Indecision and fear have delayed the much awaited return of Uganda’s National Social Security Fund to the local bourse even after the Ministry of Finance, Planning and Economic Development allowed the Fund to resume investment activities in its real estate and equity business.
Market sources who spoke to The EastAfrican revealed that the NSSF board and senior management are apparently undecided on when to resume trading on the Uganda Securities Exchange (USE) citing increased nervousness within the Fund towards major investment transactions in the aftermath of the Temangalo scandal that involved an irregular purchase of 460 acres in Temangalo at a cost of Ush11 billion ($5.6 million).
The land was co-owned by Minister of Security Amama Mbabazi and his business partner, Amos Nzeyi — a scenario that raised eyebrows and led to a parliamentary inquiry that culminated in the suspension of the Fund’s managing director, David Jamwa and his deputy, Prof Mondo Kagonyera.
Though the parliamentary investigation was concluded last year, additional investigations being conducted by the Auditor General’s office and private audit firm KPMG have slowed down the decision making processes leading to a near paralysis in the Fund’s investment operations.
This is reflected in apparent reluctance and nervousness among top management to endorse key transactions, including some that were approved by the former board of directors.
Though the ban was lifted, the impact of the investigations has limited our ability to make investment decisions. The appointment of a new board has also affected us because of challenges faced in persuading its members on various investment matters that were not concluded by the previous board,” said a senior NSSF official who requested anonymity.
NSSF owns about 20 per cent of all the shares listed on the USE and usually accounts for about 50 per cent of trading volumes when active on the market.
Information obtained by The EastAfrican indicates that the Ministry of Finance ban against investment in equity and real estate activities was lifted in February this year following pressure from prominent market players.
Subsequently, NSSF’s investment committee sat in March and approved its return to the local bourse. However, the appointment of a new board of directors last month stalled the process on account of pending statutory approval.
Previous meetings held by the new board have reportedly yielded no results, thereby creating fresh uncertainty about the Fund’s participation on the USE this year.
Investors’ hopes are now pinned on the next board meeting scheduled for June 2009. Similar hesitation led to NSSF’s recent decision to withdraw from a $10 million financing agreement with the Uganda Revenue Authority meant for the construction of the latter’s headquarters.
The Fund’s delayed return to the USE has also led to a backlog of huge sale offers from stockbrokers serving smaller institutional and individual investors. Such offers, estimated in millions of shares, are attributed to desperate investors eager to quit the market on account of the sustained downturn felt since the second half of last year.
