NSSF saga in new twist

By Peter Nyanzi

Workers turn to mass action to protect savings

Fed up with government’s apparent lack of concern for their welfare, workers in Uganda are resorting to mass action in a bid to put pressure on the government to protect their pension savings in the National Social Security Fund (NSSF).

The National Organisation of Trade Unions (NOTU), the labour organisation that represents millions of Ugandan workers, has said it will mobilise its members on March 19 to march to the Supreme Court in an unprecedented show of solidarity aimed at showing the government that they will do anything to safeguard their savings from “crooks and fraudsters.”

Wilson Usher Owere, the NOTU chairman general, told a press briefing at their offices on March 8 that workers would not accept to lose even a shilling of “their hard-earned money.”

“We would like to call upon all workers and members of NSSF, on March 19 to leave whatever they are doing, and get a chance to attend the Supreme Court hearing of NSSF’s application to amend their appeal,” Owere said.

“This case is no-longer about NSSF because in reality it is the members who will suffer at the end of the day.”

The NSSF vs Alcon saga has been on for 14 years and has dug deep into the Fund’s coffers. For instance, the Fund made a provision of more than Shs 11 billion for the case in 2011 alone. Alcon won in the first rounds and was awarded about US$9 million (Approx. Shs 22 billion) in compensation with 6% interest, a decision that NSSF appealed to the Court of Appeal. But following the refusal by the Court of Appeal to accept new ‘key’ evidence against Alcon, NSSF appealed to the Supreme Court, which will make a ruling on March 19 as to whether or not the Court of Appeal erred in refusing to accept the new evidence. However, workers are worried about the amount of interest that continues to accumulate – now standing at over US$16 million.  Alcon is also holding the land title to Workers House.

The evidence NSSF wants court to accept is a previous court ruling that pulled the plug on the company, indicating that there were four Alcons in Kenya, Uganda and UK with the same directors. The judges in their 2007 Court of Appeal ruling described the directors as “crooks” who should have been investigated and prosecuted.

That the Police, the Auditor General, Solicitor General and IGG and the respective government offices have seemingly remained aloof and taken no action to save the situation appears to have irked the workers.

“A speedy trial and disposal of this suit should be done so as to save the worker’s money in unnecessary legal costs and interest payments – should we lose the case,” Owere said, adding that instead of interrupting their actions, the police should instead work towards investigating and bringing Alcon directors to book over their “crooked” activities.

Owere declined to say what course of action the workers would take if the NSSF lost the Supreme Court appeal saying they will “cross that bridge when they get to it.” But analysts say the workers see an opportunity to exert popular pressure given the high stakes involved and given the fact that the new evidence could significantly swing the case firmly in the workers’ favour. However, concerns also abound as to whether the ruling will come any time soon given that the Supreme Court lacks quorum and some of the judges on the bench have already disqualified themselves, having been involved on the case earlier in one way or another.

Thorny issues

Workers MP Sam Lyomoki told The Independent in a telephone interview that they are in total concert with NOTU over staging what he described as a “mass defiant campaign” to protest the abuse of workers’ rights and marginalisation of their interests by the government.

“The Alcon case and mismanagement at NSSF are just symptoms of a wider issue, which we want to force the government to address,” he said.

“Workers are fed up. All along we have been just talking but now it is time to take action through demonstrations and industrial action. This is the first of its kind in Uganda and nothing of this scale has ever been seen before.”

Over the years, Trade Unions and workers of all shades of political opinion have opposed the apparent abuse of their savings but have never come out boldly to show their displeasure through mass action.  This has probably been because Unions are heavily patronised. Workers have five representatives in Parliament and Lyomoki said they have been planning with their members to take action so that the mess in the pension sector is sorted out once and for all.

Lyomoki said the government has failed to set up the Uganda Retirement Benefits Regulatory Authority (URBRA) seven months since the Act was passed and accented to by the President, while the liberalisation of the sector is being carried out without workers’ input, which the workers would not accept.

On the URBRA, Owere said the workers will force the government to act, if it does not implement the law within the next two months.

The highly-anticipated URBRA provides for the establishment of a competent and independent regulator for the entire social protection sector to register, licence, set standards and enforce the law. Under the new dispensation, other benefits like major medical and maternity, mid – term access for unemployment, self-education and home ownership, and burial can be approved by the regulator. Workers could also get benefits such as child education, basic health care, home – ownership and further studies for members.

Estimates show that social security coverage is limited to only about 5% of the working population in Uganda of about 11 million – with all the pension schemes put together. As of June 30, 2011, NSSF alone had over 9,000 employers registered with the Fund. The number of account holders stood at over 450,000, which is very low compared to other countries at a similar level of economic development.

The proposals in the new laws if implemented are thus expected to go a long way in providing social protection to tens of thousands of more workers in formal employment. But they are taking too long, according to the workers, and the government has to be woken up to move faster, according to NOTU. Workers contribute 5% and employers 10% of monthly emoluments to the NSSF.

Workers and employers are unhappy that non – stakeholders, such as the government, which is a non-contributor, continue to be in full control of the Fund.

They say the transfer of the fund to the Finance Ministry was counter-productive as it exposed workers’ savings to abuse by government-favoured interests.

Having been under the oversight of the Ministry of Labour, Gender and Social Development since 1987, NSSF was controversially transferred to the Ministry of Finance in 2004.

NSSF queries

MP Patrick Amuriat Obol, the chairman of the Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises, said the committee has a dossier on NSSF which they want to summon NSSF top bosses to appear and respond to. The dossier comprises queries raised by the Auditor General’s report, complaints raised by NSSF staff and other whistle blowers.

“In the next few weeks we plan to summon them to appear and explain these issues, it is only that we are still bogged down by a few other issues but as soon we clear them they will come and explain,” he said.

Citing the Auditor General’s 2011 report, The Independent reported in issue March 02-08, 2012 that the Fund’s members are losing more than they are benefiting from their savings.

But NSSF Managing Director Philip Byarugaba said evaluation of the Fund’s performance requires taking a long-term view. In an interview on March 5, he said NSSF invests on the basis of more than five years.  “The good news is that the proposed Pension Bill has provisions for mortgages, education and medical coverage. NSSF is eagerly waiting to roll out these products when the Bill becomes law,” he said.

In the Auditor General’s report of 2011, administration costs are shown to have shot to Shs 44 billion, up from about Shs 32 billion in 2010.

Byarugaba said the main increase between 2010 and 2011 (Shs 12 billion) was reported under legal expenses.  More than Shs 11 billion of the Shs 12 billion was a provision for the Alcon case.

“The increase in liabilities was primarily driven by the provisions for the legal cases, part of which was impacted by a depreciated Uganda Shilling,” he said.

The AG report shows that the Fund’s surplus for the year has dropped from Shs 132 Billion in 2010 to Shs 81 billion, which Byarugaba attributed to “unrealised gains” worth Shs 64 billion from revaluation of property and changes in stock market prices. No revaluation was performed in 2011 because of a new policy to only revalue real estate assets once every two years.

He, however, said a drop in treasury rates in the early part of the year had led assets invested during that time to yield lower interest income.  On the Shs 27.7 billion, which lies unallocated to any member because the beneficiaries have not been identified, Byarugaba absolved the Fund of any blame saying it was up to PERD and the Ministry of Finance to resolve the issue.

According to Jim Mugunga, the PERD publicist, the money does not belong to PERD but to former employees of dozens of divested companies whose remittances were not being submitted to NSSF before they were privatised. He said reconciliation is going on and some of the former employees of the divested companies are getting their money allocated to their accounts, provided they have documentary evidence to back their claims.

Following revelations that NSSF offers its staff loans to acquire/ build houses over a period of 15-20 years, officials said the facility has been withdrawn. About Shs 5 billion was disbursed to employees in 2011.

The Fund is also upgrading its Management Information System (MIS), which will enable them hit the target of two days for updating members’ accounts upon receipt of members’ contributions, according to Byarugaba.

When the looming liberalisation of the pension sector is completed, NSSF is expected to cease being a provident fund and become a hybrid provident/pension fund. The Bill is still being scrutinised by the Parliament.

However, NOTU wants to appear before the Committee to demand more consultation on the liberalisation law so that members’ interests are not marginalised.

Until the law is passed, Byarugaba said their “hands are tied” because he does not want to go to Luzira Prisons for breaking the NSSF Act, which stipulates under what circumstances he can invest workers’ savings.

Passed way back in 1987 when the economy was still very small, the law was over-cautious in a bid effort to ensure safety of member savings and a provision of an optimal return within an acceptable and reasonable risk profile.  Unfortunately, it also put in place an elaborate and complex control structure that takes the Fund almost a year to get an investment project off the ground.

For instance, the 464 acres of land at Temangalo, which the Fund bought in 2008 at about US $5.6 million, is yet to be developed because of what Byarugaba described as an “over elaborate approval process”.  While the money to set up a modern housing estate is available, the contractor is yet to be approved by the relevant authorities.

The Fund is thus forced to rely on equities and securities, whose return on investment is significantly lower.  For instance, the highest yielding treasury instrument in Uganda is the 10-year government bond, which yields just 13%.  For the calendar year 2011, the stock exchange had declined by 27% thus reducing earning there to a bare minimum.  The Fund is therefore looking to real estate projects like Temangalo and Nsimbe Estates to provide meaningful long-term returns to workers.

NSSF bosses, who included deputy MD Geraldine Ssali and Company Secretary David Nambale, disputed claims that they were “extravagant” with workers’ money and that members were withdrawing from the Fund.

Figures that show that withdrawal benefits paid out during the period under review rose by four times to a record Shs 63 Billion from just Shs 16 billion in 2010, the officials said once a member meets the criteria, and upon application, the Fund is obligated to pay benefits to that member.

But unlike the age benefits, which are paid to members who clock 55 years of age, withdrawal Benefits are paid to members who reach the age of 50 years and have been unemployed for the past 12 months. Analysts say for withdrawal benefits to rise four times in a year raises questions on the manner withdrawal benefits are being administered.

However, the Fund officials said it is “is a reflection of the economic situation” such as the drastic increase in the level of unemployment.

“The Fund pays every member who qualifies to receive their benefits,” Byarugaba said.

The officials said an “unqualified opinion” in the financial report for the first time 10 years, reflected the amount effort and resources that has gone into improving the overall Fund’s internal processes; including cleaning of member data, improving on the fiscal operations of the fund.

He said processing time has reduced from one time high of 105 days to an average of 12 days, the increased benefit total payout from Shs 64 billion to Shs 80 billion and the upgraded IT operating system that will further improve processes for our members.