Weak Economy: NSSF Slashes Interest Rate to Members

NSSF MD Richard Byarugaba

The National Social Security Fund (NSSF) is looking to slash the earned interest to its savers accounts this year, there to a yet to be announced rate.

The unpleasant decision is in reaction to a myriad of setbacks, both national and regional that shocked the Funds’ performance through the previous (2015/16) Financial Year.

NSSF’s Managing Director Mr. Richard Byarugaba made the announcement today while speaking the press at the Workers House in Kampala.

The MD named some of the reason to the impending cut on the savers interest, as the country’s poor economic growth last year, the volatility of the Uganda Shillings, the coming of regional stock markets and the uncertainty caused by the 2016 general elections.

Last year, NSSF announced a remarkable increase in the interest rate payable to savers of 13%, up from 11.5% in the previous year.

This translated into Shs 514 billion which was credited on the members’ accounts compared to Shs 366 billion paid in 2014.

“The return paid to members every year depends on the financial performance of the Fund,” explained the MD Byarugaba today.

“The tough investment environment, modest growth of the economy, the effects of the stock market across East Africa, the effects of the depreciation of the shilling, have affected the Fund’s financial performance, and in effect, may affect the return the Fund will pay to members.”

Although he couldn’t readily divulge the lowered interest rate for this year, Byarugaba said it will still be a “reasonable return,” as the Fund keeps its promise to pay a return that is 2 percentage points above the 10 year inflation (now at 7.7%).”

Finance Minister Matia Kasaija, is expected to announce this year’s rate interest rate in accordance with the NSSF Act on Friday this week.

Poor Growth

Uganda’s economy grew by just 4.6% for the financial year 2015/2016, lower than the projected growth of 5.8% at the beginning of the year. Indeed in December, it was downgraded to 5% by the Bank of Uganda citing slower growth of major markets and declining global commodity prices (Monetary Policy Statement, December 2015).

In November 2015, the global ratings agency Moody’s downgraded Uganda’s credit rating outlook to negative, citing slowing economic growth, rising inflation and a weak shilling, later upgrading to stable, after the markets showed signs of recovery.

Weak Shilling

The Uganda shilling was volatile for most of the last financial year, depreciating at a much faster rate than other currencies in the East African region, negatively affecting Ugandan businesses and the economy. This Mr Byarugaba says had a strong effect on the Funds investments. Since then, the shilling has somewhat stabilized.

The 2016 elections and post elections uncertainty according to the MD also compounded the situation. This had a knock on effect on the business environment


Amidst the huddles, Mr Byarugaba expressed pleasure that the Fund still performed relatively well, citing its total assets which grew but 18% to Ushs6.58 trillion from 5.55 trillion last year, mainly driven by continued rise in both member’s contributions and investment volumes.

The Realized revenue also went up by 21% from Ushs 583 billion to Ushs 708 billion, mainly due to the improved interest rate regime and higher dividend income obtained from equity investments. Treasury yields improved across all maturities, rising above the 17% mark compared to last year at 16.7%.

The Fund has also managed to make proficts of up to Shs 491 billion, (after tax) in the previous year while member contributions in the year increased by 14%, from Ushs 688 billion to Ushs 785 billion.

The assessment of NSSF customers also indicated a growth in satisfaction from 83% to 88%.


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