Poor planning for activities sunk NSSF into losses - IGG

Continued from yesterday: What we found out at NSSF - IGG report
Ownership wrangles of the land
The Nakigalala land was not free from encumbrances and there was an ongoing civil suit No 033 of 2013 before the High Court (Land Division) contesting the ownership of the land by Madhvani Group. The family of the Late Prince Yusuf Ssuuna Kiwewa was also claiming ownership of the same land. If NSSF purchases the land in this current state, it is likely to be exposed to endless disputes and costly litigation.

Conclusion
The minister was right to say that the land at Nakigalala had ownership disputes.

Recommendation
The management of NSSF should halt any further processes leading to the acquisition of land at Nakigalala until the ownership disputes over the land are conclusively resolved.

2.1.2 Whether NSSF performance had been declining over the years
It was established that NSSF registered an increase of 14,000 new members between 2019 and 2022. The Fund had a total of 1,517,471 members as at July 2022. 701,000 of these were active (making regular contributions). Between 2015 and 2022, the total annual contributions made by members increased by 116 percent (from Shs688,095,082,000 in 2015 to Shs1,486,439,181,376 in 2022).

 The accumulated contributions steadily increased by 922 percent (fromShs1,659,793,727,000 during FY 2009/2010 to Shs16,961,837,142,000 during FY 2021/2022).

For the period 2012 to 2021, NSSF consistently offered an interest to members of at least 10 percent, with the highest interest of 15 percent in 2018. In 2022, the Fund declared an interest of 9.65 percent, partly as a result of Shs626,098,945,132 it paid out as mid-term access benefits to members following the amendment of the NSSF Act in January 2022.

It was not true that the Fund’s performance had been declining. To the contrary, the performance was good and better than most service sector institutions like commercial banks and insurance companies that registered slow growth and high cost income ratios of above 50 percent between 2017 and 2022. It also performed better than NSSF Kenya. 

A review of the Directors’ reports together with audited financial statements of NSSF Kenya and NSSF Uganda for the period 2017 to 2021 showed that the percentage growth of NSSF Kenya between the FY 2017/18 and the FY 2018/19 declined from 0.137 percent to 0.058 percent while between the FY 2019/20 and the FY 2020/21, there was increased percentage growth from 0.059 percent to 0.135 percent. 

The percentage growth of NSSF Uganda between the FY 2017/18 and the FY 2018/19 declined from 0.26 percent to 0.136 percent while in the FY 2019/20 and the FY 2020/21, there was increased percentage growth from 0.17 percent to 0.173 percent.
There is no justification to support the view that the Fund’s performance had been declining.

2.1.3 Whether the former MD took bribes and commission through waiving of NSSF contributions of workers of the Uganda Railways Corporation, Uganda Broadcasting Corporation and arbitrarily reduced penalties that were to be paid by Tororo Cement.

It was established that:In 2008, NSSF filed a suit in the High Court seeking recovery of unremitted contributions, statutory interest and penalties from Uganda Railways Corporation (URC) for the period 1995 to 2001. During the course of the hearing, the then ministers of Works and Finance intervened in the dispute and the parties entered into a partial consent which was endorsed by Court on February 7, 2013. 

Under the consent, URC acknowledged the under remittance and undertook to pay UGX 4,893,359,606, being due contributions, interest thereon and a discounted penalty. Initially, the total penalty that URC owed NSSF was Shs25,161,283,831. However, the MD waived 94 percent of the penalty following an appeal from the Minister for Finance Planning and Economic Development. This left an outstanding penalty of Shs1,000,000,000.

In 2016, NSSF conducted a compliance Audit on Tororo Cement Ltd which revealed that the firm had NSSF contribution arrears of Shs1,279,954,284 and a penalty of Shs3,460,227,863. 

NSSF and Tororo Cement Limited entered into a settlement deed where it was agreed that the firm would pay Shs1,279,954,284 to NSSF in four instalments and the penalty would be considered for waiver by the MD upon settlement of the payment. 

The firm paid the money as indicated in the deed. However, they had not applied for the waiver by the time of these investigations. So the penalty remained at Shs3,460,227,863.

In 2018, NSSF filed a criminal case in the Chief Magistrates Court of Nakawa against Uganda Broadcasting Corporation for recovery of NSSF contribution arrears, interest thereon and penalty that had accumulated as a result of noncompliance. On September 22, 2021, a consent judgment was entered between UBC and NSSF to pay the outstanding amounts in instalments. 

UBC was supposed to pay Shs4,942,741,170 being unremitted monthly standard contributions for the period of November 2005 to September 2016 and Shs3,749,377,185 as the annual statutory interest accrued on the contributions as at July 2019. It was also agreed that the Fund would waive the accrued penalty of Shs29,150,077,970. As at January 2023, UBC was still indebted to NSSF to the tune of Shs11,691,728,081

Conclusion
Mr Byarugaba waived the penalty of Uganda Railways Corporation by 94 percent upon intervention from the then Minister of Finance. Tororo Cement penalty was not waived because they had not applied for the waiver. The penalty for UBC was not waived because they had not yet paid the outstanding amounts of members’ contributions. It is therefore not true that he waived members’ contributions or arbitrarily waived penalties as alleged.

2.1.4  Whether the Managing Director,    rejected initiatives to scale up registration of new members in Industrial Parks (especially Kapeeka)
It was established that the NSSF registered a total of 137 companies in the various Industrial parks in the country, with a total of 12,535 employees and an average of Shs1,907,000,000 in monthly NSSF contributions. This was on top of the existing contributors of the Fund.

There were 20 entities/factories in Liao Shen Kapeeka Industrial Park. By December 2022, NSSF had registered 16 companies operating in the park, with a total of 1,808 employees and an average of Shs76,171,462 in monthly NSSF contributions. The other four companies in the industrial park were still under construction and not yet operational.

Conclusion
There was no evidence to support the allegation that the MD rejected initiatives proposed by the minister and other officials to scale up registration of new members in industrial parks.
 
2.1.5 Whether previous recommendations by the IGG in respect of the sale of land at Bakuli were not implemented.

The allegations relating to the irregular disposal of land at Bakuli were investigated by the IG under reference HQT/06/05/2013 and a report issued in April 2014. It was established that the land at Plot 434 Namirembe was purchased by NSSF at Shs650,000,000 in 2008 and disposed of at the same price in 2012. Following were the IG recommendations:

i) Mr David Nambale, former Corporation Secretary, should refund the sum of Shs1,570,623 which he spent on personal telephone calls to his spouse while he was attending a training course in the United Kingdom. The said amount should be deposited in the Inspectorate of Government Asset Recovery Account in the Bank of Uganda.

ii) The management of NSSF should explore methods of reducing the expenses incurred on roaming charges when blackberry services are used by the Managers as soon as possible to prevent accumulating heavy bills for the fund.

iii) Telephone usage limits should be set for the top managers of NSSF, including for the use of mobile blackberry services as soon as possible.
iv) The managers of NSSF should plan activities in such a manner as not to cause unnecessary losses to the fund and due to poor planning and uncoordinated execution of activities as was the case when the DMD attended a training program in Dubai in March 2013.

v) The former MD of NSSF, Mr Richard Byarugaba, should be sternly reprimanded for making the decision to replace Ms Kasirye with Ms Ssali to attend the training in Dubai at short notice and without preventing a nugatory expense from being incurred by the Fund as a result of hid decision.

vi) The monetary awards to Mr Rchard Byarugaba, Mr David Nambale, and Ms Geraldine Ssali Busuulwa ordered by the NSSF Board of Directors should not be paid to them unless they are based on the provisions of the NSSF staff Handbook or Law. The decision to pay an award to Ms Muteesi was ultra vires the powers of the Board of Directors; it should not be honoured unless it is justified by law.

 vii) NSSF should release the UNFFE certificate of title in respect of Plot 27 Nakasero road and meet the relevant statutory disbursement required of the fund during the time that it held the title as registered proprietor. This should be done without further delay to enable UNFFE transact its planned activities and prevent NSSF from incurring further costs relating to the outgoings on holding the property as registered proprietor.

viii)  The claims made by UNFFE as costs incidental to or as a result of the preparation of the BOOT agreement to construct Farmers House should then be determined according to the terms of the BOOT agreement and the matter should be settled amicably between the two parties.

ix) The Minister of Finance, Planning and Economic Development should enforce appropriate sanctions against the former Managing Director/ Accounting Officer of NSSF, Mr Richard Byarugaba, for neglecting his duty and failing to ensure that the highest value possible is obtained from the sale of the land known as Block 4 Plot 434 at Namirembe.

x) In future all disposal of land by NSSF should strictly follow the disposal procedures laid out under the Public Procurement and Disposal of Assets Act and Regulations. Sufficient time should also be taken to do proper investigations on assets to be procured or disposed of. The advice given about assets by the legal team should be taken more seriously than it was in the case of disposal of land at Plot 434 at Namirembe.

xi) In future, the management of NSSF must obtain clearance from the Attorney General before entering into transactions such as that in respect of purchase of shares in the UMEME IPO.

xii) Subject to existing laws relating to Pensions Funds and the NSSF in particular, the Attorney General should as a matter of urgency consider and respond to NSSF’s request to be exempted from the application of the provisions of Article 119 (5) of the Constitution as is provided for in Article 119(6), in the process of making quick decisions about investments for the benefit of the fund.
 All the I.G recommendations made in this matter were implemented save for these two:

i) Mr David Nambale, former Corporation Secretary, should refund the sum of Shs1,570,623 which he spent on personal telephone calls to his spouse while he was attending a training course in the United Kingdom. The said amount should be deposited in the Inspectorate of Government Asset Recovery Account in the Bank of Uganda.

ii) The Minister of Finance, Planning and Economic Development should enforce appropriate sanctions against the former Managing Director/ Accounting Officer of NSSF, Mr Richard Byarugaba, for neglecting his duty and failing to ensure that the highest value possible is obtained from the sale of the land known as Block 4 Plot 434 at Namirembe.

It was established that Mr David Nambale who was supposed to refund the money had left the Fund by the time the report was issued.

Conclusion:
There was no evidence obtained to indicate that the Managing Director refused to implement the orders / directives of the Inspectorate of Government. The directive was to be implemented by the Minister of Finance, Planning and Economic Development. The MD had no direct role in implementation of the IG recommendations in respect of the sale of land at Bakuli.
                                           To be continued tomorrow