5^th–11^th July 2010

The government of Uganda has finally succumbed to pressure to open up the pensions sector.  The proposed reforms, if passed into law, will open up the sector to competition and end the monopoly that has been enjoyed by the National Social Security Fund [NSSF] since time immemorial.

Coming at a time when the NSSF is embroiled in corruption scandal after corruption scandal, we welcome the government’s move to open up the pensions sector to competition from entrepreneurs in the private sector.  We believe that with competition, it will be a win-win situation for everyone.  Pension savers will get good deals on their returns of investment, the private sector will expand, and more jobs will be created for the many unemployed Ugandan graduates.

We only have to look at the telecoms sector to see that it makes a lot of sense to break up monopolies.  Today, Ugandans are spoilt for choice as telecommunications companies fight for their custom.  That fight between the phone companies has forced rates down significantly from when companies like Celtel and MTN dominated the market a few years back.

To avert the misuse of workers savings, Finance Minister [General Duties] Mr. Fred Mr Omach is reported to have said that the new Bill that is now before the Finance Committee of parliament “seeks to create an independent body that will supervise institutions which provide retirement benefits, products and services”. This is a particularly welcome move that should help safeguard depositors’ hard earned cash that is estimated to be in the region of 1[one] trillion shillings.

But to avoid loss of deposits in the event that a private pension firm collapses, we call upon the government to amend the Bill to compel the incoming private pension companies to take up insurance policies with reputable organisations that will indemnify depositors in the event of a collapse.  The collapse of the Maxwell Pension Fund in the UK a few years back should be an instructive lesson for both our government and depositors.