‘NSSF operated at risky deficit of over sh800m’

Apr 16, 2006

THE National Social Security Fund (NSSF) operated at a ‘dangerous’ deficit from 1995 to 1997, which was only reversed when a surplus of sh1.3b was made in 1998, the parliamentary report on the mismanagement of the fund has revealed.

By Cyprian Musoke
and Apollo Mubiru

THE National Social Security Fund (NSSF) operated at a ‘dangerous’ deficit from 1995 to 1997, which was only reversed when a surplus of sh1.3b was made in 1998, the parliamentary report on the mismanagement of the fund has revealed.
The report that parliament started debating last week, notes that even with increased contributions and income, NSSF continued to incur a deficit of sh857m per year.
It said the fund’s accumulated deficit carried forward as at June 2004, amounted to sh7.68b, due to tremendous increase in the fund’s expenditure and interest payments.
“The fund’s expenditure more than doubled in the last three years. It increased from sh6.1b in 2001/02 to sh19.4b in 2003/04.
“Meanwhile, interest payments increased from sh7.5b in 2001/02 to sh21.6b in 2003, representing an increase of 189%.
“The Ernst & Young report (2002) reaffirmed that the fund’s investment income was insufficient to meet the current costs and earn interest to its contributors,” the report says.
The report notes that although M/S S.K Sejjaaka & Co., warned that expenditure and investments should be controlled if the fund’s core activities were to be achieved, and value of savings maintained, NSSF paid a deaf ear.
It observed that the corporation secretary, Martin Bandeebire, the now acting managing director, should be held accountable for failing to provide legal advice to the board and management that Special Purpose Vehicles (SPVs) would lead to loss of control of NSFF funds.
It says the investment manager. Geoffrey Kitakule, should be held accountable for not carrying out a feasibility study on Nsimbe Estate, and that the project managers, Christina Kakeeto and Isaac Mwesigye, needed to be guided to develop and gain the necessary experience in handling projects of that magnitude.
The report also recommends that NSSF should develop investment guidelines and procedures and other regulations to ensure the security and profitability of workers funds.
It also says that the Nsimbe project was hurriedly and poorly handled and that it should be halted until a reputable consultant carries out a feasibility appraisal.
The reports says the Government should expedite the reforms in the social security sector to eliminate such unfortunate circumstances and the speculation surrounding the management of the sector.
The committee recommended that Mugoya Construction unconditionally accepts to renegotiate the contract to increase the NSSF shareholding in the company to cater for the overvaluations in land, payments, inconsistent payments and the amount NSSF has injected in the project.
Ends

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