It is a difficult conversation. But no matter which side you view it from, you must focus on reaching an agreeable conclusion.
True, these are not normal times. Covid-19 has turned everything upside down and created serious uncertainties that need hard thinking and thoughtful evaluation.
Indeed, for NSSF, it is a catch 22 that must carefully be discussed without prejudices. To inform, the debate, two issues – the wider implications and the times we are living in – must not be discussed in isolation.
Otherwise, to discuss the proposed 20 per cent payout of members’ savings, oblivious of the current environment and wider implications, will not shape an informed debate.
Obviously, the proposed payout, which has been gaining traction since it was first proposed in March by a section of the public, seems, for valid reasons, to be an unpopular conversation in some quarters.
Richard Byarugaba, the National Social Security Fund (NSSF) managing director, has already indicated it “will not address the wider need for relief yet it will leave irreparable damage on the economy”.
Whereas NSSF says it has the capacity to mobilise the money to implement the proposal, in case it is passed by Parliament, it will come at a huge cost.
“Yeah, we can [mobilise the money] if the law is passed. We would pay members what is due to them but this would come at a very huge discount,” Byarugaba told Daily Monitor last week, noting the Fund would have to incur losses by liquidating some of its assets and monetary instruments.
Byarugaba had, in a May 8 letter to Finance Minister Matia Kasaija, indicated, the Fund would on the extreme need to mobilise Shs3.4 trillion, of which Shs2.6 trillion would go towards implementing the 20 per cent payout while Shs800b would pay retiring members.
The letter also breaks down a number of issues and shows how the payout would impact the larger economy and the finance system.
Key among the aspects that would be at risk are interest rates and inflation, which would move northwards, access to private sector credit, foreign exchange and stock markets stability.
All these, which are currently facing serious headwinds, have wider ramifications on the economy and according to Byarugaba: “Whatever form the Fund [takes to] meet liquidity requirements ... would severely hurt the economy”.
However, Geraldine Ssali, the former NSSF managing director and an accountant, who authored an opinion, does not agree with the narrative of “hurting the economy”.
Actually, she takes the debate in a totally new direction, arguing “members were not thinking about the economy when they were saving”.
The opinion, she says, was authored on the request of an MP, who had sought to tap into her understanding of NSSF to inform himself and others debating this matter.
Some of NSSF’s members, she argues, have not been working, others have lost jobs while others have been naturally evicted by other catastrophes such as flooding. Therefore, she says, such members expect some goodwill, especially because these are not normal times.
“This is the time when, for whatever reason, the Fund must work for its members. What NSSF should be saying, is, let us look at the possibilities. Let them not just dismiss what members are saying. Members were not thinking about the economy when they were saving. Let NSSF show some goodwill. You can speak all the good English and financial expertise but this is not the time,” Ms Ssali, who exited NSSF in 2017 after the board had declined to renew her contract over performance related issues, says.
The former deputy managing director, who also acted as the Fund’s managing director for sometime, also fought a number of court battles with NSSF, some of which resulted into compensations in her favour.
“From a human perspective alone, when I weigh the cost [to the economy and NSSF] .... against the need to bail out Fund members … I feel the very purpose of the Fund’s existence has been obliterated,” she wrote in an opinion that was widely circulated.
However, her views, which have been echoed elsewhere, are not agreeable to government and according to Kasaija, the payout will only make the current economic shocks worse.
At the weekend, Kasaija told Daily Monitor that whereas the payment is possible, it is no appropriate.
“I support my MD [NSSF managing director Richard Byarugaba] 100 per cent. We have examined that position. With due respect to my former [NSSF] deputy MD [Geraldine Ssali], I think she is not getting the thing [sic] right. It is not a question of being possible [to payout the 20 per cent] but what will happen after that? By doing [sic] the 20 per cent, you will have very serious financial implications for the country and the Fund,” he says.
Close to two weeks ago, Kampala Central MP Muhammad Nsereko moved a motion in Parliament, proposing that NSSF members be allowed to access at least 20 per cent of their savings due to the impact of Covid-19. This, had earlier been proposed by a section of business people and politicians key among them former FDC presidential candidate Dr Kizza Besigye.
The proposal is not part of the NSSF Amendment Bill, which is currently being discussed by Parliament.
The Bill proposes midterm access as well as putting in place provisions that allow NSSF to create products such as employment, education and housing benefits, among others.
And to Byarugaba, Parliament should focus on the amendment Bill and not the 20 per cent payout.
However, the National Organisation of Trade Union (Notu), which also has representation on the NSSF board, argues differently, saying that the Fund needs, although on a case-by-case basis, to look into how it can help members that have been affected by Covid-19.
“You know, Wilson Owere, the Notu chairman general, says: “It is not only the 20 per cent. We started thinking of how NSSF can be made relevant to its members, the owners of the money and that is why we put in reforms such as benefits for unemployment ... by all standards NSSF is social security, it is supposed to improve life of its members. We don’t want NSSF to be stagnant and only befit government. We want NSSF to think outside the box,” he says.
Therefore, he argues, the 20 per cent payout is possible because it is backed by research.
However, Daily Monitor could not independently verify whether there is such a research.
“At first we had proposed 30 per cent but we did some actuaries and adjusted. The 20 per cent has safeguards, it is not that everybody will go and get the money,” Owere says and notes that for anyone to access the money, that is if the proposal is passed, he or she must fulfill certain conditions key among them being above 45 years and having worked for 10 years.
However, to Prof Augustus Nuwagaba, a consultant on economic transformation, such suggestions only seek quick fixes, which is totally outside the NSSF mandate.
“NSSF is long term, it is never for short-term fixes. Fine, one would understand, we have had problems of Covid-19, but NSSF money is a long-term safety net,” he says, and notes that any substantial draw down, would impact interest rates, inflation and would create problems for NSSF among them penalties for premature exit of contractual obligations.
The Shs13 trillion, Prof Nuwagaba says, is just a balance sheet and much of it is invested here (Uganda) and abroad (Kenya).
View from a banker
According to Mathias Katamba, the dfcu managing director, whereas the advocates of the payout have valid arguments, it is important to listen to the managers of the Fund.
“What are the managers saying? I would not at the moment want to discuss a subject that has no sufficient bearing. I have heard different suggestions being thrown around. But on the whole, we all want what is best for our country and our institutions. The virus will go but you will want our institutions to survive through while you will also want members to continue contributing,” he said.
Additional Reporting by Dorothy Nakaweesi