Today, we bring the second part of the strong-worded and query-loaded letter to National Social Security Fund (NSSF) Board of Director (BoD) Chairman Peter Kimbowa. The letter, written on December 7th 2022 and whose receipt at NSSF was acknowledged on December 21st 2022, is authored by the line minister, of Gender Labour and Social Development, Hon. Betty Amongi Ongom.
In the first story titled; “Blow by Blow of the Minister`s Letter to NSSF Board Chair Leaving no Hope for MD Richard Byarugaba`s Continuity,” we captured how Minister Amongi, in constant reference to the Chief Coordinator of OWC, Gen. Caleb Akandwanaho aka Salim Saleh`s dissatisfaction of NSSF MD Richard Byaruhanga`s operations, exhibited her reluctance in reappointing the latter in the same position after he clocked his retirement age limit.
Indeed, the letter is titled; “Deferral of Appointment of MD NSSF Pending Clarifications on Emerging Issues.” In this part, she now hits at the corruption allegation bit against MD Richard Byaruhanga and, this is why it has always been our counsel here at the Investigator, that Byaruhanga had better bowed out at the right time. Below, the letter continues…
“Create Jobs, Increase Income and Create Members for NSSF
Globally, small and medium enterprises (SME) account for 60% – 70% of the formal jobs. Clearly, one of the fastest ways to create jobs is to support entities overcome the constraints of starting and growing a business enterprise. Some of the constraints faced by SMEs in Uganda, include: low levels of technical or managerial skills, inability to access appropriate financing, unethical behavior, and general mis planning.
The fund has initiated a partnership with the Mastercard Foundation, and piloted a concept whereby, it made available seed capital ($20,000) and technical support to 27start-ups. I have interacted with them. The data from that pilot showed incredible exponential growth in jobs created. In the Agriculture value chain alone, a light manufacturing or Agro business created 9 direct jobs.
Each direct job created indirect 64 jobs. Mastercard Foundation validated data showed that total jobs created exceeded 15,000 jobs from the pilot. NSSF needs to scale this program, so that by the end of the NDPIV cycle, at least 1000 start-ups have been provided with this type of catalytic support. Assuming that 50% of these startups are in Agro business or light manufacturing, decent jobs created could be in excess of 250,000.
As it registers these employees, NSSF would have created new members for itself. By innovating and tweaking the intervention, and attracting other funding partners, this program can be extended to artisans such as carpenters, and mechanics, and to community associations in both urban and rural Uganda who have something that can be monetized and only lack an organized supporting structure. The intent is to improve the income level of these Ugandans, thereby, giving them the capacity to save with the Fund. On an overall basis, the cost of this program is low (without partners estimated at $10m or UGX 36billion), and yet the impact is great. This directly supports government priorities.
Bridge Between Farmers and Markets:
A good proposal on this has been made by Chief Coordinator, OWC. Uganda has always been considered the food basket of East Africa. The country has two planting seasons a year due to its mild temperatures all year round, and relative fertile soils. However, this potential is not fully exploited due to lack of proper organization, coordination, and enforcement of regulations.
The result is haphazard practices in the agricultural sector and industry, that hardly make a dent in the agricultural potential that the country has. Government programs like NAADS, OWC, etc… have been developed to support agricultural productivity and supply. This has, to a certain extent, given the supply side of Agriculture a reasonable level of capacity.
Unfortunately, these programs have not addressed the demand side of agriculture. The aspirations within the PDM programs will not be realized unless the market structural bottlenecks are addressed. The markets continue to be chaotic. They are characterized by low prices, no assurances, and predictability to the farmers for their produce. Farmers have become demotivated to even focus on the quality and quantity of their activities.
No wonder, we are not competitive globally. Even locally, we continue to import what we could even produce domestically. Recently, the president assented to the NSSF Amendment Act. This Amendment has provided an opportunity for all Ugandans, including the Agricultural players, to save for their future with the Fund. However, the ability to save, is hampered by low levels of earnings that are being delivered through the current production and market systems.
No wonder long term domestic savings, currently stand at less than 15% of GDP. This is hardly enough to propel Uganda into the middle-income status. A pilot study conducted by the Fund proved that farmers would save for their future, out of their incremental earnings. The authors of NDP III wisely recognized that in a developing economy, the government cannot remain a bystander while the private sector struggles to access markets. NDP II deliberately recognizes that one of the strategic activities will be strengthening the role of government in increasing access to market opportunities in global and regional markets.
The Proposed Solutions:
As you are aware, the Chief Coordinator OWC proposed strategic investment through the grain council. Our maize has ready market in Kenya. This proposal is that the Government, together with the Fund, form a national marketing vehicle that will organize the pathway to the huge potential markets that exist in the region and the whole of Africa. The company will identify specific markets for Uganda produce, and then support farmers produce and supply the products needed by those markets.
Responding to the market needs together with an assurance and certainty of fair pricing will be a major motivation for farmers to improve on both the quantity and quality of their produce, thereby increasing their sales and incomes. You know the initial response from the MD and how he has dragged on this matter. AND yet, this proposal, if executed well, will revolutionize the agricultural sector.
It will: 1) Open new markets and lead to a sustainable market driven agricultural industry. 2) Lead to better pricing for Uganda produce and ensure fair prices for the farmers. 3) Motivate farmers to increase yields and quality. This brings the realization of the aspirations embedded within the Parish Development Model (PDM). 4) Ensure that standards and regulations are enforced. 5) Position Uganda products in the global marketplace with the necessary quality.
6) It will ctivate the resources within the agricultural ecosystem that is needed to support the sector, including affordable financing, quality inputs, insurance, relevant equipment and machines, post-harvest handling infrastructure, logistics support, and market intelligence. 7) Increase employment across the entire value chain, thereby, broadening the tax base. 8) Improve the capacity of the farmers to plan and save for their social security needs, thus increased membership, and revenue for NSSF.
Estimated overall cost to the Fund, approximates UGX40 Billion for capitalization of the program. The operational funds would initially come from revolving lines of funding and later from retained earnings. If we can allocate UGX15Bn for staff welfare, UGX220Bn for operations, USD1million for construction of court as corporate social investment, why are we dragging on this contribution of only 20bn? Which is a strategic investment proposed by a senior government official! Is there now firm commitment from the MD? I need his answer.
Leveraging on the External Investments
As of June 2022, (per NSSF audit report), the regional location of the investment portfolio are as follows: Uganda, UGX9483834M representing 56%, Kenya, UGX5079079M, representing 30% Tanzania, UGX2022975M, representing 12%, Rwanda, UGX75516M, representing 0.45% and others at UGX174977M, representing 1.05%… A number of these countries have special concessions for investors with significant investments in the country.
Tanzania, for example, has negotiable concession with an investor who has invested at least USD50m in the country. NSSF Uganda has invested more than USD500m in Tanzania. This investment can be used as a leverage to negotiate with Tanzania on matters of national interest to Uganda. NSSF Uganda has invested more than USD1.2Bn in Kenya. This level of investment can be used as a leverage to negotiate with Kenya on matters of national interest to Uganda. Would the Kenya government support be blocking their markets to our Latto milk, if they knew how much Uganda has invested in Kenya?
What is needed is that our diplomatic and political heads are furnished with this type of investment information. Cost of this leveraging these investments is “0”, Is H.E the President, who is the Chief Foreign Relations Officer of the country, furnished with this information? When the MD travels to those countries, does he interact with our ambassadors to let them be part of, and leverage those investment portfolios? My interaction with our Ambassador to Tanzania recently confirm no knowledge of the same.
There are other potential opportunities that will require more funds and more sophisticated restructuring. For example, now that the UMEME concession will not be renewed, can NSSF, with 23% shareholding, be encouraged to negotiate a deal at good concession and, therefore, minimize the impact of required cash flow to close pay out the shareholders.
Can the government partner with NSSF to provide affordable housing, and related lower interest loans that will contribute to owning a house more affordable to workers who are savers and other Ugandans? The opportunities are immense. The government has to ensure that NSSF is transparent and is managed well. This will improve trust in the Fund and lead to rapid growth, which growth can fund more opportunities as they come.
Allegation of Financial Impropriety (Pension Towers)
This is a project that was launched in 2006, but construction began in 2008. It’s an office complex consisting of 3 towers of 25 stories with 75,000 square meters (807.293sqf) of space with a contract cost of UGX260Bn. First phase by ROKO Construction Company cost UGX42.5Bn, in August 2012, China Civil Engineering Construction Corporation (CCECC) was awarded the second phase at a contract price of UGX222.3Bn. Later in 2018, the second phase construction cost was announced at $110M.
In 2012, Inspector General of Government (IGG) investigated and confirmed that the selection of the contractors contravened PPDA procedures with awarded Bidder contract cost of project being UGX20Bn, higher than that of another contractor. The award was cancelled by IGG and Head Procurement fired. In 2018, a new contractor, China Railway Construction Engineering Group Limited was awarded at anew revised cost of construction of USD110m (410Bn).
This made the construction price to go up by 57%. The project was contracted on the basis of the contractor using his money to design and build and when completed, NSSF will then pay the contractor. However, the terms have since been changed. Details of allegations on Pension Towers; A) Pension Towers being built by China Railway Construction Engineering Group. It is alleged that, 5%of the contract value was paid in commissions by the contractor to Richard Byarugaba through De-point Consultants Limited.
The money was wired to a Bank in Mauritius and then to Barclays Bank in London, according to a source who is willing to provide information directly to H.E the President and provide evidence of transaction. Additionally, another variation totalling UGX75Bn, was processed for Pension Towers, and currently, a new requisition totalling about UGX40Bn in variation is before Solicitor General for approval.
The total cost of Pension Towers stands at approximately UGX.485Bn. If the new variation is to be approved, it will stand at UGX522Bn (5% of UGX522Bn is 26,100,000,000 Ed ). Allegation of Collusion with Contractor; NSSF awarded Pension Towers with the Requirements/Building Terms and Conditions of the contractor that the contractor will finance the construction and will be paid at the end of the project.
Can you confirm to me if the Board of Directors changed the terms and conditions? Are you aware as Board of Directors, that the MD has been authorizing payment based on a certificate of completion? What is your explanation on the costs of the project escalation? On the crack in the building, its alleged that all money for commission from contractor were passed through Ssentongo & Company and routed through various consulting firms. Can the board use the services of government engineers of any of the big four to verify the crack, rather than relying on the same company working as supervising consultants? Do you expect them to accuse themselves?
One of the terms of the contract was that the interest was to be factored in the prices at the tendering stage and was supposed to cover the delayed payment for the whole construction period. Now that they have been paid earlier than the period that was anticipated at bidding, has the interest reduced? Did the MD disclose this and where is the money for interest?” Other Corruption Allegations: To be continued…
- Stanley Ndawula is a two and a half decades’ seasoned investigative journalist with a knack for serious crimes investigations and reporting. He’s the Founding Editorial Director and CEO at The Investigator Publications (U) Limited
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