Governance gaps leave NSSF money at the mercy of vultures

Then National Social Security Fund (NSSF) managing director Richard Barugaba (right)  addresses to some of the people applying for mid-term benefits at Kololo Independence Grounds in Kampala on March 9, 2022. PHOTOs/FILE

What you need to know:

  • Low calibre board members and meddlesome politicians leave workers’ money at NSSF vulnerable as the last piece of our investigation into the Fund shows.  

In early August 2022, the members of the executive board and central executive council of the Central Organisation of Free Trade Unions – Uganda (Coftu) were invited to a meeting, on the 26th of that month. The agenda for the meeting was to nominate two members from the trade union to take up its seats on the board of the National Social Security Fund (NSSF). 
A few days before the meeting, Dr Sam Lyomoki, the Coftu general secretary, wrote to the members to inform them that the meeting had been rescheduled to September 8, 2022. On September 1, 2022, a week before Coftu’s top organ was to meet to pick its nominees, Dr Lyomoki was appointed to the NSSF board. 
Also appointed was Dr Lyomoki’s very close friend, Ms Peninnah Tukamwesiga, for a rare third term on the NSSF board. 

We were not able to establish whether the Coftu meeting eventually took place, or how the trade union picked the two nominees whose names were forwarded to Labour minister Betty Amongi to appoint. 
In just over a year, Dr Lyomoki would be caught up in several allegations of soliciting money from NSSF managers for himself and from the Fund for his trade union. This, and the power fight between Ms Amongi and NSSF managing director Richard Byarugaba have raised fresh questions about the governance of the Fund, the independence of its managers, and the transparency of its investments.
 
Boarding up trouble
Governance is NSSF’s Achilles’ heel. David Chandi Jamwa, the managing director before Mr Byarugaba, is serving a 12-year jail sentence for causing financial loss to the Fund. His predecessor, Leonard Mpuuma, pleaded guilty to the same charge and paid a fine of Shs100 million while his board chairperson, Geoffrey Onegi-Obel was acquitted of the same offence. 
Management failures at NSSF often reflect weak oversight from the board as well as meddling from politicians. Take Mr Jamwa, for example. When he took the reins at NSSF, he was just 36 and bursting with ideas, intelligence and enthusiasm. But he was also shot from the hip – and not only at shooting ranges in Las Vegas – took many risks and came under the influence of people keen to dip into the NSSF pie. 
A look at the calibre of the board members meant to supervise him is telling. When she wasn’t attending NSSF board meetings, Ms Agnes Kunihira could be found behind her typewriter at RVR, the railway concessionaire. Ms Kunihira has since been elevated to Workers’ MP.

Mr Musa Okello, another board member whose highest education qualification was a certificate, could be found at one of the halls of residence at Makerere University where he was a custodian. 
The other board members were Mr Henry Mukasa, a records keeper at Scoul Sugar Factory in Lugazi, Mr Richard Birigwa who was in charge of the laundry at Sheraton Kampala Hotel, and Mr Christopher Kunihita who boasted a certificate in metrology obtained around independence in 1962.

However well-intentioned they might have been, they were not the best qualified to supervise a Fund that, by the time they were replaced, was worth Shs2.7 trillion. 
As the size of the Fund has grown, the calibre of the board members has improved, but not necessarily the governance. Dr Lyomoki, for instance, spent 20 years in Parliament as a Workers’ MP, and is a medical doctor with three master’s degrees. 
Part of the problem is structural. Workers, who contribute five percent of their incomes, have four representatives on the NSSF board; employers pay in double but have only two. The four worker representatives come from the two trade unions but only about 10 percent of the NSSF members identify as belonging to a trade union. 
And while the unions boast membership in the millions, workers MPs are, for instance, picked by an electoral college of fewer than 500 people. Given the opaque nature of nomination noted in the example of Coftu last August and September, almost half of the NSSF nine-person non-executive directors are people picked in a non-transparent manner from a very small set of options.
 

President Museveni (centre) with officials from NSSF and  special interest groups  after a meeting at State House Entebbe on November 11, 2021. 


Political pressure
NSSF’s other pain point is interference from politicians who, notably, often do not have significant financial stakes in the Fund or are already catered for by parliamentary or public service gratuity schemes. 
Political pressure manifests in at least two ways. Formally it manifests in the form of supervision of the Fund. Until 2004 when President Museveni transferred it to the Finance ministry, NSSF was supervised by the Ministry of Gender, Labour and Social Development. In shifting the responsible line ministry, Mr Museveni argued that Finance had a higher capacity to manage the large sums of money in the Fund and a lower risk of corruption. 
During the debate on the NSSF Amendment Bill, MPs proposed to split the reporting lines: Finance would oversee NSSF investments while Gender and Labour would be responsible for policy matters. Mr Museveni warned against the move in a letter to then-Speaker of Parliament Rebecca Kadaga. 

“The proposed arrangement would cause delays in decision-making and create loopholes for corruption,” President Museveni wrote on October 4, 2019. “The Ministry of Gender, Labour and Social Development is represented on the Board of the NSSF. Multiple apex authorities are dangerous for accountability. If things go wrong, whom shall we blame?” Given recent developments at NSSF, President Museveni’s letter was prescient. 
Pressure on NSSF can be felt to come from other centres of power. In her 19-page letter deferring the reappointment of Mr Byarugaba despite the recommendation of the board and the reappointment of deputy managing director Patrick Ayota, Ms Amongi made 10 references to the “chief coordinator of Operation Wealth Creation”, Gen Caleb Akandwanaho, aka Salim Saleh, and only three to Mr Matia Kasaija, the Minister of Finance with whom she supervises the Fund. 
In her letter, Ms Amongi said to create a bridge between farmers and markets, Gen Saleh proposed that NSSF makes a “strategic investment” in the Uganda Grain Council, a membership organisation of private sector grain traders. However, NSSF’s top leadership appeared lukewarm.

“You know the initial response from the managing director and how he dragged on this matter,” Ms Amongi noted in her letter. “If we can allocate Shs15b for staff welfare, Shs220b for operations, $1 million (Shs3.7b) for construction of court as corporate social investment, why are we dragging on this contribution of only Shs20b? Which is a strategic investment proposed by a senior government official! Is there now firm commitment from the managing director? I need his answer.” 
It is not clear whether Gen Saleh’s view was a suggestion or a directive and how binding it was on the NSSF team. We were also not able to establish from the Ministry of Finance, which is responsible for approving investments, what they thought of the proposal. 

Our investigations, however, reveal the backstory. The Grain Council’s 120 members were looking for working capital of about Shs409 billion. They had already borrowed from the Uganda Development Bank, the Agriculture Credit Facility (ACF) at Bank of Uganda, and other sources. Then they approached NSSF. 
NSSF officials were reluctant to invest money in the Grain Council because it was and remains a non-profit entity. Privately, NSSF officials noted the high risk associated with the agricultural sector and noted that the ACF already provided an alternative funding source for such initiatives. 
To respond to the political pressure but also insulate themselves from the risk, NSSF developed a business proposal to set up a special purpose vehicle, Thamani Ya Kilimo (Agricultural Value) with 40 percent shareholding each from the government and NSSF, with the rest of the 20 percent available to other like-minded shareholders. NSSF would, at the right time, list its equity on the stock exchange and exit what is an inherently risky industry. 

However, the Grain Council members rejected the proposal in a November 25, 2022 letter to Mr Ayota, who had led the discussions between the two entities. 
“The board was taken aback by the minute and rather insignificant role the council would be made to play in the ownership and management of Thamani Ya Kilimo, only represented by a single member of the board out of a possible 11,” Mr Henry Kasumba Musisi, the executive director of the Grain Council board, noted in a letter to NSSF. 
“The other very major concern expressed by the board is the fact that we would have participated in the nurturing of an entity with the capacity to practically swallow us in the future, and an entity we have absolutely no control over. For these reasons, the Grain Council expresses serious reservations on going ahead with the establishment of Thamani Ya Kilimo, especially in its current form.”
The borrowers had rejected the terms of the lenders. A week later Mr Byarugaba was gone. Another week on, he was under investigation.

With reporting by Jane Nafula, and support from the Wananchi Initiative.
 
 

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