One of the things that have held back the faster economic growth of this country is the insufficient energy and transport infrastructure. There are reasons that explain this but one of the most outstanding is the lack of financing mechanisms to fund the often cash-intensive projects.
The only available option and so far what we have relied on-donor funds and foreign borrowing-has proved to be so bureaucratic and often comes with strings that are not entirely in our favour.
A good example is the World Bank withdrawal of financing for the $580m (about Shs1.4trillion) 200MW Bujagali hydro dam in 2003 and the subsequent power crisis that cost the economy several billions in shillings in high tariffs and unrealised production and the consequent GDP growth slowdown.
For example, government had to spend a total of Shs1.53trillion between 2005 and 2012 on energy subsidies to the electricity sub-sector. Only four years down the road, the same dam- this time with an added capacity of 50MW was flagged off for a whopping $900m (about Shs2.3trillion).
Even with the increased capacity, the cost of Bujagali was eventually ballooned from $2.9m (about Shs7.4b) per installed MW in 2003 to $3.6m (about Shs9.2b) per Mega Watt- an increase of 24 per cent. Besides the price of supplying each KWh increased from $10.5 (about Shs27,000) to $12 (about Shs30,000).
As an NSSF saver, I am concerned that social security savings held in NSSF- now amounting to over Shs4.2trillion and growing at an average Shs50 to Shs60b, are just being left to sit almost idle while the nation is struggling with foreign borrowings for infrastructure projects.
NSSF savings are perhaps the second biggest pool of savings after commercial bank deposits. NSSF savings are, however, the only savings of that magnitude held in a single pool.
If only the management and the decision making of how those funds are used was freed from a lengthy bureaucratic process that involves PPDA, Solicitor General, Ministry of Finance and politicians, that often leads to missed investment opportunities, we the workers who are the actual owners of that money would be benefitting through higher return on our investments but also the entire economy would be benefitting by way of strategic investments in key sectors such as energy, transport and health. This is why I have picked interest in how the reform of the pensions sector is ongoing.
This country is badly in need of reforming the pensions sector but how well it is done, is more important than just the sheer need for reforms for its own stake. I am concerned by how the debate to reform the sector has more less degenerated into a debate on how to dissolve NSSF, rather than on how to enable NSSF deliver more to both its members and the country.
I have read in the papers that as of today, 29 firms have been licensed to carry out either fund management, custodial, administrator and trustee roles. 190 others await licensing. Should all these companies get licenses, then we risk over-splitting the small savings that there is and therefore cannot harness much from reforming the sector, other than enriching the owners of the funds.
To encourage competition and at the same time leverage the benefit that a large pool of domestic savings can provide to the economic development of our country, ten per cent of the current mandatory contributions we are paying should be retained by NSSF as the national scheme and five per cent be allowed to be placed in a scheme of any employee’s choice at least for the next five years. Appropriate reforms can allow NSSF to play a huge role in other sectors such as housing, transport infrastructure, insurance and health.