The National Social Security Fund intends to trade on regional stock exchanges to widen its investment pool, Richard Byarugaba, the fund’s managing director, has said.
“The existing opportunities in Uganda are not strategic enough to absorb our liquidity. We, therefore, need to diversify and take advantage of the liquid stock exchanges in the East African region,” he said.
Byarugaba was speaking at the Fund’s offices while receiving a dividend of Shs 1.9bn from Umeme, the largest it has received in the last three financial years. NSSF invested in Umeme’s initial public offer late last year amidst widespread public scepticism. NSSF invested Shs 36bn in the power distributor, taking up an 8.1 per cent stake in the company.
Now, Byarugaba points to the dividend payout as proof that the fund’s decision to invest in Umeme was a correct one.
“We did an internal investment appraisal, which assessed whether the price on offer was at a discount. We also looked at third-party research which indicated that the offer price was undervalued. We also did a legal due diligence and considered the risk report for the investment. These gave us the confidence to invest,” Byarugaba said, adding: “We were guided by the Fund’s investment policy.”
Sam Zimbe, the Umeme General Manager Corporate and Regulatory Affairs, said they had also paid Shs 2.6bn to the Uganda Revenue Authority as Withholding Tax, which is a big boost to the economy.”
While NSSF needs to be applauded for attracting such a huge dividend payout, much of the concern will be how the fund intends to invest that money. The fund has for long complained that Uganda lacks investment opportunities that can absorb the amount of money at the fund. And this is part of the reason it is looking at more options across the borders.
“Currently, the investment opportunities in Uganda are not sufficient to absorb our liquidity. What is needed are strategic domestic and regional long-term investments that can provide a reasonable return to members. We are looking forward to the new regulatory environment to enable us diversify our investment portfolio,” Byarugaba said.
While NSSF has in the past invested in markets as far as Johannesburg, the idea to tap deeper into regional stock markets is breaking new ground. The Nairobi Stock Exchange, with more than 50 listed companies, and with much more liquidity, appears the most likely destination for NSSF funds.