OUR PERFORMANCE:
CFO's Financial Review
Taxation
Following the favourable ruling from the High Court in November 2020, which categorised interest paid to members as a deductible expense for income tax purposes, NSSF attained another milestone. In FY2023/24, URA refunded UGX 25Bn initially collected from the Fund in respect to this case. However, URA intends to appeal the case.
Cashflow analysis
The closing cash and bank balances stood at UGX 295Bn in FY2023/24 compared to UGX 191Bn in FY2022/23.
Net cash generated from financing activities amounted to UGX 828.3Bn. Net cashflows used in investing activities was UGX 606Bn whereas net cashflows used in operations was UGX 118Bn.
This is a clear indicator of the Fund’s ability to generate enough cash for all routine operations, financing and investing activities.
Update on accounting standards
In response to the constantly evolving global business environment, the International Accounting Standards Board (IASB), which develops and approves International Financial Reporting Standards (IFRSs) under the oversight of the IFRS Foundation, regularly issues new standards and amendments to 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:
There are new and revised International Financial Reporting Standards issued but not yet effective. These included the following:
These included the following:
We highlight further the significant accounting policies and how these affect the Fund in Note 3 of the financial statements.
Economic outlook over the short, medium and long term
The IMF predicts the world economy to continue growing at 3.2% during 2024 and 2025, at the same pace as in 2023. Sub Saharan Africa (SSA)’s growth is not enough to dent poverty, according to the World Bank. Global inflation is forecast to decline steadily, from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies. The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability.
Kenya’s economic outlook shows mixed results, stable growth amidst persistent macroeconomic risks. Kenya’s growth is projected to reach 5.2% on average during 2024-2026, mainly driven by the private sector as business confidence strengthens and the public sector continues to scale back.
The country faces large funding needs, ongoing risks to external finances, high domestic financing costs, expensive external commercial borrowing, and challenges to fiscal consolidation, despite the government’s stronger commitment to narrowing the budget deficit.
Tanzania is expected to continue with a stronger stable growth, higher than Uganda and Kenya. The real GDP growth in Tanzania is expected to rise to 6.3% in 2024 supported by increased mining and tourism activity, as well as infrastructure investment. In the long term, real GDP growth will benefit from the development of offshore gas fields and liquefied natural gas (LNG) production (from 2029). However, external pressures remain due to reduced level of foreign-exchange (FX) inflows, higher import bill, debt amortisation and a tightly managed exchange rate, resulting in FX shortages.
Uganda’s economic prospects are projected to improve with GDP forecasted to grow at 6.5% in 2023 and 6.7% in 2024 according to the African Development Bank. This assumes that global growth slowdown will be short lived. BOU’s contractionary monetary policy stance since June 2022 to date, along with the declining global inflation, is expected to reduce inflation further in the coming months. The relatively stable shilling has also helped accelerate the disinflation process.
Despite the improvement in the near-term inflation outlook, BOU’s current inflation projections remain susceptible to eminent risks like imported inflation and tighter global financial conditions which could weaken the shillings exchange rate. This could exert pressure on consumer prices.
The positive economic outlook provides an enabling operating landscape that will not only be critical to achieving our 2035 vision but also envisioning NSSF of the next decade. Our ambitious goals for the next decade include enhancing our coverage to 50% which currently stands at less than 10%, attaining an asset size of UGX 50Trillion (Currently UGX 18Trillion) and achieving employee and stakeholder engagement scores of 95%.
As a Finance Function, we remain committed to driving Fund-wide strategic and operational excellence by providing data driven decision support, predictive analytics, adoption of relevant emerging technologies for continuous process improvements and talent nurturing. These continuous efforts are critical pillars that strengthen our ability to keep adapting in the ever-changing operational landscape, and ultimately guiding the Fund towards lasting success.
Appreciation
My sincere appreciation is extended to the Board and the Executive Management Team for their great support and co-operation rendered during the year. Special thanks is extended to Team Finance for their continuous commitment to future readiness through excellence and innovation and, lastly to all NSSF employees for their firm commitment to ensuring that the Fund achieves its purpose of Making Lives Better.
A NEW DAY - CREATING SHARED VALUE FOR SUSTAINABLE GROWTH