Uganda’s Minister of Finance Matia Kasaija on Tuesday declared a 10 percent interest rate for National Social Security Fund (NSSF) members for the 2022/2023 financial year, arguing that it is consistent with the fund’s commitment made in 2013 to pay savers a real annual return, that is, at least 2 percentage points above the 10-year rate of inflation.
According to the minister, the new rate which is equivalent to Ush1.591 billion ($422,800) in total, will be calculated and credited to the balance outstanding on the members’ accounts as of July 1, 2022.
“Last financial year, the 10-year average rate of inflation was 4.2 percent. The rate I have just declared is 5.8 percent above the 10-year average, which means that the Fund has once again delivered on its promise and surpassed it by almost 3.8 percent. To the members, thank you for trusting the NSSF with your money. The fund is an institution we are proud of,” Kasaija said during the NSSF 11th annual members meeting in Kampala.
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During the meeting, the NSSF management reported assets growth from Ush17.26 trillion ($4.6 billion) in Financial Year 2021/22 to Ush18.56 trillion ($4.93 billion) in financial year 2023/24.
“Many naysayers did not imagine the possibility of growing this fund to Ush20 trillion ($5.3 billion). Achieving this strategic objective, a year ahead of schedule is laudable,” the minister remarked seeming to thwart members’ fears and anxiety in the aftermath of media reports of a poorly managed fund which saw the former managing director Richard Byarugaba clash with one of his supervisors, Minister for Gender, Labour and Social Development Betty Amongi.
“The second KPI I am interested in is the money you generated during the year because that shows the productivity of the investments that I approved during the year. I am therefore glad that the total realised income earned increased by 15 percent from Ush1.9 trillion ($504.92 million) in the financial year 2022/22 to Ush2.2 trillion ($584.64 million) in the financial year 2022/23.
This is very commendable given the turmoil in Europe due to the Russia-Ukraine war, investor flight from most of the developing markets back to the US, reduction in value across all East African stock markets and increased scrutiny that the fund underwent in the third quarter of the just concluded financial year,” he said.
Earlier, the fund’s Chairman Board of Directors Peter Kimbowa reported that member contributions had increased by 15.4 percent from Ush1.49 trillion ($396 million) in Financial Year 2021/22 to Ush1.72 trillion ($457.1 million) in financial year 2022/23.
“Total Realised Income earned increased by 15 percent from Ush1.9 trillion in the financial year 2022/22 to Ush2.2 trillion in the financial year 2022/23. Benefits paid to qualifying members increased by 1 percent from Ush1.189 trillion in the financial year 2021/22 to Ush1.199 trillion in the financial year 2022/23. The cost-to-income ratio improved from 11.7 percent in the financial year 2021/22 to 9.4 percent in the financial year 2022/23,” he said.
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According to him, the fund’s cost of administration reduced from 1.18 percent of total assets to 1.02 percent.
Amongi tasked the fund managers to change in the way “we are conducting business at the fund” and innovate solutions for its members based on the three dimensions, during the three lifecycles so as to provide actual social protection.
The fund declared an interest rate of 9.5 percent in the financial year 2021/2022 down from 12.5 percent it declared in the previous year and the lowest in recent years.
NSSF former managing director Byarugaba said the decline in the 12.5 percent interest rate paid the previous year was mainly attributed to the reallocation of investment in long-term to short-term fixed income instruments to provide liquidity for mid-term payouts, inflation pressures and spillovers from turbulence in the global economy.
