A recent statement by President Museveni regarding the investment posture of the National Social Security Fund (NSSF) has reignited a deeper question about Uganda's economic structure: why does capital remain so expensive, and where is it actually being deployed?
Speaking on April 23, 2026, the President observed that "NSSF in Uganda has a lot of money, but they just invest in treasury bills, where the government borrows and eats the money." His remarks point to a broader structural concern: the allocation of domestic savings and its impact on private sector development.
In February 2024, NSSF announced it had crossed UGX 20 trillion in assets under management -- eighteen months ahead of target. By June 2025, that figure had reached Shs26 trillion, making it the largest pension fund in the East African Community.
Managing Director Patrick Ayota noted that for every shilling spent on administration, eighteen shillings of value were created -- a performance that compares favourably with regional peers such as Kenya and Tanzania.
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These are impressive figures. They reflect disciplined savings by Ugandan workers and institutional efficiency.
But they do not answer a critical question: what is this money actually building?
A pension fund that allocates over 79 percent of its portfolio to government securities is not directly building an economy. It is largely financing government consumption.
Where the money goes
According to NSSF's September 2024 fact sheet, 79.2 percent of its portfolio is invested in fixed income instruments -- mainly government treasury bonds. Only 13.1 percent is in equities, and 7.7 percent in real estate. A very small portion flows into productive sectors such as manufacturing, agro-processing, and logistics.
This is not unique to Uganda. The OECD Africa Capital Markets Report 2025 shows that pension funds across Africa heavily favour government debt.
In Ghana, the figure is 81 percent. In Kenya, 47.5 percent. At the African Development Bank's 2025 meetings, officials noted that over 80 percent of Africa's $2.1 trillion in institutional assets is parked in government securities, financing recurrent expenditure rather than productive investment.
Uganda's informal savings ecosystem reflects a similar pattern. According to FinScope 2023, millions of Ugandans in Saccos and savings groups primarily invest in land, fixed deposits, or government instruments that preserve wealth but do not expand productive capacity.
The debt problem crowding out the private sector
The preference for government securities is reinforced by Uganda's rising public debt. By June 2025, total public debt stood at Shs116.2 trillion -- about 51.3 percent of GDP. Domestic debt alone rose sharply from Shs40.6 trillion in June 2024 to Shs60.3 trillion in June 2025.
Government borrowing domestically has created a powerful incentive distortion. Banks and pension funds prefer risk-free government paper offering double-digit returns over lending to the private sector.
The Bank of Uganda's November 2025 Monetary Policy Report noted that rising lending rates were driven by increased demand for government securities. In practical terms, government borrowing is crowding out business credit.
Private sector credit demand reached Shs8.7 trillion in the three months to September 2025, but only Shs5.7 trillion was approved. Lending rates averaged 18.85 percent, with prime rates exceeding 20 percent -- levels that make productive investment unviable for most businesses.
As Bank of Uganda noted earlier, a significant portion of tax revenue -- about 32 percent -- goes to debt servicing, reducing fiscal space for infrastructure and enterprise support.
The real cost: jobs not created
Uganda's employment challenge is not just unemployment -- it is the quality and structure of growth. The National Employment Strategy 2023-2028 notes youth unemployment at 16.3 percent nationally and 20 percent among young women.
More critically, Uganda suffers from "jobless growth." Between 1992 and 2017, the economy grew at an average of 6.8 percent annually, while employment grew at only 2.7 percent.
Manufacturing remains stuck at about 15.4 percent of GDP despite multiple industrial parks. By comparison, countries that successfully industrialised such as Vietnam and South Korea saw manufacturing rise above 20-28 percent during their growth transitions.
The difference is not resources. It is capital allocation.
Uganda continues to export largely raw commodities like coffee, tea, and cocoa, losing value addition and jobs to external markets.
What must change
First, fiscal consolidation is essential. Reducing domestic borrowing would ease pressure on interest rates and allow private credit to expand. Uganda's tax-to-GDP ratio remains below 15 percent, indicating room to widen the tax base and reduce dependence on debt.
Second, NSSF's mandate should evolve. Even a modest allocation -- 10 to 15 percent of assets -- into productive investments such as infrastructure funds, agro-industrial equity, and venture capital could transform capital formation. Proper governance frameworks would be necessary to manage risk.
Third, credit guarantee schemes should be expanded. The real constraint in Uganda is not capital scarcity but risk perception. A well-designed national credit guarantee facility would encourage banks to lend to SMEs without distorting interest rates.
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Fourth, Saccos and savings groups should be better integrated into productive investment channels. With over 12 million Ugandans participating in informal savings systems, even a partial shift toward enterprise co-investment could unlock significant domestic capital.
The urgency of now
Uganda's median age is approximately 17. By 2035, the working-age population will expand significantly. If current capital patterns persist -- where savings are parked in government securities, land, and fixed deposits -- the country risks a demographic burden instead of a dividend.
Uganda has the savings. It has the institutions. It has the workforce.
What is missing is capital flowing into production.
President Museveni's comments about NSSF touched on an important truth: Uganda's largest pool of long-term capital should not merely finance government consumption. It should help build the economy.
Because an economy does not grow by storing wealth.
It grows by putting it to work.
Mr Mas Yunus Masaba is Development Economist & Entrepreneur, CEO, Mas Group Africa
