OUR BUSINESS

MATERIAL MATTERS

MATERIAL MATTERS PROCESS

Material matters are those issues that could substantially affect our ability to create value in the short, medium and long term. These matters influence our strategy and how we manage our associated risks, as well as opportunities we explore as a result of these factors.

The process we follow to determine our material matters is as follows:

The outcomes of our materiality process resulted in the prioritisation of the following materiality themes:

Governance Challenges

Material Matter - Management and Board conflicts, Appointment of a substantive Managing Director

The Fund has been subject to thorough investigations by government bodies, including the Parliamentary Committee, the Auditor General, and the Inspector General of Government (IGG). Our active cooperation reflects our commitment to transparency and accountability in maintaining high governance standards.

Risks
  • Reputation Risk
    • The image of the Fund was severely impacted following the negative press from the parliamentary probe, Auditor General and Inspector General of Government (IGG) investigations.
  • Governance Risk
    • Management and Board conflicts that arose during the financial year.
    • The continued absence of a substantive Managing Director creates a leadership vacuum at the Fund.
Mitigation Response
  • Short Term
    • Stability is expected in the short term as Management and the Board focus on delivering value to members and other stakeholders.
    • The Fund is in the process of reviewing its policies and filling the position of the Managing Director.
  • Long Term
    • The Fund developed a response strategy to deal with all issues raised by various investigating bodies which will be integrated in our day-to-day operations. In addition, a stakeholder engagement strategy was developed and implemented.
Opportunites and impact on business model
  • The insights derived from the investigations will be seamlessly incorporated into the Fund's policies and procedures, enabling a proactive approach to preventing the reoccurrence of similar issues.
Targets
  • Execute the recommendations stemming from investigations, ensuring that they are fully embraced and implemented by all relevant stakeholders and responsible parties.
Strategic Objectives
Capitals Impacted

Regulatory change

Material Matter - NSSF Act Amendments

The NSSF Amendment Act 2022 was passed into law in January 2022. The Fund is now mandated by law to provide social security services to all workers in formal and informal employment within the private sector. Under provisions of the NSSF Amendment Act 2022 anyone can now save with NSSF for their retirement.

Risks
  • Liquidity Risk
    • The increase in cash outflows due to an increase in benefits payouts are mainly driven by the midterm access.
  • Compliance and Litigation Risk
    • Litigation cases relating to 1) employers’ non remittance of NSSF contributions and 2) land ownership.
  • Limited Product Range
    • Expanding our product range within the Fund continues to present a persistent challenge. Regulatory restrictions have hindered our ability to broaden our selection of products. As a result, we have faced limitations in enhancing our product offering.
Mitigation Response
  • Short Term
    • To ensure adequate liquidity, the Fund continues to make regular adjustments in strategic asset allocation which resulted in increased investment in fixed deposits at the expense of treasury bonds.
    • The Fund conducts comprehensive due diligence before we purchase land, and we have adequate legal resources to defend the Fund’s interest in any litigation.
    • The Fund is in the final stages of obtaining approval for new products, especially in the voluntary space.
  • Long Term
    • The Fund will continue to undertake regular cash flow forecasts and address any potential shortfalls in the liquidity requirement while ensuring a reasonable return to members.
    • The Fund will roll out several products in the medium and long term in line with its purpose of helping members make savings a way of life.
Opportunites and impact on business model
  • The payouts have increased the confidence and trust of members in the Fund, creating an opportunity for potential members once the voluntary products are rolled out.
  • Sensitisation of all stakeholders will minimise non-compliance with regulatory and contractual obligations.
  • New products are likely to increase membership as NSSF strives to make saving a part of the lives of more Ugandans, especially in the informal sector.
Targets
  • Accelerate delivery of value-adding products: Insurance Partnerships, Unit Trusts, Wealth Management.
  • Implement the new business model to deliver value-adding products/services.
  • Rollout of Smart Life Savings Plan: Empowering voluntary savings.
Strategic Objectives
CAPITALS IMPACTED

Global Economic Uncertainty

Material Matter - Slow economic growth and macro economic variables

The Russia-Ukraine conflict, initially perceived as short-lived by many, has grown into a global crisis, disrupting economies. Its far-reaching consequences are anticipated to leave a lasting impact on the economic, social, and political landscape, heightening business uncertainty. Post-election unrest in Kenya has prolonged, escalating internal political tensions and exacerbating economic challenges. Furthermore, terrorist activities expanded into Uganda and Kenya, causing fatalities and trade downturns.

Risks
  • Equity Risk
    • Equity price risk has escalated resulting from an exit of foreign investors due to their reduced confidence in emerging markets.
  • Foreign Exchange Risk
    • The Fund was mainly affected by foreign exchange risk, due to the appreciation of the Uganda shilling against regional currencies, especially the Kenyan shilling.
Mitigation Response
  • Short Term
    • The Fund is a long-term investor; hence our strategy is not to respond to short term market movements.
  • Long Term
    • Monitoring market variables and adjusting the portfolio mix to respond to the changing market environment.
Opportunites and impact on business model
  • There is an opportunity to acquire stock at a cheap price for companies whose investment fundamentals are strong.
  • There is an opportunity to acquire assets at low prices as soon as there are indications of economic stability in Kenya
Targets
  • Return on Investments 2% above inflation.
  • Collections -  UGX 1.9Tn.
  • New members recruited – 160,000.
Strategic Objectives
CAPITALS IMPACTED

Digital Acceleration

Material Matter - Our new Pension Administration System – IT infrastructure upgrade

The Fund implemented new robust core pension system in December 2021 to improve efficiencies, enable product innovation and create a seamless experience for our customers.

Risks
  • Information and Cyber Security Risk
    • With increased automation of our processes (registration, collection, claim initiation, etc.), there is a heightened risk of cyber-attacks with the expanded attack surface. In addition, as the asset base increases, the Fund becomes more attractive to potential attackers.
  • Technology Failure and System Downtime Risk
    • The dependence on technology to deliver services increases the risk of technology failure as the Fund would be crippled by any interruptions in the network infrastructure or software application.
Mitigation Response
  • Short Term
    • On a continuous basis, we monitor our system to flag and resolve any system vulnerabilities using the latest monitoring tools.
    • A mechanism has been developed to respond to system failure at short notice and system improvements will continue to enhance our members experience and satisfaction.
  • Long Term
    • We invest in continuous professional development in the field of cyber security.
    • The Fund will continue the trend of innovation and systems will be tested and scenario analysis conducted to prevent technological failure.
Opportunites and impact on business model
  • The automation of processes has improved customer experience and coverage. Now our members can register from any part of the world at any time.
  • New systems have improved our ability to serve customers across the world.
Targets
  • ERP deployment will centralise data and decision-making.
  • Integrate benefits application, contributions, registration, and member updates using third-party channels for convenience.
  • A financial literacy chatbot will empower clients and a data warehouse will facilitate data-driven decisions.
Strategic Objectives
CAPITALS IMPACTED