The National Social Security Fund (NSSF) will pay savers an interest rate of 12.5 per cent for the financial year 2015/2016, down by 0.7 percent from 13 per cent that  was paid out last financial year.

The minister of finance, Matia Kasaija, said: “I would like to commend NSSF for living up to its promise of delivering competitive returns to its members. The interest rate I have declared today is above the 10 year average inflation rate”.

The minister said that the slight drop in the interest rate has been caused by the slow growth in the economy.

Earlier projections indicated the economy would grow at a rate of 5.6%, however the contraction growth has been sluggish at a rate of 4.6%.

While addressing the media recently, Richard Byarugaba the Managing Director of NSSF said the Fund’s asset had grown from Shs 5.6 trillion to 6.5 trillion representing a rate of 18% growht rate.

According to Richard Byarugaba, the growth in the assets was because of increased member contributions from a monthly average of Ushs 57.3 billion in 2014/15 to Ushs 66 billion.

Byarugaba however said the Ugandan economy was not offering many more opportunities for NSSF to invest because of the limited incentive structure. The fund has been struggling to get a Withholding Tax exemption on returns on investment but this has persisted with Uganda Revenue Authority (URA) insisting the fund must pay. He described Tanzania as the “sleeping giant” in the region, noting that they country had opened by providing tax incentives on long-term investments for the fund.

“We have become big for the Ugandan market. Diversifying in the region is part of spreading our risk but we need further exposure,” he noted.

NSSF is still playing it safe with 77% of investments placed in the fixed income segment because of them being low-risk.

Uganda was almost the bad apple in NSSF’s performance in 2015/16. The economy grew slower than expected at 4.6% instead of the projected 5.6% and the Uganda Shilling weakened much faster in Uganda than the rest in the region. The result was a foreign exchange paper loss of Ushs74 billion.

“The Uganda shilling was volatile for most of the last financial year, depreciating at a much faster rate than other currencies in the East African region, negatively affecting Ugandan businesses and the economy. Since then, the shilling has somewhat stabilized. The volatility of the shilling affected investments,” Byarugaba said.

The 2016 elections also further compounded the problems for the fund as it dampened investor confidence.