Parliament and NSSF report

By Agather Atuhaire

MPs say committee recommendations outdated, unrealistic, and barred by court

Recommendations by a committee of parliament that was instituted to probe the National Social Security Fund (NSSF) over purchase of shares in power distributor; Umeme, the rehiring of its managers, and alleged losses incurred in transaction of prime real estate, risked being ignored even as parliament debated them at the end of March.

Several legislators had disagreed with the committee and concluded that the executive was likely to ignore its recommendations mainly because most of them have been overtaken by events while others are simply unrealistic.

Almost a year after the five-member select committee was instituted by Speaker Rebecca Kadaga on July 17, 2014 following Aruu Municipality MP, Odonga Otto’s motion that alleged “scandal and abuse of office at the fund,” this appears to be the verdict of parliament.

While discussing the Committee report in late March, Parliament desisted from discussing some of the committee recommendations because the issues are in court.

The committee wants former minister of FINANCE Maria Kiwanuka held responsible for the loss of Shs500 million that was spent on the recruitment of NSSF MD Richard Byarugaba and the deputy Geraldine Ssali.

It is noted that although that sum was purportedly spent, the Minister re- appointed former the former MD and Deputy even when they had not emerged the best in interviews.

But parliament refused to debate the recruitment of the fund’s senior managers because the case is in court following a petition by one Vincent Kibanja who wants their re-appointment revoked. Kibanja says it went against the recommendations of the NSSF Board of Directors.

In other cases, Parliament found most of the Committee recommendations confusing and contradicting both the laws regulating the sector and the committee’s own findings. Based on this, one MP advised parliament not to take the report seriously because even its authors are divided on its recommendations.

Among its recommendations, the committee wants the chairman of the NSSF board Ivan Kyayonka and NSSF Deputy Managing Director Geraldine Ssali suspended for among other things authorising the purchase of Umeme shares without consulting the Minister and the Solicitor General.

In a related recommendation, the committee wants the Capital Markets Authority (CMA) reprimanded for allegedly facilitating Umeme to breach the concessional agreement it signed with the government. It says selling further shares to NSSF during the secondary market left Umeme’s shares at less than 15% yet the agreement requires that its stake does not go below 51%.

It wants CMA to be reprimanded for allowing the brokerage firm; Africa Alliance Uganda Ltd, to act for both the seller (UMEME) and the buyer (NSSF). The committee notes a conflict of interest.

The Committee accuses CMA, as the regulator, of allowing these illegalities and demands a review of Umeme’s agreement to cater for the changes that occurred regarding the company’s shareholding.

While some MPs agree with the recommendation of the committee, others say the NSSF board and managers committed no offence in INVESTING the Fund’s money since it is provided for in the Act.

While section 30 of the NSSF Act stipulates that the minister of Finance be consulted before any INVESTMENT is undertaken, the URBRA Act which in section 95 provides for its supremacy over all other laws in sector limits the involvement of the minister to just issuing statutory instruments for policy guidance.

The committee recognises this in its report and further recommends that the requirements of consulting a minister during INVESTMENT decision making should be abolished to let the board and management of the Fund take full responsibility.

Section 30 of the NSSF Act stipulates that “all monies of the fund, including the reserve account, which are not aren’t for the time being required to be applied for the purposes of the fund shall be INVESTED in such INVESTMENTS as may be determined by the board in consultation with the minister.”

Kabula MP James Kakooza told fellow MPs that the Act gives the Fund’s management the authority to INVEST all monies in the Fund which are not for the time being required in INVESTMENTS that will be determined by the board.

MPs disagree

The MPs who disagree with the committee also argue that buying shares does not allow time to consult all the people that need to be consulted.

“Buying shares is something floated on market and it’s competitive,” said Kakooza “I don’t see why there is need to consult the minister and the Solicitor General when the Act empowers fund’s board to INVEST the money.”

Kakooza said he would only support the committee’s recommendations if the INVESTMENT led to any loss of funds but can’t support the suspension of the board chair for doing what the law allows him to do.

Ndorwa East MP Wilfred Niwagaba agrees with Kakooza. He says that the Fund’s Board was not obliged to consult the minister since the URBRA Act, which takes precedence over all the NSSF Act, does not compel them to consult the minister.

Although the new CEO of URBRA David Nyakundi admits that he is not yet familiar with the sector, he says private schemes generally need to invest for return on investment.

“There is nothing wrong in making investments,” Nyakundi said, “all that is required is for one to do the necessary due diligence and do it within the law.”

The committee members say that the Fund’s management should not have bought more shares in Umeme since an Ad hoc Committee of parliament that investigated the electricity sector had called for the termination of the government’s contract with Umeme.

The recommendation of the Committee, which was instituted in 2011 when there were acute power outages and high power tariffs, have remained on paper as the executive maintains that terminating Umeme’s contract would have grave implications.

Wrong investigation

In another case, on how NSSF bought prime land   in 2008 at Shs650 million and was sold in 2011 at the same Shs650 million even after the Fund spent Shs65 million on transferring the land from leasehold to freehold, a committee member; Alex Ruhunda, disagreed with colleagues.

The committee has recommended that Kyayonka and NSSF MD Richard Byarugaba be compelled to refund the loss of Shs65 million that resulted from the sale. However, Tim Lwanga disagreed with the committee’s inclusion of the expense incurred during the title transfer. He said this is not part of the value of the asset.

Meanwhile, Ruhunda said if anyone should be blamed, it should be the people that bought the land but not those that sold it. The committee was unable to meet with the former MD David Chandi Jamwa over the matter.

The land is located at Plot 436 Namirembe Road but NSSF managers insist they sold it off because it lacked an access road. MP Ruhunda says, because of this, the committee should have investigated how the land was bought instead of how it was sold.

The committee notes in its report that the fund hired two valuers including the Chief Government Valuer to determine its market value and they all put it at a rate below Shs650 million.

The Chief Government valuer put it at Shs600 million while the private valuer; East African consulting surveyors put it at Shs610 million.

The MPs disagreed during the debate with some asking how the committee determined that there was a loss resulting from the sale when the valuers’ rates were lower than what it was sold at.

Rubanda West MP Henry Musasizi proposed an amendment seeking to have that particular recommendation deleted.

He said that the value of any property should be based on the book value which was given by the valuers that were hired.

“Value is scientific and only a valuer can scientifically determine the official market value,” said Ndorwa East MP Wilfred Niwagaba, “the committee has no scientific evidence to dispute the value given by the Chief Government Valuer.

But committee Chairperson, Kyankwanzi woman MP Ann Maria Nankabirwa who replaced Kalungu East MP Vincent Sempijja who was appointed minister during the last cabinet reshuffle, insisted that there was a loss because the value of the plot should have appreciated over the three years.