Kampala. Hopes of fixing the country’s pension sector, and breaking the National Social Security Fund (NSSF) monopoly, were unceremoniously dashed by President Museveni on Tuesday. This is a huge setback for reformers and good news to the unionists who were sceptical about the new players in a liberalised sector.
Although the NRM government initiated the delayed pension reforms through the Retirement Benefits Sector Liberalisation Bill, 2011, the President, speaking at the NSSF’s 30th anniversary dinner held at the Kampala Serena Hotel, said NSSF monopoly is better than liberalisation.
Under the proposed liberalisation, workers would choose the pension scheme where their money can be saved. However, the President said he doesn’t know the wisdom behind the hullabaloo for reforms.
Mr Museveni, who described himself as “a good soldier” when convinced, said there has been a debate about the liberalisation of the pension sector but nobody has convinced him on “why we should liberalise the sector”. “Some people have been coming to me with this idea that the sector will be more efficient when private players are allowed in, but I just kept quiet. I have never opposed or supported the proposed reforms.”
“Unless these people who are pushing for liberalisation are saying that NSSF is being mismanaged, they will really have to convince me more,” he said. “Having one player has one good advantage that we have money available for any useful capital development projects.”
The permanent secretary in the ministry of Gender, Mr Pius Bigirimana, also criticised the proposed bill and promised a comprehensive social protection policy. “Me, I do not subscribe to this liberalisation bill, which was being brought, I am sorry. I don’t because it was missing key ingredients and when the workers were talking, I think we should have listened to them. I hope we shall listen to them.”
However, with more players in the market, Ms Rita Wasswa, the legal services manager, Uganda Retirement Benefits Regulatory Authority said, there will be more options available to savers in addition to the few existing players, including the Public Sector Social Protection Fund and the NSSF who may be limited in their capacity to deliver to greater numbers if reforms are not pursued.
Reformists say, under liberalisation, there will be benefits to the wider economy through increased savings that will provide long-term capital to finance domestic investment and lower lending interest rates to borrowers. Currently, Ms Wasswa said, the country’s savings to GDP ratio is about 11 per cent compared to Asia of about 35 to 45 per cent. The growing pension funds will increase the volume and quantity of funds to be used to finance domestic development.
President Museveni said concentration [monopoly] is good for a small economy like Uganda and that “when you disperse the players, it means you must pay all those different groups. I don’t know the wisdom there”, insisting that “concentration is better than dispersal.”
To those who were demanding for the return of NSSF to the ministry of Gender, where it belonged as a department in 1980s, Mr Museveni said: “NSSF money is not pocket money that it should be managed by the department of labour. Labour can deal with industrial accidents and compensation but huge money should be managed by ministry of Finance. We are talking about a Shs6 trillion Fund which is bigger than some commercial banks.”
Responding to NSSF boss, Richard Byarugaba’s request, Mr Museveni advised NSSF managers to invest in the energy and railway sectors to grow the Fund.
He asked NSSF to look at Ayago dam (850Megawatts) and houses for the diaspora people as viable investment areas. He said NSSF cash can be invested in areas that benefit the economy. Museveni said he renewed Byarugaba’s contract as a reward for good performance.
Government in October 2014 withdrew the Retirement Benefits Sector Liberalisation Bill, 2011 from Parliament and admitted “duplicating” issues in the disputed law that seeks, among other things, to restructure the pension sector. It emerged that ministry of Finance officials, either “knowingly or unknowingly” brought two draft bills to Parliament on pension reforms, “a serious omission” according to MPs that misled the House Finance Committee and the Speaker to proceed on a wrong bill.
The bill was read for the first time on September 19, 2014 and referred to the committee for further scrutiny. This same bill was first tabled in the 8th Parliament and was never withdrawn yet the government brought another draft in the 9th Parliament. In the process of scrutinising the proposed pension reforms, the Finance Committee wrote to the Speaker on July 7, 2014 citing the technical glitch. The Speaker wrote to the committee on July 27, 2014 ordering the Government to withdraw the bill. The bill is among the pending bills in Parliament.