New Vision (Kampala)

11 December 2012

Uganda: NSSF Set to Lose Out On Multimillion Uganda-Reinsurance Deal

National Social Security Fund (NSSF) is set to lose out on the multimillion investments in the Uganda-Re if the investment approvals are not cleared by December 18, New Vision has learnt.

New Vision has established that the NSSF old board chaired by Vincent Ssekono approved the investment of purchasing 56% shares from Uganda-Re at a the tune of Shs5bn but a year down the road, it is yet to be approved by Finance Minister Maria Kiwanuka.

One of the NSSF Board members speaking on condition of anonymity told New Vision that that they had done their part and handed over the mantle to Kiwanuka.

"The board sat and approved the investments, we felt NSSF and its members would benefit more by buying shares in Uganda-Re but as a board we can't approve the investments; it is done by Finance minister," said the member.

Private Sector Foundation Uganda (PSFU) executive director Gideon Badagawa in a November 20 letter (obtained by New Vision) written to Kiwanuka reminded her that basing on advice from the Uganda Insurance Commission, Uganda would earn 15% of the sh290b of the estimated compulsory sessions in 2013.

"With the advent of Oil extraction the insurance industry is expected to experience an unprecedented boom. Estimated insurable transactions from direct and indirect oil related services is between USD 6-8bn a year. This boom will happen to the Uganda Reinsurance Company which will benefit from the compulsory sessions mentioned above," wrote Badagawa.

He said that in order to ensure that most of the wealth created remains within the economy, NSSF was approached and agreed to be the core investor in this business with a majority shareholdings of up to 56% in the company.

"We are informed that the NSSF board approved the investment and forwarded the proposal to your office for clearance as per the statute. The purpose of this letter is therefore to urgently request you to consider and facilitate this investment by NSSF so that they can in turn formalize the process to be able to become the core investors in Uganda Reinsurance Company," wrote Badagawa.

"We remind you that should NSSF fail to formalize this investment requirements by November 28, Uganda will lose this lucrative deal to other companies which are already lined up to purchase these shares. The Ugandan depositors with NSSF will also be denied this lucrative opportunity with a multiplier effect to the national economy," said Badagawa.

When contacted on Monday Kiwanuka referred this reporter to NSSF. "Please contact NSSF for current situation," she 'said.

When contacted, NSSF chief Richard Byarugaba said: "I am currently traveling but the comment is that the matter is with the ministry of Finance still."

According to Gordon Sentiba, the Uganda Reinsurance Company Operationalization committee member, NSSF has up to December 18 to take up the shares.

"The money with NSSF is not short- term money. NSSF money must appear in the economy in long term instruments. It is not money you are putting there and removing the following day like you put in your account in commercial banks. So long term money should not be kept in short term instruments like fixed deposits," said Sentiba.

He added: "Maria Kiwanuka needs to move; she needs to really do something urgently. When we say that sh5b must be reinvested in Uganda-Re we are only saying that NSSF money must be invested in doing the right thing. If Shs5bn is put in buying shares in Uganda-Re that is a long term investment."

He said that for Uganda to be seen to develop its economy, we need to invest much of NSSF money in long term investment such as Uganda-Re Uganda Development Bank and Housing Finance Bank.

Sentiba said Byarugaba finished his part by writing to the Finance Minister the resolution of the board. He described as unfortunate Kiwanuka's delay to approve the investment passed by the board.

"If by December 18 Kiwanuka does okay the board resolutions, then definitely the shares are gone. And these shares will be bought by the insurance companies owned by a few individuals," he warned.

NSSF is expected to invest Shs5bn for its stake, while the rest of the insurance companies will take up 27% or Shs2.4bn of the company's total share capital of Shs9bn. Brokers and assessors have been offered 5%.

International player Baobab Re has been offered 5%, while regional insurers PTA Re and Zep Re have been given 4%. Existing shareholders like IRA and Insurers Association will take up 3%, although NSSF will snap this up if the stake is not taken.

The acquisition of a majority stake by NSSF in Uganda Re will widen the fund's footprint further current with deposits hitting a whooping three trillion as announced last week.

Currently insurers are investing a portion of their short-term assets in real estate and securities while sending the rest to foreign firms.

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