Declining stock market value costs NSSF Shs48 billion
Posted Monday, February 8 2016 at 02:00
Spill-over. Different investors in Kenya have seen shares drop too.
Kampala. The declining stock market value on the Uganda Securities Exchange (USE) and Nairobi Securities Exchange (NSE) has affected the performance of National Social Security Fund (NSSF) in the first half of 2015.
In its half year results to December 31, 2015 published last week, the fund revealed a paper loss of Shs48b from a profit of Shs108.5b over the same period in 2014.
NSSF booked this as a paper because it is the value of the assets that have fallen and the fund has not sold the shares at below market price.
Mr Richard Byarugaba, the managing director NSSF told Daily Monitor that the unrealized loss was a result of their stock holding in listed companies declining in value.
“This decline in the market value is captured as an unrealised loss on our portfolio. It must be understood that market movements are cyclical and as markets recover, the value of the portfolio increases,” Mr Byarugaba said, adding that the fund is in a strong financial position and will stay that way.
The NSE-20 share index in 2015 alone was down 23 per cent whereas NSE All-Share Index, declined 12 percent over the same period.
The Nairobi market did not affect NSSF alone as Business Daily, a sister newspaper to Daily Monitor in December 2015 reported that 14 prominent billionaire investors in Kenya had seen the value of their shares drop by KSh27.3b (Shs925b).
The value of NSSF’s shareholding in investment firm, Centum dropped from Shs8b in 2014 to Shs6.7b in 2015. In Uganda, the USE All-Share Index dropped by 8 per cent in 2015. The value of shares NSSF holds in Stanbic Bank and Uganda Clays dropped from Shs35.6b and Shs13b respectively to Shs33.5b and Shs10b, respectively.
Mr Byarugaba further pointed out that an increment in the provision for payment of member interest also contributed to the loss.
NSSF has made a provision of Shs253b compared to Shs204b the same period in 2014.
Overall, the fund has recorded a 22 per cent growth in assets from Shs4.94 trillion in December 2014 to Shs6 trillion as of December 2015. Additionally, member funds also grew by 20 per cent from Shs4.91 trillion in December 2014 to Shs5.98 trillion in December 2015.
Mr Byarugaba describes this as good performance, “a result of improved investment portfolio coupled with a strategic rebalancing of investments from short-term commercial paper to medium and long-term government paper.”
NSSF increased the government securities investment from Shs2.8b in 2014 to Shs3.8b by the end of 2015.
Interest returns on government securities have been on the rise since the start of 2015, which has pushed NSSF’s income to Shs270b from Shs230.7b.
“This performance puts NSSF in a position to pay out a competitive interest rate to its members at the end of this financial year. It also signifies that the Fund has the ability to continue paying out benefits to retiring members as and when they qualify,” Mr Byarugaba explained.
Fixed Assets. Fixed income assets went up to Shs4.5b in 2015 from Shs3.7b in 2014
Real estate. Real estate assets declined to Shs445.3b from Shs445.7b as a result of the depreciation of the value of land in Lubowa.
Investments. Equity investments rose to Shs970b from Shs506b due to the purchase of additional shares in KCB, Equity Bank and Tanzania Breweries.
Assets. Other assets rose to Shs70b from Shs56b.