PROFILE: NATIONAL SOCIAL SECURITY FUND
The National Social Security Fund (NSSF) Uganda is a multi-trillion Fund mandated by the Government through the NSSF Act, as amended, to provide social security services to all eligible employees in Uganda.
The National Social Security Fund was established by the 1985 Act of parliament to provide for its membership, the payment of contributions to and the payments of benefits out of the Fund and for other purposes connected there.
The Fund is a contributory scheme and is funded by contributions from employees and employers of 5% and 10% respectively of the employee’s gross monthly wage. The Fund is regulated by the Uganda Retirement Benefits Regulatory Authority while the Minister of Gender, Labour & Social Development, and the Minister of Finance, Planning & Economic Development are responsible for policy oversight.
The Fund manages assets worth over UGX 18.5 trillion, invested in Fixed Income, Equities, and Real Estate assets within the East Africa region.
The Fund covers all employers, irrespective of the number of employees between 16 and 55 years of age, with the exception of employees under the Government Pensions scheme. It is the obligation of the employer to remit contributions to the Fund for his/her employees every month.
The employer must deduct 5% from the employee’s total gross monthly wage and add 10% of the total gross monthly wage making a total contribution of 15% for each employee. The payment of contributions must be paid by the 15th day of the following month.
Voluntary:
Employers and workers that are not compelled by the mandatory provisions of the NSSF Act have the opportunity to voluntarily save for their retirement.
Under voluntary membership, the Fund recruits and registers persons who are self-employed, as well as contributing members who wish to make voluntary contributions to the Fund over and above their standard contributions.
The Board of Directors is the governing body of the Fund and accountable for reviewing, evaluating and making recommendations about the Fund’s Strategic plan and objectives. The Chairman heads the Board and consists of nine directors, each of whom is appointed by the Minister of Gender, Labour and Social Development for a three-year renewable term. Directors include one Executive Director and eight Non- Executive Directors who represent each of the stakeholder groups of members, employers and Government.
Investments
The overall objective of the Fund’s investments is to create value for members by generating competitive returns to provide members and beneficiaries with benefits as required by law.
This is accomplished through a carefully planned and executed long-term investment program that efficiently and effectively allocates and manages the assets of the Fund. This objective is accomplished through a carefully planned and executed long-term investment programme that efficiently and effectively allocates and manages the Fund’s assets, per the Fund’s Investments Policy.
The Fund is a long-term investor. This long-term investment horizon is because the liabilities, over the long term, are majorly influenced by a relatively young member profile.
The Fund collects members’ contributions and invests them judiciously, and pays commensurate benefits to qualifying members. The money collected is maintained on individual member accounts, invested and earns an annual interest depending on the Fund’s return on investments.
On qualification, the member is paid the lump sum amount plus interest computed every year.
Investments Policy Framework
Investment decision-making and execution are informed by the NSSF Act, the URBRA Investment Guidelines and the internal Investments Policy. The NSSF Act mandates the Board to determine the Fund’s investments, while the Investments Policy provides a guiding framework for investments of the assets within acceptable risk levels.
Assets Under Management
The Fund’s Assets Under Management (AUM) hit Ugx 20 trillion in February 2024, one and a half years ahead of schedule, according to the Fund’s 10-year Strategic Plan.
Investments Asset Allocation:
The Fund invests mainly in three asset classes: Fixed Income, Equities (listed and unlisted), and Real Estate.
The current asset class allocation is as follows;
- Equities 13.8%
- Real Estate 7.1%
- Fixed Income 79.1%
This portfolio mix is informed by 3 key factors – the long-term funding needs, the need for diversification and the reduction of market risk. They committed to delicately balance the risk/return trade-off.
ASSET CLASSES COMPOSITION
Fixed Income
The Fixed Income asset class is composed of Treasury Bonds, Corporate Bonds and Corporate Loans.
The composition is dominated by medium to longer-dated instruments, consistent with the Fund’s strategy of matching assets and liability spans.
Equities
The Equities portfolio is composed of both listed and unlisted equities, with the majority exposure in listed equities by far. The listed equities in East Africa include the following;
Bank_of_Baroda DFCU New_Vision_Limited Uganda_Clays
Centum Safaricom (KShs) Stanbic Bank Tanzania Portland Cement
Umeme KCB Equity Bank of Kigali
Unlisted equities include;
- TPS
- Trade & Development Bank
- Yield Fund (Uganda)
SUCCESSES
In March 2024, the National Social Security Fund (NSSF), Uganda’s national savings scheme, announced that the Fund had hit UGX 20 trillion in Assets Under Management (AUM), one and a half years ahead of schedule, according to the Fund’s 10-year Strategic Plan.
In 2015, the Fund launched the 2015-2025 Strategic Plan, with a key strategic objective to grow the Fund’s Assets Under Management to UGX 20 trillion by 2025. The other strategic objectives were improvement in business processes to pay benefits to qualifying members in 1 day and achieving 95% staff and customer satisfaction.
“The unwavering commitment to deliver our value proposition of safety, convenience, and empowerment to our members, has propelled the Fund to achieve this milestone.”
“When we set this audacious goal in 2015, to many people, it seemed beyond reach. In addition, we did not know that the journey would be filled with disruptions: a global pandemic that kept us locked for almost two years, an unprecedented mid-term benefit payout, and disruptive and intrusive investigations. Despite all this, we didn’t just endure, we thrived,” NSSF Managing Director Patrick Ayota has said.
He added that the key drivers that enabled the Fund to achieve the milestone ahead of schedule are consistent growth in both contributions from members and income from the Fund’s investments.
Information from the Fund shows that contributions increased from only UGX 688 billion in 2015 to UGX 1.27 trillion in 2020 and hit UGX 1.72 trillion by 2023.
Despite the volatile economic environment over the last 10 years, income has also consistently increased. In 2015, the Fund’s income stood at UGX 583.2 billion, but rose to UGX 1.47 trillion by 2020. Last Financial Year, the Fund recorded UGX 2.2 trillion in realised income.
Ayota said that he is confident the Fund will achieve its strategic objectives as scheduled. Some benefit types, such as Age and mid-term are already being paid in less than seven days, while the average payment time is currently 11 days. Customer and staff satisfaction stood at 86% as at the end of last Financial Year.
“We thank God. We thank our staff, various Boards of Directors over the years, our supervising ministries, and all who have made this possible. We are now on the brink of a new era – a new day where we aim to redefine what’s possible once again. Our next goal is to grow Assets Under Management to UGX 50 trillion by 2035,” Ayota said.
Dividend from MTN
In July 2024, the National Social Security Fund (NSSF) earned a total of UGX 80.6 billion from its investment in MTN Uganda over the last three years, following payment of UGX 39.8 billion dividends for the year ended December 31, 2023.
The payment is the largest the Fund has earned from a listed company in the region this year, NSSF Managing Director Patrick Ayota said during a media conference at Workers House on Thursday.
“Not only is MTN Uganda the highest dividend payer across our equity portfolio this year, but the company has also been consistent in delivering positive growth over the last 3 years since the IPO. We commend the management of MTN Uganda for its commitment to creating shareholder value while also focusing on the long-term growth of the company,” Ayota said.
The Fund earned UGX 9.3 billion and UGX 31.5 billion dividends for the years 2021 and 2022 respectively.
Speaking at a ceremony to hand over a dummy cheque to NSSF at Workers House in Kampala, MTN Chief Executive Officer Sylvia Mulinge said: “NSSF Uganda is to date our largest institutional shareholder and MTN Uganda is privileged to serve the many Ugandans who have a stake in the Fund. We remain cognizant of the Fund’s important mandate of ensuring the social security of their stakeholders and we reiterate our commitment of ensuring strategic investment and sustainable financial performance to fulfill the objectives and goals of the Fund.”
The Fund in December 2021 had already invested UGX 360 billion to acquire 1.98 billion shares in MTN Uganda following its Initial Public Offer (IPO) in December 2021.
The latest investment brings the Fund’s total investment to UGX 450.95 billion for 2,629,607,910 shares, further solidifying NSSF’s position as the largest indigenous shareholder in MTN Uganda with 11.7% shareholding.
Ayota said the additional investment is a vote of confidence in MTN Uganda and is a belief that the company will continue to offer long-term benefits for NSSF members and the country.
“The effective price of UGX 140 per share presented an opportunity to invest in a cash-generative business with high growth potential. Also, MTN Uganda plays an integral role in the Fund’s growth and the Country’s development. Equally important, MTN Uganda presents a long-term growth opportunity for us, given its consistently impressive business and financial performance over the years,” Ayota said.
Regarding the secondary offer for the sale of ordinary shares in MTN Uganda, Ms. Mulinge commented that she was pleased with the outcome that registered a 230% subscription. The oversubscription signaled an appreciation of the Company’s strategy and continued positive performance evolution.
“The increased Fund investment in MTN Uganda, aligns broadly with MTN Group’s objective to broaden local shareholding in the countries it invested in. The offer provided an opportunity to all Ugandan retail and professional investors, including MTN Uganda’s loyal customers, to own a stake in the Company and participate in its future growth,” she said.
MTN Uganda currently has 20,636 shareholders with over 200 smaller pension funds and SACCOs representing millions of Ugandans.