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NSSF managing director Richard Byarugaba

NSSF posts lowest growth in contributions since 2010; members face single-digit interest rate

“Economic slowdown also had a ripple effect on the Fund’s business, and contributions were affected. Contributions grew at 5.2%, the lowest level in the last 10 years,” the managing director said.
posted onSeptember 24, 2020

The National Social Security Fund (NSFF) is among government entities whose performance was hit by the economic downturn from the Covid-19 pandemic.

The Fund’s managing director Richard Byarugaba announced Thursday that it might not be able to pay double-digit interests after recording the lowest contributions in the past 10 years.

“Economic slowdown also had a ripple effect on the Fund’s business, and contributions were affected. Contributions grew at 5.2%, the lowest level in the last 10 years,” the managing director said.

“Member contributions increased by only 5% from Shs1.22 trillion to Shs1.28 trillion. The marginal growth is attributed to the amnesty we offered to businesses that were affected by the Covid-19 pandemic,” he explained.

“To put into context, the Fund deferred a total of about Shs22 billion.” In the previous year, there was a 17% growth in contributions collections from Shs1.049trn to Shs1.208trn, driven by growth in membership and voluntary contributions.

According to Byarugaba, NSSF’s Assets under Management (AUM) increased by 17% from Shs11.3 trillion to Shs13.38 trillion as of June 30, 2020. In the previous year, AUM increased by 13.1% from Shs9.98trn to Shs11.3trn on June 30, 2019.

NSSF has over the years invested in three classes of assets, that is, Equities, which take               15.1% of the investment share, Real Estate (7.7%) and Fixed Income (77.2%).

But the performance of these assets was affected by a decline in economic activity in the East African region where the Fund has invested.

For instance, in Uganda, the economy shrunk by 3.2% in the second quarter of 2020 and the economic growth rate projections dropped to 3.0% to 4.0% in the financial year 2020 to 2021, compared to 5.2% the previous Financial Year 2018/2019. 

The slowdown was mainly attributed to the effects of the COVID-19 pandemic and the subsequent lockdown that affected economic activity. Growth in the industry sector was 2.3%, services (3.6%) and agriculture (4.2%).

The Uganda Stock Exchange lost 9.8%, the Nairobi Exchange lost 8.0%, Rwanda Stock Exchange lost 10.4%, only the Tanzania stock market gained 5.6%. This affected the Fund’s equity holdings across the region.

During the lockdown, the money paid in benefits to qualifying members increased by 8% from Shs450 billion in 2018/2019 to Shs486bn in 2019/20, as most claimants opted to defer their claims.
In the previous year, said Byarugaba, the amount of money paid in benefits increased by 25% from Shs360 billion in 2017/2018 to Shs450bn in 2018/19. 

That being said, the MD revealed that the economic downturn in Uganda and East Africa due to the impact of the Covid-19 Pandemic lockdown might see the Fund fail to pay members a double-digit interest rate.

“For purposes of contextualizing this situation, the Fund last paid a single-digit interest rate 9 years ago in Financial Year 2010/2011,” he said.

He, however, urged members to wait for the actual rate the Minister of Finance will declare at the upcoming Annual Members Meeting. 

He also revealed that the Minister will declare a rate that is “very competitive compared to what Funds of our size in the region can offer” and it will be “Higher than the 10-year average rate of inflation, which implies that the Fund is adding value to members’ savings”.

The Minister of Finance, Planning and Economic Development Matia Kasaija will declare the annual interest rate on Monday, September 28, 2020, at the Fund’s Annual Members Meeting. This is in line with Section 35 (2) of the NSSF Act.

Last year, the Fund paid 11% interest rate, and 15% the previous year. Due to COVID-19 Standard Operating Procedures (SOPs), the Fund will hold a virtual meeting. NSSF members will participate online and via live television.


On the revenue side, the Fund’s revenue increased by 17% from Shs1.25 trillion in 2018/19 to Shs1.47 trillion as of June 30, 2020, driven by growth in interest income as a result of exposure to high yielding fixed income investments and rental income.

However, dividend income reduced by 19% from Shs77 billion as of June 30, 2019, to Shs62 billion as of June 30, 2020, due to the cancellation of dividend payouts by commercial banks.

In the previous year, according to Byarugaba, total revenue reduced by 44% to Shs891 billion in 2019 from Shs1.6 trillion in 2018, affected foreign exchange and equity positions value reduction of a reduction of Shs402 billion.

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