By Silvia Nyambura
Richard Byarugaba’s previous term as Managing Director at the National Social Security Fund [NSSF] can simply put be said to have been eventful. In October 2014 the Minister of Finance Maria Kiwanuka reappointed him for the position. This was after finishing his first 3 year term since August 2010. In this interview with The CEO Magazine, he spells out his plans for his second tenure.
You are back at the fund a year after you left. How is the whole experience of being back?
It feels good to be back. The Fund is still very strong. Compliance levels continue to be high above 70 percent. The Cost Income Ratio is below 15 percent while Fund cost to total asset under management continues to come down at 1.3 percent. The Fund value has touched Ushs5 trillion and our customers continue to enjoy the experience. The investments we have made continue to perform well despite the turbulence in the international and regional markets. We are on course to give our members a return that is in line with our target of offering inflation plus which is a real rate of return on their savings. For this, I would like to appreciate the work done by my Deputy Geraldine Ssali as well as the management, board of directors and staff for having managed to keep the Fund going for the 11 months I was away despite the challenging environment.
What are the key issues you have identified to address in the next three years of your tenure?
I believe we have two main issues to deal with. The first one is on the Collection side. We have been very successful with the Relationship Management model which involved offering amnesty to employers who have not complied and also allowing the employees to whistle blow on the employers. That combined with our ability to offer our members a point of contact within the Fund to manage their affairs has enabled us to drive compliance levels from below 50 percent when I first joined the Fund. We however think that figure has peaked around the 70 plus percentage point and we believe there is slightly more scope to drive the number on compliance higher. We are looking at targets of 90 percent plus. We plan on doing this by increasing audits to non-complying companies especially in the informal sector and in the SME space where they fall near the threshold of 5 employees.
The second area of focus is on the investment side and this involves two specific things. One is to continue to diversify our portfolio and reduce concentration in the fixed income space. We will increase our exposure to the equities asset class specifically within the East African region. There continues to be very good opportunities in the Kenyan market as well as new ones in the Tanzania market where their capital account has been opened. This means that we will be looking for equities quoted on the Dar es Salaam Stock Exchange and also in the private equity space specifically in the energy sector in Kenya, Uganda and Tanzania.
The other area of concentration within the investment is on the Real Estate where we continue to have procurement challenges when bringing contractors on board. We have outsourced the procurement process to third party providers in conjunction with the PPDA. We believe that bringing on board of these third party providers will ensure that we can go to the market to contract providers of construction services to enable us bring to market the three main projects of Pension Towers, Lubowa Housing project and Temangalo Housing project.
What is your projection for the Fund in 2015?
We project to achieve the mark of USD 2 Billion in assets under management and a return on investment that is at least 2 percentage points above the rate of 10 year average inflation. We believe that is achievable within the course of this financial year. Some of the key investments we will implement specifically on the real estate side include starting Lubowa Housing Project, Mbuya phase 2 and getting a contractor to start on phase 2 of Pension Towers.
The fund’s investments evoke varied reactions and some seem to stoke controversy. What explains these reactions and how do you plan to evade such controversies in the future?
Investments like these tend to be complex transactions that might not be well understood by all stakeholders. We believe our role as management of the Fund is to try and explain what the risks are and what mitigating factors we have in place when we make the said complex investments. I believe this role has not been played very well in the past and this is something we want to rectify in the future. We shall be proactive to ensure all stakeholders including the general public, our members, the board, Ministry of Finance, the IGG, PPDA and the Solicitor General are all brought on board. This will ensure we obtain all approvals from all involved parties before making investment decisions. This is the only way to mitigate the so called controversies.
You have said, in the past that the investment environment you can play in is quite limited. How do you plan to overcome this challenge?
The environment is still quite limited especially when considering investing in Uganda. The Fund is now worth about Ushs5 trillion and we invest in 80 percent of the companies listed in the Uganda Stock Exchange (USE). We hold over 40 percent of all government treasury bonds as well as 15 percent of all deposits in commercial banks. If you consider those numbers, we are the “giant in the room” and we believe our exposure to investment in Uganda has limited space. Fortunately, the Ministry of Finance has allowed us to invest at least 25 percent in the East African Region which is a diversification strategy. The figures as at Q4 2014 indicate that we have invested at least 20 percent outside Uganda but within East Africa.
Security of members’ savings is probably the most important issue. How can you give them assurance that their savings are not only safe but also growing?
The assurance to our members is that we are very prudent and conservative when investing. As a matter of fact, 99 percent of the Fund is invested in interest earning assets, 81 percent of which is in Fixed income, mostly government treasury bonds which are very safe. If for some reason, the Fund were to wind up today, we would be able to repay all our members plus their interest provided for in their account. The Fund’s investment policy also rhymes very well with the recently issued guidelines from the Uganda Retirement Benefits Regulatory Authority (URBRA) which in turn is based on best international practice which we already follow.
The liberalization of the Pensions Sector has sparked mixed reactions from various stakeholders. Most however agree it is inevitable. How ready is NSSF for this?
This move is very much welcome. NSSF has been constrained in terms of the products we can offer. A lot of our customers complain that they cannot withdraw part of their savings, get medical insurance or get housing benefits. The Liberalization Bill will enable us provide more opportunities in terms of products for our customers in addition to allowing us to be more innovative in the space of pensions as opposed to providing just a lump sum payment. We believe NSSF will be ready for business when the law comes in place. The other advantage is there is an option to provide competition which is good for innovation as well as for driving better customer service.
You were part of the reform process that has seen the Fund become more innovative. Should we expect to see more of that?
We have already begun on the innovative areas having introduced our electronic channels both for service delivery through SMS, Mobile apps and the internet. These allow customers to keep track of their accounts and balances. We are looking at other delivery channels including kiosks and card delivered services. I think, should the reforms be signed into law, we should be able to improve on service delivery. We have already done significant work which enables us update customers’ statements through an efficient centralized computer system.
Nyambura is a senior journalist based in Kampala