY)2023/2024 as will be declared by the Minister of Finance, Planning & Economic Development at the 12th Annual Members Meeting,” Mr Ayota said.
After a disappointing return of 9.6 percent in FY2021/2022, the first single-digit interest rate in a decade, NSSF gave savers a slight increase to 10 percent in the following year. The Fund’s members are now eyeing a higher return for the last financial year, which sources said could be around 12 percent.
While inflation has remained below the Central Bank target rate of five percent, NSSF savers will be hoping that the Fund returns a higher return than unit trust and Treasury bill investments, which hover just below 12 percent.
Mr Ayota announced that the Fund’s size had grown by Shs3 trillion to Shs22.13 trillion. Revenue also increased by 15 percent over the 12 months to June from Shs2.2 to Shs2.5 trillion.
The growth in revenues, the Fund executives said, was on the back of a favourable economic environment, a recovery in the equities markets, and an increase in member contributions.
“Our contributions grew by 13 percent,” Mr Gerald Kasato, the deputy managing director of the Fund, said. “The money that we made from our investments was very good. Part of that was driven by the recovery in equity markets; the return on the equity side was 20 percent year-on-year. Our dividend [earnings] grew from Shs145b to Shs175b on account of the investments in MTN and Airtel.
“The dividends we got from MTN were Shs40b compared to last year’s Shs30b; from Airtel, we made Shs22b. Equity Bank and Safaricom also gave us good returns. The exchange rate recovered in our favour to the extent that we made Shs255b in exchange gains alone. And when we amalgamate all our equity possessions year-on-year, the share value gain on equity was more than Shs300b.”
Mr Ayota added: “The economic environment, with general growth at six percent compared to 5.3 percent; a fall in inflation from 4.9 percent in June 2023 to 3.9 percent in June 2024; the regional stock markets have recovered; and our currencies have appreciated against regional currencies; the bonds in Uganda increased; Kenya also went up, and Tanzania. The implication of this is that the bulk of our investments, around 78 percent, is in the bond market, and we got some good return for our members. If you look at the stocks, all of them rose in the year.”
After a tumultuous two years in which the Fund was rocked by a leadership crisis, Mr Ayota used his moment on Tuesday to pay tribute to his former boss and predecessor at the Fund, and years of collective strategic planning at NSSF.
“The Fund has not started doing well this year or last year. The Fund has been doing well, so Richard [Byarugaba], the former managing director, did a good job putting the team together, putting the right strategies in place to make sure the Fund grows,” he said.
“The best decision was to see what to improve and leave those that are working well.”
Mr Ayota revealed that the Fund had surpassed its targets in its 2015 – 2025 strategic plan ahead of time. A key target of growing the Fund size to Shs20 trillion by next year was met in January.
“Our goal and our plan was to get to Shs20 trillion by June 2025. We hit that number in January 2024, 18 months ahead of schedule,” he said. “So, by the end of June 2024, the Fund has grown to Shs22.1 trillion. We grew by Shs2 trillion between January and June.”
The Fund is now targeting to grow to Shs50 trillion and cover half the population by 2035. NSSF investments are held in treasury bonds (79.2 percent), equities (13.1 percent) and real estate (7.7 percent).
Member contributions have increased from Shs1.72 trillion to Shs1.93 trillion year-on-year. This, Mr Ayota said, was evidence of the confidence Ugandans have in NSSF.
NSSF paid out Shs1.1 trillion in benefits over the past year and the total amount of mid-term benefits claimed, which kick in at age 45 and after 10 years of contributions, dropped from Shs272.2b to Shs176.6b.
Despite the overall positive performance, compliance remained low, with only 57 percent of members remitting their savings consistently. NSSF also missed a deadline for the completion of construction of the Pensions Tower, which has been under construction for more than a decade. The investment in Uganda Clays, a building materials maker, also remained loss-making, despite year-on-year growth in the country’s construction sector.
The final interest rate to savers will be announced next Thursday.
