Uganda's National Social Security Fund Achieves Historic 22.53% Return

The National Social Security Fund (NSSF) in Uganda has reported a historic 22.53% return on investment, amounting to Shs5.44 trillion, up from 13.5% last year. This significant increase has garnered attention from the market and stakeholders. According to NSSF Managing Director Patrick Ayota, the Fund's assets under management rose 26% to Shs32.8 trillion, and total income rose 85% to Shs6.51 trillion. This performance is a substantial improvement compared to the industry range of 12-15%.

The NSSF's achievement can be attributed to various factors, including interest from government bonds, which brought in Shs3.49 trillion, and unrealized gains of Shs2.62 trillion, primarily from revaluing listed shares as East African stock markets rallied. The Uganda Securities Exchange index rose from about 1,288 to 2,064, and Tanzania's index climbed approximately 72%. Ayota also credited the growth to investments in banking, telecoms, and breweries, as well as the weakening of the shilling.

The NSSF's performance sends a signal to investors that the equities market is alive and presents opportunities for growth. The Fund's strategy to 2035 targets 15 million savers, and with 3.6 million registered members, about 2.7 million of whom have balances, the NSSF is poised for expansion. A 22.53% headline return is seen as a strong advertisement for voluntary saving, encouraging more Ugandans to save with the Fund.

However, experts caution that part of the NSSF's return is attributed to paper gains, which reflect changes in the value of investments rather than actual cash in hand. The payout of Shs5.44 trillion includes Shs2.62 trillion in unrealized gains, mainly from share revaluation. This means that if markets fall, those gains can shrink, and the return may decrease. Therefore, the NSSF's performance should be viewed with a nuanced understanding of the market dynamics.

The NSSF's achievement has significant implications for competitors in the market, including private pension schemes, unit trusts, and SACCOs. These institutions will need to explain their performance in comparison to the NSSF's 22.53% return. The Fund's success may drive healthy competition, pushing other institutions to improve their performance and offer better returns to their clients.

The NSSF's growth has also attracted attention from politicians, with some leaders expressing interest in utilizing the Fund's resources for infrastructure projects. General Tumukunde emphasized that the Fund's resources should be used to turn the economy around, citing potential investments in government infrastructure projects, including the Kampala-Jinja Expressway. Savers must remain vigilant, ensuring that their pension funds are used effectively and efficiently.

In conclusion, the NSSF's historic 22.53% return on investment is a positive signal for the market, demonstrating the potential for growth and returns on savings. While there are nuances to consider, the Fund's performance is a testament to effective management and diversified investments. As the Fund continues to grow, it is essential to maintain discipline, transparency, and a focus on the needs of its members.

Key points

• The NSSF achieved a record 22.53% return on investment, totaling Shs5.44 trillion.
• The Fund's growth is attributed to investments in government bonds, equities, and other sectors.
• The NSSF's performance may drive competition in the market, pushing other institutions to improve their returns.