The National Social Security Fund (NSSF) in Uganda reported that its shareholding in MTN yielded the highest dividend income for the 2022/23 financial year.
The annual report, which evaluates the fund’s performance, highlighted that MTN, Safaricom, Equity Group Holding, CRDB Tanzania, and National Microfinance Bank were the top dividend earners for NSSF during this period.
MTN’s Contribution
NSSF earned UGX 31 billion from its stake in MTN, a substantial increase from the UGX 9.3 billion it earned in the previous financial year.
The fund is the second-largest shareholder in MTN, holding an 8.84 percent stake.
MTN’s strong financial performance, with profits reaching UGX 409 billion for the year ending in 2022, significantly benefited NSSF.
Dividend Income from Other Sources
NSSF also received dividend income from other notable companies, including UGX 19 billion from Equity Group Holding (compared to UGX 14.1 billion), UGX 16.1 billion from Safaricom, UGX 14 billion from CRDB Tanzania, and UGX 10.6 billion from National Microfinance Bank.
NSSF’s Investment Composition
NSSF allocates approximately 12.51 percent of its investments to equities, encompassing stocks and securities.
The majority of its investments are divided between fixed income (78.4 percent) and real estate (9.01 percent).
Financial Performance
In the year ending in June, NSSF reported a 15.11 percent increase in revenue attributed to fixed income investments, rising from UGX 1.9 trillion to UGX 2.2 trillion.
The fund’s revenue from dividend income increased by 45.42 percent to UGX 145.12 billion from UGX 99.7 billion in the previous financial year, marking the most substantial growth among its investment vehicles.
While income from real estate slightly decreased to UGX 11.94 billion from UGX 11.97 billion, revenue from fixed income increased to UGX 2.04 trillion from UGX 1.8 trillion.
Fixed-income investments continue to be the primary source of revenue for NSSF.
Cross-Border Equities
NSSF has identified cross-border equities as a worthwhile investment, holding stakes in at least 10 companies in East Africa, all of which provided dividends in the year ending in June 2023.
Notably, four of the top five contributors to NSSF’s dividends are from outside Uganda, contributing 41.32 percent of the fund’s total dividend income.
Challenges in the Local Market
Financial market analysts and industry experts pointed out that the Uganda Securities Exchange (USE) is relatively less active compared to markets like the Nairobi Securities Exchange, largely due to its limited number of listed companies.
Furthermore, the dominance of institutional investors with substantial holdings can hamper liquidity and market activity.
Investor Preference
Investors are reportedly seeking markets where their investments can grow, which has prompted some to explore alternatives beyond Uganda due to the performance of local companies.
Companies in neighboring countries have attracted investors looking for growth opportunities while acknowledging the associated market risks.
Overall, NSSF’s strong financial performance, driven by strategic investments in dividend-yielding companies, continues to underpin its growth and contribution to the nation’s social security initiatives.