The only way a managing director can
protect their job at the fund is by sitting on their arms and doing nothing
Early this
year, the National Social Security Fund (NSSF) bought shares worth Shs 52
billion in an Initial Public Offering by Umeme, the electricity distributor in
Uganda. In response, the Central Organisation of Free Trade Unions – Uganda
(COFTU) and the National Organisation of Trade Unions (NOTU) have launched a
complaint to the Minister of Finance, Maria Kiwanuka. The complaint is veiled
blackmail that threatens “a series of actions beginning March 1, 2013” if she
does not accept to meet with them. In short, COFTU and NOTU are saying that for
NSSF to invest, they must have a say.
Almost 90
percent of people who contribute to NSSF are non-unionised workers. I would
have expected the president of Uganda to defend the interests of the majority
against this loud organised minority. Indeed, the unions nominated to NSSF
individuals who cannot qualify to sit on a board of a major financial
institution. However the Central Bank Governor, Emmanuel Tumusiime-Mutebile,
accepted them under political pressure.
As I write
this article, NSSF has a portfolio of nearly Shs 3.1 trillion. They collect
about Shs 2.1 billion per working day, making it Shs 50 billion per month. Of
this, 82 percent is invested in short term fixed income assets – government
bonds and fixed deposit accounts in commercial banks. Six percent is invested
in equities i.e. shares on the Uganda Stock Exchange (USE) and about 12 percent
in real estate. If a pension fund in any other country in the world had such a
portfolio mix of its investments, the managers and the board would be fired
immediately.
As a pension
fund, NSSF has long term liabilities to its subscribers. For example, someone
who graduates from university at 22 and begins working and saving with NSSF can
only get their money at 55 years i.e. after 33 years. To ensure that such a
subscriber’s long term savings have a good and reliable return, NSSF is
supposed to match such an obligation with a long term investment. Yet as seen
above, 82 percent of total NSSF assets are short term investments that are not
even cushioned against inflation. Consequently, over the last 10 years
(2002-2012), NSSF subscribers have earned a real interest (interest earned
minus rate of inflation) of only one percent.
I used to
think that NSSF troubles emanate from its internal management dynamics. Over
the years, I have learnt that the internal problems are secondary. NSSF’s
biggest problems emanate from its external environment i.e. politics. Because
it is controlled by the government, this gives room for every Tom, Dick and
Harry who can leverage either public opinion or the powers-that-be to arm-twist
NSSF. The problem is not just the powerful money barons with behind the scenes
influence. The other problem is a collection of ordinary but ill-informed
people who have the power of public opinion (legislators, journalists and our
chattering class) or the vote (trade unions).
Hence the
only manager at NSSF who can succeed at their job without blemish is one who
does nothing. Thus, if an NSSF MD collects our savings and buys treasury bills
and bonds and puts the rest of the money in fixed deposit accounts in
commercial banks, he would never get into trouble. He would only need to ensure
that the board members, especially those representing the unions, are taken
good care of i.e. their sitting and other allowances are paid regularly,
promptly and generously.
For example,
since David Jamwa left NSSF almost five years ago, the fund has not purchased
anything of value – except Umeme shares. And now it is very possible that the
current MD, Richard Byarugaba, may lose his job over it. This cannot simply be
due to internal corruption. Neither can it be because of impunity i.e. lack of punishment
for previous misdeeds. Every former NSSF MD or board chair has left the Fund
amidst allegations of corruption leading to criminal prosecution, spending time
in Luzira and loss of reputation.
From Abel
Katembwe to Yolamu Barongo, Leonard Mpuma to David Jamwa, the story does not
seem to change. Byarugaba has been the most cautious and equally the one who
has spent the longest time trying to resolve investment issues.
It has taken
more than ten years since NSSF bought land in Lubowa, five years since it
purchased Temangalo land, 20 years since it acquired the Lumumba Avenue plot
and another nine years since it bought Nsiimbe land. All of them have been
under negotiations for development without ever succeeding. Any purchase of
substantial real estate by NSSF always leads to investigations, political
contestations and the eventual fall of the MD and board. This is not because of
the corruption. That is an excuse – if at all. The problem is political
fractionalisation.
I see this in
the United States. There, vested interests generate political contestation
along partisan lines on almost anything and everything the federal government
tries to do. Consequently, it took the richest country in the world 70 years to
pass major healthcare legislation giving its indigent citizens health
insurance. And even then, the matter was resolved by the Supreme Court – and
the deciding vote, the Chief Justice made it clear, was political
considerations.
NSSF is a
financial institution like commercial banks. The only difference is that we are
all mandated by law to save with it and it holds our savings for a long time.
When Crane Bank or Barclays are lending money or buying shares they do not seek
the approval of the minister of Finance or PPDA. How can NSSF be required to seek
a minister’s approval or the consent of unions to buy publically listed shares?
How can it compete in the market with such controls? The best solution is to
avoid state control of anything of value. Most value generating assets should
be owned by the private sector. So privatise NSSF!
No comments:
Post a Comment