The Fund continues to demonstrate resilience despite the challenging business environment due to the Covid-19 Pandemic
The Fund delivered yet another remarkable performance that demonstrates our unwavering commitment to grow our members’ savings and offer a competitive return that consistently surpasses the 10-year average inflation threshold
CHIEF FINANCIAL OFFICER
Stevens Mwanje
Material Matters
Strategic Objectives
Stakeholders
Risks
About the Finance Department
The evolving role of the finance function and the uniquely challenging business environment exacerbated by the continued effects of the Covid-19 pandemic emphasises the need to have a finance function and team that is fit for purpose as well as future fit. We are on a transformation journey guided by our vision of becoming a valued business partner, delivering key insights for decision making. We continue to focus on achieving over 90% automation of all major finance processes, undertaking continuous learning and reskilling to improve digital capabilities for enhanced business insights, a cross-pollinating professionalisation of finance staff among other initiatives.
The results of this progress are quickly becoming visible both internally and externally. In addition, the department won several local and regional awards last year, and these included:
These achievements further entrench the department’s resolve towards continuous transformation in this constantly disrupted financial environment. Additionally, these clarify our drive towards implementation of a business advisory and partnering function that will be at the peak of business service delivery and value creation by 2023.
Building on last year’s progress, the highlights of key milestones reached this year are as follows:
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Automated processes include fixed assets recording and control, e-Rent portal, automated budgeting system among others.
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To enhance our digital and data capabilities, the Planning and Analytics Section drives predictive analytics, process improvements and automated reporting for the department. During the year, a working analytics data warehouse was created to enable the creation of dashboards with real time insights.
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As part of our Business Advisory journey, we launched the FINSPOT Magazine. This is a quarterly publication aimed at disseminating key financial information to internal stakeholders for better service delivery.
Our operating context
Although the start of this financial year was characterised by easing of lockdown restrictions and a semblance of return to normalcy, for the largest part of the year, the effects of the pandemic slowed down economic growth and completely changed the way we work and conduct our business.
The Covid-19 standard operating procedures (SOPs) issued by the Ministry of Health led to a significant reduction in numbers of staff working from the office. The transition to the new normal was easily achieved due to the strong technological drive in the Fund strategy. There was a need for increased expenditure in certain Covid-19 related costs including Occupational Health and Safety (OSH) and expenditure related to remote working. However, the Fund realised a net saving in costs especially driven by reductions in many routine costs such as travel, office welfare, events, among others.
Please refer to note 44 in the Financial Statements for a full assessment of the impact of the pandemic on the Fund’s business and our response to Covid-19.
Uganda’s economic growth slowed down with GDP expected to grow at 3% in FY2020/2021, a growth rate similar to the previous year. This was a significant drop of more than half from the 6.8% growth rate recorded in FY2018/2019 prior to the effects of the pandemic according to the World Bank.
Global recovery continues as vaccines are rolled out. However, Uganda’s immediate focus remains saving lives by enforcing measures to limit the spread of the pandemic as the government continues to secure more vaccines to boost the very low vaccination coverage.
Business and financial performance
Despite the very disrupted and challenging business environment during the financial year, the Fund’s performance was commendable; demonstrating our resilience and unwavering commitment to grow our members’ savings and consistently offer a competitive return.
2021 key performance highlights
Revenue
Operating costs
Annual total costs amounted to UGX 164 Bn, up by 4% from UGX 158 Bn in 2020 and 11% lower than budget of UGX 184 Bn. This is attributed to the cost savings realised from process improvements but also due to Covid-19 where certain expenditures were not incurred.
The annual cost to income ratio stood at 8.9% in 2021 down from 10.8% in 2020.
The expense ratio continued to drop; from 1.19% in 2020 to 1.06% in 2021 and better than the target of 1.23%. This is an improvement of 0.13% from the previous year.
Whereas revenue and collections have grown by a CAGR of 28% and 13% respectively, costs have only grown by a CAGR 11% over a 10-year period (2010/2011-2020/2021). Revenue has posted significant growth over the historical period, and it surpassed collections from FY2018/2019 onwards. In FY20/21, revenue was higher than collections by 19% and this gap has continued to increase.
Interest credited to members
The Fund declared an impressive return to members of 12.15% in the FY 2020/2021 resulting into UGX 1,516Bn compared to 10.75% in FY 2019/2020 which resulted into UGX 1,154Bn. This was on the back of a strong performance during the period.
Accumulated Member Fund and Reserves
Taxation
The Tax Appeals Tribunal ruled against the Fund on 27th March 2020 in a significant income tax matter that has been in dispute since 2013. The Fund appealed against the decision of the Tax Appeal’s Tribunal to the High Court, Commercial Division which subsequently quashed the decision and ruled in favor of the Fund on 2nd November 2020. However, Uganda Revenue Authority filed an application for leave to appeal in the High Court, Commercial Division and we await Court’s ruling. The Fund is still resolute in its belief in the legal strength of its case.
Cashflow analysis
The closing cash and bank balances stood at UGX 81 Bn in 2021 compared to UGX 26 Bn in 2020.
Net cash generated from financing activities amounted to UGX 737 Bn. Net cashflows used in investing activities was UGX 560 Bn whereas net cashflows used in operations was UGX 103 Bn.
This is a clear indicator of the Fund’s ability to generate enough cash for all routine operations and investing activities.
Update on accounting standards
Due to the constantly evolving global business environment, the International Accounting Standards Board (IASB) that develops and approves International Financial Reporting Standards (IFRS) under the oversight of the IFRS Foundation issues new standards and amendments to the existing ones.
Several amendments to existing standards became effective during the year. However, these had little/no impact on the Fund’s financial statements. These included the following:
We highlight further the significant accounting policies and how these affect the Fund in Note 3 of the financial statements. Refer to it for a detailed account on how the significant accounting policies have been applied to the Fund.
The Six Capitals
The report adopts an integrated thinking approach that has enabled the Fund to convey the value creation story through the lens of the six capitals. The planned and actual expenditure and other key financial parameters for FY2020/2021 demonstrating our ability to create long term value in line with these six capitals are presented as follows:
Financial Capital
We manage the Fund in a value adding and profitable manner through prudent investment decisions. We operate optimally to ensure we give a competitive return to our members. Key financial related metrics for FY2020/2021 include:
Human Capital
Our top objectives are to ensure that we attract, develop, enable, and retain the best talent through providing competitive remuneration packages and benefits, continuous learning, creating an exciting and vibrant work environment and providing our people with attractive career paths. The key expenditure directly related to human capital was as follows in FY2020/2021:
Intellectual Capital
The Fund reputation and brand image are intangible assets we continually strive to preserve and improve. Below are some of the key expenses related to intellectual capital:
Manufactured Capital
This comprises of our governance, business processes, building infrastructure, leading systems as well as our investment in information technology infrastructure and, innovation that enable us to manage the organisation in a prudent and professional manner. Major expenditure under this includes:
Social and Relationship Capital
The relationships and collaborations we have with our key stakeholders – members, employees, suppliers, communities, the board, Government of Uganda and our regulator, URBRA amongst others defines the Fund’s reason for existence. Expenditure on key stakeholders for FY2020/2021 was as follows:
Natural Capital
Use of natural resources responsibly to reduce the carbon footprint and water usage adopting a sustainable approach to waste management. In FY2020/2021, savings realised on energy, water and paper consumption are as follows:
Financial outlook over the short, medium and long term
Recovery and growth in FY2021/2022 hinges on the envisaged improvement in domestic demand conditions and a continuation of global recovery as Covid-19 vaccines are rolled out.
Uganda’s economic outlook in the short term remains a challenging one constrained by Covid-19 containment measures. With the gradual easing of these measures, business activity is expected to improve especially in relation to manufacturing, construction, and wholesale trade. However, entertainment, tourism, hospitality, and education sectors are likely to remain subdued over the short term.
As the Finance function, in FY2021/2022, we shall continue to operate optimally and, advance the Fund’s 10-year strategic priorities key among which is value for money cost management. Some of the enablers of this include acquiring a new accounting software and Robotic Process Automation (RPA).
In addition, to support the Fund and continue to navigate this uncertainty, we shall remain at the heart of providing key business insights and advice through use of business intelligence tools to enable informed decision making.
NSSF Chief Financial Officer, Stevens Mwanje facilitating a presentation with the Finance Department team
Medium-to-long-term targets
Despite the sombre economic outlook, our focus remains on the key priorities aimed at ensuring that the Fund remains on course to deliver on its 2015-2025 Financial Strategic goals of growing the fund size to UGX 20 Tn while keeping operating costs below 1% of the fund size.
Our Audited Financial Statements 2021
We are proud of delivering triumphant returns amid the pandemic enduced new normal. For details of these results refer to our Audited Financial Statements for the year ending 30 June 2021.
Appreciation
I would like to thank the Board and the Executive Management Team for their unwavering support and co-operation rendered during the year. My special appreciation goes to the amazing and awesome Finance Team for their continuous commitment to excellence and innovation and, lastly to all NSSF staff for their unwavering commitment to ensuring that the Fund achieves its purpose of Making Lives Better.
Stevens Mwanje
CHIEF FINANCIAL OFFICER