NSSF net profit drops by Shs156b

Tuesday September 27 2016
fin01pix

Left to Right: NSSF chief investment officer Gerald Paul Kasaato, NSSF managing director Richard Byarugaba and the company’s marketing manager, Ms Barbara Teddy Arimi, address a press conference yesterday at the Fund’s offices in Kampala. PHOTO BY RACHEL MABALA

Kampala.

The National Social Security Fund (NSSF) members are likely to get a lower-interest return on their savings after the Fund posted a drop in net profit for the financial year 2015/16 due to a myriad of factors.

The weak economy, sluggish performance of East African stock markets, depreciation of the Uganda Shilling and election cycle influenced NSSF’s reduced income and profitability.

During a press conference on Monday, the Fund declared after tax profit of Shs491b down from Shs647b in 2014/15 mostly due to a drop in unrealised income because of the fall in the value of shares held in companies. It is from the after tax profit that members are paid and interest is determined.

Unrealised income is a profitable position that has yet to be sold in return for cash, such as a stock position that has increased in capital gains but still remains open.

Mr Richard Byarugaba, the NSSF managing director said 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.

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In Uganda, the economy grew at a slower rate than projected reflecting overall distressed environment of low investor confidence.

“Uganda’s economy grew by just 4.6 per cent for the financial year 2015/2016, lower than the projected growth of 5.8 per cent at the beginning of the year.”

“In December, it was downgraded to 5 per cent by the Bank of Uganda, citing the slower growth of major markets and declining global commodity prices,” Mr Byarugaba said.

Uganda’s economy was particularly affected by the election cycle that slowed the flow of Foreign Director Investment (FDI) in the country. Additionally, the Shilling also depreciated by almost 20 per cent during 2015/16, which pressured the Central Bank to adjust the lending rate upwards in order 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, negatively affecting Ugandan businesses and the economy. Since then, the Shilling has stabilised,” he said.

Despite the fall in net profit, the income of the Fund grew 21 per cent to Shs707b in 2015/16 because of the growth in return from government debt.

As interest rates of private sector debt rose, the government debt yields. 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.

On Friday, the Finance minister, Mr Matia Kasaija, is expected to announce the interest rate to members, as the NSSF Act stipulates.

Mr Byarugaba said the return will be declared based on the performance of Fund during the financial year.

The Fund is worth Shs6.58 trillion, mainly driven by continued rise in both member’s contributions and investment volumes up from Shs5.5 trillion.

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