RK: Today, we are delighted to be joined by Danstan Kisuule and Patrick Ayota. Danstan is the head of YSAVE and Patrick is the deputy MD at NSSF.
Welcome gentlemen to #360Mentor. We are going to be talking about earnings & savings.
DK: It’s a pleasure Robert.
PA: Thank you Robert.
RK: Danstan, let’s talk about the mindsets in our country. A lot of people feel that they are already living on meagre incomes and yet they still have to pay back tax. They feel that at the end of the day, they have nothing left to save. And that they will starve. What do you say about that kind of thinking?
DK: Thank you Robert. There is something I always tell people that finances are based on principles. One of the principles to financial success is to spend what you have left over after saving instead of saving what you have left over after spending.
RK: First hold it there. I need to inform all the people listening now that Danstan Kisuule is not a financially trained man. He is a civil engineer. If a civil engineer can speak with the confidence of a financial expert like Ayota, you listening to this have absolutely zero excuse. This is not for financial experts, this is for you. It is about your life. It is about you being able to live off your money in the future.
DK: For me, my principle is, when I get money, I first take off 10% for God, then save and then spend.
RK: So you first keep?
DK: And then spend. Other than spend and then keep. The moment you do that, everybody will tell you money is not enough.
RK: Danstan, normally on this show, I go back into people’s past and ask them about their journey and where they are now. For you, at what point in your life did you reach this realisation in your life and what had been your experience before you learnt this very powerful lesson?
DK: That is a bit of the story of YSAVE. Y stands for Young, S for Savers, A for Association, V for Ventures and E for Entrepreneurship. It was started on the 24th October 2000. So what happened then is that some of us had worked for a number of years out of university and we were living from hand to mouth.
RK: Even engineers?
DK: Yes. We were living hand to mouth. So we came together to change the situation. So we must start saving. And for us we have a forced saving culture. We started saving 2000, we agreed to leave a minimum balance of UGX 500,000 which you don’t touch.
RK: What? This is in 2000?
DK: As we speak, the minimum balance which you can’t touch is ugx 4 million.
RK: You first wait, let me ask Patrick, in today’s money, how much was 500,000?
PA: That could give you almost UGX 860,000. If the inflation rate was 5% to the power 11. However most prices have gone beyond that, you would have 1.5 million shillings.
RK: Danstan, going by Patrick’s calculation, what was sacred to you and your friend was 1.5m. You are saying today it is 4million?
DN: Yes, if you don’t have it, you keep contributing. Let me give you another important statistic. Recently, we did a survey of our members and the majority of our members earn between 500,000 and 1,000,000.
RK: No way. Explain to me; your minimum is 4 million and most guys earn between 500,000 and 1,000,000, how are they able to build up the 4 million, how does that work?
DN: They have been able to build it over time. You see, saving is a sacrifice.
RK: What is the most practical way in which they are doing this?
DN: Everybody has a minimum amount of money they have to contribute on a monthly basis which is 100,000. Somebody earning 600,000 has to contribute 100,000. The people employed in the multinational companies are the minority of the population of the people in Uganda. Everybody must pay the 100,000 and live off whatever they have left. And they had done it. They have bought land and built houses. Those are statistics I have and can prove that these people have not stolen.
Rk: Okay, you go back, how did you build YSAVE and why did they believe in you?
DK: One of the things I have seen is;
The vision: what do you want to achieve? YSAVE is about a journey. We all go through a journey of life. Some people go to Teacher’s colleges. Others go to universities and others in different areas. So you start your journey of life. You all want to buy land, you want to build a house, you want to marry. And you will get children who will have to go into school. The journey is long. At one point you will have to get into retirement. You want to have a source of income and you are not becoming a burden to your children. That’s what we teach you at YSAVE. We teach you to prepare for marriage, school fees and retirement.
RK: So your first point of call from your members is to go to YSAVE and deposit the mandatory savings of 100,000 and the other is for the other causes you will need on your journey of life.
DK: Yes, we call it the target.
RK: Danstan I understand the vision and all that, but looking at the practical levels, why have you been very compelling and very persuasive to your members, how many are they?
DK: We have about 1500 adults and 2000 children.
RK: So you have a total of approximately 3,500 members. What is it that they find compelling? Why do they trust you?
DK: It’s not me as an individual. It’s about the organisation. What people are seeing about the organisation is that;
1. This organisation is helping me walk my journey of life. Without being disrespectful some people can ask, why don’t I put my money with say Insurance but they are only giving you an interest and they are not going to walk your journey with you which we shall be able to do as an organisation.
You will come to us and ask for land. Then we do a survey, buy in bulk and subdivide it and people buy land at a give away price. What could have cost you 15,000,000, you are able to get it at 7,000,000. Then you take a loan and pay it on reasonable terms.
RK: So you are not just collecting money from people, but you are actually holding their hands on choices they are making with their lives?
DN: And giving them advice on those choices. The advice is not only from me. Our members belong to their respective sectors. Teachers meet together. Doctors together. For us, there is no competition. If you have a pharmacy and I have another, we work together. People work together and they help each other.
RK: Basically, you are a fellowship.
DN: Yes, that is what we are. That’s how we started.
RK: You said earlier that we have little money, that’s why we need to be part of a bigger group. In 2000, you guys were tired of living hand to mouth, how did you plan this journey? 21 years later, what are the milestones?
DK: The first thing we did as a group was we prayed but also we had to act. That’s very important. Prayer gives you the guidance of what to do. Robert, the start was not as people see it now. Because the rule was everybody had to save or be chased out of YSAVE. That was very fundamental. You can imagine sending people out of the organisation with whom you are going to church. That was the principle and it still stands. If you don’t save, you leave. But we shall still pray with you.
RK: If you don’t save, we will pray with you but we won’t save with you.
DK: That was the fundamental. We built a culture of people saving. If you asked me, if I die, that’s something God has enabled me to do. Robert, let me tell you, in the first lockdown in 2020, it was more severe. There was no movement. And so, the banks we use are not in some of the remote places where we stay. You find someone who stays in Kabanyoro where there is no bank. People called and we had to find mobile money lines where they could save from.
RK: Even at the hardest point, your members were asking to save?
DK: Yes. Because they knew if they didn’t save, they would be asked to leave.
RK: Belonging to YSAVE is a matter of life and death.
DK: Exactly. I know Patrick will like this, for us we have money people can’t access until you are 50. Even in covid, no one could dare mention it. Some things you just keep quiet.
RK: You die quietly.
DK: There are people who have saved for the university tuition of their children for 15 years. you cannot come and claim it because of covid.
RK: No going to parliament or the state house? Let me bring in Patrick. I am laughing at you Patrick.
PA: Danstan is right. He has talked about four principles.
1. Save first before you spend. This is the hardest.
2. It’s not how much you earn but how much you save that matters.
3. Consistency and discipline. When you start with us, if you don’t we shall kick you out.
4. Have a goal. Why are you saving?
If his member wants land, and he wants it now, Danstan will tell his member to tell him off if that is not what he is saving for. The truth of the matter is 15 years ago, our lifespan as Ugandans was 40 years. Today it is 63. Beyond that, that is what they call longevity according to the UN. Most of us here are going to live until 77 years. And that’s why we still have our uncles. That should tell you that you need the discipline and consistency to save.
For the midterm thing to come in, you needed a law. And even with the law, we have to do it with discipline if we are to achieve our goals.
RK: Danstan, I am going to set you up; assuming you are the new MD of NSSF, how would you structure your message to the savers so they can be compelled to save?
DK: Like I said, life’s a journey. I know one of the things NSSF is doing. For us at YSAVE, teaching people was military, it’s either you did or didn’t. there was no democracy.
The other thing we have done along the way is to teach people why they need to save. Financial literacy sessions. Teaching people to budget, to live within their means and so on. You must also make sure you give people reasonable interest so that their money does not lose value.
If people save and they don’t feel a reason why they are saving, they will become resistant. They will feel forced. But I know NSSF is doing that to a big extent. I wish they could do it a little bit more.
RK: I feel there is a distortion somewhere. I feel that the employers are not involved in having to educate their staff why they need to save. And I think we have created an impression that saving is a burden and a tax on your ability to enjoy now. Even NSSF is presented as a burden. How can we close the gap? Many people see NSSF as a cousin of URA. How do you change that?
DK: It has to be deliberate for us to have discussions. When you talk to most of the people. They say “I want to do an investment” but then you ask them how are you going to do an investment without the money? Those are the discussions most of the organisations need to come up with. But they are not looking at that, they are looking elsewhere. I have seen companies like New Vision and NSSF have gone ahead to start SACCOS, especially for the corporate. Those are people who earn money monthly and it is very deceiving.
RK: Why do you say it is deceiving?
DK: Because it is not going to last forever.
RK: Even if you earn 6 million now, will it stop coming one day?
DK: Yes. You know it keeps you at work but one day you wake up and you have lost your job and you don’t have a house or a business. What are you going to do?
That is why I say it is deceiving. People need to sit down and you tell them off. Like Patrick was saying, be intentional. What are the things that you want to do as part of your life journey? When organisations form associations or SACCOS like YSAVE, it gives them an avenue to achieve those financial goals that they want to get.
RK: Patrick, how can savings be converted into a future income?
PA: I will give you an illustration. Many of you know of a guy called Albert Einstein, the guy who gave us relativity. He was one of the world’s renowned physicists. He came up with the 8th wonder of the world. He said, he who understands it, earns it. he doesn’t pays for it.
Take the example of someone who earns 500,000 as an employee. The law says, 5% of that money should go to NSSF. Which is 25,000. The law also says, the employer is supposed to match it, which means the employer puts in 50,000. So his monthly savings is 75,000. Let’s say this employee is 25 years old. He is going to work till 55. Remember he kept 95%.
Let’s assume NSSF gives him only 5% each year for the next 300 years. Let’s also assume he doesn’t get any salary increase for the next 30 years. Under that scenario, at the end of the 30 years, he will have 59.9 million shillings. He put aside 5% which is 25000.
If your home is in Wandegeya, that’s a bodaboda ride from town. I could walk that distance every evening and save my 25,000 a month. It can be as simple as that. If NSSF gave you 8%, that would be 101 million shillings.
RK: Wait a minute, I want to be sure I get you well, if someone saves 75,000 shillings, in 30 years they will have 101 million?
PA: Yes. If NSSF remains at 8% and they have not been fired.
Rk: So the interest element paid by the institution you save is what compounds your interest?
PA: Yes. Because every interest each year earns more interest in the next year. That is what is called compound interest. That’s why Albert Einstein called it the 8th wonder of the world. It is not how much you save but the consistency with which you save.
DK: From what Patrick has been saying, I want to tell you something I put in practice. 15 years ago, I decided to open an account where I was saving for my wife’s retirement. I began with 50,000 , then 80,000 and now it is 100,000. I began in 2003. My goal was that by the time she turned 50, she could be earning a certain amount of interest on a regular basis. As I speak, that account has about 45 million shillings. The interest has been compounding. The money saved is about 25 million, but the interest is about 20 million.
If that 100,000 shillings was not being put aside on a monthly basis. That money is a lot but also little depending on what you are going to do. That’s the 8th wonder of the world.
RK: Patrick, you had something to say.
PA: The good thing with NSSF. The law forces the employer to double the employer’s contribution.
RK: One of the problems of saving, because of its a sacrificial nature, is that people see it as a tax. Have we communicated to the people that saving can translate into an income called interest so that the public stops seeing it as a denial of immediate enjoyment and an investment in the future?
PA: For the longest time, members who saved with NSSF thought that the money did not exist. What Richard did was to come up with the idea of a monthly sms text to let the saver know their balance. The idea is when you receive that message five months in a row, you will know that is your money.
RK: Every time I receive that message, I just go direct to see the figure.
PA: And guess why people are excited about NSSF money, they have believed that the money is there and they do not want anyone to mess up with their money. So they will raise all kinds of dust with anyone who is messing up their money.
RK: Dansan, what would you tell young people on this forum, on how to make the sacrifice to save? What’s the promise?
DK: The secret to financial success is to save before they spend. Secondly, if you have saved, grow your savings. What you can never dispute is somebody’s testimony. What they have gone through.at YSAVE, it is those testimonies that have pushed us on. Someone earns 5 million but cannot save and another earns 1.3 million and has land. That compels people to change.
RK: Patrick, why is it hard for you guys at NSSF to steal the idea of YSAVE and sell it to your members?
PA: Right now, we have a law that limits us from what we can do. The amendments are being made which allows members to increase their savings. We are going to become more relevant to our members.
The other thing is the financial formula called the rule of 72. For any amount you save and invest in, something gives 8 % each year, your money will double in 9 years (72/8). If the interest rate is higher, your money will double in a few years. There are a number of things we can do to help us plan.
Comrade Otoa: Danstan, what advice would you give young people to save more even in harder times?
DK: When you get to saving, discipline is more important than the amount. For the young people, when you receive money, divide it into five jars. 10% in one jar fro God, 10% for giving% and the 3rd jar, 10% for your saving. I always tell people you must have your net salary saved for 6 months somewhere it earns interest, in the 4th jar, put there 20% for investment. 50% is yours to spend.
If you have not been saving, the 10% for saving and 20% for investing will become very hard. Start by taking off at least 1% and 3% for saving and investment. Everybody must have money they intentionally put aside to invest. You must be intentional. It should not come as a by the way.
PA: I come from a small village in Tororo called NyemNyem. About 8 years ago, Christmas came around and there was little meat in the village and the women nearly demonstrated. The men resolved never to be caught up. They passed a resolution. At the malwa joint, you have to first deposit 500 shillings and they began doing it at the beginning of the year consistently. Guess what, that first year around October, they had collected about 1.5 million shillings and they bought 2 cows which fed them around Christmas. The men were able to carry meat home that had stayed. That every Christmas has been sustained.
You have to be very intentional when saving. And you have to be very intentional about it.
Muwanguzi: How do you advise on priority expenditure especially for low income households?
PA: The more money you have, the more people who want to eat it. You have to make savings a priority.
DK: I always tell people to always make sure during our budgeting that your expenses are not more than your incomes. You don’t have to have three meals a day, it is not the desired goal, but it is a fact.
Patricia: For people who lose their jobs and are not able to meet their income, how do you go about that?
DK: People are given upto 6 months. If they cannot raise the money, we give them what they saved up and we let them go.
Arthur: Define definied benefit plan, or defined contribution plan?
PA: Under defined contribution, it means you have been putting some money aside overtime, at the end of your saving, you take it all. It all depends on what you put in.
Under defined benefit plan, it is about your employer defining what you take home like is that case for pension. This is government driven.
RK: Thank you gentlemen for the time and the education, your parting remarks.
PA: To me, I know a bit more, saving should be a priority. We don’t control the future, we don’t know what is going to come. You can have short term savings and long term savings.
DK: Thank you Robert for giving me this opportunity. If you are to save, you must have set goals. If you save for nothing, you will end up spending the money on nothing. There is nothing like over saving, you must be saving for a reason. Covid taught us to have an emergency fund. Let’s do that.