The National Social Security Fund (NSSF) has told members that it will pay lower interest rate this year compared to 15% paid out last year.
This is after the Fund’s holdings in all foreign exchange markets and its equity positions accumulated to an unrealized loss of Shs402bn as at June 30th 2019.
Addressing the press yesterday at the Fund’s head offices in Kampala, Richard Byarugaba, the NSSF Managing Director attributed the Shs402bn loss to poor performance of East African stocks.
“During the year, the East African stock markets suffered significant losses in value. The NSE lost 14%, the USE lost 10% in Uganda and Tanzania plummeted by 21%,” Byarugaba said.
He added: “We believe the main driver was as a result of foreigners remaining net sellers on the back of global uncertainty regarding trade wars, US interest rates and Brexit. However, other factors like the policy uncertainty and slowed economic activity in Tanzania exacerbated the sell offs.”
He however noted that this is “just a slump in the market and that as a long- term investor these downturns shall recover.”
Additionally, long-term bond yields dropped with the 15-year moving from 17.75% at the start of the year to 15.85% as at the end of June 2019.
“This was significant for the Fund, given that we hold over 70% of our total investment portfolio in long term bonds,” Byarugaba said.
He added given the unimpressive performance this year, the Fund will not match the interest rate paid the previous Financial Year 2017/2018.
“As we await the declaration by the Minister of Finance, Planning & Economic Development, our members should therefore expect a reduction in the interest rate this year compared to last year,” he said.
He added: “Our members should be confident in the health of the Fund. In the short, medium and long term, the Fund remains financially stable and growing. The Fund can withstand any shock in the economy, given our aggressive but prudent investment approach and our investment diversification strategy.”
The amount of money paid in benefits increased by 25% from Shs360bn in 2017/2018 to Shs450bn in 2018/19.
The Average Benefits Turn-Around-Time 2018/19 remained flat at 8 days. The increase in benefits is attributed to both an increase in the average payout and members paid.
Further, Cost of Administration improved slightly from 1.31% in 2017/2018 to 1.28% in 2018/2019 with the cost income ratio remained flat at 11.6%, while Customer satisfaction slightly dipped by 1% from 85% in 2017/2018 to 84% in 2018/2019.
There was 17% growth in contributions collections from Shs1.049 trillion to Shs1.208 trillion.
“The growth in contributions was driven by growth in the economy which increased the new members registered, the historically competitive performance of the Fund which is attracting voluntary contributors and overall improvement in compliance,” Byarugaba said.
