What became of pension reforms?

Sunday April 7 2013

NSSF has invested workers’ savings in constructions like

NSSF has invested workers’ savings in constructions like NSSF Building in Kampala. FILE PHOTO 

By Yasiin Mugerwa

Just a bit of throat-clearing before we deal with the issue of shelved pension reforms: On March 23, a new law came into force in South Korea that effectively banned the wearing of miniskirts in public. The controversial piece of legislation called the “overexposure law” is an attempt by Ms Park Geun-hye, the first female president of this Asian nation, to curb public indecency.

Amazingly, even in Swaziland where bare-breasted virgins picked from all over Swazi Kingdom normally dance naked in front of King Mswati III in a glamorous traditional “reed dance” has also banned miniskirts and crop tops because they encourage rape. Indonesia and another southern seaside town of Castellammare di Stabiastate in Italy have also introduced similar laws.

Back home, it emerged this week that Uganda is also trying to ban miniskirts because they’re “pornographic.” The draft text of this new piece of legislation, coming on the heels of another hot potato Bill - The Marriage and Divorce Bill - seeks to restore urban decorum and facilitate better civil coexistence, protecting women and children in the process. We can stop at that, we will get time and deal with the relevance of these anti-social behaviour Bills.

On the pension laws, a few years back – we were at the forefront of the national sector reforms but now there is total silence on the matter. Two critical Bills were brought to Parliament to kick-start the pension reforms: The Uganda Retirement Benefits Regulatory Authority Bill, 2010 was effectively passed by the 8th Parliament and is now a law but The Retirement Benefits Sector Liberalization Bill, 2011, is held in the system.

The stalled pension reforms seek to end the National Social Security Fund’s monopoly and open up the sector to competition, saving the taxpayer billions in the process. There are reports that some individuals hatched a verbal deal with the NSSF to frustrate this very important Bill, peddling falsehoods that if passed into law, the new players would disappear with workers’ savings.

The spirit behind the proposed reforms according to NSSF’s allies is to turn the Fund into the compliance function of the sector and cream away the cost-free, profitable “fund management” function.

In an attempt to block the proposed reforms, at some point, NSSF’s allies and “image cleaners” in and outside Parliament have referred to the proposed fund managers in the Bill as “robber barons”.

These people forget that the reason why Parliament passed The Uganda Retirement Benefits Regulatory Authority was purely to ensure efficiency in the process, mitigate risks associated with conflict of interest, mismanagement and corruption in the sector.

How about the watchdog role of the Office of the Auditor General and Parliament?
Without addressing the endemic corruption in government veins, it’s a delusion for workers’ leaders to imagine that we can have a 100 per cent corruption- free social security sector without key reforms.

In any case, who says workers’ money at NSSF is 100 per cent safe? How about the infamous Temangalo-land outrage, Nsimbe Estates saga and the Alcon fiasco among other scandals? Therefore, the dreaded crooks in government systems, just as the case in the NSSF, can well be dealt with on a case-by-case basis. For that matter, before we demonise the proposed pension reforms, let’s look at the bigger picture.
Unfortunately, even workers’ representatives in Parliament have been duped to believe the only solution to the standoff is to block the proposed reforms. This is wrong. First, they claimed they were not consulted before accusing the government of opening up workers funds to risk-takers. Ultimately, the workers unions also rejected the draft piece of legislation and forced the government to withdraw the Bill from Parliament to carry out more in-depth discussions on the reform of the social security system.

While I welcome in-depth discussions on the proposed reforms, the deferral of this critical Bill is hurting our economy. Pension reform is expected to unleash enormous opportunities for Uganda. Even without withdrawing the Bill, the issues raised by workers and other stakeholders would have been addressed from the Finance Committee, after all the role of Parliament is to make laws. The public pension system, which is a kind of long-term insurance, should be given a chance.

Tax exemption
The quarrel over threshold of five employees in an attempt to ensure that everybody in formal employment contributes and the dire need to amend the income tax Act so that Ugandans who willingly contribute to the scheme are exempted from taxes; how to manage the transition from the NSSF’s limiting era to a liberalised sector will be addressed by Parliament.

For instance, the new Bill seeks to break the NSSF cartel and provide window for workers who have saved for 10 years to access at least 30 per cent of their savings to secure a mortgage or a loan for purchasing a residential house from any financial institution.

This proposal is “felicitous” by all standards and should be supported in public interest. Most importantly, this Bill seeks to introduce a contributory pension scheme for public servants, a huge relief to the taxpayer.

Pension reform was supposed to be one of President Museveni’s biggest accomplishments after years of failed previous attempts. My view is that any pension reforms, targeting our social security system must be planned on the basis of candid discussions taking into consideration of the previous scandals at the NSSF.

Ugandans are tired of waiting; they want pension reforms to take shape. When Ugandans ask Parliament to stop wasting time on immaterial Bills, they are asking Speaker Rebecca Kadaga to salvage the shelved pension reforms.