finance 31 May 2026 Daily Monitor (Uganda)
NSSF's Patience With Uganda Clays Debt Cripples Investor Returns
Uganda Clays Limited owes the National Social Security Fund a debt that has ballooned to over Shs23 billion, crippling investor returns and highlighting the complex relationship between the two entities. Source: https://www.monitor.co.ug/uganda/business/finance/how-nssf-patience-hurts-investors-of-uganda-clays-5479796
The financial entanglement between Uganda Clays Limited (UCL) and the National Social Security Fund (NSSF) has continued to impact investor returns for over 15 years. NSSF, which holds a 32% stake in UCL, also acts as a significant lender, a dual role that has created persistent financial strain for the company.
Initially, UCL borrowed Shs11.05 billion from NSSF in 2010. By 2015, this debt had escalated to Shs20.6 billion, prompting NSSF to freeze interest and repayments. For eight years, while UCL experienced periods of profitability and paid dividends, the frozen loan remained dormant. However, this changed in 2023 when a restructuring agreement replaced the old debt with a new loan of Shs15.81 billion, with interest resuming and repayments scheduled for January 2025.
Unfortunately, UCL could not meet the 2025 repayment deadline, leading to another three-year moratorium until January 2028. During this period, interest continues to accumulate, pushing the debt higher. The resumption of interest charges has drastically reduced shareholder profits, with interest payments in 2025 significantly outweighing the net profit available to investors.
UCL has struggled with consistent free cash flow, often channeling operational earnings back into capital expenditure. The debt’s growth is outpacing the company’s ability to generate profits. Despite operational improvements and planned new products, the escalating debt poses a significant challenge. By January 2028, the loan is projected to reach approximately Shs30.7 billion, with annual repayment obligations far exceeding the company’s current operating cash generation.
Concerns about collateral security have also arisen, with auditor reports indicating that the market value of pledged assets is below the loan amount. This situation raises questions about potential future restructurings and the long-term viability of UCL’s ability to service its ever-growing debt to NSSF.