CFO's Financial Review

Stevens Mwanje
CHIEF FINANCIAL OFFICER

Despite the unprecedented challenges the Fund had to navigate, we demonstrated more than ever our commitment to making the lives of our members better in this financial year. The Fund was able to proactively reorganise itself in terms of structure, supporting systems and infrastructure to ensure smooth adoption of the changes in the law amidst a challenging operating environment. 

Despite the unprecedented challenges the Fund had to navigate, we demonstrated more than ever our commitment to making the lives of our members better in this financial year. The Fund was able to proactively reorganise itself in terms of structure, supporting systems and infrastructure to ensure smooth adoption of the changes in the law amidst a challenging operating environment. 

The Fund was able to seamlessly handle all midterm benefit obligations for all qualifying claimants to ensure we lived up to our “Now You Can take charge of your future” promise.

 

Despite the increased pay-outs that had a direct impact on funds available for investment, the Fund was able to deliver reasonable performance that demonstrates our unwavering commitment to grow our members’ savings and offer a competitive return that consistently surpasses the 10-year average inflation threshold.

About the Finance Department

The Finance Function at the Fund continues to evolve in response to the constantly changing business environment. Technology, and a recalibrated mix of people, are at the heart of our continuous transformation journey guided by our vision of becoming a valued business partner delivering key insights for decision making.

The Finance Team plays a critical role in the day-to-day running of the Fund’s business

Achievements

Despite the uncertain business environment characterised by the continued effects of Covid-19, regulatory changes (the NSSF Amendment Act 2022) and, disruption in global supply chains due to global geopolitical tensions, we were able to achieve several milestones:  
  • Deployment of Robotic Process Automation (RPA) to our Accounts Payables Function: RPA is software that performs manual, repetitive, and rule-based tasks. As the Fund moves away from the traditional ways of work to more robust digital channels, the Finance Function was thrilled to embrace automation capabilities provided by RPA. This will form the benchmark for scaling RPA capabilities to other functions of the Fund.
  • Petty Cash Automation on the Xente platform that facilitates mobile money and online transactions enabled us to manage our petty cash throughout our headquarters, departments, and branches. This reduced the risk of holding physical cash, providing an audit trail for petty cash and enabling real-time replenishment of petty cash among other benefits.
  • Commendable strides have been taken towards achieving our Business Advisory During the year, we supported the Financial Literacy programme with financial management, tax, accounting, and budgeting content. In addition, we provided the initial business development services under the Hi-Innovator programme as a pilot. This shall be rolled out to more businesses in the subsequent years.

We persistently aim at creating an agile operating structure that optimises performance which is essential for the Fund in this uncertain operating environment. Our efforts continue to pay off, and these have led to internal recognition at the departmental level but also externally at the organisational level. External recognition received in the form of awards during the reporting period included the following:

 

  • For the second year running, NSSF won the Integrated Report of the Year Gold Award at the 11th edition of the Financial Reporting Awards by the Institute of Certified Public Accountants Uganda (ICPAU)
  • CFO of the Year Award at the Uganda 2021 CFO Awards facilitated by ACCA and Deloitte
  • Overall winner of the 2021 Public Sector Financial Reporting Award, First Runner-Up in the Sustainability and Corporate Governance Reporting at the 11th edition of the Financial Reporting Awards (FiRe) by ICPAU

 

These awards are not only a testament to our commitment to excellence,  but also to be transparent and accountable to our members, employers, government, and other key stakeholders.

 

As a Finance Function, we remain committed to undertaking the necessary transformation to remain fit for purpose and future fit to maintain excellence in line with the continuously evolving operating environment.

*NSSF wins the Integrated Report of the Year Gold Award at the FiRe Awards

The Financial Environment

Covid-19

The Covid-19 related uncertainty characterised the first half of the FY 2021/22. The deadly Delta Variant necessitated the Government of Uganda to institute a 42-day lockdown between June and July 2021. Infection rates and deaths had reduced drastically by the end of the first half of the year.

Global impact

The regional securities exchanges, especially Nairobi and Dar es Salaam, where the Fund holds investments, experienced falling share prices due to massive selloffs by international investors who liquidated their investments in emerging and frontier markets because of preferential rising interest rates in the US and Europe.

Local economy

Uganda’s economic growth rebounded strongly as domestic economic conditions improved following the full reopening of the economy in January 2022. Economic recovery was hampered by the disruptions in global supply chains caused by the effects of Russia’s invasion of Ukraine in February 2022 which created shortages of key goods and in turn led to a spike in inflation in the global economies. To manage the rising inflation, the Bank of Uganda increased the Central Bank Rate (CBR) from 6.5% to 7.5% in June 2022.

The Shilling weakened sharply in May-June 2022. This was due to weak exports alongside increased US Dollar demand for project-related capital imports and, strengthening investor sentiment towards the US Dollar amid heightened global uncertainty due to the Russia-Ukraine conflict.

Resilience and continuity

Daily operations were not disrupted as the Fund had long embraced the hybrid operating model in addition to strong supporting technology. However, the rising commodity prices, exchange rate fluctuations and falling share prices led to a general rise in the Fund’s operational expenditure, foreign exchange losses on regional investments and capital losses on our regional Equity investments, respectively.

 

On the side of regulation, the National Social Security Fund (Amendment) Act 2021 was assented to by the President on 2 January 2022. The key part of the amendment that had significant financial implications on the Fund was the introduction of midterm access to qualifying members i.e., members at the age of 45 years and above who had made contributions to the Fund for at least 10 years. This necessitated a change in the Fund’s investment strategy from a predominantly long-term to a combination of both long and short-term to match the short-term obligations of the midterm access. This had an impact on the aggregated returns generated from the Fund’s investments.

Business and Financial Performance

Despite the challenging business environment, the Fund demonstrated more than ever its resilience and its true commitment to making the lives of its members better.

 

The Fund was able to fully meet all midterm benefit obligations. Total midterm benefit pay-outs amounted to UGX 440Bn. However, income generated was impacted by the reduction in funds available for investment coupled with the undertaking of short-term investments to ensure that there is enough cash to meet these obligations. That notwithstanding, the Fund remained steadfast and still managed to deliver a reasonable return for its members that surpasses the 10-year average inflation threshold.