NSSF savings interest earning drops to 12.3 per cent

Finance minister Matia Kasaija (3rd left) declares an interest earning of 12.3 per cent for savers with the National Social Security Fund (NSSF) at a press briefing on Friday. Looking on is NSSF MD Richard Byarugaba (2nd right). Photo by Stephen Otage

What you need to know:

  • NSSF suffered at least Shs73b in foreign exchange losses as a result of the weak shilling.
  • The Fund had slightly outgrown the Uganda market and there is need to have more investment products accepted.

Kampala – Finance Minister Matia Kasaija has declared an interest earning of 12.3 per cent for savers with the National Social Security Fund (NSSF), a decline from 13 per cent in the last financial year.
“This rate is above the 10-year average rate of inflation at 8.85 per cent. I am pleased to note that despite the tough economic environment, the Fund has performed well as reflected in the interest rate that will be paid to members,” Mr Kasaija said at a press briefing this morning. The total interest payout will total Shs606b, up from Shs515b due to the higher number of savings. The amount will be credited on member accounts based on their balances as at July 1, 2016.

The decision of the minister to slash the rate was informed by a Shs150b drop in the Fund’s after tax profit. On Monday, the Fund revealed that the after tax profit declined to Shs491b from Shs630b in 2014/15 on account of a slowing economy, depreciating shilling and a decline in the value of the stock exchanges in Kenya, Uganda and Tanzania. NSSF is restricted to only invest in East Africa.
The total interest payout will total Shs606b, up from Shs515b due to the higher number of savings.

The Uganda Securities Exchange (USE), the Nairobi Securities Exchange (NSE) and Dar-es-Salaam Securities Exchange (DSE) declined by 14.5 per cent, 15 per cent and 9 per cent, respectively, in 2015/16. The Uganda Shilling also depreciated by almost 20 per cent during 2015/16, which pressured the Bank of Uganda (BoU) to adjust the lending rate upwards to avoid inflationary pressures.

“The Uganda shilling was volatile for most of the last financial year, depreciating at a much faster rate than other currencies in the East African region. This meant that the value of our assets declined during the year,” the fund’s managing director Mr Richard Byarugaba said.

NSSF suffered at least Shs73b in foreign exchange losses as a result of the weak shilling.
The reduced the monetary value of the shares held by NSSF in the listed companies despite the higher dividend earnings from the same companies.
For instance in Uganda, the government borrowed at about 23 per cent during the financial year 2015/16, compared to rates of about 16 per cent in 2014/15. Mr Byarugaba pointed out that government securities remain a safe investment because they are low risk.

Additionally, Mr Byarugaba said the Fund had slightly outgrown the Uganda market and there is need to have more investment products accepted.
“We would like to see more infrastructure bonds at tax free rates. We would like to see companies also issue corporate bonds that we can buy. Government of Uganda should also issue more bonds because this is how the Fund can help the economy to grow,” he added.