OPINION
First and foremost, it’s Gen Museveni’s 80th birthday, for crying out loud. What better way to reward his loyal partners the Ugandan laborers (workers/proletariat) who have stood by him for nearly four decades? Unlike in many other nations, Uganda’s labor force is among the most disciplined in the world. Rarely do they strike, disobey state laws, or politicize the economics of their industries.
It should be remembered that the 1917 Communist Revolution in Russia, along with other global uprisings like Uganda’s Bush War and even the two World Wars were sparked because workers of that era had lost hope in political economics. They had never seen a yield of 17% on anything in their lives until all capitalists were overthrown, and many of their leaders were executed. By 1945, capitalists lost their colonial assets, largely due to the growing discontent of the labor force. Tormented by low wages, exploitative capitalist corporations, and neo-imperialism, Chinese workers under the CCP also rose up to create a “dictatorship of the workers,” which continues to lead China today, much to the dismay of Western capitalists who resisted paying fair wages. The Kuomintang fled to Taiwan, where their policies of low wages and unfair labor practices continue, while Chinese workers rebuild their nation and foster growth in Africa, including Uganda.
If NSSF believes that the Ugandan proletariat will tolerate the continued accumulation of capital that does not directly benefit them, then they are not fully aware of the political and economic history of labor. A semi-satisfied, economically stagnant workforce is the most fertile ground for revolution in any society. May Uganda never become such a place.
Secondly, the National Social Security Fund (NSSF) recently announced a 15% increase in earnings, rising from UGX 2.2 trillion to UGX 2.53 trillion for the financial year ending June 30, 2024. NSSF Managing Director Patrick Ayota attributed this growth to an increase in interest income, dividend income, and real estate earnings similar to 2017/18.
In simple economics, when a business’s revenues and profits increase, so should the benefits, profits, and dividends for the investor. It’s a psychological and logical expectation of mankind.
However, uncontrolled expansionism such as NSSF’s current strategy of buying up assets across Africa can have the effect of “diverting” or “withholding” excess returns, supposedly for future growth, without providing proportionate benefits to the shareholders. This often leaves the investor in the same economic position, which rarely motivates them to invest more, nor does it encourage new investors to come on board.
In short, I predict that NSSF will likely announce only an 11% interest payout this September during its Annual General Meeting not because we’ve hacked NSSF computers, but because we’ve become accustomed to this predictable, almost involuntary figure of around 10%. NSSF seems to take pride in this as if it’s a silent, agreed-upon culture within the organization.
When the economy underperforms, NSSF is quick to lower interest payouts to any figure they desire, as long as it stays above the 10-year average inflation rate, which usually hovers around 5-7%, depending on how one calculates it.
But why can’t NSSF also increase payouts when the economy performs well, as it is now? If you can lower interest rates, you should also be able to raise them.
Paying out a 17% return to savers, which would be the highest since the 15% payout in the 2017/18 financial year, would help the fund, the savers, and the economy of Uganda achieve three key short-term organizational goals that are often influenced by “mood and morale” human speculative habits. Back in that financially prosperous year, the Managing Director credited “diversification of investments” and “good returns” for the decision to make the country happy. I presume that this diversification and these returns are now even better today.
Looking at the data, it’s clear that after the 15% payout in 2017/18, everything about the fund expanded exponentially, from qualitative factors like confidence and trust in the fund, to the number of savers, newly registered employers, and the value of assets managed. All of this has led to the current state of growth.
The following three short-term goals are also essential for a positive performance appraisal of the NSSF board and management, who recently reported being “very contented and happy.” I suspect everything about their own rewards has grown by more than 17% in the last decade, even though they claim to have lowered administrative costs to about 1% a figure that I suspect is more than last year’s in terms of value, given the growing fund base.
1. Encourage more voluntary savers: A 17% return is unmatched by other forms of investment in Uganda and would undoubtedly attract more people to save voluntarily.
2. Discourage mid-term withdrawals: A high return would make it prudent for those over 45 years old, who are eligible for mid-term access, to reconsider withdrawing their savings early. Data already shows that those approaching 45 are becoming more reluctant to withdraw, and a 17% interest rate would push them towards total rejection of early withdrawal.
3. Boost whistleblowers against non-remitting employers: Such a high interest rate would motivate employees to demand that their employers remit their contributions, knowing what they stand to gain by saving with NSSF.
It’s worth noting that even with the rather modest 9-11% interest rates over the past decade, NSSF has still experienced significant growth. Assets under management have risen from UGX 15 trillion to UGX 22 trillion in just five years.
Surely, paying a 17% return to members would not collapse the fund or the economy. Regardless of the interest rate, NSSF will still remain the largest and most successful fund manager in East Africa by 2030, when it forecasts UGX 50 trillion in assets under management, though I predict it will be closer to UGX 75 trillion.
The author is Patrick Asiimwe Jago Minyang Makombo,
NSSF Member, Pan-African Political and Economic Theorist,
and Assistant RDC of Masindi.
