NSSF investments in Umeme followed right legal procedure

The board and management of the National Social Security Fund (NSSF) has noted with regret a number of misrepresentations being carried in the media regarding the ongoing parliamentary probe into the alleged mismanagement at NSSF.
I would like to clarify the misrepresentations being attributed to various witnesses called to the probe in regard to NSSF’s investment in Umeme, especially the second issuance on the secondary market.
These baseless allegations centre around three issues: NSSF did not seek the clearance of the Solicitor General during the Umeme IPO transaction NSSF did not secure the minister’s clearance during the second Umeme transaction the NSSF board did not approve the second Umeme transaction.

First, it is important to understand the regulatory framework guiding NSSF and by extension NSSF investments. Sections 3(1), 4 (3) and 5 (4) of the National Social Security Fund Act (1985) are very clear on who constitutes the NSSF board, the decision making processes of the board.

Sections 30 and 39(2c) are very clear on the fact that all excess monies in the Fund shall be invested in such investments as may be determined by the board and management in consultation with the minister.

It is important to understand that the NSSF Act squarely puts the responsibility of investment on the board and the managing director, in consultation with the minister. “In consultation with the minister” is not similar to “with the minister’s approval” and as such, the Act does not bestow upon the minister explicit veto powers over the Fund’s investments. The minister’s role is aisory and aice given may or may not be considered while making investment decisions.
I would also like to clarify on the role of the Solicitor General in NSSF investments. For instance, in response to request for aice regarding NSSF’s planned investments in Tanzania Breweries Limited and Cooperative Bank of Kenya Ltd, the Solicitor General, among others, aised the Fund as thus:
• When we read your submissions, there is no indication that they are a contract or a document creating any legal relationship. It is simply an expression by NSSF on how and where they intend to invest the surplus money collected and unnecessary for paying for benefits at the moment.
• Secondly, according to Section 30 of the NSSF Act, it is the responsibility of the CEO (managing director), board and minister to decide on investment of surplus money collected by NSSF.
• It is, therefore, our opinion that your request is not a contract or a document creating a legal relationship to necessitate our clearance in accordance with Article 119 (5) of the Constitution. We, therefore, aice you to conduct the investment in accordance with Section 30 and 39 of the NSSF Act.

As clearly pointed out by the Solicitor General, NSSF’s intentions to invest are not a contract and, therefore, do not require the Solicitor General’s ‘no objection’. However, whenever possible, the Fund has consulted the office of the Solicitor General for guidance.

NSSF is also guided by the Uganda Retirement Benefits Regulatory Authority Act, 2011(NSSF in May 2013, received a licence to operate as a retirement benefits scheme). Section 67 of the URBRA Act says all investment decisions of the Fund should be guided by a prudent investment policy whose major aim is to secure adequate rates of return on member savings.

A Fund’s investment policy is, however, subject to regulations made by the minister, in consultation by the board.
Section 91 (1 and2)learly states that the minister can only do this by a statutory instrument and not any other means.

Again, the UBRA Act does not give the minister veto powers over investment decisions, but rather acknowledges the aisory role of the minister. In line with the URBRA Act 2011, the NSSF board in June 2013, revised the existing investment policy.

The new policy gave the Management Investment Committee, chaired by the MD, exclusive powers to decide on a range of investment decisions, including equity acquisitions.

The MIC would then refer the investments to the Board Investment and Projects Monitoring Committee who would then recommend to the board. The board would then approve all investments while the minister would be consulted.
Unlike the Umeme IPO, which was carried out in the framework of the NSSF Investment Policy that did not require board approval but instead required that NSSF secures a “No Objection” from the minister, the acquisition of the second tranche of Umeme shares was approved under a new investment policy that did not require a “No Objection” from the minister.

In conclusion, it should be noted that Umeme transactions were done within the frameworks of all the guiding laws. The decision to invest in especially Umeme 2 was approved by the board on a simple majority of 6:5. The presence of dissenting views by some board members does not make the decision of the board illegal.

To date, Umeme is one of the best performing stocks in the NSSF portfolio. The value of the shares bought at IPO has grown by 47.6 per cent from Shs275 to Shs406 to date, while the value of shares bought during the second transaction has, in just two months, grown by 19.4 per cent from Shs340 to Shs406 as of August 21st.
The Inspector General of Government has previously investigated the investment into Umeme shares and concluded that the investment was driven by the benefit for the Fund and did not find evidence of the alleged personal interests. This same issue has been investigated and cleared by the Auditor General.

We welcome the parliamentary investigation and wish to pledge our total commitment to give all the required information. We trust that the committee will run its proceedings in a fair and equitable manner. We strongly believe that we will be vindicated by the probe committee.

Ms Ssali is Ag managing director , NSSF

SOURCE: Daily Monitor

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