KAMPALA, UGANDA – The National Social Security Fund (NSSF) here is set to step up real estate investments that will create some 2,000 jobs to give a better return on savings to its members.
Interest in the lucrative real estate sub-sector is part of the fund’s five- year strategic business plan announced last Thursday by the board chair, Mr. Edward Gaamuwa and the managing director, Mr. David Jamwa at a lengthy news conference.
“A number of real estate projects have been revitalised….my board is determined that all these projects move on. It is through projects that we shall be able to give a good return to our members,’ Gaamuwa said at the fund’s Kampala head office.
With prime land scattered across the country, the fund is looking to construct 5,000 housing units, 16 ultra modern commercial buildings and some US$60 million (Ush104.7 billion) into mortgages.
The revelation means that chances are now high that the botched Nsimbe Housing project for some 4,000 housing units on the Kampala-Masaka highway would be pursued to the end.
The project was suspended after irregularities were uncovered involving NSSF’s old board, top management and the contractor, Kenyan based Mugoya Construction Ltd. President Yoweri Museveni subsequently disbanded the board.
NSSF has over the years destroyed the value of savings to its members in real terms by consistently paying interest to members that is lower than inflation.
Of Uganda’s 11 million working labour force, only 250,000 are covered by NSSF and 300,000 by the government’s pension scheme.
“If we can not pay an interest rate that is at least the level of inflation, then we are destroying the value,” Jamwa said.
Cognizant of this, the fund will commencing this year increase the interest on members’ savings by 100 basic points annually from the current 7% to 12% over the next five years.
Jamwa said that it was not prudent for the Ugandan worker to access their retirement savings at the age of 40 years and insisted on the 55 ceiling.
“If the withdrawal age was ever reduced to 40 years, then in four years, NSSF would liquidate itself at a huge loss, as close to 80% of its members would be eligible for withdrawal,” Jamwa said in defence of the age ceiling.
Statistics from NSSF shows that while Ugandans only save 6% of their income, neighbours Rwanda, Tanzania and Kenya save about 44%, 29% and 50% respectively.
Of Ugandan’s 6% savings, 0.3% come from voluntary savings, 0.7% mandatory staff savings scheme and the 5% balance is NSSF. On average, Ugandans save Ush19,833 per month ($11.36).
Jamwa, labelling private funds and investment managers as ‘stone throwers’ said that their call for liberalising the pensions sector was not the solution to promoting savings in the country.
“The investment fund managers are obviously ecstatic about this thought as they wrongly believe that, on liberalisation, all mandatory contributions to NSSF averaging about Ush170 billion annually will simply flow to them.
What will actually happen, evidenced by our very low, almost none existent savings rate, and given the extremely high Ugandan marginal propensity to consume, this money would be consumed by the contributors.”
Not done with them, Jamwa continued: “Investment and fund managers should have no business in targeting the mandatory last line of financial defence cash flows for their own selfish ends at the expense of workers’ social security.”
Efforts to get a comment on record from any fund manager by press time were futile.
With a new IT system due for installation at NSSF within the next six months, turn around time for processing members’ benefits will fall to 21 days from the current 180 days.
The strategic business plan that will among others address the IT system, outsourcing, obtaining withholding tax exemption, operations re-engineering and amendment to the pensions act was authorised by the board and the finance minister.
